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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

For the fiscal year ended September 30, 2009

OR

For the transition period from                     to                   

Commission file number 333-117633

SENECA GAMING CORPORATION

(Exact name of registrant as specified in its charter)

310 Fourth Street

Niagara Falls, New York (Seneca Nation Territory) 14303

(716) 299-1100

(Address, including zip code, and telephone number,

including area code, of registrant’s principal executive offices)

Securities Registered Pursuant to Section 12(b) of the Act:

None

Securities Registered Pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes  o  No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.  Yes  x  No  o

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  o  No  x

(Note: As a voluntary filer, not subject to the filing requirements, the registrant filed all reports under Section 13 or 15(d) of the Exchange Act during the preceding 12 months.)

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  o  No  o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in any definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (as each is defined in Rule 12b-2 of the Exchange Act).

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  o  No  x

At December 22, 2009, the registrant had no outstanding shares of common stock. The registrant is a wholly-owned governmental instrumentality of the Seneca Nation of Indians.

DOCUMENTS INCORPORATED BY REFERENCE:     None

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SENECA GAMING CORPORATION

Form 10-K

TABLE OF CONTENTS

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995.  The words “believe,” “anticipate,” “expect,” “estimate,” “intend,” “plan,” “project,” “will be,” “will continue,” “will likely result,” and similar expressions, as they relate to us or our management, indicate forward-looking statements.  Similarly, statements that describe our plans, business, strategy or goals are all forward-looking statements.  These forward-looking statements are subject to numerous risks, uncertainties and other factors that could cause actual results, performance or achievements to differ materially from those expressed in or implied by these forward-looking statements.

Factors that could cause actual results, performance or achievements to differ materially from those expressed in or implied by these forward-looking statements include, but are not limited to, the risk factors described under Item 1A of this Annual Report on Form 10-K.   Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date of this filing. In addition to the risk factors described under Item 1A of this Annual Report on Form 10-K, the following important factors, among others, could affect our future financial condition or results of operations, causing actual results to differ materially from those expressed in the forward-looking statements: the local, regional, national, or global economic climate, our substantial indebtedness and ability to meet our financial obligations and operate in accordance with the restrictions pursuant to such indebtedness, our incurrence of any additional indebtedness, the availability of financing, our failure to generate cash flows, increased competition, changes in federal Indian law, issues relating to the Nation-State Gaming Compact between the Seneca Nation of Indians and New York State, the control of our company by the Seneca Nation of Indians of New York, changes in the membership of the Nation’s Council (the Nation’s legislative body) or Nation policies, changes in gaming laws or regulations, ongoing or future litigation challenging our ability to conduct gaming operations, changes in federal or state tax laws or the administration of such laws, our failure to retain existing management, fill current vacancies, and attract new personnel, our limited experience operating casinos, hotels, and the golf course we intend to open, seasonality and weather-related factors, investigative reviews by regulatory authorities relating to our gaming revenues, and acts of war or terrorism.

We assume no obligation to update these forward-looking statements.

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PART I

Item 1.            Business

Except as otherwise indicated by the context, in this Annual Report on Form 10-K, or this Annual Report, we refer to (1) Seneca Gaming Corporation as “SGC” or “the Company,” (2) Seneca Niagara Falls Gaming Corporation, a wholly-owned subsidiary of SGC, as “SNFGC,” (3) Seneca Territory Gaming Corporation, a wholly-owned subsidiary of SGC, as “STGC,” (4) Seneca Erie Gaming Corporation, a wholly-owned subsidiary of SGC, as “SEGC,” (5) Lewiston Golf Course Corporation, a wholly-owned subsidiary of SNFGC, as “LGCC,” (6) Seneca Massachusetts Gaming Corporation, a former wholly-owned subsidiary of SGC, that was dissolved on April 11, 2009, as “SMGC,” (7) the Seneca Nation of Indians of New York, as “Nation,” “Seneca Nation” or “Seneca Nation of Indians,” (8) the Nation-State Gaming Compact between the Seneca Nation of Indians and New York State, dated August 18, 2002, as the “Compact,” and (9) SGC, SNFGC, STGC, SEGC, LGCC, and SMGC collectively, as “we,” “our,” “ours” and “us.”  SNFGC, STGC, SEGC and LGCC are sometimes collectively referred to as the “restricted subsidiary guarantors,” based on their respective guarantees of SGC’s obligations under the senior notes.  Our fiscal year ends on September 30.  “Fiscal 2009” is defined as the fiscal year ended September 30, 2009,  “Fiscal 2008” is defined as the fiscal year ended September 30, 2008, and fiscal years prior to 2008 are defined similarly within the context of this Annual Report.

Overview

SGC is wholly-owned by the Nation and chartered to develop, manage and direct all of the Nation’s Class III gaming operations on the Nation’s territories in Western New York. SGC was chartered by the Nation in August 2002.  In August 2002, the Nation entered into the Compact with New York State that provides the Nation with the right to establish and operate three Class III gaming facilities in Western New York. Class III gaming, the most heavily regulated of the gaming classes, includes, among other things, slot machines and casino table games (other than poker). For a description of the classes of gaming, see “The Indian Gaming Regulatory Act of 1988- Classes of Gaming” below. We currently operate three Class III gaming facilities in Western New York—Seneca Niagara Casino and Hotel, which is located in the City of Niagara Falls, New York (Niagara Territory) and operated by SNFGC, approximately 20 miles north of Buffalo, New York; Seneca Allegany Casino and Hotel, which is located in the City of Salamanca, New York (Allegany Territory) and operated by STGC, approximately 60 miles south of Buffalo, New York and 75 miles northeast of Erie, Pennsylvania; and Seneca Buffalo Creek Casino, which is located in the inner harbor district of Buffalo, New York (Buffalo Creek Territory) and operated by SEGC. Seneca Niagara Casino and Hotel opened on December 31, 2002 (initially, as the Seneca Niagara Casino).  Seneca Allegany Casino and Hotel opened on May 1, 2004 (initially, as the Seneca Allegany Casino).  Seneca Buffalo Creek Casino commenced operations on July 3, 2007 in a temporary facility.  Our three casinos are located on land held in restricted fee by the Nation, which, together with the rights under the Compact, allows us to conduct Class III gaming operations in Western New York.

Our principal executive offices are located at 310 Fourth Street, Niagara Falls, New York (Nation Territory) 14303, and our telephone number is (716) 299-1100.  We make available, free of charge, through our internet website, www.senecagamingcorporation.com, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and, if applicable, amendments to those reports filed or furnished pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC.  We are not including the information contained on our website as a part of, or incorporating it by reference into, this Annual Report.

The websites for our Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel properties are located at www.senecaniagaracasino.com and www.senecaalleganycasino.com, respectively. The Nation also furnishes information about SGC and its properties at www.sni.org.   The information on these websites is not part of, or incorporated by reference into, this Annual Report.

SENECA GAMING CORPORATION, SENECA NIAGARA CASINO, SENECA NIAGARA CASINO AND HOTEL,  SENECA ALLEGANY CASINO, SENECA ALLEGANY CASINO AND HOTEL, SENECA BUFFALO CREEK CASINO, SENECA PLAYERS CLUB, SENECA LINK, and THE WESTERN DOOR are registered trademarks in the U.S.  All other trademarks, trade names and service marks appearing in this Annual Report are the property of their respective holders.

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Seneca Niagara Casino and Hotel

Seneca Niagara Casino and Hotel is located on approximately 45 acres in the City of Niagara Falls, New York (24 of which are currently owned by the Nation and constitute its Niagara Territory), and offers gaming, entertainment, lodging and related amenities. Seneca Niagara Casino and Hotel is SGC’s flagship resort property catering to mid to high value gaming guests looking for a full service gaming resort destination.  Seneca Niagara Casino and Hotel is open 24 hours per day, seven days per week and is our flagship gaming facility.  We opened our original Niagara Falls gaming facility on December 31, 2002 in the former Niagara Falls Convention and Civic Center.  Since opening, we have continued to invest in facilities and equipment at this property.  On December 15, 2005, we opened our expanded gaming floor, which added approximately 950 slot machines and 20 table games.  On March 31, 2006, we completed the phased opening of our luxury hotel, along with all other amenities.  SGC’s aggregate capital investment in the Seneca Niagara Casino and Hotel as of September 30, 2009 is approximately $530.0 million.

As of September 30, 2009, Seneca Niagara Casino and Hotel featured:

·   over 147,000 square feet of Class III gaming space with 4,062 slot machines; 104 table games, including, but not limited to, blackjack, craps and roulette; and keno;

·   604 luxury hotel rooms, including 118 suites of various sizes;

·   a full-service luxury spa, salon, and fitness center;

·   food and beverage amenities, including three full-service themed fine dining restaurants, a 400-seat international buffet, two casual dining restaurants, a walk-up delicatessen, a snack bar, and four bars and lounges;

·   five retail stores;

·   a 25,200 square-foot multi-purpose entertainment and special event facility, which can seat up to 2,400 for concerts, and can also be used for meetings, banquets and small conventions;

·   a 468-seat showroom;

·   8,000 square feet of conference and banquet space; and

·   a 2,130-space parking garage, surface parking for over 1,500 vehicles, and a transportation center.

Niagara Falls Real Estate Acquisitions

In 2002 and pursuant to the Compact, the Nation acquired from the State of New York approximately 24 acres of land and related improvements in the City of Niagara Falls, New York, including the then-Niagara Falls Convention and Civic Center.  The State of New York further agreed in the Compact to assist the Nation in whatever manner appropriate, including through the exercise of its power of eminent domain, to acquire the remaining acreage within the approximate 50-acre footprint in the City of Niagara Falls, New York, designated by New York State under the Compact for ownership by the Nation. The Compact specifically excluded approximately 1.5 acres of land within the footprint owned by a Roman Catholic Church.  Additionally, in July 2006, the Nation agreed to waive its right to acquire approximately one half acre of additional land within the footprint owned by End Time Handmaidens, Inc., a religious organization.  In return for the waiver, the Nation obtained a right of first negotiation and refusal with respect to the future sale of the parcels.  As a result of the carve-out relating to the parcels owned by the Roman Catholic Church, and the Nation’s agreement with End Time Handmaidens, the total acreage of the Niagara Territory upon completion of the condemnation process is anticipated to be approximately 48 acres.

We have obtained possession of, either through eminent domain proceedings or private purchase, substantially all of the

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remaining acreage within the footprint, other than certain streets and alleys owned by the City of Niagara Falls providing access to the above church parcels, and a bicycle path owned by the New York State Department of Transportation. We expect to acquire the above Niagara Falls city street and alley parcels by early 2010, with acquisition of the NYSDOT bike path requiring further dialogue with New York State.

With the exception of approximately two acres of land and a hotel property within the footprint acquired for $7.9 million through a private sale in December 2005, substantially all of our post-2002 acquisitions within the footprint have been accomplished through condemnation proceedings pursuant to New York State Eminent Domain Procedure Law, or EDPL.  The amounts paid to condemnees from whom we have acquired property are deemed to be advance payments, in that property owners are entitled to reserve their rights to challenge the appraised property values determined by the condemnor’s appraisers.  To date, all record owners from whom property was acquired pursuant to the EDPL have reserved rights to claim additional compensation.  If a court determines that the value for the land and improvements is higher than the appraised value we paid to a condemnee, then we may be liable to the condemnee for the difference and potentially also responsible for certain additional costs and payments to the condemnee, such as attorneys’ fees.   As of September 30, 2009, $1.7 million of the previously recorded reserve of $6.4 million remained for such matters and is included in the other current and long-term liabilities sections on SGC’s consolidated balance sheet.

In 2006, we began master planning activities for the remaining approximately 24 acres of undeveloped land contained in the Niagara Falls footprint.  As of September 30, 2009, these master planning activities have been suspended due to the continuation of weak economic conditions, adverse credit market conditions and an uncertain economic outlook.  As a result of these circumstances an impairment charge was recognized related to these activities in Fiscal 2009, in the amount of approximately $3.5 million.

Seneca Allegany Casino and Hotel

Seneca Allegany Casino and Hotel, our second Class III gaming facility, is located on the Nation’s Allegany Territory in the City of Salamanca, New York.  Seneca Allegany Casino and Hotel offers Class III gaming, entertainment, lodging and related amenities.  Seneca Allegany Casino and Hotel caters primarily to middle-market, drive-in patrons from its primary and secondary markets and is open 24 hours per day, seven days per week. Seneca Allegany Casino opened on May 1, 2004.  On March 30, 2007, we opened a 212-room resort hotel, including food and beverage and other amenities, which followed the December 28, 2006, official opening of a new permanent gaming floor.  In March 2008, we completed the conversion of the former temporary casino structure into an event center and additional administrative office space.  SGC’s aggregate capital investment in the Seneca Allegany Casino and Hotel as of September 30, 2009 is approximately $346.0 million.

As of September 30, 2009, Seneca Allegany Casino and Hotel featured:

·   over 63,500 square feet of gaming space with approximately 2,265 slot machines and 41 table games, including, but not limited to, blackjack, craps and roulette;

·   212 luxury hotel rooms, including 28 suites of various sizes;

·   a full-service luxury spa, salon, and fitness center;

·   food and beverage amenities, including two full-service themed fine dining restaurants, a 322-seat international buffet, a 24-hour casual dining restaurant, a walk-up delicatessen, a snack bar, and two bars and lounges;

·   a multi-faceted retail store, including logo merchandise, sundries, etc.;

·   a 20,000 square-foot multi-purpose entertainment and special event facility, which can seat up to 2,200 for concerts, and can also be used for meetings, banquets and small conventions; and

·   a parking garage for approximately 1,850 vehicles and surface parking for approximately 1,000 vehicles.

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Construction on our next phase of development at Seneca Allegany Casino and Hotel, which was planned to include an additional 200 room hotel tower, and up to 30,000 square feet of additional gaming space and related amenities, for a total estimated cost of approximately $130 million, was suspended in August 2008 for reasons including:  the continuing economic recession; inability to obtain construction financing at reasonable interest rates; and operating and other demands on our available cash, such as our payments and distributions to the Nation.  As of September 30, 2009, due to the continuation of weak economic conditions, adverse credit market conditions and an uncertain economic outlook, construction remained suspended indefinitely.  As a result of these circumstances an impairment charge was recognized for costs incurred related to these activities in Fiscal 2009, in the amount of approximately $17.1 million.

Seneca Buffalo Creek Casino

In addition to Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel, we operate a  third Class III gaming facility which is located in Buffalo, New York. This Class III gaming facility is referred to as Seneca Buffalo Creek Casino.

On October 3, 2005, the Nation acquired approximately nine acres of land in the inner-harbor district of downtown Buffalo, which constitutes the Nation’s Buffalo Creek Territory.  Initially, the nine acre parcel was bisected by a two block section of Fulton Street, a street owned  by the City of Buffalo.  In November 2006, we acquired this two block section of Fulton Street from the City of Buffalo for a purchase price of $631,600.

On December 8, 2005, we began construction of a temporary Class III gaming facility on the Seneca Buffalo Creek Territory, in accordance with the requirements of the Compact.  On July 3, 2007 we commenced operations at this gaming facility, which consists of approximately 6,000 square feet and features 135 slot machines and a snack bar.  During the quarter ended March 31, 2008, the temporary facility was expanded to include an additional 109 slot machines. The current temporary facility is approximately 8,600 square feet, and features 244 slot machines and a snack bar.  SGC’s aggregate capital investment as of September 30, 2009 in the temporary gaming facility in Buffalo, New York is approximately $12.5 million.

Construction on our next phase of development at Seneca Buffalo Creek Casino and Hotel, which was planned to include approximately 90,000 square feet of gaming space; 2,000 slot machines; 45 table games; a 22-story all-suite hotel; four restaurants; a full-service spa and salon; retail and other amenities; and a 2,200-space parking garage, for a total estimated cost of approximately $333 million, was suspended in August 2008 for reasons including:  the continuing economic recession; inability to obtain construction financing at reasonable interest rates; and operating and other demands on our available cash, such as our payments and distributions to the Nation.  As of September 30, 2009, due to the continuation of weak economic conditions, adverse credit market conditions and an uncertain economic outlook, construction remained suspended indefinitely.  As a result of these circumstances an impairment charge was recognized related to these activities in Fiscal 2009, in the amount of approximately $87.0 million.

On August 8, 2009, the Nation offered SEGC a $9 million unsecured loan for purposes of expanding the Buffalo Creek Casino temporary facility to include up to 250 additional slot machines.  If utilized by SEGC, the loan will carry an interest rate of 5% per annum with principal and interest payable over a 12 month period commencing on the 15th day of the calendar month following the opening of the expansion. Although the SEGC Board of Directors, on August 14, 2009, accepted these terms,  SEGC has not yet drawn upon the loan or executed a note for it. On October 19, 2009 we broke ground on the expansion, which will add approximately 5,300 square feet of gaming space to the facility and will accommodate 200 to 250 additional slot machines. The expansion is due to be completed in spring 2010.

Our ability to continue to operate the Seneca Buffalo Creek Casino temporary facility will depend on various factors, including existing legal challenges.  See “Item 3 — Legal Proceedings” for a discussion of existing legal challenges regarding our Seneca Buffalo Creek Casino.

Status of Former Class II Operations

In January 2005, we transferred all Class II gaming operations to the Nation, which included our poker operations at the Seneca Niagara Casino and Hotel and Seneca Allegany Casino. Class II gaming includes bingo, poker and similar games, and is subject to tribal regulation and federal oversight by the National Indian Gaming Commission, or NIGC. For a description

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of the classes of gaming, see “The Indian Gaming Regulatory Act of 1988 - Classes of Gaming” below. The transfer of the Class II operations in January 2005 was consistent with our understanding of the Seneca Nation Tribal Council’s (the Nation’s legislative body) intent that we manage and operate the Nation’s Class III operations and that Council directly manage and operate the Nation’s Class II operations.

The Nation, through its wholly-owned business enterprise, Seneca Gaming & Entertainment, operates the Class II poker operations at Seneca Niagara Casino and Hotel, in addition to two Class II gaming facilities located on the Nation’s Territories in Salamanca and Irving, New York, respectively. On November 9, 2009, Seneca Gaming and Entertainment relocated its poker operations at Seneca Allegany Casino to a new facility located within one mile of our Salamanca, New York property.

Lewiston, NY Golf Course Development

In March 2006, we acquired 257 acres of land with the intent to design and build a championship level golf course in Lewiston, New York, approximately eight miles from Seneca Niagara Casino and Hotel.  We selected the Robert Trent Jones II firm to design the golf course, which will be named Seneca Hickory Stick Golf Club.  Construction of Seneca Hickory Stick commenced in July 2007 and it is anticipated that the official opening of the course will occur in 2010.  The total cost to construct the golf course and related amenities is estimated to be approximately $25.5 million. The Nation formed the Lewiston Golf Course Corporation, as a subsidiary of the Seneca Niagara Falls Gaming Corporation, to own and operate the golf course.  LGCC has engaged Kemper Sports Management, Inc. to manage and operate Seneca Hickory Stick on its behalf.

Massachusetts Gaming Development

Seneca Massachusetts Gaming Corporation, a wholly-owned subsidiary of SGC, formed on August 11, 2007 to explore development opportunities related to gaming in the Commonwealth of Massachusetts, was dissolved by the Nation’s Council on April 11, 2009, and its assets were transferred to SGC.

Business and Marketing Strategy

SGC believes that it is the premier gaming operator in Western New York State and in the areas of Northern Pennsylvania and Ohio located within its primary and secondary markets. Since the December 31, 2002 opening of the Seneca Niagara Casino, SGC has invested significantly in the development, expansion and maintenance of its gaming facilities, including the completion of the hotel and gaming projects at Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel, and the opening of the temporary casino on the Seneca Buffalo Creek Territory.  These investments enable SGC to maintain its position as the premier gaming operator in the region described above. A principal goal is for the facilities to complement each other, offering diverse hotel, entertainment and gaming experiences for guests.

SGC continues to believe the exclusivity provided in the Compact gives SGC the opportunity to serve the Western New York market by providing patrons with unique entertainment and gaming experiences.

SGC’s gaming facilities are intended to provide a high-quality and diverse gaming experience that SGC believes will add to its patron base and strengthen patron loyalty in each segment of the gaming market.  In order to maximize income from operations, SGC attempts to coordinate advertising, promotions, entertainment and special events to minimize competition among its gaming facilities, and integrate administrative and information technology functions.  As slot play currently represents approximately 90% of SGC’s consolidated gross gaming revenues, SGC also strives to offer the most current selection of slot machines in order to provide cutting-edge options for guests, and to differentiate it from the regional competition.  SGC plans to continue to brand the Seneca name through advertising and promotion of its Seneca Link Player’s Card, which is accepted at all of SGC’s facilities. The key components of our integrated marketing plan include the following:

·   Promote the Seneca Brand Name.     The successful operation of Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel has established Seneca as a leading gaming brand in the region.  We plan to continue to capitalize on this brand recognition by prominently incorporating the Seneca name at all of our gaming and entertainment facilities.

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·   Incorporate the Seneca Link Player’s Card.     We encourage guests to sign up for a Seneca Link Player’s Card, and to use their Player’s Card at their venue of choice.  Guests accumulate points at our facilities and may redeem them at any of our casinos.  Our player’s club card program enables us to understand our guest preferences by providing us with valuable information about our patrons’ gaming activity and use of our facilities’ various non-gaming amenities.  As of September 30, 2009, we had approximately 560,000 active members in the Seneca Link Player’s Card database each with at least one rated trip to our properties during Fiscal 2009.

·   Expand Target Markets and Patron Base.     The completion of our hotels in Niagara Falls, New York and Salamanca, New York has enabled us to expand our marketing efforts to higher-value gaming patrons from a wider geographic area.  We continue to evaluate our marketing programs and have continued our efforts to attract more guests from the region, including New York, Pennsylvania and Ohio, as well as higher-value patrons from New England, New Jersey, New York City, and Toronto, Canada.  We intend to continue to market to these areas by offering various promotions, including special events for preferred gaming patrons, use of commissioned, independent representatives or splinter arrangements, air charters, motor coach tours and organized package group visits.  We have also recently expanded our player development staff and have upgraded our entertainment offerings to further brand our properties and to attract repeat visits, encourage loyalty and attract guests with higher gaming budgets.

·   Offer Diversified Gaming Experience to Broadest Customer Base.    We intend to operate each of our gaming facilities in a manner that will be complementary. Seneca Niagara Casino and Hotel is SGC’s flagship resort property catering to mid to high value gaming guests looking for a full service gaming resort destination.  With the opening of the permanent casino and 212-room resort hotel at Seneca Allegany Casino and Hotel, SGC expanded its marketing efforts to attract guests with higher gaming budgets. SGC integrates the marketing of the Seneca Buffalo Creek Casino, as explained below, to guests of SGC’s Niagara and Allegany casinos, which provides SGC’s guests a variety of gaming and entertainment options.

·   Utilize an Integrated Marketing Strategy.    Our marketing strategy relies on the high quality of our facilities, the personal service level of our employees, and an integrated approach of targeted direct mail, radio, print and outdoor advertising, promotions, slot and table tournaments, special events, bussing, entertainment and player development staff, to attract and retain our patrons and to brand the Seneca name as the premier gaming and entertainment experience in Western New York. We coordinate our marketing events and the amenities of our facilities to maximize the quality and length of stay of patron visits and to minimize competition among our gaming facilities. Our patron tracking system through the Seneca Link Player’s Card is sophisticated and scalable and provides us with the ability to analyze our guests’ gaming preferences.  In addition, we recently redesigned the levels of player club options, each based on the level of each guest’s gaming activity, to ensure each level is properly recognized based upon their gaming activity.  Starting in May 2004, we began using a “promotional credit” program that provides slot credits to our patrons based on the amount of  their gaming at our facilities. These credits are available on the patron’s Seneca Link Player’s Card when they return for visits. These credits must be played and cannot be redeemed for cash, which we believe encourages repeat business.

·   Reinvest in our Gaming Facilities.    We believe our commitment to reinvest in each of our gaming facilities is critical to our continued success and future growth. We intend to reinvest in our gaming facilities to ensure their attractiveness to our patrons, subject to the availability of sufficient funds and the improvement of current economic conditions.  To increase our profitability we intend to upgrade our slot machines with the most popular products in order to create a more exciting gaming experience for our patrons. We have also invested in technology, including slot machine “ticket-in/ticket-out” technology, automated ticket redemption machines, player tracking system enhancements and the development of a Seneca brand inter-property progressive link. Reinvestment in our gaming facilities will help to ensure that our patrons have an enjoyable entertainment experience.

·   Offer the Highest Quality Service.    We believe that we can distinguish our gaming facilities from competitors with consistent superior patron service, as evidenced by our achieving the AAA Four Diamond Award at both Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel, which is a fundamental component of our business and marketing strategy. We attribute much of our success at Seneca

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Niagara Casino and Hotel and Seneca Allegany Casino and Hotel to our employees’ ability to provide high quality, efficient and friendly service.  We require that each new employee participate in substantial customer service training as part of their orientation.  It is our intention to continue to invest in providing the highest level of guest service as an integral component of our long-term financial success.

Market and Competition

Market

Seneca Niagara Casino and Hotel is located on the Nation’s Niagara Territory in the City of Niagara Falls, New York, approximately 20 miles north of Buffalo and approximately 90 miles west of Rochester. Our primary market for this property includes the cities of Buffalo and Niagara Falls, New York, and covers the area in the United States within an estimated 50 miles of Seneca Niagara Casino and Hotel.  Our secondary market includes the City of Rochester, New York, and covers the area in the United States within an estimated 51 to 100 miles of Seneca Niagara Casino and Hotel.  Our outer markets include Toronto, Canada, Erie and Pittsburgh, Pennsylvania, Ohio, and other areas of New York and Ontario, Canada.  We continue to seek to expand our geographic reach with targeted marketing efforts for higher-end gaming patrons in the New York City area, New England, New Jersey, Michigan, Illinois and Canada.  In addition, Niagara Falls is a major tourist destination, and we attempt to draw patrons from its tourist base.

Seneca Allegany Casino and Hotel is located immediately off Interstate 86 in southwestern New York. Since its opening in May 2004, the primary market for this property has been the area within 75 miles of the casino, which includes Erie, Pennsylvania.  The secondary market has been the area within 75 to 175 miles of the casino, which includes Cleveland and Akron, Ohio and Pittsburgh, Pennsylvania.  Since opening, the Seneca Allegany Casino has catered primarily to middle-market, drive-in patrons from its primary and secondary markets.  With the opening of our 212-room resort hotel in March 2007, we implemented additional targeted marketing programs focused on expanding our geographic reach.

The temporary casino on the Nation’s Buffalo Creek Territory facility is designed for the convenience gamer.

As of September 30, 2009, approximately 52% of the 560,000 active Seneca Link Player’s Card members live in New York State, and approximately 17%, 16%, and 9% live in Pennsylvania, Ohio and Canada, respectively.

Competition in Immediate Market Area.

The United States and Canadian gaming industries are highly regulated and the overall number of casino operations in the Northeast is limited. In recent years, there has been a trend to relax the legal restrictions on entry and to permit the development of additional gaming operations. While we believe that we are the premier gaming operator in Western New York State and in the areas of Northern Pennsylvania and Ohio located within our primary and secondary markets, we face intense competition in these markets. Currently, there are two large casino resorts, Casino Niagara and Niagara Fallsview Casino Resort, and five major racetrack facilities with gaming operations, Fairgrounds Gaming and Raceway, Finger Lakes Gaming and Racetrack, Batavia Downs Gaming and Raceway, Fort Erie Racetrack and Slots and Woodbine Racetrack, within the 100-mile radius that constitutes Seneca Niagara Casino and Hotel’s immediate market area.  Fairgrounds Gaming and Raceway, Fort Erie Racetrack and Slots and Presque Isle Downs in Erie, Pennsylvania, which opened in February 2007, each directly compete in Seneca Allegany Casino and Hotel’s immediate market area.

Casino Niagara and Niagara Fallsview Casino Resort are located in Niagara Falls, Ontario, and are both within two miles of Seneca Niagara Casino and Hotel. Casino Niagara and Niagara Fallsview Casino Resort are owned and operated by the Province of Ontario and managed by the Hyatt-led Falls Management Company. Casino Niagara offers over 95,000 square feet of gaming space including more than 1,700 video gaming machines, or VGMs, 60 table games, three restaurants and three bars. Niagara Fallsview Casino Resort opened in June 2004 and features 200,000 square feet of gaming space that includes over 3,000 VGMs, over 100 table games, a 374-room Hyatt hotel, a spa and various restaurant and entertainment venues. Casino Niagara and Niagara Fallsview Casino Resort are both located approximately 70 miles from Seneca Allegany Casino and Hotel on the outer edge of Seneca Allegany Casino and Hotel’s primary market area.

Fairgrounds Gaming and Raceway (formerly Buffalo Raceway), a racetrack facility in Hamburg, New York offering over 950 VGMs in a 27,000 square foot gaming facility, is located approximately 30 miles and 50 miles from Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel, respectively.  Batavia Downs, in Batavia, New York, is located

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approximately 55 miles and 75 miles from Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel, respectively, and features approximately 600 VGMs.  Finger Lakes Gaming and Race Track in Farmington, New York, is located approximately 90 miles and 140 miles from Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel, respectively, and operates approximately 1,200 VGMs in a video gaming facility.  Fort Erie Racetrack and Slots in Fort Erie, Ontario, Canada, is located approximately 15 miles and 60 miles from Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel, respectively, and operates 1,000 VGMs in a 75,000 square foot gaming facility. Woodbine Racetrack, a 56,000 square foot racetrack facility featuring over 2,000 VGMs, is located in Ontario, Canada, approximately 50 miles and 160 miles from Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel, respectively.  Presque Isle Downs, a racetrack facility in Erie, Pennsylvania offering approximately 2,000 slot machines, is located approximately 120 miles and 80 miles from Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel, respectively.

Competition in Broader Regional Market.

Outside of our immediate market area, we also face competition in our broader regional market. The Oneida Indian Nation operates a gaming facility resort, Turning Stone Resort & Casino, near Syracuse, New York, located approximately 190 miles and 235 miles from Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel, respectively.  Turning Stone Resort & Casino features approximately 2,400 multi-gaming machines and 80 table games.

The St. Regis Mohawk Tribe currently operates a small casino facility, Akwesasne Mohawk Casino, near Hogansburg, New York, which is located approximately 350 miles and 390 miles from Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel, respectively. Akwesasne Mohawk Casino features approximately 1,600 slot machines and 20 table games.

Competition elsewhere in New York State includes other racetracks that operate VGMs, including:  Saratoga Raceway in Saratoga Springs (located approximately 325 miles and 340 miles from Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel, respectively); Monticello Raceway in Monticello (located approximately 325 miles and 280 miles from Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel, respectively); Tioga Downs in Nichols (located approximately 190 miles and 160 miles from Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel, respectively); Yonkers Raceway in Yonkers (located approximately 415 miles and 370 miles from Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel, respectively); and Vernon Downs in Vernon (located approximately 195 miles and 245 miles from Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel, respectively).

Competition in Pennsylvania includes:  Rivers Casino, located in Pittsburgh, which opened August 10, 2009 (located approximately 240 miles and 190 miles from Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel, respectively); Mount Airy Casino Resort, located in the Pocono Mountains in Northeast Pennsylvania (located approximately 320 miles and 270 miles from Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel, respectively); Sands Casino Resort Bethlehem, located in Bethlehem (located approximately 350 miles and 310 miles from Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel, respectively); Harrah’s Chester Casino and Racetrack in Chester (located approximately 420 miles and 370 miles from Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel, respectively); Philadelphia Park Casino and Racetrack in Bensalem (located approximately 420 miles and 370 miles from Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel, respectively); Hollywood Casino at Penn National in Grantville (located approximately 315 miles and 250 miles from Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel, respectively); The Meadows Racetrack and Casino in Meadow Lands (located approximately 255 miles and 220 miles from Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel, respectively); and Mohegan Sun at Pocono Downs in Wilkes-Barre (located approximately 300 miles and 250 miles from Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel, respectively).

Competition in West Virginia includes: Wheeling Island Racetrack and Gaming Center, located in Wheeling, is located approximately 290 miles and 250 miles from Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel, respectively. Mountaineer Casino, Racetrack and Resort, located in Chester, is approximately 250 miles and 215 miles from Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel, respectively.

Foxwoods Resort Casino, owned and operated by the Mashantucket Pequot Tribe, and the Mohegan Sun Casino, owned and operated by the Mohegan Tribe of Indians of Connecticut are each located in southeastern Connecticut, approximately 460 miles and 480 miles from Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel, respectively.

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To a lesser extent, SGC competes with Casino Rama, which is north of Toronto and located approximately 150 miles and 240 miles from Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel, respectively.

There are also numerous casinos in Atlantic City, New Jersey (approximately 480 miles and 430 miles from the Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel, respectively) with which SGC competes.

New Market Entrants

New York State Indian Gaming Operations

Despite the exclusivity in Western New York provided by the Compact, SGC’s casinos face competition in New York State from both Indian and non-Indian gaming operations. The Compact allows New York State to permit the Tuscarora Indian Nation and the Tonawanda Band of Seneca Indians to obtain the right to include gaming devices in a compact without abrogating the exclusivity provisions of the Compact, so long as either tribe locates its proposed gaming facility either on its existing reservations or more than 25 miles from a Nation gaming facility. In addition, New York State could allow other Indian gaming facilities to be located within our area of exclusivity, in which case the state would forfeit its right to receive exclusivity fees for the types of Class III games in such competitor’s facility on which we pay an exclusivity fee under the Compact. Of the seven federally recognized Indian tribes or nations in New York State other than the Nation, only the St. Regis Mohawk Tribe and Oneida Indian Nation of New York have signed compacts with New York State to open casinos.

In October 2001, New York State authorized six new casinos to be run by Indian tribes in the state, each of which was to be permitted to feature Class III slot machines. The validity of the legislation authorizing these casinos was upheld by the New York Court of Appeals in Dalton v. Pataki, et al. and Karr v. Pataki, et al.  Three of these authorized casinos are operated by SGC (Seneca Niagara Casino and Hotel, Seneca Allegany Casino and Hotel and Seneca Buffalo Creek Casino). It was expected that the other three casinos, including the casino planned by the St. Regis Mohawk Tribe, would be located in Sullivan and Ulster Counties in the Catskill region, approximately 325 miles and 275 miles from Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel, respectively.  In February 2007, the Governor of New York State approved plans for a casino by the St. Regis Mohawk Tribe to be located in Sullivan County, New York. The Tribe had proposed a $600 million Class III gaming facility, to be located immediately adjacent to Monticello Raceway in Sullivan County, but in January 2008, the U.S. Department of the Interior rejected the Tribe’s right to operate a casino in the Catskills.

In April 2009, the Sullivan County Legislature approved an agreement with the Nation, the Seneca Catskills Gaming Corporation, and Sullivan County to develop a Class III Gaming casino on 63 acres of land in the town of Thompson. The casino development at this property, if ultimately permitted and carried out, would likely be a property of the Nation separate from SGC. Such a property would be approximately 325 miles and 275 miles from Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel, respectively.

New York State previously reached settlement agreements, subject to numerous contingencies, with the following tribes for potential Class III gaming operations to be located in Sullivan or Ulster counties in the Catskills region of New York State: the St. Regis Mohawk Tribe, the Seneca-Cayuga Tribe of Oklahoma, the Cayuga Nation of New York, the Oneida Tribe of Indians of Wisconsin and the Stockbridge-Munsee Community Band of Mohican Indians. However, as a result of the U.S. Supreme Court’s decision in City of Sherrill, NY v. Oneida Indian Nation of New York, 414 U.S. 661 (2005), the then Governor withdrew pending legislation and land claim settlements with the Seneca-Cayuga Tribe of Oklahoma, the Cayuga Nation of New York, the Oneida Tribe of Indians of Wisconsin and the Stockbridge-Munsee Community Band of Mohican Indians.

New York State Racetracks

In 2001, New York State awarded licenses to eight racetracks to operate VGMs. In April 2005, the Governor of the State of New York signed a law providing race tracks with a larger share of proceeds from VGMs and extending VGM authorization through 2017. This law also allows for up to eight additional VGM venues in New York State.  These eight licenses would be awarded in a competitive bid process to the state-owned Off-Track Betting Corporation or other operators which may be located in our primary and secondary markets.

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The New York State government currently is considering legislation that would allow the state’s video-lottery gaming facilities to expand hours and add electronic table games, such as roulette and blackjack. The facilities can now stay open for 16 hours a day or 112 hours a week, but the proposal would allow larger tracks, such as Saratoga Gaming and Raceway and Yonkers Raceway, to stay open for 140 hours per week and smaller tracks, such as Batavia Downs, to stay open for 128 hours per week.  Such expanded hours would allow tracks the opportunity to keep their video-lottery parlors open 24 hours a day for multiple days each week. The New York legislature, during its 2009 regular session, failed to enact new legislation to expand hours and legalize electronic table games at racinos in the state, including Empire City in Yonkers and Aqueduct in Queens. The State Lottery has taken the legal position that electronic versions of roulette, baccarat, blackjack and craps are legal in the state and may be introduced as early as 2010. Additionally, Governor Patterson reopened the bidding process for a developer to build and operate video lottery terminals, or VLTs, at Aqueduct Racetrack, with that facility expected to open within two years. In May 2009, seven developers filed new bids to develop the Aqueduct facility. The Shinnecock Indian Nation on Long Island also is reportedly under active consideration for federal recognition by the Bureau of Indian Affairs, or BIA, and has plans for gaming, if recognized, and has reservation land taken into trust. Several federally-recognized Indian tribes, including the Nation, as well as the St. Regis Mohawk Tribe and the Stockbridge-Munsee Tribe of Wisconsin have renewed plans to pursue tribal casinos in the Catskills region of New York, with newly announced support from New York’s state officials and the state’s congressional delegation. Any development at this property, if ultimately permitted and carried out, would likely be a property of the Nation separate from SGC.

In January 2004, Sportsystems (now known as Delaware North Gaming & Entertainment) opened a 1,300 VGM facility at Saratoga Raceway in Saratoga Springs, New York.  Shortly thereafter, in February 2004, Finger Lakes Gaming and Race Track in Farmington, New York, opened its video gaming facility.  Fairgrounds Gaming and Raceway in Hamburg, New York, opened its 27,000 square foot gaming facility in March 2004 and offers approximately 1,000 VGMs. Monticello Raceway in Monticello, New York, opened a gaming facility in June 2004, and offers approximately 1,500 VGMs.  Batavia Downs, in Batavia, New York, opened in May 2005 and offers approximately 600 VGMs.  The New York Racing Association has also granted a right to operate VGMs at the Aqueduct racetrack in Queens, New York, approximately 425 miles and 380 miles from Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel, respectively. After suspending work on the 4,500 VGM facility from August to December 2003, the project was scheduled for completion by mid-2005; however, as of September 30, 2006 , the project had been stopped again and VGMs were not in operation at the Aqueduct racetrack. Recently, in September 2007, the State of New York solicited proposals for an experienced gaming operator to manage and operate the VGM’s at the Aqueduct facility, and formally awarded such rights to Delaware North Companies in October 2008.  Delaware North announced plans to develop a complex with 4,500 VGM’s, in addition to a series of restaurants, hotels, conference and retail amenities. Delaware North later withdrew from the development, and the State of New York is again soliciting proposals from experienced gaming companies to develop a similar type facility. In October 2006, Vernon Downs Racetrack in Vernon, New York, approximately 200 miles and 245 miles from Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel, respectively, commenced operation of a gaming facility offering 1,000 VGM’s, and in July 2006, Tioga Downs, located approximately 190 miles and 160 miles from Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel, respectively, opened a 750 VGM facility in central New York.  Both Vernon Downs and Tioga Downs are operated by Nevada Gold, Inc.  Finally, Yonkers Raceway near Manhattan, New York, features approximately 5,300 VGMs, in addition to multiple dining amenities and an entertainment lounge.

Pennsylvania Casinos and Racetracks

On July 5, 2004, the Governor of Pennsylvania signed a bill permitting up to an aggregate of 61,000 slot machines at 14 locations in Pennsylvania.  The Pennsylvania legislation permits up to 5,000 slot machines at seven proposed or existing racetracks, five stand-alone gaming facilities with up to 5,000 slot machines each, and 500 slot machines at two existing resorts.  On December 20, 2006, the Pennsylvania Gaming Control Board awarded 11 permanent slot licenses, each allowing up to 5,000 slot machines. Six licenses were earmarked for proposed or existing racetracks (which had already received conditional licenses in early 2006) and another five licenses were awarded for stand-alone gaming facilities.

One of the six “racetrack” licenses was awarded to MTR Gaming Group to build and operate Presque Isle Downs in Erie, Pennsylvania. This facility opened in late February 2007 and operates approximately 2,000 slots, and includes dining and entertainment options that include a steakhouse, a buffet and four lounges.  Presque Isle Downs is located approximately 120 and 80 miles from Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel, respectively.  In addition, one of the licenses for the stand-alone facilities was awarded in the Pittsburgh, Pennsylvania area, a secondary market for Seneca Allegany Casino and Hotel, and an outer market for Seneca Niagara Casino and Hotel. Rivers Casino opened in August 2009 and operates approximately 3,000 slots, and includes dining and entertainment options that include a steakhouse, a buffet and

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four lounges.  Rivers Casino is located in Pittsburgh, approximately 240 and 190 miles from Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel, respectively.

During 2009, the Pennsylvania state legislature added tax revenue from the legalization of table games to the proposed state budget. Currently the state only offers legalized slot machine gambling. Table games legislation remains under negotiation in the state legislature. This legislation may also increase the number of slot machines allowed at “resort casinos” in Pennsylvania.

Ohio Casinos

On November 3, 2009, the voters of Ohio approved a proposal for a casino to be located in each of Ohio’s four largest cities: Cleveland, Cincinnati, Toledo, and Columbus. A casino in Cleveland will increase competition at Seneca Allegany Casino and Hotel, likely commencing in 2012. Cleveland is approximately 180 and 220 miles from the Seneca Allegany Casino and Hotel and the Seneca Niagara Falls Casino and Hotel, respectively. Casinos in Cincinnati, Toledo and Columbus will increase competition to a lesser extent, as these cities are at least 290 and 300 miles from the Seneca Allegany Casino and Hotel and the Seneca Niagara Falls Casino, respectively.

Massachusetts Gaming

In the Commonwealth of Massachusetts, new legislation, which has been reported to have the support of new legislative leadership and the continued support of the Governor, is expected to be introduced and debated in the fall of 2009 to permit state-licensed gaming at multiple locations throughout the state, and state regulators are reportedly drafting regulations to administer the new system, if enacted. Also, the federally-recognized Mashpee Wampanoag Tribe continues to pursue the establishment of its initial reservation in Mashpee and Middleboro, as well as a large gaming facility in Middleboro. In April 2009, the tribe announced that the casino will likely be smaller and may take longer than originally anticipated. If gaming facilities are permitted to operate in Massachusetts, these facilities could compete with us in our broader regional market.

Non-Gaming Competition

We also face competition from other non-gaming leisure activities and destinations in the geographic areas referred to above.

If we are unable to compete successfully, our business, financial condition and results from operations could be materially adversely affected. See “Item 1A — Risk Factors — We compete with casinos, other forms of gaming and other resort properties. If we are unable to compete successfully, we may not be able to generate sufficient cash flows to fund our operations or meet our obligations as they become due.”

Seasonality

We have generally observed seasonal increases in gaming activity during the spring and summer months and decreases in gaming activity during the winter months associated with inclement weather.

Class III Gaming Compact

The Nation’s Compact with New York State provides the Nation with the right to establish and operate three Class III gaming facilities in Western New York. The Compact grants the Nation the exclusive right to operate specifically defined gaming devices, including slot machines, within a 10,500 square-mile, geographic area in Western New York, beginning on Route 14, approximately 30 miles East of Rochester, and extending westerly throughout New York State. In exchange for this exclusivity, the Nation pays exclusivity fees to New York State based on a percentage of the slot machine net drop (money dropped into the machines after payout but before our expenses). The exclusivity payment was 18% for the first four years, has been 22% for years 5-7 (beginning January 1, 2007), and will be 25% for the remainder of the term (beginning January 1, 2010). The exclusivity payment to New York State was approximately $106.0 million, $115.7 million, $103.4 million, $79.1 million and $67.4 million for Fiscal 2009, 2008, 2007, 2006 and 2005, respectively.  If New York State breaches the exclusivity arrangement by, for example, allowing a person or entity to operate Class III slot machines within the zone of exclusivity, then the State forfeits the exclusivity fees as to Class III slot machines. The Compact allows New

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York State to permit the Tuscarora Indian Nation and the Tonawanda Band of Seneca Indians to obtain the right to include gaming devices in a compact without abrogating the exclusivity provisions of the Compact, so long as either tribe locates its proposed gaming facility either on its existing reservations or more than 25 miles from a gaming facility site authorized by the Compact. The Compact provides that the Nation may acquire property and establish a gaming facility in the City of Niagara Falls within an approximate 50 acre area designated as land to be developed by the Nation. Seneca Niagara Casino and Hotel is located on land within this designated area on lands held in restricted fee pursuant to the Seneca Nation Lands Claim Settlement Act of 1990, or SNLCSA. The two additional Class III gaming facilities include the Seneca Allegany Casino and Hotel on the Nation’s Allegany Territory and the Seneca Buffalo Creek Casino on the Nation’s Buffalo Creek Territory.  The Compact is in effect until December 9, 2016, and will automatically renew for an additional period of seven years unless either party objects in writing, or it is terminated as a result of any of the following: (1) the repeal of the Indian Gaming Regulatory Act of 1988, or IGRA; (2) the Nation’s adoption of a referendum revoking the Nation’s authority to conduct Class III gaming; or (3) either the Nation or the State commits a “Material Breach” as defined by the Compact.

Employees

As of September 30, 2009, SGC employed approximately 3,640 employees.  Of those, the Seneca Niagara Casino and Hotel employed approximately 2,510 employees; the Seneca Allegany Casino and Hotel employed approximately 1,080 employees; and the Seneca Buffalo Creek Casino temporary facility employed 50 employees.

We consider relations with our employees to be good. None of our employees are currently members of any labor union or similar organization.

Seneca Gaming Corporation and the Nation

Seneca Gaming Corporation.  SGC was established by the Nation in August 2002 for the purpose of developing, constructing, leasing, operating, managing, maintaining, promoting and financing Nation gaming facilities, including without limitation any Class III gaming facilities established in accordance with the Compact.  Our Class II operations were transferred to the Nation as of January 1, 2005.  For further discussion of our former Class II operations, see “Status of Former Class II Operations,” above.  SGC is a governmental instrumentality of the Nation and was established by the Nation pursuant to Nation law by a duly enacted resolution of the Council. SGC is wholly-owned by the Nation for economic and governmental purposes and shares in the Nation’s sovereign immunity, which can be waived if the board of directors adopts a resolution waiving immunity in a specific situation and such waiver is approved by the Nation’s Council. SGC is managed by a board of directors with seven members, not less than five of whom must be enrolled members of the Nation. The Nation’s Council alone has the power to appoint and remove SGC’s directors.

There are four subsidiaries under the control, operation and management of SGC: Seneca Niagara Falls Gaming Corporation, established in August 2002 to finance, develop, and operate the Nation’s gaming facility in Niagara Falls, New York; Seneca Erie Gaming Corporation, established in August 2003 to finance, develop, and operate the Nation’s gaming facility in Erie County, New York; Seneca Territory Gaming Corporation, established in September 2003 to finance, develop, and operate the Nation’s gaming facilities on the Nation’s Allegany or Cattaraugus Territories; and Lewiston Golf Course Corporation, established in June 2007 to develop and operate SGC’s golf course amenity in Lewiston, New York. Seneca Massachusetts Gaming Corporation, formerly a wholly-owned subsidiary of SGC, formed on August 11, 2007 to explore development opportunities related to gaming in the Commonwealth of Massachusetts, was dissolved by the Nation’s Council on April 11, 2009, and its assets were transferred to SGC. SNFGC operates the Seneca Niagara Casino and Hotel located on the Nation’s Niagara Falls Territory in Niagara Falls, New York. STGC operates the Nation’s Seneca Allegany Casino and Hotel located in the City of Salamanca, New York on the Nation’s Allegany Territory. SEGC operates the temporary Seneca Buffalo Creek Casino located in the City of Buffalo, New York, on the Nation’s Buffalo Creek Territory.  SGC’s current corporate structure is as follows:

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Each of SGC’s subsidiaries is required to make periodic financial reports and submit an annual report to the SGC board of directors. The SGC board of directors is required to make quarterly and annual reports to the Council regarding the financial condition of the companies, including but not limited to, significant problems and accomplishments, future plans, and such other information as the Council deems pertinent. The SGC board of directors is also required to provide monthly reports to Council regarding certain budgetary and related matters.  The members of the boards of directors of SGC and its subsidiaries are the same.

Seneca Gaming Authority and Class III Gaming Ordinance.  SGC’s gaming operations are subject to the supervision and regulation of the Seneca Gaming Authority, or SGA, which was established by Nation ordinance and is responsible for overseeing the regulation of all of the Nation’s gaming operations. The Nation’s Class III gaming ordinance, or Gaming Ordinance, which provides regulatory authority to SGA for the Nation’s Class III gaming, was originally adopted on August 1, 2002, subsequently amended on November 16, 2002 and approved by the National Indian Gaming Commission, or NIGC, on November 26, 2002. The Nation amended the gaming ordinance to extend SGA’s regulatory authority to include jurisdiction over Class II gaming. The amended ordinance was further amended in August 2006 to incorporate certain clarifications into the ordinance.  This amendment was approved by the NIGC as of November 6, 2006.  On June 9, 2007, the Nation enacted a new gaming ordinance with certain site-specific language applicable to the Buffalo Creek Territory.  This action was taken in connection with ongoing litigation challenging the Nation’s right to conduct Class III gaming on the Buffalo Creek Territory (Citizens Against Casino Gambling v. Kempthorne), in which the judge had vacated the NIGC’s approval of the Nation’s 2002 gaming ordinance as it pertained to gaming on the Buffalo Creek Territory.  The amended Ordinance was submitted to the NIGC on June 9, 2007 and was identical to the prior approved ordinance except that the new ordinance’s definition of “Indian Lands” contains a site specific legal description of the Buffalo Creek Territory.  This site-specific Ordinance applicable to the Buffalo Creek Territory was approved by the NIGC on July 2, 2007. In response to ongoing events in connection with the Buffalo Creek litigation, on July 16, 2008, the Nation submitted a further amended gaming ordinance to the NIGC, so that the NIGC could consider the applicability of new Department of the Interior regulations concluding that lands like Buffalo Creek Territory are exempt from Section 20 of IGRA’s prohibition on gaming. The NIGC approved the amended ordinance on January 20, 2009.  This approval has been challenged in a lawsuit brought by Citizens Against Casino Gambling in Erie County.  For additional information regarding the status of, and litigation relating to, our Seneca Buffalo Creek Casino, see discussion of “CACGEC III” under “Item 3 – Legal Proceedings”.

The SGA consists of five commissioners selected by the Nation and is responsible for, among other things, monitoring and regulating the standards of operation and standards of management of all authorized Class III gaming, protecting the assets and integrity of casino operations, overseeing casino surveillance, monitoring the compliance of the Nation’s gaming activities with external accounting and audit control procedures, and supervising the licensure of all employees and vendors of the Nation’s gaming activities. The SGA functions independently and autonomously from the Council in all matters within its purview. The SGA’s statutory authority confers on it responsibility only for regulatory matters relating to the Nation’s gaming activities, and leaves SGC (or one of its subsidiaries) responsible for the day-to-day management and operation of the Nation’s Class III gaming activities.  In practice, the SGA’s regulatory approach and practices drive significant management decisions, command a material portion of the time of SGC’s senior management and have had a material effect on SGC’s

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ability to recruit and retain personnel.  For further discussion of the Seneca Gaming Authority, see “Regulation of the Nation, Seneca Gaming Corporation and its Subsidiaries,” below and “Item 1A — Risk Factors.”

The Nation

The Seneca Nation of Indians is a federally recognized, self-governing Indian nation operating under a Constitution originally adopted in 1848 and most recently amended in 1993. The Nation’s current total enrolled population is approximately 7,800. The Seneca Nation is one of the Six Nations of the Iroquois Confederacy that consists of the Seneca, Cayuga, Onondaga, Oneida, Mohawk and Tuscarora nations. The members of the Nation originally lived in the area between the Genesee River and Seneca Lake in the Finger Lakes region of New York. Today, the Seneca Nation holds title to five distinct Territories in Western New York State, including land in Niagara Falls and Buffalo and land set aside by the 1794 Treaty of Canandaigua: the Allegany, Cattaraugus and Oil Spring Territories. These three Territories designated by the Treaty encompass parts of four counties in New York State: Allegany, Cattaraugus, Chautauqua, and Erie counties. The Oil Springs Territory is 640 acres, or one square mile, of land located 43 miles southeast of the Cattaraugus Territory and 24 miles east of the Allegany Territory. The Allegany Territory is composed of 31,097 acres and includes the City of Salamanca which is located within its territorial boundaries. The Cattaraugus Territory is 35 miles north of Allegany and encompasses 22,012 acres of land. In addition, approximately 24 acres of land (of the approximate 50 acre parcel identified in Appendix I of the Compact) in Niagara Falls and approximately nine acres of land in Erie County have been converted into restricted fee lands pursuant to the SNLCSA. By operation of federal law, these lands and other parcels that may be acquired in the future pursuant to the SNLCSA, whether in Niagara Falls or Erie County, are subject to restrictions against alienation, constitute Indian country subject to the jurisdiction of the Nation, and qualify as gaming eligible Indian lands pursuant to IGRA.  For further discussion of land acquisitions in Niagara Falls, New York, see “Niagara Falls Real Estate Acquisitions,” above.

Nation Governance

The Nation came into formal existence in 1848 when the chief system was replaced by a constitution with elected officials. The Nation’s Constitution provides for three branches of government: executive, legislative and judicial. The Nation holds an election every two years for its three Executive Branch officers: the President, the Treasurer and the Clerk. These officers alternate between the two principal Territories, Cattaraugus and Allegany, every two years. The next election of the Executive Branch Officers will be held in November 2010. The Legislative Branch, or the Council, has sixteen members, of which eight members are elected from each of the two principal Territories. Each Councilor is elected to a four-year term, which is staggered.  The most recent election of eight Council members was held in November 2008, with the next election to occur in November 2010.

Nation Governmental Operations

The Nation currently has administrative departments located on both the Allegany and Cattaraugus Territories. The Nation’s programs include tribal administration functions as well as a wide array of community services, including health, environmental, education, recreation and community planning. In order to provide efficient services to the communities, many departments have offices located on both Territories. The tribal administrative executive offices are housed in the two central administration buildings located on the Allegany and Cattaraugus Territories: the G.R. Plummer and the William Seneca Buildings, respectively. The other Nation organizational departments are located in buildings adjacent to the main tribal administration building or surrounding area.

Nation Businesses

The Nation enterprises, subdivisions of the Nation’s government, are responsible for the various economic development initiatives undertaken by the Nation other than SGC and its subsidiaries. The Nation enterprises are currently comprised of the following: Seneca Construction Management Corporation, Seneca Gaming & Entertainment, Seneca One Stop, Seneca-Iroquois National Museum, and Highbanks Campground. The Nation has also formed Seneca Catskills Gaming Corporation, as a wholly-owned governmental instrumentality of the Nation, to develop prospective gaming operations in the Catskills region of New York State. None of these enterprises is a part of SGC or its subsidiaries or otherwise contributes to its revenue. Individual Seneca entrepreneurs also operate their own businesses on Nation lands. The businesses include, but are not limited to, restaurants, retail shops, hotels, gas stations, and Internet-based businesses.

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Tribal Employment Rights Ordinance

Our operations are subject to the Nation’s Tribal Employment Rights Ordinance, or TERO, which requires the granting of a preference to enrolled Nation members and other Native Americans in the hiring of employees.  Prior to February 14, 2009, it granted a similar preference in the engagement of certain vendors and contractors.  TERO is implemented by a five member commission, appointed by the Nation’s Council.  With respect to employees, TERO requires that we give preference to qualified Indians in all hiring, promotion, training and all other aspects of employment.  With respect to vendors, TERO required that, in awarding contracts or subcontracts for supplies, services, labor and materials in an amount in excess of $5,000 where the majority of the work will occur on Nation lands, we give preference to Indian-owned firms when contracts are subject to a competitive bidding process and the bids of the Indian-owned firms fall within a defined percentage or amount of the lowest responsive bid (ranging from 1% when the lowest responsive bid is $7 million or more, to $9,000 when the lowest responsive bid is $100,000 or less), in each case as specified in TERO.  The Nation, through its TERO Commission, possessed the sole power to determine and certify whether and to what extent a firm is “Indian-owned”.

Regulation of the Nation, Seneca Gaming Corporation and its Subsidiaries

The conduct of our Class III gaming activities on Nation lands is subject to multiple levels of regulation, including regulation by the Nation through its Gaming Ordinance (and the SGA, which has regulatory jurisdiction over the Nation’s gaming activities) and regulation by the State of New York, through the New York State Racing and Wagering Board and the New York State Police, each in accordance with the Compact between the Nation and New York State. See “Certain Material Agreements of SGC and the Nation—Nation-State Gaming Compact” for further discussion of the regulatory authority of the SGA and New York State gaming officials.  The federal government also oversees Indian gaming generally pursuant to IGRA and exercises regulatory oversight through the NIGC. The Department of Justice also possesses authority to enforce IGRA and the Gambling Devices Act, 15 U.S.C. § 1171-78, more commonly known as the Johnson Act. The following description of the regulatory environment in which gaming takes place and in which SGC and its subsidiaries operate is intended as a summary and is not a complete recitation of all relevant laws. Moreover, because the regulatory environment is dynamic and evolving, it is impossible to predict how certain provisions will ultimately be interpreted or applied or how they may affect SGC and its subsidiaries. Changes in such laws or regulations could, under certain circumstances, have a material adverse effect on the operations of SGC and its subsidiaries.

Seneca Nation Law and Legal Systems

Applicability of State and Federal Law

The Nation is an Indian tribal government with certain sovereign powers. The Nation’s ability to enact its own laws and regulations to regulate gaming activities derives from the exercise of the Nation’s inherent sovereign powers, recognized by the United States in the 1794 Treaty of Canandaigua and in subsequent federal court opinions. It is the position of the United States, and federal courts have uniformly held, that Indian nations are subject to certain federal laws and certain state laws where federal law so prescribes. It is therefore possible that a federal agency with whose regulations the Nation may not be currently complying could object to such noncompliance. If an agency sought to enforce compliance, such agency action and any resultant federal court ruling could result in the disruption of construction, operations, and related activities of SGC, which events would have a material adverse effect on our financial results.

Waiver of Sovereign Immunity; Court Jurisdiction; Exhaustion of Tribal Remedies

Indian nations enjoy sovereign immunity from unconsented suit similar to that of the states and the United States. An Indian nation and its wholly-owned tribal entities, such as SGC and its subsidiaries, share in the Indian nation’s sovereign immunity, but may formally waive their sovereign immunity with respect to suits against them. The Nation and SGC, respectively, granted a limited waiver of sovereign immunity and consent to suit in connection with the senior notes issued by SGC in 2004 and 2005, including suits against SGC to enforce its obligation to repay the senior notes.  Courts have held waivers of sovereign immunity to be effective, if given explicitly with proper authorization.

The remedies available against an Indian nation also depend, at least in part, upon the jurisdiction of courts and the rules of comity and doctrines requiring initial exhaustion of remedies in tribal tribunals and, as to some judicial remedies, the particular nation’s consent to jurisdictional provisions contained in the disputed agreements. The U.S. Supreme Court has

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ruled that state courts do not have jurisdiction over actions involving Indians or Indian tribes and arising within Indian country unless Congress specifically grants jurisdiction to those courts. Congress has allowed the courts of New York State to hear certain matters involving Indians and occurring on Indian lands in New York, although each situation must be analyzed on a case-by-case basis.

The Nation’s judiciary branch is comprised of separate Peacemaker, Appellate, and Surrogate Courts. The Nation court system has its own clerks and facilities and has heard numerous civil cases.

The U.S. Supreme Court has held that, under certain circumstances, where a tribal court exists, the remedies and jurisdictional questions in that forum must first be exhausted before the claim can properly be heard by federal courts that would otherwise have jurisdiction. We sometimes waive our right to require exhaustion of tribal court remedies.  For example, the Nation and SGC, respectively, consented to the jurisdiction of the federal and New York State courts in connection with any action by the trustee to enforce the senior notes and operative documents related thereto and agreed to waive the requirement of exhaustion of tribal court remedies. However, it is not clear that such a waiver would be effective. Generally, where a dispute as to the existence of jurisdiction in the tribal forum exists, the tribal court must first rule as to the limits of its own jurisdiction. In the event that a waiver of tribal court jurisdiction is held to be ineffective, the recipient of the waiver (e.g., the trustee and holders of the senior notes) may be required to enforce their rights and remedies against the Nation or SGC in Nation court. In addition, unless the decisions of the Nation court violate some applicable state or federal law, if any, there may be no effective right to appeal such decisions in state or federal court.

The Federal Court of Appeals for the Second Circuit (which has appellate jurisdiction over federal district courts located in New York State) has ruled that if a non-member of a tribe asserts a claim against a tribe based on state or federal law, and not on tribal law, and no prior tribal court proceedings are pending, a federal court generally may adjudicate the claim without requiring the plaintiff to exhaust tribal court remedies. A similar ruling by a New York State appellate court concluded that the state trial court properly proceeded with adjudicating a dispute rather than requiring the plaintiff to exhaust tribal court remedies where the dispute was among tribal members involving issues not concerning internal tribal affairs, the state court had jurisdiction concurrent with tribal courts over the issues and no case was currently pending before the tribal court. Courts in other states and federal judicial circuits have reached different conclusions, and it cannot be certain whether a court in New York State will defer exercising jurisdiction over a case until after the appropriate tribal court has had an opportunity to adjudicate the matter, even where there is a waiver of exhaustion of tribal court remedies.

The Indian Gaming Regulatory Act of 1988

IGRA

All gaming activities on Indian lands are subject to IGRA. Congress enacted IGRA in order to establish a system for regulating gaming activities on Indian lands. IGRA’s purpose is to provide a statutory basis for the operation of gaming by Indian tribes as a means of promoting tribal economic development, self sufficiency, and strong tribal governments. Congress simultaneously sought to shield Indian gaming from organized crime and other corrupting influences, to ensure that the Indian tribe is the primary beneficiary of the gaming operation and that gaming is conducted fairly and honestly by both the operator and players.

Classes of Gaming

IGRA divides gaming into three classes, each of which is regulated differently. Class I gaming encompasses social games solely for prizes of minimal value or traditional forms of Indian gaming engaged in by individuals as a part of, or in connection with, tribal ceremonies or celebrations. Such gaming is subject to the exclusive jurisdiction of the tribes and is not subject to regulation under IGRA. Class II gaming includes bingo, poker and similar games, and is subject to tribal regulation and federal oversight by the NIGC. Class III gaming, the most heavily regulated of the three classes, encompasses all other forms of gaming, and includes slot machines, casino games, banking card games, dog racing, and lotteries. Class III gaming is lawful only if it is (1) authorized by a tribal ordinance, (2) located in a State that permits such gaming for any purpose by any person, organization, or entity, and (3) conducted in conformance with a Tribal-State compact.

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National Indian Gaming Commission

The NIGC, an independent executive agency located in the Department of the Interior, is vested with regulatory authority over gaming activities on Indian lands pursuant to IGRA and its implementing regulations. The NIGC is charged with the administration and enforcement of IGRA. The NIGC regulates gaming by Indian tribes, in order to shield tribes from organized crime and other corrupting influences, to ensure that the Indian tribe is the primary beneficiary of the gaming operation and that gaming is conducted fairly and honestly by both the operator and players. Congress aimed to make gaming a means of promoting tribal economic development, self-sufficiency, and strong tribal governments. To carry out these goals, Congress gave the NIGC substantial power, including the authority to initiate enforcement actions, close tribal gaming operations and levy civil fines. Moreover, the NIGC has authority to issue regulations governing gaming activities of Indian lands, review and approve Class II and Class III gaming ordinances, review and approve management agreements for tribal gaming operations, conduct investigations and generally monitor Indian gaming activities. IGRA also provides for federal criminal penalties for illegal gaming on Indian land and for theft from Indian gaming facilities. The Secretary of the Interior retains certain responsibilities under IGRA, such as the approval of tribal-state compacts and approval of per capita distribution plans.

NIGC Regulations Implement Certain Provisions of IGRA

These regulations govern, among other things, the submission and approval of tribal gaming ordinances or resolutions, and require an Indian tribe to have the sole proprietary interest in and responsibility for the conduct of gaming activities. Pursuant to NIGC regulations, tribes are required to issue gaming licenses only under certain articulated standards, to conduct or commission financial audits of their gaming enterprises, to perform or commission background investigations of primary management officials and key employees and to maintain facilities in a manner that adequately protects the environment and the public health and safety. NIGC regulations also set forth a review procedure for tribal licensing of all gaming operation employees and require tribes to report certain specified information, including information derived from background investigations, to the NIGC.  On August 24, 2005, the United States District Court For The District of Columbia in Colorado River Indian Tribes vs. National Indian Gaming Commission, ruled “that the [IGRA] does not confer upon the NIGC the authority to issue or enforce [minimum internal control standards] for Class III gaming.”  Accordingly, the Court declared unlawful the minimum internal control standards as applied to Class III gaming.  On October 26, 2006, the D.C. Circuit Court of Appeals unanimously upheld this decision finding that the Indian Gaming Regulatory Act does not grant the NIGC power to impose operational standards on Class III gaming.

On November 18, 2005, Senate Indian Affairs Committee Chairman McCain (R-AZ) introduced S. 2078, the Indian Gaming Regulatory Act Amendments of 2005.  S. 2078 makes a number of amendments to IGRA, including authorizing the NIGC to promulgate “regulations addressing minimum internal control standards for class II gaming and class III gaming activities.”  The import of this particular amendment would have been to essentially overrule the Colorado River Indian Tribes vs. National Indian Gaming Commission decision.

Tribal-State Compacts

Under IGRA, Class III gaming activities are lawful on Indian lands only if such activities are conducted in conformance with a Tribal-State gaming compact. A Tribal-State gaming compact is the product of negotiation by a tribe and a state which sets the terms by which the tribe may conduct Class III gaming. IGRA contemplates that states and tribes will utilize the compacting process to address public policy issues of mutual concern. IGRA provides a representative list of the types of provisions that may be included in a Tribal-State gaming compact. Among other things, Congress sought through the compact process to accommodate significant governmental interests of the states. At the same time, IGRA’s compacting process affords reciprocal protection for the significant governmental interests of tribes by requiring a state to negotiate over a form of Class III gaming as long as the state permits it for any purpose by any person. The mechanism for entering into a Tribal-State gaming compact is set forth in IGRA.

The Nation’s Compact was executed on August 18, 2002, and deemed approved by the Secretary of the Interior on October 25, 2002 pursuant to IGRA. After taking effect on December 9, 2002, when notice was published in the Federal Register, the Compact authorized the Nation to own and operate three Class III gaming facilities, two then off-Territory in the City of Niagara Falls and in Erie County, New York, and one on the already existing Nation Territory.

Tribal-state gaming compacts have been the subject of litigation in a number of states, including New York State. In 1996, the U.S. Supreme Court ruled in the case of Seminole Tribe of Florida v. Florida that the provision of IGRA that permits Indian

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tribes to sue in federal court to force states to negotiate tribal-state gaming compacts in good faith is unconstitutional, as applied to an unconsenting state, by virtue of the Eleventh Amendment to the U.S. Constitution.

In 1999, certain legislators, organizations and individuals opposed to casino gambling brought a lawsuit: (1) challenging the validity of the 1993 gaming compact between New York State and the St. Regis Mohawk Tribe under the separation of powers provisions in the New York State Constitution; and (2) seeking a declaration that New York State Constitution’s general prohibition on gambling covers Las Vegas-style gaming at casinos operated pursuant to IGRA by Indian tribes on their Territory lands in New York. The plaintiffs also requested an injunction prohibiting New York State from expending any money in furtherance of the gaming compact.  The lawsuit was made moot by the subsequent approval by the New York State Legislature of the 1993 compact.

In October 2001, the New York Legislature passed Chapter 383 of the Laws of 2001, or Chapter 383, which allowed former Governor Pataki to enter into a gaming compact with the Seneca Nation of Indians and to enter into gaming compacts with other Indian tribes for the establishment of three additional casinos in the Catskills. Chapter 383 also approved the installation of VGMs at certain racetracks.

In January 2002, two actions were filed in the Supreme Court of the State of New York, County of Albany, challenging the validity of Chapter 383. The actions were captioned Dalton v. Pataki, et al, and Karr v. Pataki, et al. Plaintiffs sought a judgment declaring the legislation unconstitutional and enjoining its implementation. These two cases were consolidated and we refer to both cases below as Dalton v. Pataki.

On July 17, 2003, the New York Supreme Court dismissed the plaintiffs’ complaints in Dalton v. Pataki and held that Chapter 383 is constitutional. The plaintiffs appealed the Court’s decision to the Third Department of the New York Supreme Court’s Appellate Division and oral argument was held on December 16, 2003. On July 7, 2004, a five-judge panel issued its Opinion and Order declaring the provisions of Chapter 383 authorizing the additional compacts constitutional, the licensing of VGMs to racetracks to be unconstitutional due to the impermissible revenue distribution scheme set forth therein and the provision of Chapter 383 authorizing the Division of the Lottery to participate in the multi-state lottery constitutional.

On May 3, 2005, the New York Court of Appeals held all of Chapter 383 (including the licensing of VGMs to racetracks) to be constitutional. In July 2005, the New York Court of Appeals, the State’s highest court, denied a motion to rehear the case.  Appellants filed a writ of certiorari seeking review by the United States Supreme Court.  On November 28, 2005, the United States Supreme Court denied the writ.

Indian Lands

In order for the Nation to conduct gaming pursuant to the Compact, it must do so on Indian lands within its jurisdiction. Indian lands include, but are not limited to, lands located within the boundaries of an Indian territory. For non-territory lands to qualify as Indian lands under IGRA, the land must be either held in trust by the United States for the benefit of any Indian tribe or individual, or held by any Indian tribe or individual subject to restriction by the United States against alienation, and the tribe must exercise governmental power over those lands.

As it relates to lands that have been acquired in trust or restricted fee status for gaming purposes after October 17, 1988, IGRA generally prohibits gaming on such lands unless certain conditions are met. As relevant to date, lands that are acquired as part of a settlement of a land claim are exempt from the prohibition against gaming on lands acquired after the enactment of IGRA.

Pursuant to the Compact, the Nation may acquire property and establish gaming facilities in the City of Niagara Falls within the boundaries of the approximate 50 acre area of land described in Appendix I of the Compact and designated as land to be developed by the Nation in connection with its gaming facilities. The Compact also authorizes the Nation to establish a gaming facility in Erie County, New York and one on the already existing Nation Territory. Moreover, the Compact authorizes the Nation to use funds appropriated under the SNLCSA to acquire parcels of land in Niagara Falls and Erie County for gaming purposes.  See “Certain Material Agreements of SGC and the Nation—Nation-State Gaming Compact,” below.

In 1990, Congress enacted the SNLCSA which provides the Nation with fair compensation for use of its land and for the

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impact on the Nation from prior lease arrangements in the City of Salamanca, New York. The funds appropriated under the SNLCSA are available for the Nation to acquire land which could be placed into restricted fee status. The SNLCSA provides that unless the Secretary of the Interior determines that lands acquired pursuant to the SNLCSA should not be subject to restrictions against alienation, such lands shall be held in restricted fee status by the Nation.

As determined by the Secretary of the Interior in connection with the approval of the Compact, the Nation will have jurisdiction over lands placed into restricted fee status pursuant to the SNLCSA. Indeed, lands placed in restricted status pursuant to the SNLCSA are held in the same legal manner as existing Nation lands are held and thus, subject to the Nation’s jurisdiction. In addition, the Secretary determined that lands placed into restricted fee status pursuant to the SNLCSA are Indian lands as defined by IGRA, and the Nation is authorized to use such land for gaming purposes pursuant to IGRA, because such lands will be acquired as part of a settlement of a land claim.

In the future, if and when all funds appropriated under the SNLCSA have been used by the Nation, the Nation may acquire lands in fee status and then request such lands to be held in trust on its behalf through the land-into-trust process.  To the extent the Nation acquires lands in trust in the future, it is noted that the land-into-trust process, as compared to the restricted fee process under the SNLCSA, will be much more cumbersome and lengthy.

The Nation (as opposed to SGC or its subsidiaries) has acquired approximately 24 acres in Niagara Falls (of the approximate 50 acre area of land described in Appendix I of the Compact) with funds appropriated under the SNLCSA.  On October 3, 2005, the Nation acquired approximately nine acres of land in Erie County with SNLCSA funds.     By operation of federal law, these lands and other parcels that may be acquired in the future pursuant to the SNLCSA (in Niagara Falls or Erie County), are subject to restrictions against alienation, constitute Indian country subject to the jurisdiction of the Nation, and qualify as gaming eligible Indian lands pursuant to IGRA. The Nation’s existing casino and hotel on the Niagara Falls Territory and existing temporary casino on the Buffalo Creek Territory are situated on these lands.

In addition to the two then off-Territory sites in Niagara Falls and Erie County, the Compact also authorizes the Nation to establish a gaming facility on then already existing Nation Territory. The lands upon which the Nation owns, operates and manages its Territory-based Seneca Allegany Casino and Hotel, are located within the Nation’s Allegany reservation boundaries, thus constituting Indian lands eligible for gaming pursuant to IGRA.

Possible Changes in Federal and State Law

Our operations are regulated by Nation laws, the Compact and federal statutes, most notably IGRA.  Changes with respect to any applicable laws potentially could affect our operations.

The Department of the Interior has recently published final regulations effective August 25, 2008 governing the conduct of gaming on lands taken into trust after October 17, 1988.  The regulations on their face do not purport to impair the ability of the Nation and SGC to expand its gaming operations.  Future gaming legislation or court decisions construing the new regulations could adversely impact expansion of SGC gaming operations and the future growth of the Nation’s revenue base. In addition, from time to time, various government officials have proposed taxing Indian casino gaming or otherwise limiting or restricting the conduct of gaming operations by Indian tribes. No assurance can be given that such legislation, if and when enacted by Congress, would not have a material adverse effect on the operations of SGC. If Congress were to enact comprehensive amendments to the IGRA, such legislation could have a material adverse effect on the operations of SGC. In addition, under federal law, gaming on the Nation’s lands may be dependent upon the permissibility under New York State law of certain forms of gaming or similar activities. If New York State were to make various forms of gaming illegal or against public policy (or the courts were to similarly rule), or otherwise to take a legal position adverse to SGC, such actions could have a material adverse effect on our ability to conduct our gaming operations as currently conducted. Moreover, the 1996 U.S. Supreme Court decision in Seminole Tribe of Florida v. Florida may permit a state to avoid or refuse to negotiate amendments to existing compacts such as the Compact.

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Certain Material Agreements of SGC and the Nation

The following summaries of certain material agreements related to our operations, to which the Nation or SGC (or its subsidiaries) is a party, do not purport to be complete and are qualified in their entirety by reference to the agreements summarized herein, which are included as exhibits to this Annual Report on Form 10-K. Capitalized terms used but not otherwise defined herein have the meanings ascribed to such terms in the agreement being summarized (unless otherwise indicated).

Nation-State Gaming Compact

The Nation engages in Class III gaming activities in accordance with the Compact, approved on October 25, 2002. The Compact was negotiated between the Nation and New York State in accordance with the provisions of IGRA applicable to the conduct of Class III gaming operations by Indian tribes. See “The Indian Gaming Regulatory Act of 1988—Tribal-State Compacts,” above.

The Compact provides, among other things, that:

(1)  The Nation may conduct the following games of chance on its lands: baccarat, bang, beat the dealer, best poker hand, blackjack, Caribbean stud poker, chuck-a-luck, craps, gaming devices, hazard, joker seven, keno, let it ride poker, minibaccarat, pai gow poker, pai gow tiles, red dog, roulette, sic bo, super pan, under and over seven, wheel games, casino war, Spanish blackjack, multiple action blackjack, and three card poker. The legality of slot machines pursuant to State law, however, is the subject of ongoing State court litigation. See “The Indian Gaming Regulatory Act of 1988—Tribal-State Compacts,” above. The Compact sets forth specifications describing and governing the operation of each of these types of games by the Nation.

(2)  The Compact provides for the establishment of the SGA, which exercises jurisdiction over and responsibility for the conduct of gaming operations by the Nation. The SGA was established pursuant to the Gaming Ordinance. The New York State Racing and Wagering Board and the New York State Police, collectively, the SGO, act in a concurrent regulatory and oversight role with regard to the Nation’s Class III gaming operations. The SGA is entitled to unfettered access to all areas of the Nation’s gaming facilities including the surveillance room(s), copies of daily inspection reports as well as access to the business and accounting records relating to the Nation’s gaming operations during the course of an investigation. Each Nation Class III gaming operation must provide reasonable office and reserved parking space adjacent to the Class III gaming facilities for the SGO. New York State is empowered to sue to enforce applicable Compact terms and to remedy violations through arbitration or in federal court.

(3)  Law enforcement responsibilities relating to the Nation’s Class III gaming operations are concurrent between the Nation Law Enforcement Agency and the New York State Police as a matter of federal law. Nothing in the Compact alters the jurisdiction of New York State, if any, over Indian land as provided by applicable law. Members of the New York State Police in the course of official duties have unfettered access to all areas of the Class III gaming and auxiliary facilities, subject only to State and federal constitutional limitations. As stated, the Nation Law Enforcement Agency may exercise concurrent authority with that of the New York State Police to maintain public order and safety, to the extent authorized by federal law.

(4)  All gaming employees are required to apply for, and obtain, a valid gaming employee license issued by the SGA, following a fingerprint check by the New York State Division of Criminal Justice Services, a background investigation by the New York State Police, and a suitability determination by the SGO. Applicants must submit a license application to the SGA concerning personal and family history, personal and business references, criminal conviction record, business activities, financial affairs, gaming industry experience, gaming school education and general educational background. The SGA may in specified circumstances suspend, revoke or deny a renewal of any gaming license.

(5)  Any enterprise providing gaming services, gaming supplies or gaming equipment to a Nation Class III gaming operation must hold a current valid gaming service registration issued by the SGA.

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(6)  Any enterprise that provides goods, supplies or services to a Nation Class III gaming operation (other than gaming services, gaming supplies or gaming equipment) in a total amount exceeding $75,000 in a single twelve-month period must be identified to the SGO by the Commission. The SGA cooperates with the SGO in any reasonable investigations deemed necessary by the SGO relating to the fitness of any such enterprise to engage in any business with a Nation Class III gaming operation. The SGO may bar such an enterprise from providing such goods, supplies or services upon a determination of a threat to the effective regulation of Class III gaming or danger of unfair or illegal practices, methods and activities in the conduct of Class III gaming.

(7)  The Nation’s Class III gaming operations must conform with a detailed set of operational and management standards relating to a variety of matters, including accounting, internal controls, operational procedures, surveillance personnel and the handling of cash and credit.

(8)  The Nation must maintain complete and accurate records of all transactions relating to the revenues and costs of its gaming operations. The forms of such accounts must be consistent with generally accepted accounting principles. An annual audit of the financial statements of its gaming operations must be conducted by an independent certified public accountant in a manner consistent with generally accepted auditing standards.

(9)  The Nation reimburses New York State for its costs of oversight under the Compact. Costs include staffing, fringe benefits, overhead costs and non-personal services.

(10)  The Nation prohibits the possession of firearms in its Class III gaming facilities except by persons authorized by law and does not permit persons under the age of 18 to be admitted to any Class III gaming facility or to place any wager, directly or indirectly. The SGA maintains and shares with SGC a list of persons barred from the Class III gaming facilities because of criminal histories or associations posing a threat to gaming integrity or safety.

(11)  As required by IGRA and the Gaming Ordinance, SGC has constructed, maintained, and operated its gaming facilities in a manner that adequately protects the environment and the public health and safety.

(12)  SGC (or its subsidiaries) or the Nation on its behalf maintains liability insurance to compensate injured patrons of Class III gaming facilities. The Nation has established procedures for the adjudication of compensation for tort claims by patrons of Class III gaming facilities.

(13)  Except for disputes concerning the games and activities permitted under the Compact, the Nation and New York State have established binding arbitration as a method of resolution of all other disputes concerning compliance with and interpretation of Compact provisions.

(14)  The terms and conditions of the Compact may be modified or amended by written agreement of both parties. If the State agrees to permit any other Indian nation or tribe to conduct a Class III game or activity which has not been authorized under the Compact, the State shall notify the Nation, which may then conduct such game or activity upon adoption of the State’s specifications regarding such game or activity.

(15)  The Compact is in effect until December 9, 2016, to be renewed for an additional period of seven years unless either party objects in writing, or terminated as a result of any of the following: (1) repeal of IGRA; (2) the Nation adopts a referendum revoking the Nation’s authority to conduct Class III gaming; or (3) either the Nation or the State commits a Material Breach (as defined by the Compact).

(16)  The Compact in no way waives the right of the Nation to request negotiations for amendment or modification to the Compact with respect to a Class III game or activity which is to be conducted on Nation lands but which is not permitted under the provisions of the Compact.

(17)  Except as specifically provided in the Compact, neither New York State nor the Nation waived its sovereign immunity by entering into the Compact.

The President of the Nation and the Governor of New York signed the Compact on August 18, 2002, and, on October 25,

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2002, by operation of law, the Compact was deemed approved in accordance with IGRA. The Compact took effect on December 9, 2002, when notice was published in the Federal Register.

Assignment and Plan of Distribution Agreement

On May 5, 2004, SGC entered into an Assignment and Plan of Distribution Agreement, or the Assignment Agreement, with the Nation. Pursuant to this agreement, the Nation has adopted a plan of distribution providing that in the event of the dissolution or final liquidation of any of these entities, the net liquidation or dissolution proceeds shall be distributed to SGC. The Nation further assigned to SGC all of its rights, title and interest in and to these proceeds. The Nation entered into the Assignment Agreement because even though SNFGC, STGC, and SEGC are owned by SGC, according to the charters of these subsidiaries, in the event of a liquidation or dissolution of a subsidiary, the Nation, and not SGC, would be entitled to receive the net proceeds of the liquidation or dissolution after all liabilities and obligations of the subsidiary have been paid, satisfied and discharged. Both the Nation and SGC also waived their respective sovereign immunity from unconsented suit and consent to suit in accordance with the Assignment Agreement. Remedies against the Nation are generally limited to specific performance. However, in the event a subsidiary has distributed net liquidation or dissolution proceeds to the Nation and the Nation has not transferred those proceeds to SGC, the Nation may be required to transfer an amount equal to the liquidation proceeds to SGC, or if such remedy is not available, SGC may file a claim for money damages in an amount no greater than the amount of net liquidation or dissolution proceeds not assigned. Any such money damages for which the Nation is liable are only payable from assets held by the Nation, SGC, SNFGC, STGC, or SEGC related to the gaming business, other than real property held in trust for the Nation by the United States.

Distribution Agreement

On April 27, 2007, SGC entered into a Distribution Agreement, or the Distribution Agreement, among the Nation, the Seneca Nation of Indians Capital Improvements Authority, or the Authority, SGC and Wells Fargo Bank, National Association as Trustee.

The Authority is a wholly-owned governmental instrumentality of the Nation formed for the purpose of financing, developing and operating such capital improvements of the Nation as the Nation designates.  On April 27, 2007, the Authority sold an aggregate principal amount of $159.5 million Special Obligation Bonds to Merrill Lynch Pierce Fenner & Smith Incorporated, as the initial purchaser, for sale to qualified institutional buyers and investors outside the United States in accordance with Regulation S.  The Special Obligation Bonds were issued in two series, one designated Series 2007-A (tax exempt) in the aggregate principal amount of $119.5 million (consisting of $32.8 million aggregate principal amount due 2016 bearing interest at a rate of 5.25%, or Series 2007-A Bonds due 2016, and $86.7 million aggregate principal amount due 2023 bearing interest at a rate of 5.00%, or Series 2007-A Bonds due 2023) and the other designated Series 2007-B (taxable) in the aggregate principal amount of $40.0 million due 2013 bearing interest at a rate of 6.75% (the Series 2007-B Bonds), together with the Series 2007-A Bonds due 2016 and Series 2007-A Bonds due 2023, or collectively, the 2007 Bonds).  The 2007 Bonds are governed by an Indenture between the Authority and the Trustee dated April 27, 2007.  The 2007 Bonds are not obligations of SGC or the Nation, and the issuance of the 2007 Bonds will not give rise to an obligation of the Nation to levy any tax or make any appropriation for their payment.

The Authority intends to pay the debt service on the 2007 Bonds from certain Distributions (as defined in the Distribution Agreement) that SGC makes to the Nation and, at the direction of the Nation and the Authority, pays directly to the Trustee under the Distribution Agreement.  The Distribution Agreement obligates SGC, subject to any contractual restrictions applicable to it, to make monthly Distributions to the Nation at the times and in the amounts necessary to enable the Authority to pay the debt service on the 2007 Bonds as required under the Authority’s Indenture.  The Distribution Agreement obligates the Nation not to permit SGC to enter into any contractual obligation that would materially adversely affect SGC’s ability to comply with its monthly Distribution obligations under the Distribution Agreement (with it agreed that contractual obligations comparable to those in SGC’s Indenture would not be deemed to violate or breach this covenant). Existing or future contractual obligations of SGC, SGC’s obligations to make the Excluded Payments (as defined in the Distribution Agreement) as well as the results of SGC’s and its consolidated subsidiaries’ gaming operations, may prevent SGC from making these Distributions at the times and in the amounts sufficient to enable the Authority to pay the principal of, premium, if any, and interest on the 2007 Bonds when due whether on their scheduled payment dates, by earlier call for redemption, by acceleration or otherwise.  The Distribution Agreement provides that neither the Trustee nor the Authority’s bondholders will have any recourse under the Distribution Agreement to any revenues, assets or property of SGC or its subsidiaries should SGC fail to comply with its Distribution obligations.  The 2007 Bonds are limited recourse obligations of the Authority payable solely from the Trust Estate (as defined in the Distribution Agreement), consisting almost exclusively

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of the Pledged Distributions (as defined in the Distribution Agreement).  Recourse to the Nation with respect to its obligations is limited to the Pledged Distributions.

Interest on the 2007 Bonds, commencing on the issue date, was payable on December 1, 2007, and continues to be payable on each June 1 and December 1 thereafter.

The Authority is required to redeem the 2007 Bonds at a redemption price equal to the principal amount of the 2007 Bonds to be redeemed plus accrued and unpaid interest to the redemption date, on June 1 and December 1 in the years and in the principal amounts set forth below, subject to certain credits as provided for in the Authority’s Indenture.

Mandatory Sinking Fund Redemption

Series 2007-A Bonds Due December 1, 2016

Series 2007-A Bonds Due December 1, 2023

Series 2007-B Bonds Due December 1, 2013

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The Authority is required to redeem all of the 2007 Bonds, at a redemption price equal to their principal amount plus accrued and unpaid interest, on the last semi-annual payment date preceding (i) the termination date of the Nation’s Compact with New York State pursuant to paragraph 4(c) thereof or (ii) the termination of such Compact pursuant to paragraph 4(d) thereof.

The Authority is required to redeem all of the Series 2007-A Bonds in the event of a Determination of Taxability (generally, a final determination by the Commissioner or any District Director of the Internal Revenue Service or a determination by a court of competent jurisdiction that interest on the Series 2007-A Bonds is not excludable from gross income for federal income tax purposes under Section 103 of the Code), on a date selected by the Authority but not later than 180 days after such Determination of Taxability, at a redemption price equal to the principal amount thereof plus accrued and unpaid interest to the date of redemption plus a premium equal to 4% of the principal amount thereof.

The Authority may, at its option, redeem at any time on June 1, 2017 and on any business day thereafter, all, or from time to time any part of, the Series 2007-A Bonds due 2023 prior to maturity, at a redemption price equal to 100% of the principal amount of the respective Series 2007-A Bonds due 2023 then being redeemed plus accrued and unpaid interest to the redemption date.

There is no optional redemption of the Series 2007-A Bonds due 2016 or of the Series 2007-B Bonds.

Senior Secured Revolving Loan Agreement

Effective June 19, 2008, SGC entered into a $50.0 million Senior Secured Revolving Loan Agreement, which matured on June 19, 2009, subject to extension by SGC at its election (at any time after the six months anniversary of the closing date and prior to June 19, 2009) for an additional period of six months provided that no default or event of default existed at the time of election.  On June 11, 2009, SGC exercised this election, extending the maturity date to December 19, 2009, and on December 18, 2009, further extended the maturity date to December 31, 2011.

SGC’s obligations under the Senior Secured Revolving Loan Agreement are secured by substantially all gaming and related assets (including substantially all gaming revenues) not constituting real property or improvements.  SGC’s obligations are guaranteed by SNFGC, STGC, SEGC and LGCC.  The guarantors’ obligations are secured by substantially all of each guarantor’s gaming and related assets (including substantially all gaming revenues) not constituting real property or improvements. The Senior Secured Revolving Loan Agreement contains certain financial covenants requiring minimum consolidated EBITDA of $160 million (on a rolling 12 month basis) and compliance with certain leverage and coverage ratios. The Senior Secured Revolving Loan Agreement also contains additional customary covenants, including covenants restricting the incurrence of additional indebtedness, the creation of additional liens and the disposition of assets.

As of September 30, 2009, at SGC’s request, the lender under the Senior Secured Revolving Loan Agreement had issued letters of credit totaling $19.6 million, $13.2 million of which may be drawn upon to fund the purchase of certain parcels within the 50 acre “footprint” described in the Compact with New York State and designated for ownership by the Nation, with the remaining $6.4 million issued in connection with worker’s compensation policies and certain other contracts, as required.  On October 29, 2008, SGC borrowed $20.0 million under the Senior Secured Revolving Loan Agreement.  During the third quarter of Fiscal 2009, SGC paid $20.0 million on the Senior Secured Revolving Loan Agreement, leaving no outstanding balance at September 30, 2009.

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Effective December 18, 2009, SGC amended the Senior Secured Revolving Loan Agreement to further extend the maturity date until December 31, 2011. Amounts borrowed under the Amended Senior Secured Revolving Loan Agreement continue to bear interest at either one, three or six-month LIBOR plus one and one quarter percent (1.25%), or the prime rate (as reported in The Wall Street Journal) plus one quarter percent (0.25%), with any outstanding principal balance to be paid by, or on, the new maturity date.  The $50.0 million commitment reduces in tandem with any reduction in the letter of credit requirement imposed by the Empire State Development Corporation, or ESDC (as described below in “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operation — Liquidity and Capital Resources — Other Commitments”), up to an aggregate reduction of $10.0 million.  The Amended Senior Secured Revolving Loan Agreement requires that SGC maintain all of its deposit and investment accounts with the lender, subject to limited exceptions for certain existing accounts.

SGC’s obligations under the Amended Senior Secured Revolving Loan Agreement continue to be secured by substantially all gaming and related assets (including substantially all gaming revenues) not constituting real property or improvements. SGC’s obligations are guaranteed by SNFGC, STGC, SEGC and LGCC, and the guarantors’ obligations continue to be secured by substantially all of each guarantor’s gaming and related assets (including substantially all gaming revenues) not constituting real property or improvements. The Amended Senior Secured Revolving Loan Agreement modifies certain of the financial covenants contained in the Senior Secured Revolving Loan Agreement, including reducing the minimum consolidated EBITDA covenant from $160 million to $145 million (on a rolling 12 month basis) while modifying the total leverage ratio (of total funded debt to EBITDA) to a limit of 3.5 to 1.0.  The Amended Senior Secured Revolving Loan Agreement also continues to contain additional customary covenants, including covenants restricting the incurrence of additional indebtedness, the creation of additional liens and the disposition of assets. As of September 30, 2009, SGC was in compliance with all covenants in the Senior Secured Revolving Loan Agreement, and as of the date of this Annual Report, SGC was in compliance with all such covenants in the Amended Senior Secured Revolving Loan Agreement.

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Item 1A.  Risk Factors

In addition to the other information in this Annual Report, including the matters addressed in “Cautionary Note Regarding Forward-Looking Statements” on page 1, the following risk factors should be carefully considered in evaluating Seneca Gaming Corporation and our business because such risk factors may have a significant impact on our business, operating results and financial condition. As a result of the risk factors set forth below and elsewhere in this Annual Report, actual results could differ materially from those projected in any forward-looking statements. We may amend, supplement, or add to the risk factors described below from time to time in future reports with the SEC.

Risks Relating to Our Indebtedness

We have substantial indebtedness and other financial obligations which could adversely affect our financial condition and prevent us from fulfilling our obligations, including our senior notes.

We have substantial indebtedness and significant fixed debt service obligations in addition to our operating expenses. As of September 30, 2009, we had $500.0 million of 7-¼ % senior notes outstanding. The Indenture governing the senior notes permits us and our subsidiaries to incur additional debt in certain, limited circumstances. If we incur additional debt in the future, the related risks could increase.

In connection with an April 2007 issuance of $159.5 million of bonds by a governmental instrumentality of the Nation (the “Authority Bonds”), we, subject to any contractual obligations applicable to us, are obligated, pursuant to a distribution agreement governing our distribution obligations with respect to the Authority Bonds (the “Distribution Agreement”), to make monthly distributions to the Nation at the times and in the amounts necessary to pay the debt service on such Authority Bonds.  The foregoing distribution obligations are in addition to distribution commitments to the Nation relating to Compact exclusivity fees, Head Lease payments and certain regulatory and shared services expenses.  If we become obligated or committed to make additional distributions or payments to the Nation in the future, the related risks could increase.

Effective June 19, 2008, SGC entered into a $50.0 million Senior Secured Revolving Loan Agreement, which matured on June 19, 2009, subject to extension by SGC at its election (at any time after the six months anniversary of the closing date and prior to June 19, 2009) for an additional period of six months provided that no default or event of default existed at the time of election.  On June 11, 2009, SGC exercised this election, extending the maturity date to December 19, 2009.

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Effective December 18, 2009, SGC amended the Senior Secured Revolving Loan Agreement to further extend the maturity date until December 31, 2011. Amounts borrowed under the Amended Senior Secured Revolving Loan Agreement continue to bear interest at either one, three or six-month LIBOR plus one and one quarter percent (1.25%), or the prime rate (as reported in The Wall Street Journal) plus one quarter percent (0.25%), with any outstanding principal balance to be paid by, or on, the new maturity date.  The $50.0 million commitment reduces in tandem with any reduction in the letter of credit requirement imposed by ESDC (as described below), up to an aggregate reduction of $10.0 million.  The Amended Senior Secured Revolving Loan Agreement requires that SGC maintain all of its deposit and investment accounts with the lender, subject to limited exceptions for certain existing accounts.

SGC’s obligations under the Amended Senior Secured Revolving Loan Agreement continue to be secured by substantially all gaming and related assets (including substantially all gaming revenues) not constituting real property or improvements. SGC’s obligations are guaranteed by SNFGC, STGC, SEGC and LGCC, and the guarantors’ obligations continue to be secured by substantially all of each guarantor’s gaming and related assets (including substantially all gaming revenues) not constituting real property or improvements. The Amended Senior Secured Revolving Loan Agreement modifies certain of the financial covenants contained in the Senior Secured Revolving Loan Agreement, including reducing the minimum consolidated EBITDA covenant from $160 million to $145 million (on a rolling 12 month basis) while modifying the total leverage ratio (of total funded debt to EBITDA) to a limit of 3.5 to 1.0.  The Amended Senior Secured Revolving Loan Agreement also continues to contain additional customary covenants, including covenants restricting the incurrence of additional indebtedness, the creation of additional liens and the disposition of assets.

Our high level of indebtedness, our distribution obligations and commitments could have important consequences to holders of our senior notes and significant adverse effects on our business. For example, it could:

·                  increase our vulnerability to general adverse economic and industry conditions or a downturn in our business;

·                  limit our ability to obtain additional debt financing for working capital, capital expenditures, development projects or other purposes;

·                  require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness or to meet our distribution obligations, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, development projects and other general business purposes;

·                  limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and

·                  place us at a competitive disadvantage compared to our competitors that have less debt and other financial obligations and/or more financial resources.

If our indebtedness and distribution obligations and commitments affect our operations in these ways, our business, financial condition and results of operations could suffer, making it more difficult for us to satisfy our financial obligations.

Despite current indebtedness levels and restrictive covenants, we may incur additional indebtedness in the future, which would intensify our leverage risks.

Although the Indenture governing the senior notes, the Distribution Agreement, and the Senior Secured Revolving Loan Agreement restrict us and our subsidiaries from incurring additional indebtedness, these restrictions are subject to exceptions and qualifications in certain, limited circumstances.  If we and/or our subsidiaries incur additional indebtedness, the risks that they and we now face as a result of our indebtedness could intensify.  If our financial condition or operating results deteriorate, our relations with our creditors and lenders may be materially and adversely affected.

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.

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Our ability to make payments on the senior notes and fulfill our other financial obligations will depend on our ability to generate cash flow from our current and future operations. Our ability to generate sufficient cash flow to satisfy our financial obligations will depend on our future operating performance, which is subject to many economic, competitive, regulatory and business factors that are beyond our control. If we are not able to generate sufficient cash flow to service our financial obligations, we may need to refinance or restructure such obligations, sell assets or reduce or delay capital investments, or seek to raise additional capital. Additionally, our senior notes mature in 2012, and we will need to refinance or satisfy this debt as it matures.  For the following reasons, among others, these measures may not be available to us on reasonable terms or at all, or, if available, they may not be adequate to enable us to satisfy our financial obligations, including the senior notes:

·                  our ability to incur additional debt will be limited by the covenants of the Indenture governing the senior notes, covenants of the Distribution Agreement and covenants under our $50.0 million Amended Senior Secured Revolving Loan Agreement;

·                  the Indenture governing the senior notes and the loan agreement governing our Amended Senior Secured Revolving Loan Agreement include covenants which limit our ability to create additional liens on or sell our assets and the covenants of the Distribution Agreement limit our ability to sell our assets;

·                  unlike non-governmental businesses, we are prohibited by law from generating cash through an offering of equity securities; and

·                  based on general economic or market conditions, including if current market conditions and the instability in the global credit markets and the deterioration in the public debt markets continue, our ability to refinance on favorable terms may be limited.

If our cash flow is insufficient and we are unable to raise additional capital, we may not be able to satisfy our financial obligations, including making payments on our senior notes.

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’ secured indebtedness.

Holders of SGC’s and the restricted subsidiary guarantors’ secured indebtedness will have claims that are prior to the claims of holders of senior notes to the extent of the value of the assets securing the other indebtedness. The Indenture governing the senior notes permits certain secured indebtedness. The senior notes are effectively subordinated to all of that secured indebtedness. In the event of any distribution or payment in any foreclosure, dissolution, winding-up, liquidation, reorganization, or other bankruptcy proceeding, holders of SGC’s and the restricted subsidiary guarantors’ secured indebtedness will have prior claim to those assets that constitute their collateral. Holders of the senior notes will participate ratably with all holders of SGC’s and the restricted subsidiary guarantors’ unsecured indebtedness that is deemed to be of the same class as the senior notes, and potentially with all of SGC’s and the restricted subsidiary guarantors’ other general creditors, based upon the respective amounts owed to each holder or creditor, in the remaining assets. In any of the foregoing events, we cannot assure senior note holders that there will be sufficient assets to pay amounts due on the senior notes. As a result, holders of senior notes may receive less, ratably, than holders of secured indebtedness.

As of September 30, 2009, the net amount of the consolidated indebtedness of SGC was approximately $497.4 million.

Effective June 19, 2008, SGC entered into a $50.0 million Senior Secured Revolving Loan Agreement, which matured on June 19, 2009, subject to extension by SGC at its election (at any time after the six months anniversary of the closing date and prior to June 19, 2009) for an additional period of six months provided that no default or event of default existed at the time of election.  On June 11, 2009, SGC exercised this election to extend the maturity date to December 19, 2009.  As of September 30, 2009, at SGC’s request, the lender under the Senior Secured Revolving Loan Agreement had issued letters of credit totaling $19.6 million, $13.2 million of which may be drawn upon to fund the purchase of certain parcels within the 50 acre “footprint” described in the Compact with New York State and designated for ownership by the Nation, with the remaining $6.4 million issued in connection with worker’s compensation policies and certain other contracts, as required.  On October 29, 2008, SGC borrowed $20.0 million under the Senior Secured Revolving Loan Agreement.  During the third

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quarter of fiscal year 2009, SGC paid $20.0 million on the Senior Secured Revolving Loan Agreement, leaving no outstanding balance at September 30, 2009.  The Loan Agreement contains certain financial and non-financial covenants including restricting the incurrence of additional indebtedness, the creation of additional liens and the disposition of assets. SGC’s obligations under the Senior Secured Revolving Loan Agreement are secured by substantially all gaming and related assets (including substantially all gaming revenues) not constituting real property or improvements.  SGC’s obligations are guaranteed by SNFGC, STGC, SEGC and LGCC.  The guarantors’ obligations are secured by substantially all of each guarantor’s gaming and related assets (including substantially all gaming revenues) not constituting real property or improvements.

Effective December 18, 2009, SGC amended the Senior Secured Revolving Loan Agreement to further extend the maturity date until December 31, 2011. Amounts borrowed under the Amended Senior Secured Revolving Loan Agreement continue to bear interest at either one, three or six-month LIBOR plus one and one quarter percent (1.25%), or the prime rate (as reported in The Wall Street Journal) plus one quarter percent (0.25%), with any outstanding principal balance to be paid by, or on, the new maturity date.  The $50.0 million commitment reduces in tandem with any reduction in the letter of credit requirement imposed by ESDC (as described below), up to an aggregate reduction of $10.0 million.  The Amended Senior Secured Revolving Loan Agreement requires that SGC maintain all of its deposit and investment accounts with the lender, subject to limited exceptions for certain existing accounts.

SGC’s obligations under the Amended Senior Secured Revolving Loan Agreement continue to be secured by substantially all gaming and related assets (including substantially all gaming revenues) not constituting real property or improvements. SGC’s obligations are guaranteed by SNFGC, STGC, SEGC and LGCC, and the guarantors’ obligations continue to be secured by substantially all of each guarantor’s gaming and related assets (including substantially all gaming revenues) not constituting real property or improvements. The Amended Senior Secured Revolving Loan Agreement modifies certain of the financial covenants contained in the Senior Secured Revolving Loan Agreement, including reducing the minimum consolidated EBITDA covenant from $160 million to $145 million (on a rolling 12 month basis) while modifying the total leverage ratio (of total funded debt to EBITDA) to a limit of 3.5 to 1.0.  The Amended Senior Secured Revolving Loan Agreement also continues to contain additional customary covenants, including covenants restricting the incurrence of additional indebtedness, the creation of additional liens and the disposition of assets.

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 financial obligations, including the senior notes.

SGC conducts substantially all of its operations through its restricted subsidiaries. Accordingly, SGC relies on dividends from its restricted subsidiaries to provide funds necessary to meet its obligations, including the payment of principal and interest on the senior notes. The ability of any restricted subsidiary to pay dividends or make cash distributions to SGC may be contractually restricted. If SGC is unable to access the cash flows from its restricted subsidiaries, SGC may have difficulty meeting its financial 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.

SGC and the restricted subsidiary guarantors are liable exclusively for the payment of the senior notes. The Nation is not obligated for the payment of the senior notes. The assets of the Nation and its affiliates other than SGC and the restricted subsidiary guarantors will not be available to pay the senior notes. Therefore, the senior note holders’ rights as creditors in a bankruptcy, liquidation or reorganization or similar proceeding would be limited to the assets of SGC and the restricted subsidiary guarantors and the senior note holders would have no right to the assets of the Nation or its other affiliates.

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.

We issued the senior notes pursuant to the Indenture. In addition, in connection with our issuance of the senior notes, the Nation entered into the Nation Agreement with the Trustee pursuant to which the Nation agreed not to take certain actions with respect to us while the senior notes were outstanding. References to the “Nation Agreement” are to the Nation Agreement as amended on May 23, 2005. On May 5, 2004, the Nation entered into an assignment and plan of distribution

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agreement, or the Assignment Agreement, with SGC pursuant to which the Nation assigned to SGC the Nation’s rights to the net proceeds in the event of a liquidation or dissolution of SNFGC, STGC or SEGC and pursuant to the plan of distribution, the net liquidation or dissolution proceeds of such entities shall be distributed by such entities directly to SGC. See “Item 1 — Business—Certain Material Agreements of SGC and the Nation—Assignment and Plan of Distribution Agreement.” Under federal law, we and the Nation have sovereign immunity and may not be sued without our and its consent, respectively. In the Indenture governing the senior notes, we do, and, in the Nation Agreement and the Assignment Agreement, the Nation does, grant a limited waiver of sovereign immunity and consent to suits to interpret or enforce the Indenture governing the senior notes, and the other agreements entered into in connection with the respective offerings involving the senior notes. This waiver does not extend to all possible claims or remedies that a holder of the senior notes might allege or seek against us or the Nation. Specifically, the waiver limits available remedies to specific performance in most cases and limited money damages equal to the amount of a payment made in prohibition of the Indenture governing the senior notes or to the amount of the net liquidation or dissolution proceeds not assigned to SGC; provided, that, such money damages are only payable from assets held by the Nation, SGC, SNFGC, STGC, SEGC or other restricted subsidiary and used in connection with a “related business” (as defined in the Indenture), other than real property held in trust for the Nation by the United States. In the event that a New York court would find that specific performance is not an available remedy, the trustee and the holders of the senior notes may not have an adequate remedy against the Nation under the Nation Agreement and the Assignment Agreement. Furthermore, in the event that the Nation’s or our limited waiver of sovereign immunity is held to be unenforceable, the trustee and the holders of the senior notes could be precluded from judicially enforcing their rights and remedies under the senior notes, the Indenture governing the senior notes, the Nation Agreement, and the Assignment Agreement.

Although we are subject to federal securities laws and could be liable with respect to any civil or criminal enforcement action brought by the United States government, we and the Nation have not waived our sovereign immunity from private civil suits, including for violations of the federal securities laws. Accordingly, the holders of the senior notes may not have any remedy against us or the Nation for violations of the federal or state securities laws if we raise sovereign immunity as an affirmative defense and it is accepted by the applicable court of law.

Uncertainty exists as to whether a federal or state court would have jurisdiction in an action related to the senior notes.

Obtaining jurisdiction over an Indian tribe and tribal instrumentalities, such as the Nation and us, can be difficult. Often, a commercial dispute with an Indian tribe or tribal instrumentality cannot be heard in federal court because the typical requirements for federal jurisdiction are absent. The failure to satisfy the requirements for federal jurisdiction occurs because there is generally no federal law question involved and there is no diversity of citizenship because an Indian tribe is not considered to be a citizen of a state for purposes of obtaining federal diversity jurisdiction.

The extent to which state courts will assume jurisdiction over disputes involving Indian tribes varies from state to state. The senior notes, the Indenture governing the senior notes and the related agreements are governed by the laws of New York State. There is conflicting case law on the issue of whether state courts can assert jurisdiction over disputes with Indian tribes or tribal instrumentalities. Federal law provides that the state courts of New York have jurisdiction over civil matters involving Indians.  However, it is possible that neither a federal nor a state court would accept jurisdiction to resolve a matter involving the senior notes and the holders of the senior notes may have no legal recourse to a state or federal court.

Under certain legal doctrines, a federal court or state court otherwise having jurisdiction may decline to hear a matter involving an Indian tribe and instead defer the matter for disposition in a tribal court or other tribal proceedings. For matters subject to the waiver of sovereign immunity by the Nation and us, the Nation and we have waived our rights to have these matters resolved in any tribal court or other proceeding of the Nation. There is case law, however, suggesting these rights may not be waived. The Nation has a tribal court system, and a federal or state court may defer to such Nation courts if, contrary to the waiver of sovereign immunity by us and the Nation, we or the Nation seek or allege our or their right to seek tribal proceedings for resolution of a dispute related to the senior notes. The Nation court system is different from federal and state civil courts. For example, there is no requirement that a judge be a lawyer and the Nation’s highest court, the Supreme court, is comprised of the sixteen Nation Councilors who are the elected Councilors to the Nation’s Council, the governing body of the Nation, and the Nation’s President. The Nation courts may reach a different conclusion than the federal or state courts would and this may have a material adverse effect on the rights of the senior note holders.

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Additionally, depending on the particular claim asserted, certain disputes may be required to be heard in Nation courts.  For example, the U.S. Supreme Court has held that claims under the federal Indian Civil Rights Act can only be brought in tribal courts, and lower federal and state courts have held, on occasion, that tribal law may only be interpreted in tribal courts.

Additionally, any non-Nation court judgment requiring satisfaction or enforcement within Nation territories may require that an order for such enforcement be issued by Nation courts.  Nation courts do not have specific rules related to granting full faith and credit to judgments of courts of the United States or New York State, except to the extent that an application for an order of attachment is made in the Nation courts and federal law requires the Nation courts to give full faith and credit to such a judgment.

Accordingly, holders of senior notes or the trustee under the Indenture governing the senior notes may have difficulty bringing suits against the Nation and us in federal or state court.

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.

We may have the right to cause senior note holders to dispose of their senior notes, or to redeem their senior notes, if regulations are promulgated pursuant to which their ownership of the senior notes is determined to be unsuitable by the Seneca Gaming Authority or the New York State Racing and Wagering Board. In such event, the redemption price will be the lowest of the amount paid for the senior notes, the principal amount of the senior notes and the then current fair market value of the senior notes, which means the senior note holders could fail to receive their anticipated return on their investments.  Our ability to make such a redemption will be dependent upon our financial condition at the time.

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 be repaid from the sale of our assets if we are unable to meet our financial obligations.

It is uncertain whether we or the Nation may be subject to federal bankruptcy laws. Without bankruptcy court protection, other creditors might receive preferential payments or otherwise obtain more than they would have under a bankruptcy court proceeding. If either we or the Nation commence a case under the Bankruptcy Code and the bankruptcy court does not dismiss the case, payments from the debtor would cease. It is uncertain how long payments under the senior notes could be delayed following commencement of a bankruptcy case.

If the guarantees of the senior notes are deemed fraudulent conveyances or preferential transfers, a court may subordinate or void them.

The restricted subsidiary guarantors have incurred substantial debt under the guarantees of the senior notes. The incurrence by the restricted subsidiary guarantors of debt under their guarantees may be subject to review under federal and state fraudulent conveyance laws if a bankruptcy, reorganization or rehabilitation case or a lawsuit, including circumstances in which bankruptcy is not involved, were commenced by, or on behalf of, unpaid creditors of the restricted subsidiary guarantors at some future date. Federal and state statutes allow courts, under specific circumstances, to void guarantees and related liens and require note holders to return payments received from the issuer or the guarantors.

An unpaid creditor or representative of creditors could file a lawsuit claiming that the issuance of guarantees constituted a “fraudulent conveyance.” To make such a determination, a court would have to find that a restricted subsidiary guarantor did not receive fair consideration or reasonably equivalent value for the guarantee, and that, at the time the guarantee was issued, such restricted subsidiary guarantor:

·                  was insolvent;

·                  was rendered insolvent by the issuance of the senior notes;

·                  was engaged in a business or transaction for which its remaining assets constituted unreasonably small capital; or

·                  intended to incur, or believed that it would incur, debts beyond its ability to repay as those debts matured.

If a court were to make such a finding in respect to a restricted subsidiary guarantor’s guarantee, it could void all or a portion of such restricted subsidiary guarantor’s obligations under its guarantee of the senior notes, subordinate the claim in respect

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of its guarantee to its other existing and future indebtedness or take other actions detrimental to holders of the senior notes, including, in certain circumstances, invalidating the guarantees of the senior notes.

The measure of insolvency for these purposes will vary depending upon the law of the jurisdiction being applied. Generally, however, a company will be considered insolvent for these purposes if the sum of that company’s debts is greater than the fair value of all of that company’s property, or if the present fair salable value of that company’s assets is less than the amount that will be required to pay its probable liability on its existing debts as they mature. Moreover, regardless of insolvency, a court could void an incurrence of indebtedness, including the senior notes, if it determined that the transaction was made with intent to hinder, delay or defraud creditors, or a court could subordinate the indebtedness, including the senior notes or the guarantees, to the claims of all existing and future creditors on similar grounds. We cannot determine in advance what standard a court would apply to determine whether we were “insolvent” in connection with the sale of the senior notes.

There is a risk of a preferential transfer if:

·                  a restricted subsidiary guarantor declares bankruptcy or its creditors force it to declare bankruptcy within 90 days (or in certain cases, one year) after a payment on the guarantee; or

·                  a guarantee was made in contemplation of insolvency.

A guarantee could be voided by a court as a preferential transfer. In addition, a court could require holders of senior notes to return any payments made on the senior notes during the 90-day (or one-year) period.

Each guarantee contains a provision intended to limit the restricted subsidiary guarantor’s liability to the maximum amount that it could incur without causing the incurrence of obligations under its guarantee to be a fraudulent conveyance. This provision may not be effective to protect the guarantees from being voided under a fraudulent conveyance law.

SGC and the restricted subsidiary guarantors may not be able to repurchase senior notes upon a change of control.

The Indenture governing the senior notes requires SGC and the restricted subsidiary guarantors to repurchase all outstanding notes at 101% of the principal amount thereof plus accrued and unpaid interest, if any, upon the occurrence of specific kinds of change of control events. SGC and the restricted subsidiary guarantors may not have sufficient funds to purchase the senior notes after a change of control. SGC’s and the restricted subsidiary guarantors’ failure to purchase the senior notes would be a default under the Indenture governing the senior notes.

The Indenture governing the senior notes and the Amended Senior Secured Revolving Loan Agreement contain various covenants and provisions that limit our management’s discretion in the operation of our business.

The Indenture governing the senior notes and the Senior Secured Revolving Loan Agreement include covenants and provisions that, among other things, restrict our ability to:

·                  incur additional debt;

·                  make investments;

·                  create liens;

·                  enter into transactions with affiliates;

·                  sell assets;

·                  merge, consolidate or sell substantially all of our assets; and

·                  make capital expenditures.

The Amended Senior Secured Revolving Loan Agreement further includes certain financial covenants requiring SGC to achieve minimum EBITDA of $160.0 million (on a rolling 12 month basis) and maintain a total leverage ratio (of total funded debt to EBITDA) of not more than 3.5 to 1.0.  All of these restrictive covenants may limit our ability to expand our operations or to pursue our business strategies. Changes in business conditions or results of operations, adverse regulatory developments or other events beyond our control may affect our ability to comply with these and other provisions of the Indenture governing the senior notes. The breach of any of these covenants could result in a default under the Indenture

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governing the senior notes and the Senior Secured Revolving Loan Agreement, which could cause those obligations to become immediately due and payable. If our indebtedness were to be accelerated, we cannot assure you that we would be able to pay such indebtedness.

Risks Relating to our Relationship to the Nation

We are controlled by the Nation and the interests of the Nation may conflict with the interests of senior note holders.

The restricted subsidiary guarantors are wholly-owned, directly or indirectly, and controlled by SGC, which in turn is wholly-owned and controlled by the Nation. Circumstances may occur in which the interests of the Nation, the Council or the members of the Nation could be in conflict with the interests of a holder of the senior notes. In particular, the Nation, the Council or the members of the Nation could make business or other decisions that may affect a senior note holder. For example, the Nation, subject to the restrictions in the Indenture, the Distribution Agreement, and Senior Secured Revolving Loan Agreement, could decide to expand our facilities, incur more debt, increase distributions or other payments to the Nation, dispose of assets or enter into other transactions that, in its judgment, are in its interest, even though these transactions might involve risks to holders of the senior notes, including making it more difficult for us to make payments on the senior notes and for the restricted subsidiary guarantors to guarantee these payments.  Additionally, the Nation’s sovereign interests may result in policies or decisions that may conflict with the interests of the senior note holders. For example, the Nation may determine not to approve a limited waiver of sovereign immunity in connection with a potential commercially favorable transaction between us and a third party, based principally on sovereignty considerations rather than customary commercial considerations, resulting in the loss of that commercially favorable business opportunity. The loss of this opportunity could adversely affect us and, as a result, the 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.

The Nation has a limited number of laws, which primarily consist of the Nation’s constitution, a limited number of ordinances and codes, Council resolutions and judicial interpretations of Nation law. Because the body and scope of the Nation’s laws are not as fully developed as federal and state law, in many instances under Nation law it is difficult to predict how and which laws will be applied. In particular, the Nation has not adopted a corporate code. Therefore, terms used in this Annual Report, the Indenture governing the senior notes and other relevant documents, including, but not limited to, terms such as “liquidation” and “dissolution” that may require application and interpretation of the Nation’s laws may have no defined meanings under those laws or may have meanings different from what one is accustomed to finding under laws with which one is familiar.

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.

As a sovereign government, the Nation is governed by elected officials who have responsibility for the welfare of all Nation members. The Nation’s elected officials appoint the SGC board of directors and retain certain approval authority over certain actions by the SGC board of directors. In making decisions relative to appointment of SGC’s board of directors and certain other aspects of SGC’s gaming business, these officials may consider the interests of their electorate, instead of pure economic or other business factors. Therefore, SGC’s gaming business will not be necessarily operated in the same manner as a private for-profit business, and we cannot assure you that this fact will not materially adversely affect senior note holders.

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.

Based on current interpretation of the Internal Revenue Code of 1986, as amended, or the Code, neither the Nation or SGC is subject to federal income or property taxes. There can be no assurance that Congress will not reverse or modify the exemption for Indian tribes from federal income or property taxation. Efforts have been made in Congress in the past to amend the Code to provide for taxation of the net income of tribal business entities. These efforts have included a House of Representatives bill that would have taxed gaming income earned by Indian tribes as unrelated business income subject to corporate tax rates. Although no such legislation has been enacted, it could be enacted in the future. The imposition of federal

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income tax on our earnings could reduce the amount available to us to fulfill our obligations. As a result, future proposals or amendments in this area could have a material adverse effect on our financial results and ability to fulfill our financial obligations, including the senior notes.

Changes in the membership of the Council, its policies or the Nation’s constitution could adversely affect our operations.

The Nation is governed by a Council, consisting of sixteen members, of which eight members are elected from each of the two principal Nation territories. Councilors are elected to four-year terms, which are staggered. The Nation holds an election every two years for its three executive branch officers: the President, the Treasurer and the Clerk. These officers alternate between the two principal Nation territories, thus ensuring that the occupants of those offices will change at each election. The most recent election of the executive branch officers and eight Council members took place on November 4, 2008. We cannot assure that the current Council, or any subsequently elected Council, will pursue the same agenda or goals as the prior government, in particular with respect to us, our expansion projects, reinvestment philosophy, or regarding compliance with the Compact and our other obligations including the covenants contained in the Indenture. In addition, the Council acts by majority vote and with respect to any issue or policy, a change in views by one or more members could result in a change in the policy adopted by the Council. Changes in the Council or its policies could result in significant changes in our structure or operations or in our planned expansion. In particular, the Council appoints the members of SGC’s board of directors and may remove a member of SGC’s board of directors for cause either upon the recommendation of a majority of SGC’s board of directors, or upon its own initiative with a vote of at least ten Councilors. The term cause has not been defined in SGC’s charter or in Nation law; therefore, it is uncertain how this term will be interpreted. As a result, a change in the membership of Council or in the views of existing members of Council, adverse to the existing board or management could result in a change in SGC’s board of directors and potentially in SGC’s management. Any such changes could adversely affect our business plan or otherwise result in a material adverse effect in our business, financial condition, results from operations or ability to meet our financial obligations, including the senior notes.

Further, while we believe that under the Nation’s constitution, adopted in 1848 and last amended in 1993, a referendum may only be called by the Council, our interpretation of the Nation’s constitution could be incorrect or the constitution may be amended in the future to provide that the Seneca people may call a referendum without the approval of the Council. If the constitution were amended to allow the Seneca people to call for a referendum directly, the Nation may, through the referendum process, adopt laws adversely affecting our business and results of operations.

Risks Relating to our Business

Our business is particularly sensitive to reductions in discretionary consumer spending as a result of downturns in the economy.

Consumer demand for casino hotel properties, such as ours, are particularly sensitive to downturns in the economy and the corresponding impact on discretionary spending on leisure activities. Changes in discretionary consumer spending or consumer preferences brought about by factors such as perceived or the current economic conditions, housing crisis and credit crisis, the impact of high energy and food costs, the increased cost of travel, the potential for continued bank failures, perceived or actual disposable consumer income and wealth, effects of the current recession and changes in consumer confidence in the economy, or fears of war and future acts of terrorism could further reduce customer demand for the amenities that we offer, thus imposing practical limits on pricing and harming our operations.  Even an uncertain economic outlook, such as we are currently experiencing, may adversely affect consumer spending at our gaming facilities and related operations, because consumers tend to spend less in anticipation of ongoing economic challenges or further potential downturns.

We are subject to greater risks than a geographically diverse company due to our location in Western New York, and are particularly susceptible to conditions affecting this region.

We currently rely exclusively on cash flow from Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel and, to a lesser extent, Seneca Buffalo Creek Casino temporary facility to service our financial obligations, including the senior notes. While we expect to continue to expand the geographic scope of our patron base, our Seneca Niagara Casino and Hotel relies primarily on patrons from within a 100-mile radius for its cash flow, Seneca Allegany Casino and Hotel relies

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primarily on patrons from within an 80-mile radius for its cash flow and Seneca Buffalo Creek Casino temporary facility relies primarily on patrons from within a 30-mile radius. Further, any future expansion plans for additional casino operations as permitted by the Compact are limited to Western New York. As a result, in addition to our susceptibility to adverse global and domestic economic, political and business conditions, any economic downturn in, or negative conditions unique to, the Western New York region could have a material adverse effect on our operations. Risks attributable to the geographic concentration of our operations include exposure to the following:

·                  regional economic downturns that would likely reduce disposable income of consumers in the Western New York region, which could result in decreases in the number of patrons visiting our facilities, trip frequency, trip duration, and amounts spent by patrons;

·                  increases in competition in New York or the Northeastern United States and Canada, particularly for day-trip patrons residing in New York State, including the development of new Indian casinos and the establishment of VGM’s and proposed electronic table games at certain racetracks in New York, and slot machines and traditional or electronic table games in Pennsylvania;

·                  impeded access to our facilities due to road construction or closures of primary access routes; and

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

The occurrence of any one of the events described above could cause a material disruption in our business and make us unable to generate sufficient cash flows to fulfill our financial obligations, including the senior notes. Furthermore, we cannot assure you that our property, casualty, terrorism and business interruption insurance will be adequate or available to cover all the risks to which our business and assets may be subject, and such insurance would not apply at all to losses resulting from economic or competition-related risks.

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.

Our casino operations compete with casinos, other forms of gaming and entertainment, and other resort properties located within and outside New York State. We face intense competition in our primary and secondary market areas, in addition to competition from casinos and gaming operations in our broader regional market. New market entrants in New York State, Pennsylvania and elsewhere in the Northeastern United States could also adversely affect our operations and our ability to meet our financial obligations. For a more extensive discussion regarding our competition, see “Item 1 — Business—Market and Competition.”

If we are unable to retain our key personnel, or to fill current vacancies at the positions of Chief Executive Officer, General Manager of the Seneca Niagara Casino and Hotel, and General Counsel, our ability to execute our business strategy could be impaired.

The continued services of our key operating and executive personnel are important to our future success. The loss of the services of such key operating and executive personnel could have an adverse impact on our business, operating results and financial condition. There can be no assurance that the services of such personnel will continue to be made available to us. We do not maintain key person life insurance policies on any of our executives. Additionally, we recently experienced several changes in our executive management team, and have not yet filled vacancies at the positions of Chief Executive Officer, General Manager of the Seneca Niagara Casino and Hotel and General Counsel.   As previously disclosed, SGC announced the termination of its President and CEO, Brian Hansberry, effective April 24, 2009. Additionally, effective September 2, 2009, Rajat Shah, SGC’s Senior Vice President of Corporate Development and General Counsel, was informed that his employment agreement would not be renewed following its expiration on September 30, 2009. Catherine Walker, our Chief Operating Officer, is serving as our principal executive officer.  Our inability to retain our current senior managers or to fill our current senior management vacancies could have a materially adverse effect on our operations.

We could face difficulties in attracting and retaining qualified employees.

The operation of the expanded facilities of Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel and the expected expansion of the temporary Seneca Buffalo Creek Casino will require us to hire additional qualified executives and managers and a significant number of additional skilled employees with gaming and hospitality industry experience and

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qualifications. There can be no assurance that we will be able to recruit, train and retain a sufficient number of additional qualified employees, particularly due to the very small number of workers skilled in the gaming industry that reside in the immediate vicinity of our casinos.

We have limited experience operating casinos and hotels in Western New York.

Our casinos have been in operation since December 31, 2002 (as to the then-Seneca Niagara Falls Casino), May 1, 2004 (as to the then-Seneca Allegany Casino) and July 3, 2007 (as to the Buffalo Creek Casino temporary facility), respectively, and we have limited experience operating our hotels in Niagara Falls and Salamanca, New York. We may experience difficulties in operating multiple casinos and hotels in a limited geographic region. Further, our two hotels and other amenities to our casinos have many of the same risks inherent in the establishment of a new business enterprise because we have limited operating history in those activities. We may not be able to identify timely or to anticipate all of the material risks associated with operating that business or additional casinos. Our lack of operating history in these new ventures may adversely affect our future operating results, ability to generate adequate cash flow and ability to fulfill our financial obligations, including the senior notes.

We may not be successful in opening our golf course in Lewiston, New York in 2010, due to our lack of experience in this business and a variety of other factors, many of which are beyond our control.

We have invested and expect to continue to invest in the development of the Lewiston, New York golf course, Seneca Hickory Stick, by our subsidiary LGCC.  Construction of the course commenced in July 2007, with an anticipated opening in 2010 at an approximate cost of $25.5 million.  LGCC has engaged Kemper Sports Management, Inc. to manage and operate the course on its behalf.

We have no experience opening and operating a golf course, and accordingly, we may not be able to identify or anticipate all of the material risks associated with this business.  There are substantial risks and uncertainties associated with this new line of business.  We may not achieve our initial timetables for opening, and as a result, our profitability or reputation may be harmed.  Once opened, the course may fail to attract the necessary number of patrons to achieve profitability.  In addition to market risks, golf course operations are subject to operating risks such as adverse weather conditions, including heavy prolonged rain, snow, or cold temperatures, blight or other diseases affecting grass or other vegetation, and costs of equipment and supplies.  Failure to successfully manage these risks could affect our future operating results, ability to generate adequate cash flows and ability to fulfill our financial obligations, including the senior notes.

Our business could be affected by weather-related factors and seasonality.

Our results of operations may be adversely affected by weather-related and seasonal factors. Since opening, Seneca Niagara Casino and Hotel’s, Seneca Allegany Casino and Hotel’s and Seneca Buffalo Creek Casino’s gaming revenue have not been materially affected by severe weather conditions, but severe winter weather conditions may deter or prevent patrons from reaching our gaming facilities or undertaking day trips. In addition, some recreational activities, such as tourism, are curtailed during the winter months. Although our cash flow management system assumes seasonal fluctuations in gaming revenue for our casinos to ensure adequate cash flow during expected periods of lower revenue, there can be no assurance that weather-related and seasonal factors will not have a material adverse effect on our operations. Our limited operating history makes it difficult to predict the future effects of seasonality on our business, if any.

Terrorism and war may directly or indirectly harm our business.

The strength and profitability of our business will depend on consumer demand for casino resorts in general and for the type of amenities Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel offer. Changes in consumer preferences or discretionary consumer spending could harm our business. The terrorist attacks of September 11, 2001 and ongoing terrorist and war activities in the United States and elsewhere, have had a negative impact on travel and leisure expenditures, including lodging, gaming and tourism. We cannot predict the extent to which terrorist activities may continue to affect us, directly or indirectly, in the future. An extended period of reduced discretionary spending and/or disruptions or declines in travel, conferences and conventions could significantly harm our operations.

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Risks Relating to Litigation and Regulation

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.

In October 2001, the New York Legislature passed Chapter 383 of the Laws of 2001, or Chapter 383, which allowed former Governor Pataki to enter into a gaming compact with the Nation and to enter into gaming compacts with other Indian tribes for the establishment of three additional casinos in the Catskills. Chapter 383 also approved the installation of VGMs at certain racetracks.

In January 2002, two actions were filed in the Supreme Court of the State of New York, County of Albany, challenging the validity of Chapter 383. The actions were captioned Dalton v. Pataki, et al, and Karr v. Pataki, et al. Plaintiffs sought a judgment declaring the legislation unconstitutional and enjoining its implementation. These two cases were consolidated and we refer to both cases below as Dalton v. Pataki.

On July 17, 2003, the New York Supreme Court dismissed the plaintiffs’ complaints in Dalton v. Pataki and held that Chapter 383 is constitutional. The plaintiffs appealed the Court’s decision to the Third Department of the New York Supreme Court’s Appellate Division and oral argument was held on December 16, 2003. On July 7, 2004, a five-judge panel issued its Opinion and Order declaring the provisions of Chapter 383 authorizing the additional compacts constitutional, the licensing of VGMs to racetracks to be unconstitutional due to the impermissible revenue distribution scheme set forth therein and the provision of Chapter 383 authorizing the Division of the Lottery to participate in the multi-state lottery constitutional.

On May 3, 2005, the New York Court of Appeals held all of Chapter 383 (including the licensing of VGMs to racetracks) to be constitutional. In July 2005, the New York Court of Appeals, the State’s highest court, denied a motion to rehear the case.  Appellants filed a writ of certiorari seeking review by the United States Supreme Court.  On November 28, 2005, the United States Supreme Court denied the writ.

If New York State were to make various forms of gaming illegal or against public policy (or the courts were to similarly rule), or otherwise to take a legal position adverse to us, such actions could affect the ability of the Nation to conduct those forms of gaming under the Compact, which could have a material adverse effect on our ability to conduct our gaming operations as currently conducted.

If our ability to operate Class III gaming facilities on land held in restricted fee by the Nation 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.

Background

Under IGRA, Indian tribes can conduct class III gaming only on “Indian lands” as defined in that Act. “Indian lands,” under IGRA, means “(A) all lands within the limits of any Indian reservation; and (B) any lands title to which is either held in trust by the United States for the benefit of any Indian tribe or individual or held by any Indian tribe or individual subject to restriction by the United States against alienation and over which an Indian tribe exercises governmental power” (25 U.S.C. § 2703(4)).

In 1990, Congress enacted the Seneca Nation Land Claims Settlement Act, or SNLCSA, which provides the Nation with fair compensation for use of its land and for the impact on the Nation from prior lease arrangements in the City of Salamanca, New York. The funds appropriated under the SNLCSA are available for the Nation to acquire land, which could be placed into restricted fee status. The Compact authorizes the Nation to use funds appropriated under the SNLCSA to acquire parcels of land in Niagara Falls and Erie County for gaming purposes. The U.S. Secretary of the Interior and the National Indian Gaming Commission, or NIGC, have determined that the Nation possesses jurisdiction over lands acquired by the Nation and placed into restricted fee status pursuant to SNLCSA, and that such lands constitute Indian lands under IGRA. Seneca Niagara Casino and Hotel is located on lands so acquired, as is the Seneca Buffalo Creek Casino temporary facility. It is possible that some person or group could successfully challenge the Secretary’s conclusion that the Nation is authorized to use such land for gaming purposes pursuant to IGRA.  If the Secretary’s or the NIGC’s determination that the Nation is authorized to use such land for gaming

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purposes pursuant to IGRA were successfully challenged, the Nation would be unable to conduct any gaming under IGRA at its current gaming facility in Niagara Falls or existing gaming facility in Erie County. However, such an adverse determination would not affect the ability of the Nation to operate its Seneca Allegany Casino and Hotel, which is located on existing Nation reservation territory.

Citizens Against Casino Gambling in Erie County v. Kempthorne (1:06-cv-00001-WMS (WDNY)) (formerly Citizens Against Casino Gambling v. Norton) — CACGEC I

In January 2006, an action was filed in the United States District Court, Western District of New York by various plaintiffs against the United States Department of the Interior, the National Indian Gaming Commission and three individuals in their official capacities as Secretary of the Interior, Acting Assistant Secretary of the Interior for Indian Affairs and Chairman of the NIGC.  The action seeks declaratory and injunctive relief under the Administrative Procedure Act, the Declaratory Judgments Act, the National Historic Preservation Act, or NHPA, the National Environmental Policy Act, or NEPA, and the Indian Gaming Regulatory Act and is principally directed at the decisions and actions of the defendants that permit the construction and operation of our Seneca Buffalo Creek Casino.  The plaintiffs claim that the defendants have failed to comply with NEPA, NHPA, and IGRA and have requested that the Court take numerous actions including declaring that the two parcels consisting of approximately nine acres in Buffalo, New York, or the Buffalo Parcels, acquired by the Nation pursuant to SNLCSA are not Indian lands within the meaning of IGRA and declaring that the Nation’s Compact violates IGRA. On November 1, 2006, oral argument was heard on the defendant’s motion to dismiss for lack of jurisdiction, on the Nation’s amicus motion to dismiss based upon failure to join the Nation as a necessary party and sovereign immunity, and on the plaintiff’s motion for summary judgment.

On January 12, 2007, the district court vacated the NIGC’s approval of the Nation’s 2002 gaming ordinance as it pertains to gaming conducted on the Buffalo Parcels and remanded the decision to the NIGC to determine whether the Buffalo Parcels constitute “Indian lands” under IGRA.  The court also granted the defendant’s motion to dismiss for lack of subject matter jurisdiction, denied the Nation’s motion to dismiss (holding, in part, that the Nation was not a necessary party because the U.S. government’s interests were aligned with those of the Nation and that the U.S. government (through the U.S. Department of Justice) was vigorously defending the case), and denied, as moot, the plaintiff’s motion for summary judgment.  In reaching its decision to dismiss on the basis of a lack of subject matter jurisdiction, the court determined that, notwithstanding the U.S. Department of Interior’s prior determination that the Nation’s Buffalo Creek Territory constitutes “Indian lands” within the meaning of the IGRA, the NIGC must make its own “Indian lands” determination, and ordered that the Nation’s 2002 gaming ordinance (which had been approved by the NIGC) be vacated insofar as it permits Class III gaming on the Nation’s Buffalo Creek Territory. The court specifically limited its holding to the Nation’s Buffalo Creek Territory. After the court denied the government’s motion for reconsideration, both the plaintiffs and the defendants appealed.  On January 29, 2007, the U.S. Department of Justice filed a motion for reconsideration, which was denied by the court on April 20, 2007, noting that the government asserted no new arguments.

On June 9, 2007, the Nation enacted and submitted to the NIGC an amended gaming site-specific Class III gaming ordinance.  The amended ordinance was identical to the prior approved ordinance, except the new Ordinance’s definition of “Nation Lands” now contains a site-specific legal description of the Buffalo Parcels.  The definition also states that the land specified is held by the Nation in restricted fee pursuant to the SNLCSA.  On June 19, 2007, the defendants and plaintiffs filed notices of appeal.  On June 25, 2007, the plaintiffs filed a motion for a stay of the proceedings remanded to the NIGC pending the outcome of the appeal.  The NIGC approved the new ordinance on July 2, 2007.  On July 3, 2007, the defendants filed a notice of NIGC approval of the ordinance revising the definition of “Nation Lands”.  On August, 6, 2007, the defendants filed a response to the plaintiffs’ motion to stay, stating that the gaming ordinance at issue in this case is superseded by the Nation’s June 9, 2007, site-specific ordinance, approved by the NIGC on July 2, 2007.  This, the U.S. argues, moots the case as to the NIGC and moots the motion for a stay pending appeal.

The U.S. Department of Justice has discontinued its appeal of the January 12, 2007 order in the initial CACGEC federal suit.  On November 9, 2007, the Second Circuit Court of Appeals stayed the plaintiffs’ appeal pending the resolution of the second federal court action described below (Citizens Against Casino Gambling v. Hogen (1:07-cv-00451-WMS (WDNY)). On July 24, 2009, the Second Circuit Court of Appeals issued an order withdrawing the appeal from active consideration by consent without prejudice to reinstatement. On December 10, 2009, the Second Circuit Court of Appeals granted the plaintiffs’ request for reactivation of the appeal.

Although the court permitted the Nation to file a brief as amicus curiae, the Nation is not a party to this action, and as such, neither it nor SGC has the ability to direct or control any aspect of the litigation.

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If the plaintiffs are successful, the Nation could be unable to conduct any gaming upon lands acquired by the Nation pursuant to the SNLCSA.

Citizens Against Casino Gambling in Erie County v. Hogen (1:07-cv-00451-WMS (WDNY)) — CACGEC II

On July 12, 2007, Citizens Against Casino Gambling in Erie County  (CACGEC) filed a second action in the United States District Court, Western District of New York against the United States Department of the Interior, the NIGC and two individuals in their official capacities as Secretary of the Interior and Chairman of the National Indian Gaming Commission, respectively.  The action seeks declaratory and injunctive relief under the Administrative Procedure Act, the Declaratory Judgments Act, and IGRA and is principally directed at the decisions and actions of the defendants in approving the Nation’s Class III gaming ordinance, and the Indian land opinion issued by the Chairman relative to that approval.  The plaintiffs claim that the defendants have failed to comply with federal law and have requested that the court take numerous actions including declaring that the lands acquired by the Nation pursuant to SNLCSA are not Indian lands within the meaning of IGRA.

Plaintiffs moved for summary judgment and defendants moved to dismiss.  Neither the Nation nor SGC is party to this action.  The Nation filed an amicus brief on the “Indian lands” issues.

On July 8, 2008, the court issued its decision and order finding (a) that the NIGC’s determination that the Nation’s Buffalo Creek Territory is “Indian country” was in accord with Congress’ intent in enacting the SNLCSA, and (b) that the NIGC’s July 2, 2007 determination that the Nation’s Buffalo Creek Territory is gaming-eligible land pursuant to the IGRA’s settlement of a land claim exception is arbitrary, capricious, and not in accordance with the law.

The court’s decision did not provide for injunctive relief, and SGC has continued its operations at the Seneca Buffalo Creek Casino.  Plaintiffs subsequently filed a motion on July 14, 2008 to force the court to enforce its judgment.

In response to ongoing events in the litigation, on July 16, 2008, the Nation submitted a new gaming ordinance to the NIGC, so that the NIGC could consider the applicability of new Department of the Interior regulations concluding that lands like Buffalo Creek Territory are exempt from Section 20 of IGRA’s prohibition on gaming.

On July 22, 2008, the United States filed a motion responding to the plaintiffs motion to enforce and requesting that the case be remanded to the NIGC for further consideration. The remand motion is based upon significant changes in the controlling law, as interpreted by the U.S. Department of the Interior.  The Nation simultaneously filed an amicus brief supporting the United States’ motion for remand to the NIGC and opposing the plaintiffs’ motion to enforce.  On August 26, 2008, the court issued its decision on the foregoing motions and granted the plaintiffs’ request that the court enforce its July 8, 2008 decision and order to the extent that the NIGC and its Chairman are directed to carry out their enforcement duties under IGRA. The plaintiffs’ motion was denied to the extent that they requested an order that would divest the NIGC of its discretion to determine the type of enforcement action to take.

On September 3, 2008, the Chairman of the NIGC issued a “notice of violation” or “NOV” to the Nation as a result of the August 26, 2008 decision. The NOV asserts that the Nation has violated IGRA by operating the Seneca Buffalo Creek Casino without an approved Class III gaming ordinance for that facility because the gaming ordinance for those lands authorized gaming on lands in Buffalo that the district court deemed ineligible for gaming.  The NOV further states that although the NIGC disagrees with the district court’s interpretation of IGRA regarding the Buffalo Parcels’ eligibility for gaming under IGRA, the NIGC, at the current time, was bound by the district court’s ruling as to this particular land parcel absent reconsideration by the district court or reversal on any appeal.  Consequently, the Chairman issued the NOV. The NOV was not accompanied by a closure order or an assessment of a civil fine. The NOV further states that the Chairman of the NIGC may modify the measures required to correct the alleged violation if the NIGC approves the Nation’s July 16, 2008 gaming ordinance amendments.  The Nation immediately appealed the NOV issuance and the administrative appeal is still pending before an independent administrative law judge. The NIGC requested a stay of the NOV appeal.

On October 21, 2008, the plaintiffs filed a motion seeking an order from the court that would require the Chairman of the NIGC to issue orders immediately halting gaming at the Seneca Buffalo Creek facility and holding the NIGC Chairman in contempt for not doing so sooner.

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On October 24, 2008, the U.S. Department of Justice filed a notice of appeal relating to the court’s July 8, 2008 ruling on whether gaming is permitted on Nation lands in Buffalo, in addition to the court’s August 26, 2008 orders (directing the NIGC to issue the NOV and denying the U.S. government’s motion to remand the case to the NIGC for an administrative decision on the basis of significant changes in controlling regulation).

On November 4, 2008, the Seneca Nation of Indians filed a motion for leave to file an amicus brief in response to the plaintiffs’ motion to enforce and motion to hold NIGC Chairman Hogen in contempt for failing to close the Buffalo Creek casino.  The United States also filed a response on that day.  On November 14, 2008, the plaintiffs filed a reply brief requesting additional time to respond to the Nation’s amicus brief if the court granted the Nation’s motion allowing it to submit an amicus brief.  On November 17, 2008, the court granted the Nation’s motion to file the amicus brief and to be heard at argument.  The court further ordered that the Nation formally file its amicus brief by November 20, 2008, which it did, and set a December 2, 2008 deadline for filing responses to the Nation’s brief.

On December 2, 2008, the plaintiffs filed their response to the Nation’s amicus brief.  On January 20, 2009, NIGC Chairman Hogen approved the SNI’s amended ordinance.  The court reviewed the Chairman’s findings and found them to be predicated on an analysis different from any advanced by the parties.  This new analysis is presumed valid unless and until it becomes the subject of a successful legal challenge.  As such, the Chairman’s January 20, 2009 ordinance approval rendered moot the plaintiffs’ motion to enforce the Court’s vacatur of the July 2, 2007 ordinance approval.  Accordingly, on January 30, 2009, the court denied the plaintiffs’ October 21, 2008 motion for order to enforce.

If the plaintiffs are successful, the Nation could be unable to conduct any Class III gaming upon lands acquired by the Nation pursuant to the SNLCSA, including the Buffalo Creek Territory.

Citizens Against Casino Gambling in Erie County v. Hogen (1:2009-cv-00291 (WDNY)) — CACGEC III

On March 31, 2009, Citizens Against Casino Gambling in Erie County  (CACGEC) filed a third action in the United States District Court, Western District of New York against the Chairman of the NIGC, the United States Department of the Interior, the NIGC, the Secretary of the Interior and the President of the United States.  The action seeks declaratory and injunctive relief under the Administrative Procedure Act, the Declaratory Judgments Act, and the Indian Gaming Regulatory Act and is principally directed at the decision by the NIGC Chairman, on January 20, 2009, to approve the Seneca Nation’s amendments to its Class III Gaming Ordinance regarding the Nation’s Buffalo Creek Territory.  The NIGC Chairman concluded that IGRA’s general prohibition against gaming on lands acquired after its enactment in 1988 does not apply to lands, such as the Buffalo Creek Territory, that are held in restricted fee.   The plaintiffs claim that, in approving the Nation’s Class III Gaming ordinance on January 20, 2009, the NIGC Chairman ignored the intention of Congress.  The plaintiffs also make several claims that go beyond their prior lawsuits.  Most notably, they challenge the constitutionality of the land purchase provisions contained in the SNLCSA, and attempt to challenge in a more extensive fashion than they had previously the validity of the Nation-State Gaming Compact.

On June 15, 2009, the Nation moved to intervene as a defendant in CACGEC III.  The Nation’s proposed intervention and participation as a defendant are expressly restricted to the three claims for relief specified in the plaintiffs’ complaint, namely:  (1) whether, as restricted fee lands over which the Nation exerts governmental authority, the Buffalo Creek Territory qualifies as “Indian lands” under IGRA; (2) whether the Buffalo Creek Territory is subject to the general prohibition found in section 2719 of IGRA against gaming on trust lands acquired after IGRA’s effective date even though the Territory consists of restricted fee, rather than trust, lands; and (3) whether, if the Buffalo Creek Territory is subject to Section 2719’s general prohibition, Class III gaming may nevertheless proceed on it because the Buffalo Creek Territory was acquired in settlement of a land claim.

The plaintiffs are opposing the Nation’s motion which is pending before the Court.

The United States has filed a motion for partial dismissal.  The motion remains pending.

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If the plaintiffs ultimately succeed in this action, or in their pending appeals in the CACGEC I and CACGEC II proceedings, the SGC may be unable to conduct any Class III gaming at its existing properties.

Scott v. Pataki (NYS Supreme Court, Erie County, Index No. 001189/06)

On February 1, 2006, an action was filed in the New York Supreme Court, County of Erie, by various petitioners against George E. Pataki, in his official capacity as Governor of the State of New York; State Gaming Officials of the New York State Wagering Board; City of Buffalo; Common Council of the City of Buffalo; Anthony Masiello in his previous capacity as Mayor of Buffalo; Byron Brown in his capacity as Mayor of Buffalo; City of Buffalo Department of Public Works; Buffalo Sewer Authority; and Niagara Frontier Transportation Authority.  The action initially sought declaratory and injunctive relief under the State Environmental Quality Review Act, or SEQRA; the First Parks, Recreation, Historic Preservation Law, or PRHPL; First City Environmental Review Ordinance, or CERO; and Freedom of Information Law, or FOIL, and is principally directed at the decisions and actions of the defendants in connection with our Seneca Buffalo Creek Casino.  The plaintiffs initially claimed that the defendants had failed to comply with SEQRA, PRHPL, CERO and FOIL and requested that the court take numerous actions including directing compliance with SEQRA, PRHPL, CERO and FOIL and restraining further action relating to the development of our Seneca Buffalo Creek Casino.  In May 2006, the petitioners further sought to enjoin demolition activity on the nine acre casino site, but the court declined to grant a preliminary injunction preventing demolition.  In June 2006, the petitioners amended their Petition to drop their claims against Governor Pataki, the State Gaming Officials and the Niagara Frontier Transportation Authority, and added the Buffalo Department of Economic Development, Permits and Inspections as a party. The amended Petition also dropped all claims except for the SEQRA and CERO claims. In October 2006, the plaintiffs moved for an injunction to prevent an agreement between SEGC and the City of Buffalo (relating to the development of the Seneca Buffalo Creek Casino) from being executed and performed, which motion was denied based upon a failure to show a likelihood of success on the merits.  The plaintiffs appealed this ruling to the New York Supreme Court Appellate Division.  On March 16, 2007, the Appellate Division unanimously affirmed the denial of the injunction.

A hearing was held on the merits of the petition in September 2007.  On July 3, 2008, the Court dismissed the Petitioners’ claims holding: (1) that the Common Council of the City of Buffalo properly reviewed the environmental impact of the construction of the Buffalo Creek Casino, and fully complied with SEQR and CERO; (2) that the abandonment and sale of Fulton Street was properly approved by the Common Council of the City of Buffalo; (3) that the Nation is a necessary and indispensible party to the lawsuit; and (4) that Petitioner’s substantive claims are without merit.

On November 13, 2009, the NYS Supreme Court, Appellate Division unanimously affirmed the July 3, 2008 decision.

If the plaintiffs were successful, the Nation could have been delayed in the completion of the expansion of Seneca Buffalo Creek Casino temporary facility.  Certain of these petitioners are also plaintiffs in the federal lawsuits filed by Citizens Against Casino Gambling in Erie County referenced above.

Warren v. United States (1:06-c-00226-JTE (WDNY))

On or about April 6, 2006, an action was filed in the United States District Court, Western District of New York, by Daniel T. Warren, a pro se plaintiff, against the United States of America, the United States Department of the Interior, the National Indian Gaming Commission, and five individuals in their official capacities as Acting Secretary of the Interior, Acting Assistant Secretary of the Interior for Indian Affairs and Chairman of the National Indian Gaming Commission, as well as Governor George E. Pataki, as Governor of the State of New York, and Cheryl Ritchko-Buley, as Chairwoman of the New York State Racing and Wagering Board. The action initially sought declaratory and injunctive relief as to numerous matters including declaring that IGRA is unconstitutional, that the Compact violates IGRA, that the New York Constitution is not preempted by IGRA, that New York does not have the authority under state law to enter into a tribal state compact under IGRA, that certain actions of the defendants were not in accordance with law, and that certain lands purchased by the Nation were not subject to being taken into trust or restricted fee status under the SNLCSA or were not pursuant to settlement of a land claim within the meaning of IGRA; and enjoining the defendants from taking actions which would further casino gambling in the State of New York under IGRA or on any lands acquired by the Nation pursuant to SNLCSA. On August 16, 2006, the plaintiff amended his complaint bringing: a Tenth Amendment challenge to IGRA; a claim that the Compact violates IGRA by providing for gaming which is not otherwise lawful in New York; a claim that both the Compact and the statute authorizing the Governor of New York to enter into the Compact violate various provisions of the New York State Constitution; and a claim that the United States has failed to promulgate regulations for gaming on off-reservation territory,

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in violation of its statutory duties.  The effect of such amendment was to limit the claims remaining in the case, by dropping many of the federal law claims in the original complaint.

On December 1, 2006, the court heard argument on the plaintiff’s motion to join (1) Barry E. Snyder, Sr., as President of the Nation; (2) John Pasqualoni, as President and CEO of SGC; (3) the Nation; and/or (4) SGC, as additional defendants.

On October 5, 2007, the plaintiff filed a motion to further amend the complaint to include as defendants (1) Maurice John, as President of Nation; (2) E. Brian Hansberry, as the new President and CEO of SGC (replacing John Pasqualoni); (3) the Nation; and (4) SGC.  On October 25, 2007, the Nation filed a response in opposition to that motion asserting that (1) the motion to amend the complaint was not properly before the court because it is premised upon a finding that the Nation is a necessary and indispensible party, and (2) the motion to amend is futile because the Nation and its officers are protected by sovereign immunity.  On August 11, 2008, the court ordered the clerk to strike the Nation’s responses to motions filed by plaintiff because the Nation had not been granted permission to participate as amicus curiae and had not renewed its motion in that regard.  On August 22, 2008, the Nation filed a motion for leave to file brief amicus curiae.

On March 16, 2009, the plaintiff filed a motion to amend/correct the amended complaint.  On March 23, 2009, the court dismissed as moot both plaintiff’s October 5, 2007 motion to amend/correct the amended complaint and the Nation’s August 22, 2008 motion for leave to file brief amicus curiae in opposition to the plaintiff’s motion.  On April 29, 2009, the Nation filed a motion for leave to appear as amicus curiae.  On June 15, 2009, the court granted the Nation’s April 29, 2009 request to file a brief amicus curiae.  On June 16, 2009, the Nation filed its response to plaintiff’s March 16, 2009 motion to amend/correct the amended complaint.

Dispositive motions to dismiss on behalf of both the plaintiff and the defendants have not yet been heard by the court.  In addition, still pending before the court is the motion on behalf of the Seneca entities and officers in opposition to being joined as defendants to the lawsuit on, among other things, sovereign immunity grounds.  If the plaintiff is successful in this lawsuit, the Nation would be unable to conduct any Class III gaming upon lands acquired pursuant to SNLCSA.

The current review by the NIGC of the Nation’s use of gaming revenues could materially adversely affect our operations.

In December of 2006, the NIGC notified the Nation that it would be commencing a review of the Nation’s use of gaming revenues starting in January 2007.  The NIGC sent its inspection team on-site three times during February and March of 2007 to review Nation financial records for fiscal years 2005 and 2006.  On March 7, 2007, following a request by the Nation that the NIGC clarify the scope of documents its inspection team is reviewing, the NIGC issued a subpoena to obtain certain documents needed to complete their review.  On March 8, 2007, Nation and SGC staff met with the NIGC inspection team to obtain clarification on the scope of the review and the documents being sought.  The Nation has been cooperating with the NIGC inspection team and has made Nation and SGC staff available to answer questions that have arisen during the course of the inspection team’s review.  The NIGC’s review of the Nation’s use of net gaming revenues is ongoing.  There is no timeline within which the NIGC must complete its review.

Under IGRA, net revenues from tribal gaming operations may only be used for the following purposes: (i) to fund tribal government operations or programs; (ii) to provide for the general welfare of the Indian tribe and its members; (iii) to promote economic development; (iv) to donate to charitable organizations; or (v) to help fund operations of local government agencies. Under IGRA tribal member distributions of net gaming revenues may only be made pursuant to a revenue allocation plan approved by the Bureau of Indian Affairs, Department of the Interior, or DOI. The Nation makes tribal member distributions from revenues it receives from our Head Lease payments. If the NIGC or DOI determines that the tribal member distributions from the operating lease payments are distributions of net gaming revenues subject to IGRA’s requirements, it may attempt to take enforcement actions against the Nation.

IGRA provides for civil penalties for a violation of the provisions of IGRA or the regulations promulgated by the NIGC. Such civil enforcement actions include without limitation: notices of violation, issuance of temporary or permanent closure orders, and assessment of civil fines of up to $25,000 per violation. IGRA also provides for an opportunity for an appeal and hearing before the NIGC with respect to any civil penalty imposed. Judicial review also remains available. We cannot predict the outcome of the NIGC’s current review of the Nation’s use of net gaming revenues. If the NIGC determines that the Nation has violated IGRA and takes enforcement actions against the Nation, such actions may materially adversely affect our ability to conduct our gaming operations as currently conducted.

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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.

In 2002 and pursuant to the Compact, the Nation acquired from the State of New York approximately 24 acres of land and related improvements in the City of Niagara Falls, New York, including the then-Niagara Falls Convention Center.  The State of New York further agreed in the Compact to assist the Nation in whatever manner appropriate, including through the exercise of its power of eminent domain, to acquire the remaining acreage within the approximately 50-acre footprint in the City of Niagara Falls, New York, designated by New York State under the Compact for ownership by the Nation. The Compact specifically excluded approximately 1.5 acres of land within the footprint owned by a Roman Catholic Church.  Additionally, in July 2006, the Nation agreed to waive its right to acquire approximately one half acre of additional land within the footprint owned by End Time Handmaidens, Inc., a religious organization.  In return for the waiver, the Nation obtained a right of first negotiation and refusal with respect to the future sale of the parcels.  As a result of the carve-out relating to the parcels owned by the Roman Catholic Church, and the Nation’s agreement with End Time Handmaidens, the total acreage of the Niagara Territory upon completion of the condemnation process is anticipated to be approximately 48 acres.

We have obtained possession of, either through eminent domain proceedings or private purchase, substantially all of the remaining acreage within the footprint, other than certain streets and alleys owned by the City of Niagara Falls providing access to the above church parcels, and a bicycle path owned by the New York State Department of Transportation. We expect to acquire the above Niagara Falls city street and alley parcels by early 2010, with acquisition of the NYSDOT bike path requiring further dialogue with New York State.

With the exception of approximately 2 acres of land and a hotel property within the footprint acquired for $7.9 million through a private sale in December 2005, substantially all of our post-2002 real property acquisitions in Niagara Falls, NY have been pursuant to New York State Eminent Domain Procedure Law, or EDPL, using the State’s power of eminent domain (through the Empire State Development Corporation, or ESDC).

The amounts paid to condemnees from whom we have acquired property are deemed to be advance payments. Pursuant to the EDPL, the New York state courts will determine the final purchase price to be paid to condemnees who elect to challenge the initial appraised value of their property.  To date, all record owners from whom property was condemned pursuant to the EDPL have reserved rights to claim additional compensation.

Fallsite LLC and Fallsville Splash, LLC have filed notices of claim in the amounts of $40.0 million and $35.0 million for land and trade fixtures, respectively, relating to a former water park within the footprint.  ESDC’s fair market appraisal value for the foregoing was approximately $17.0 million.  If a court determines that the value for the land and improvements, including trade fixtures, is higher than what ESDC has determined to be their appraised values, then we may be liable for the difference and potentially also responsible for certain additional costs and payments to the applicable condemnee(s), such as their attorneys’ fees.  The valuation trial proceedings with regard to the former water park are complete, but a final judgment is still pending.

Intertrust Development had filed a notice of claim for $15.8 million for land and trade fixtures associated with a former Holiday Inn hotel within the footprint. ESDC’s fair market appraisal value for the foregoing was $8.2 million (excluding fixtures).  We have agreed to a settlement of this matter with Intertrust, whereby Intertrust has received an additional $3.8 million in addition to the appraisal value of $8.2 million, and we have agreed to purchase, for our business promotional use, tickets to Fallsview Waterpark, an affiliate of Intertrust, for $2.5 million to be paid in three installments over three years.  Pursuant to the stipulation of settlement, Intertrust has executed a release of SNFGC, ESDC and the Seneca Nation of Indians with respect to the valuation proceeding, and ESDC and Intertrust shall file a stipulation of discontinuance.

JFD Holdings has filed a notice of claim for $1.1 million for a parcel of land at 621 Niagara Street within the footprint.  ESDC’s fair market appraisal for the foregoing is approximately $550,000.  No trial date has yet been set.

Also, three individuals have filed notices of claim with respect to four parcels within the footprint seeking $955,000, in aggregate, for the four parcels.  ESDC’s fair-market appraisal for the four properties, in aggregate, is $185,000.  No trial dates have been set.

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If a court determines that the value for the land and improvements is higher than the appraised value we paid to a condemnee, then we may be liable to the condemnee for the difference and potentially also responsible for certain additional costs and payments to the condemnee, such as attorneys’ fees. As of September 30, 2009, $1.7 million of the previously recorded reserve of $6.4 million remained for such matters and is included in the current and long-term liabilities sections on SGC’s consolidated balance sheet.  Should our liability be greater than our reserve for such matters, it could have a negative impact on our income and financial condition.

We may be subject to material environmental liability as a result of unknown environmental hazards.

Under various federal, state and local environmental laws, ordinances and regulations, a current or previous owner or operator of real estate may be required to investigate and clean up hazardous or toxic substances or chemical releases on or relating to its property and may be held liable to a governmental entity or to third parties for property damage, personal injury and for investigation and cleanup costs incurred by such parties in connection with the contamination. Such laws typically impose cleanup responsibility and liability without regard to whether the owner knew of or caused the presence of contaminants. The costs of investigation, remediation or removal of such substances may be substantial. Although neither we or the Nation has waived our or its sovereign immunity with regard to such federal, state and local environmental legislation, the existence or discovery of an environmental hazard on any of its lands could result in an assertion of liability under federal environmental laws and have a significant adverse effect on the Nation’s relations with the state and the local community.

We rely in part on federal and in part on common law trade name protection to protect certain of our trademarks.

We rely in part on federal and in part on common law trade name protection to protect certain of our trademarks. We may face claims by third parties for alleged trade name infringement. Any resulting claims, if successful, could require us to cease using one or more of the names used in our business or require us to pay to use these names.

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.

Gaming on the Nation’s land is regulated by Nation laws, the Compact and federal statutes, most notably the IGRA. Several bills have been proposed during the recent sessions of Congress that could affect Indian gaming. Certain of such bills, if enacted, could impair the ability of the Nation and SGC to expand its gaming operations and adversely impact the future growth of the Nation’s revenue base. In addition, from time to time, various government officials have proposed taxing Indian casino gaming or otherwise limiting or restricting the conduct of gaming operations by Indian tribes. No assurance can be given that such legislation, if and when enacted by Congress, would not have a material adverse effect on our operations. In addition, under federal law, gaming on the Nation’s lands may be dependent upon the continued permissibility under New York law of certain forms of gaming or similar activities. If New York State were to make various forms of gaming illegal or against public policy (or the courts were to similarly rule), or otherwise to take a legal position adverse to the Compact or any of its provisions, such actions could affect the ability of the Nation to conduct those forms of gaming under the Compact, which could have a material adverse effect on our ability to conduct our gaming operations as currently conducted. Moreover, the 1996 U.S. Supreme Court decision in Seminole Tribe of Florida v. Florida may permit a state to avoid or refuse to negotiate amendments to existing compacts such as the Compact.

The operation of all gaming on Indian lands is subject to IGRA. For the past several years, legislation has been introduced in Congress designed to amend this Act. Most of the proposals that have been seriously considered would be prospective in effect and have contained clauses that would grandfather existing Indian gaming operations such as Seneca Niagara Casino and Hotel, Seneca Allegany Casino and Hotel, and Seneca Buffalo Creek Casino. However, certain legislative acts have also proposed repealing many of the provisions of IGRA. We cannot predict the success of future legislative acts. Changes in applicable laws and regulations or an increase in the cost of compliance with applicable laws and regulations could limit or materially affect the types of gaming that we may offer and the revenue our operations generate. Furthermore, if Congress enacted legislation that was applied retroactively, our ability to meet our outstanding debt and other financial obligations could be adversely affected.

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Under the Compact and federal, state and Nation law, we are required to maintain certain licenses, permits and approvals in order to conduct gaming operations. Failure to maintain such licenses, permits and approvals could have a material adverse affect on our ability to conduct gaming operations and to fulfill our financial obligations, including the senior notes.

Regulatory actions by the Seneca Gaming Authority could affect our operations adversely.

SGC’s gaming operations are subject to the supervision and regulation of the Seneca Gaming Authority, or SGA, discussed above under “Item 1 — Business Seneca Gaming Corporation and the Nation — Seneca Gaming Authority and Class III Gaming Ordinance.”  We believe that our regulatory environment may be more restrictive and involve a higher degree of regulatory oversight than in many jurisdictions, including New Jersey and Nevada.  We believe that the SGA’s enforcement and compliance activities, generally, have resulted in greater compliance-related costs (including time of management, and legal and accounting costs), operational inefficiencies and competitive disadvantages, and have had negative effects on SGC’s ability to retain and recruit key personnel due to perceived differences between our regulatory environment and that found in other jurisdictions.

Item 1B.  Unresolved Staff Comments

Not applicable

Item 2.   Properties

Our three casinos and related amenities (other than the Hickory Stick Golf Course in Lewiston, NY) are located on land held in restricted fee by the Nation, which, together with rights under the Compact, allows us to conduct Class III gaming operations in Western New York.  Our subsidiaries lease the land for each casino from the Nation pursuant to leases (Head Leases) with the Nation.  We believe our existing properties collectively are sufficient to conduct our operations.  See “Item 3 — Legal Proceedings” for a description of ongoing litigation, some of which relates to our right to conduct gaming operations on these properties.

Seneca Niagara Casino and Hotel.    Seneca Niagara Casino and Hotel is located on Nation Territory in Niagara Falls, New York. Seneca Niagara Casino and Hotel is located approximately 20 miles north of Buffalo, New York and approximately 90 miles west of Rochester, New York.

Pursuant to the Compact, the Nation may acquire property and establish gaming facilities in the City of Niagara Falls within the boundaries of the approximately 50 acre area of land described in Appendix I of the Compact and designated as land to be developed by the Nation in connection with the Nation’s gaming facilities. The Compact also authorizes the Nation to establish a gaming facility in Erie County and one on the Nation’s Allegany Territory. The Compact authorizes the Nation to use funds appropriated under the SNLCSA to acquire parcels of land in Niagara Falls and Erie County for gaming purposes.

SNFGC has acquired approximately 45 of the 50 acres of the land in the City of Niagara Falls, New York, designated by New York State under the Compact for ownership by the Nation, thus reducing the remaining acreage to be acquired to approximately 3 acres (SNFGC has waived its right to acquire approximately two acres of land designated in the Compact for ownership by the Nation, in return for a right of first refusal to purchase such property if this two-acre parcel is offered for sale in the future by its owners, a religious organization).  See “Item 1A — Risk Factors— 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” for further description of the Niagara Falls condemnation proceedings.

The Nation has acquired from SNFGC approximately 24 acres (of the approximate 50 acres described in Appendix I of the Compact) with funds appropriated under the SNLCSA in Niagara Falls. By operation of federal law, these lands and other parcels that may be acquired in the future pursuant to the SNLCSA (whether in Niagara Falls or Erie County) are subject to restrictions against alienation, constitute Indian country subject to the jurisdiction of the Nation, and qualify as gaming eligible Indian lands pursuant to IGRA. Seneca Niagara Casino and Hotel and its 2,130 space parking garage are situated on

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the Nation’s restricted fee lands.

In March 2006, we acquired 257 acres of land with the intent to design and build a championship level golf course in Lewiston, New York, approximately 8 miles from Seneca Niagara Casino and Hotel.  We selected the Robert Trent Jones II firm to design the golf course.  The project is nearing completion and is being developed by LGCC as an amenity to the Seneca Niagara Casino and Hotel.

For further information relating to the real estate acquisitions of the Nation, SGC and its subsidiaries, see “Item 1 — Business — Seneca Niagara Casino and Hotel — Niagara Falls Real Estate Acquisitions,” above.

Seneca Allegany Casino and Hotel.    Seneca Allegany Casino and Hotel is located on the Nation’s Allegany Territory in the City of Salamanca, New York. STGC leases the land on which Seneca Allegany Casino and Hotel is located from the Nation. Seneca Allegany Casino and Hotel is located immediately off Interstate 86, approximately 70 miles south of Niagara Falls, New York and is within 75 miles of Erie, Pennsylvania, and 165 miles of Cleveland and Akron, Ohio and Pittsburgh, Pennsylvania. The land upon which the Nation owns and STGC operates Seneca Allegany Casino and Hotel is situated within the Nation’s territorial boundaries, and is therefore eligible for gaming pursuant to IGRA.

Seneca Buffalo Creek Casino.    The temporary Seneca Buffalo Creek Casino is located on approximately nine acres of land in the inner harbor district of Buffalo, New York, which constitute the Nation’s Buffalo Creek Territory.  SEGC leases the land on which the temporary Seneca Buffalo Creek Casino is located from the Nation.  The land on which the temporary casino is located was acquired by the Nation using funds appropriated under the SNLCSA.

Item 3.  Legal Proceedings

Citizens Against Casino Gambling in Erie County v. Kempthorne (1:06-cv-00001-WMS (WDNY)) (formerly Citizens Against Casino Gambling v. Norton) — CACGEC I

In January 2006, an action was filed in the United States District Court, Western District of New York by various plaintiffs against the United States Department of the Interior, the National Indian Gaming Commission and three individuals in their official capacities as Secretary of the Interior, Acting Assistant Secretary of the Interior for Indian Affairs and Chairman of the NIGC.  The action seeks declaratory and injunctive relief under the Administrative Procedure Act, the Declaratory Judgments Act, the National Historic Preservation Act, or NHPA, the National Environmental Policy Act, or NEPA, and the Indian Gaming Regulatory Act and is principally directed at the decisions and actions of the defendants that permit the construction and operation of our Seneca Buffalo Creek Casino.  The plaintiffs claim that the defendants have failed to comply with NEPA, NHPA, and IGRA and have requested that the court take numerous actions including declaring that the two parcels consisting of approximately nine acres in Buffalo, New York, or the Buffalo Parcels, acquired by the Nation pursuant to SNLCSA are not Indian lands within the meaning of IGRA and declaring that the Nation’s Compact violates IGRA. On November 1, 2006, oral argument was heard on the defendant’s motion to dismiss for lack of jurisdiction, on the Nation’s amicus motion to dismiss based upon failure to join the Nation as a necessary party and sovereign immunity, and on the plaintiff’s motion for summary judgment.

On January 12, 2007, the district court vacated the NIGC’s approval of the Nation’s 2002 gaming ordinance as it pertains to gaming conducted on the Buffalo Parcel and remanded the decision to the NIGC to determine whether the Buffalo Parcels constitute “Indian lands” under IGRA.  The court also granted the defendant’s motion to dismiss for lack of subject matter jurisdiction, denied the Nation’s motion to dismiss (holding, in part, that the Nation was not a necessary party because the U.S. government’s interests were aligned with those of the Nation and that the U.S. government (through the U.S. Department of Justice) was vigorously defending the case), and denied, as moot, the plaintiff’s motion for summary judgment.  In reaching its decision to dismiss on the basis of a lack of subject matter jurisdiction, the court determined that, notwithstanding the U.S. Department of the Interior’s prior determination that the Nation’s Buffalo Creek Territory constitutes “Indian lands” within the meaning of the IGRA, the NIGC must make its own “Indian lands” determination, and ordered that the Nation’s 2002 gaming ordinance (which had been approved by the NIGC) be vacated insofar as it permits Class III gaming on the Nation’s Buffalo Creek Territory. The court specifically limited its holding to the Nation’s Buffalo Creek Territory. After the court denied the government’s motion for reconsideration, both the plaintiffs and the defendants appealed.  On January 29, 2007, the U.S. Department of Justice filed a motion for reconsideration, which was denied by the court on April 20, 2007, noting that the government asserted no new arguments.

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On June 9, 2007, the Nation enacted and submitted to the NIGC an amended gaming site-specific Class III gaming ordinance.  The amended ordinance was identical to the prior approved ordinance, except the new Ordinance’s definition of “Nation Lands” now contains a site-specific legal description of the Buffalo Parcels.  The definition also states that the land specified is held by the Nation in restricted fee pursuant to the SNLCSA.  On June 19, 2007, the defendants and plaintiffs filed notices of appeal.  On June 25, 2007, the plaintiffs filed a motion for a stay of the proceedings remanded to the NIGC pending the outcome of the appeal.  The NIGC approved the new ordinance on July 2, 2007.  On July 3, 2007, the defendants filed a notice of NIGC approval of the ordinance revising the definition of “Nation Lands.”  On August, 6, 2007, the defendants filed a response to the plaintiffs’ motion to stay, stating that the gaming ordinance at issue in this case is superseded by the Nation’s June 9, 2007, site-specific ordinance, approved by the NIGC on July 2, 2007.  This, the U.S. argues, moots the case as to the NIGC and moots the motion for a stay pending appeal.

The U.S. Department of Justice has discontinued its appeal of the January 12, 2007 order in the initial CACGEC federal suit.  On November 9, 2007, the Second Circuit Court of Appeals stayed the plaintiffs’ appeal pending the resolution of the second federal court action described below (Citizens Against Casino Gambling in Erie County v. Hogen (1:07-cv-00451-WMS (WDNY)). On July 24, 2009, the Second Circuit Court of Appeals issued an order withdrawing the appeal from active consideration by consent without prejudice to reinstatement. On December 10, 2009, the Second Circuit Court of Appeals granted the plaintiffs’ request for reactivation of the appeal.

Although the court permitted the Nation to file a brief as amicus curiae, the Nation is not a party to this action, and as such, neither it nor SGC has the ability to direct or control any aspect of the litigation.

If the plaintiffs are successful, the Nation could be unable to conduct any gaming upon lands acquired by the Nation pursuant to the SNLCSA.

Citizens Against Casino Gambling in Erie County v. Hogen (1:07-cv-00451-WMS (WDNY)) — CACGEC II

On July 12, 2007, Citizens Against Casino Gambling in Erie County (CACGEC) filed a second action in the United States District Court, Western District of New York against the United States Department of the Interior, the NIGC and two individuals in their official capacities as Secretary of the Interior and Chairman of the National Indian Gaming Commission, respectively.  The action seeks declaratory and injunctive relief under the Administrative Procedure Act, the Declaratory Judgments Act, and the Indian Gaming Regulatory Act and is principally directed at the decisions and actions of the defendants in approving the Nation’s class III gaming ordinance, and the Indian land opinion issued by the Chairman relative to that approval.  The plaintiffs claim that the defendants have failed to comply with federal law and have requested that the Court take numerous actions including declaring that the lands acquired by the Nation pursuant to SNLCSA are not Indian lands within the meaning of IGRA.

Plaintiffs moved for summary judgment and defendants moved to dismiss.  Neither the Nation nor SGC is party to this action.  The Nation filed an amicus brief on the “Indian lands” issues.

On July 8, 2008, the court issued its decision and order finding (a) that the NIGC’s determination that the Nation’s Buffalo Creek Territory is “Indian country” was in accord with Congress’ intent in enacting the SNLCSA, and (b) that the NIGC’s July 2, 2007 determination that the Nation’s Buffalo Creek Territory is gaming-eligible land pursuant to the IGRA’s settlement of a land claim exception is arbitrary, capricious, and not in accordance with the law.

The court’s decision did not provide for injunctive relief, and SGC has continued its operations at the Seneca Buffalo Creek Casino.  Plaintiffs subsequently filed a motion on July 14, 2008 to force the court to enforce its judgment.

In response to ongoing events in the litigation, on July 16, 2008, the Nation submitted a new gaming ordinance to the NIGC, so that the NIGC could consider the applicability of new Department of the Interior regulations concluding that lands like Buffalo Creek Territory are exempt from Section 20 of IGRA’s prohibition on gaming.

On July 22, 2008, the United States filed a motion responding to the plaintiffs motion to enforce and requesting that the case be remanded to the NIGC for further consideration. The remand motion is based upon significant changes in the controlling law, as interpreted by the U.S. Department of the Interior.  The Seneca Nation of Indians simultaneously filed an amicus brief supporting the United States’ motion for remand to the NIGC and opposing the plaintiffs’ motion to enforce.  On August 26,

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2008, the court issued its decision on the foregoing motions and granted the plaintiffs’ request that the court enforce its July 8, 2008 decision and order to the extent that the NIGC and its Chairman are directed to carry out their enforcement duties under IGRA. The plaintiffs’ motion was denied to the extent that they requested an order that would divest the NIGC of its discretion to determine the type of enforcement action to take.

On September 3, 2008, the Chairman of the NIGC issued a “notice of violation” or “NOV” to the Nation as a result of the August 26, 2008 decision. The NOV asserts that the Nation has violated IGRA by operating the Seneca Buffalo Creek Casino without an approved Class III gaming ordinance for that facility because the gaming ordinance for those lands authorized gaming on lands in Buffalo that the district court deemed ineligible for gaming.  The NOV further states that although the NIGC disagrees with the district court’s interpretation of IGRA regarding the Buffalo Parcels’ eligibility for gaming under IGRA, the NIGC, at the current time, was bound by the district court’s ruling as to this particular land parcel absent reconsideration by the district court or reversal on any appeal.  Consequently, the Chairman issued the NOV. The NOV was not accompanied by a closure order or an assessment of a civil fine. The NOV further states that the Chairman of the NIGC may modify the measures required to correct the alleged violation if the NIGC approves the Nation’s July 16, 2008 gaming ordinance amendments.  The Nation immediately appealed the NOV issuance and the administrative appeal is still pending before an independent administrative law judge. The NIGC requested a stay of the NOV appeal.

On October 21, 2008, the plaintiffs filed a motion seeking an order from the court that would require the Chairman of the NIGC to issue orders immediately halting gaming at the Seneca Buffalo Creek facility and holding the NIGC Chairman in contempt for not doing so sooner.

On October 24, 2008, the U.S. Department of Justice filed a notice of appeal relating to the court’s July 8, 2008 ruling on whether gaming is permitted on Nation lands in Buffalo, in addition to the court’s August 26, 2008 orders (directing the NIGC to issue the NOV and denying the U.S. government’s motion to remand the case to the NIGC for an administrative decision on the basis of significant changes in controlling regulation).

On November 4, 2008, the Seneca Nation of Indians filed a motion for leave to file an amicus brief in response to the plaintiffs’ motion to enforce and motion to hold NIGC Chairman Hogen in contempt for failing to close the Buffalo Creek casino.  The United States also filed a response on that day.  On November 14, 2008, the plaintiffs filed a reply brief requesting additional time to respond to the Nation’s amicus brief if the court granted the Nation’s motion allowing it to submit an amicus brief.  On November 17, 2008, the court granted the Nation’s motion to file the amicus brief and to be heard at argument.  The court further ordered that the Nation formally file its amicus brief by November 20, 2008, which it did, and set a December 2, 2008 deadline for filing responses to the Nation’s brief.

On December 2, 2008, the plaintiffs filed their response to the Nation’s amicus brief.  On January 20, 2009, NIGC Chairman Hogen approved the SNI’s amended ordinance.  The court reviewed the Chairman’s findings and found them to be predicated on an analysis different from any advanced by the parties.  This new analysis is presumed valid unless and until it becomes the subject of a successful legal challenge.  As such, the Chairman’s January 20, 2009 ordinance approval rendered moot plaintiff’s motion to enforce the Court’s vacatur of the July 2, 2007 ordinance approval.  Accordingly, on January 30, 2009, the court denied the plaintiffs’ October 21, 2008 motion for order to enforce.

If the plaintiffs are successful, the Nation could be unable to conduct any Class III gaming upon lands acquired by the Nation pursuant to the SNLCSA, including the Buffalo Creek Territory.

Citizens Against Casino Gambling in Erie County v. Hogen (1:2009-cv-00291 (WDNY)) — CACGEC III

On March 31, 2009, Citizens Against Casino Gambling in Erie County (CACGEC) filed a third action in the United States District Court, Western District of New York against the Chairman of the NIGC, the United States Department of the Interior, the NIGC, the Secretary of the Interior and the President of the United States.  The action seeks declaratory and injunctive relief under the Administrative Procedure Act, the Declaratory Judgments Act, and the Indian Gaming Regulatory Act and is principally directed at the decision by the NIGC Chairman, on January 20, 2009, to approve the Seneca Nation’s amendments to its Class III Gaming Ordinance regarding the Nation’s Buffalo Creek Territory.  The NIGC Chairman concluded that IGRA’s general prohibition against gaming on lands acquired after its enactment in 1988 does not apply to lands, such as the Buffalo Creek Territory, that are held in restricted fee.   The plaintiffs claim that, in approving the Nation’s Class III Gaming ordinance on January 20, 2009, the NIGC Chairman ignored the intention of Congress.  The plaintiffs also make several

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claims that go beyond their prior lawsuits.  Most notably, they challenge the constitutionality of the land purchase provisions contained in the SNLCSA, and attempt to challenge in a more extensive fashion than they had previously the validity of the Nation-State Gaming Compact.

On June 15, 2009, the Nation moved to intervene as a defendant in CACGEC III.  The Nation’s proposed intervention and participation as a defendant are expressly restricted to the three claims for relief specified in the plaintiffs’ complaint, namely:  (1) whether, as restricted fee lands over which the Nation exerts governmental authority, the Buffalo Creek Territory qualifies as “Indian lands” under IGRA; (2) whether the Buffalo Creek Territory is subject to the general prohibition found in section 2719 of IGRA against gaming on trust lands acquired after IGRA’s effective date even though the Territory consists of restricted fee, rather than trust, lands; and (3) whether, if the Buffalo Creek Territory is subject to Section 2719’s general prohibition, Class III gaming may nevertheless proceed on it because the Buffalo Creek Territory was acquired in settlement of a land claim.

The plaintiffs are opposing the Nation’s motion which is pending before the Court.

The United States has filed a motion for partial dismissal.  The motion remains pending.

If the plaintiffs ultimately succeed in this action, or in their pending appeals in the CACGEC I and CACGEC II proceedings, the SGC may be unable to conduct any Class III gaming at its existing properties.

Scott v. Pataki (NYS Supreme Court, Erie County, Index No. 001189/06)

On February 1, 2006, an action was filed in the New York Supreme Court, County of Erie, by various petitioners against George E. Pataki, in his official capacity as Governor of the State of New York; State Gaming Officials of the New York State Wagering Board; City of Buffalo; Common Council of the City of Buffalo; Anthony Masiello in his previous capacity as Mayor of Buffalo; Byron Brown in his capacity as Mayor of Buffalo; City of Buffalo Department of Public Works; Buffalo Sewer Authority; and Niagara Frontier Transportation Authority.  The action initially sought declaratory and injunctive relief under the State Environmental Quality Review Act, or SEQRA; the First Parks, Recreation, Historic Preservation Law, or PRHPL; First City Environmental Review Ordination, or CERO; and Freedom of Information Law, or FOIL, and is principally directed at the decisions and actions of the defendants in connection with our Seneca Buffalo Creek Casino.  The plaintiffs initially claimed that the defendants had failed to comply with SEQRA, PRHPL, CERO and FOIL and requested that the court take numerous actions including directing compliance with SEQRA, PRHPL, CERO and FOIL and restraining further action relating to the development of our Seneca Buffalo Creek Casino.  In May 2006, the petitioners further sought to enjoin demolition activity on the nine acre casino site, but the court declined to grant a preliminary injunction preventing demolition.  In June 2006, the petitioners amended their Petition to drop their claims against Governor Pataki, the State Gaming Officials and the Niagara Frontier Transportation Authority, and added the Buffalo Department of Economic Development, Permits and Inspections as a party. The amended Petition also dropped all claims except for the SEQRA and CERO claims. In October 2006, the plaintiffs moved for an injunction to prevent an agreement between SEGC and the City of Buffalo (relating to the development of the Seneca Buffalo Creek Casino) from being executed and performed, which motion was denied based upon a failure to show a likelihood of success on the merits.  The plaintiffs appealed this ruling to the New York Supreme Court Appellate Division.  On March 16, 2007, the Appellate Division unanimously affirmed the denial of the injunction.

A hearing was held on the merits of the petition in September 2007.  On July 3, 2008, the court dismissed the Petitioners’ claims holding: (1) that the Common Council of the City of Buffalo properly reviewed the environmental impact of the construction of the Buffalo Creek Casino, and fully complied with SEQR and CERO; (2) that the abandonment and sale of Fulton Street was properly approved by the Common Council of the City of Buffalo; (3) that the Seneca Nation of Indians is a necessary and indispensible party to the lawsuit; and (4) that Petitioner’s substantive claims are without merit.

On November 13, 2009, the NYS Supreme Court Appellate Division unanimously affirmed the earlier July 3, 2008 decision.

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If the plaintiffs were successful, the Nation could have been delayed in the completion of the expansion Seneca Buffalo Creek Casino temporary facility.  Certain of these petitioners are also plaintiffs in the federal lawsuits filed by Citizens Against Casino Gambling in Erie County referenced above.

Warren v. United States (1:06-c-00226-JTE (WDNY))

On or about April 6, 2006, an action was filed in the United States District Court, Western District of New York, by Daniel T. Warren, a pro se plaintiff, against the United States of America, the United States Department of the Interior, the National Indian Gaming Commission, and five individuals in their official capacities as Acting Secretary of the Interior, Acting Assistant Secretary of the Interior for Indian Affairs and Chairman of the National Indian Gaming Commission, as well as Governor George E. Pataki, as Governor of the State of New York, and Cheryl Ritchko-Buley, as Chairwoman of the New York State Racing and Wagering Board.    The action initially sought declaratory and injunctive relief as to numerous matters including declaring that IGRA is unconstitutional, that the Compact violates IGRA, that the New York Constitution is not preempted by IGRA, that New York does not have the authority under state law to enter into a tribal state compact under IGRA, that certain actions of the defendants were not in accordance with law, and that certain lands purchased by the Nation were not subject to being taken into trust or restricted fee status under the SNLCSA or were not pursuant to settlement of a land claim within the meaning of IGRA; and enjoining the defendants from taking actions which would further casino gambling in the State of New York under IGRA or on any lands acquired by the Nation pursuant to SNLCSA. On August 16, 2006, the plaintiff amended his complaint bringing: a Tenth Amendment challenge to IGRA; a claim that the Compact violates IGRA by providing for gaming which is not otherwise lawful in New York; a claim that both the Compact and the statute authorizing the Governor of New York to enter into the Compact violate various provisions of the New York State Constitution; and a claim that the United States has failed to promulgate regulations for gaming on off-reservation territory, in violation of its statutory duties.  The effect of such amendment was to limit the claims remaining in the case, by dropping many of the federal law claims in the original complaint.

On December 1, 2006, the court heard argument on the plaintiff’s motion to join (1) Barry E. Snyder, Sr., as President of the Nation; (2) John Pasqualoni, as President and CEO of SGC; (3) the Nation; and/or (4) SGC, as additional defendants.

On October 5, 2007, the plaintiff filed a motion to further amend the complaint to include as defendants (1) Maurice John, as President of the Nation; (2) E. Brian Hansberry, as the new President and CEO of SGC (replacing John Pasqualoni); (3) the Nation; and (4) SGC.  On October 25, 2007, the Nation filed a response in opposition to that motion asserting that (1) the motion to amend the complaint was not properly before the court because it is premised upon a finding that the Nation is a necessary and indispensible party, and (2) the motion to amend is futile because the Nation and its officers are protected by sovereign immunity.  On August 11, 2008, the court ordered the clerk to strike the Nation’s responses to motions filed by plaintiff because the Nation had not been granted permission to participate as amicus curiae and had not renewed its motion in that regard.  On August 22, 2008, the Nation filed a motion for leave to file brief amicus curiae.

On March 16, 2009, the plaintiff filed a motion to the amend/correct amended complaint.  On March 23, 2009, the court dismissed as moot both plaintiff’s October 5, 2007 motion to the amend/correct amended complaint and the Nation’s August 22, 2008 motion for leave to file brief amicus curiae in opposition to plaintiff’s motion.  On April 29, 2009, the Nation filed a motion for leave to appear as amicus curiae.  On June 15, 2009, the court granted the Nation’s April 29, 2009 request to file a brief amicus curiae.  On June 16, 2009, the Nation filed its response to plaintiff’s March 16, 2009 motion to amend/correct the amended complaint.

Dispositive motions to dismiss on behalf of both the plaintiff and the defendants have not yet been heard by the court.  In addition, still pending before the court is the motion on behalf of the Seneca entities and officers in opposition to being joined as defendants to the lawsuit on, among other things, sovereign immunity grounds.  If the plaintiff is successful in this lawsuit, the Nation would be unable to conduct any Class III gaming upon lands acquired pursuant to SNLCSA.

In the matter of the Petition of New York State Urban Development Corporation d/b/a Empire State Development Corporation (NYS Supreme Court, Niagara County)

Valuation Proceedings Pursuant to New York Eminent Domain Procedure Law

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In 2002 and pursuant to the Compact, the Nation acquired from the State of New York approximately 24 acres of land and related improvements in the City of Niagara Falls, New York, including the then-Niagara Falls Convention Center.  The State of New York further agreed in the Compact to assist the Nation in whatever manner appropriate, including through the exercise of its power of eminent domain, to acquire the remaining acreage within the approximately 50-acre footprint in the City of Niagara Falls, New York, designated by New York State under the Compact for ownership by the Nation. The Compact specifically excluded approximately 1.5 acres of land within the footprint owned by a Roman Catholic Church.  Additionally, in July 2006, the Nation agreed to waive its right to acquire approximately one half acre of additional land within the footprint owned by End Time Handmaidens, Inc., a religious organization.  In return for the waiver, the Nation obtained a right of first negotiation and refusal with respect to the future sale of the parcels.  As a result of the carve-out relating to the parcels owned by the Roman Catholic Church, and the Nation’s agreement with End Time Handmaidens, the total acreage of the Niagara Territory upon completion of the condemnation process is anticipated to be approximately 48 acres.

We have obtained possession of, either through eminent domain proceedings or private purchase, substantially all of the remaining acreage within the footprint, other than certain streets and alleys owned by the City of Niagara Falls providing access to the above church parcels, and a bicycle path owned by the New York State Department of Transportation, or NYSDOT. We expect to acquire the above Niagara Falls city street and alley parcels by early 2010, with acquisition of the NYSDOT bike path requiring further dialogue with New York State.

With the exception of approximately 2 acres of land and a hotel property within the footprint acquired for $7.9 million through a private sale in December 2005, substantially all of our post-2002 real property acquisitions in Niagara Falls, NY have been pursuant to New York State Eminent Domain Procedure Law, or EDPL, using the State’s power of eminent domain (through the Empire State Development Corporation, ESDC).  The amounts paid to condemnees from whom the ESDC has acquired property are deemed to be advance payments, in that property owners are entitled to reserve their rights to challenge the land and improvement values determined by the condemnor’s appraisers.  The ESDC has made advanced payments under the EDPL of approximately $31.5 million for the condemned parcels within the footprint including, in particular, approximately 18 acres of land and related fixtures (a former water park) for an aggregate advanced payment of $18.0 million, and another hotel property for an aggregate advanced payment of $8.2 million (excluding fixtures).    See “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources — Other Commitments” for information regarding a letter of credit established as initial security for the Nation’s obligations to pay site acquisition costs and in furtherance of the ongoing condemnation proceedings.

Pursuant to the EDPL, New York state courts will determine the final purchase price to be paid to condemnees who elect to challenge the initial appraised value of their property.  To date, all record owners from whom property was acquired pursuant to the EDPL have reserved rights to claim additional compensation.  Four record owners have filed notices of claim to challenge the fair market value appraisals utilized by ESDC. Fallsite LLC and Fallsville Splash, LLC have filed notices of claim in the amounts of $40.0 million and $35.0 million for land and trade fixtures, respectively, relating to a former water park within the footprint.  ESDC’s fair market appraisal value for the foregoing was approximately $17.0 million.  If a court determines that the value for the land and improvements, including trade fixtures, is higher than what ESDC has determined to be their appraised values, then we may be liable for the difference and potentially also responsible for certain additional costs and payments to the applicable condemnee(s), such as their attorneys’ fees.  The valuation trial proceedings with regard to the former water park are complete. The decision of the court is pending and is expected in early 2010.

Intertrust Development had filed a notice of claim for $15.8 million for land and trade fixtures associated with a former Holiday Inn hotel within the footprint. ESDC’s fair market appraisal value for the foregoing was $8.2 million (excluding fixtures).  We have agreed to a settlement of this matter with Intertrust, whereby Intertrust has received an additional $3.8 million in addition to the appraisal value of $8.2 million, and whereby we have agreed to purchase, for our business promotional use, tickets to Fallsview Waterpark, an affiliate of Intertrust, for $2.5 million to be paid in three installments over three years.  Pursuant to the stipulation of settlement, Intertrust has executed a release of SNFGC, ESDC and the Seneca Nation of Indians with respect to the valuation proceeding, and ESDC and Intertrust shall file a stipulation of discontinuance.

Additionally, JFD Holdings has filed a notice of claim for $1.1 million for a parcel of land at 621 Niagara Street within the footprint.  ESDC’s fair market appraisal for the foregoing is approximately $550,000.  No trial date has yet been set. Also, three individuals have filed notices of claim with respect to four parcels within the footprint seeking $955,000, in aggregate, for the four parcels.  ESDC’s fair-market appraisal for the four properties, in aggregate, is $185,000.  No trial dates have been set.

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If a court determines that the value for the land and improvements is higher than the appraised value we paid to a condemnee, then we may be liable to the condemnee for the difference and potentially also responsible for certain additional costs and payments to the condemnee, such as attorneys’ fees.  As of September 30, 2009, $1.7 million of the previously recorded reserve of $6.4 million remained for such matters and is included in the current and long-term liabilities sections on SGC’s consolidated balance sheet.  Should our liability be greater than our reserve for such matters, it could have a negative impact on our income and financial condition.

Seneca Gaming Authority Proposed Notices of Violation issued to the Seneca Gaming Corporation and Employees dated July 13, 2009.

Summary

On July 14, 2009, SGC received a proposed Notice of Violation dated July 13, 2009, or the 2009 NOV, from the Seneca Gaming Authority, or the SGA, alleging fifteen violations of certain sections of the Class III Gaming Ordinance and the Seneca Nation of Indians-State of New York Compact (“Compact”), as well as our Charter.  In addition to SGC, eleven employees received similar notices arising out of the same set of facts, alleging from five to twelve violations of the provisions noted above. Each of the alleged violations is attributable to SGC’s accounting treatment of an alleged table games inventory (i.e., gaming chips) discrepancy of $25,971 that arose due to a single human error during an ordinary course table games move on April 3, 2009.  The initial notices from the SGA indicated that each of the alleged violations carried with it a potential fine of $500 per day per violation imposed from the date of the initial alleged infraction, April 3, 2009, or approximately $1,000,000 for the SGC and approximately $8,000,000 in the aggregate for the eleven individuals as of August 14, 2009. On August 17, 2009, SGC and each of the affected employees received a proposed final assessment, which included proposed fines of $10,000 payable by SGC, and proposed fines payable by four out of the eleven individual employees cited originally, ranging from $500 to $2,500.

On December 18, 2009, the SGA Commission determined that the SGA’s action with respect to seven of the affected individuals did not constitute a “Notice of Violation” and that the matter had been settled from the SGA’s perspective (confirming that the matter would not have any negative licensing implications for the individuals).  Also on that date, the SGC and the SGA entered into a settlement agreement pursuant to which the proposed Notices of Violation issued to the four remaining individuals (with proposed fines ranging from $500 to $2,500) were vacated and dismissed in their entirety, while the SGA agreed that the proposed Notice of Violation issued to SGC would be vacated and dismissed without further action of the SGA on March 15, 2010.  The settlement agreement requires that the SGC engage in certain compliance-related efforts, and remit to the SGA an administrative fine of $10,000 to cover SGA costs.  In connection with this SGA enforcement matter, the SGC indemnified the affected employees for their defense costs pursuant to mandatory Charter indemnification provisions and action of the SGC board of directors.

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Seneca Gaming Corporation v. Merrill Lynch Pierce Fenner & Smith Incorporated

On August 6, 2009, The Corporation filed suit in the United States District Court for the Southern District of New York, alleging fraudulent conduct on the part of Merrill Lynch in inducing SGC to purchase auction-rate securrities.  The claim alleges that Merrill Lynch represented the securities as highly liquid and collateralized by residential mortgages.  SGC discovered subsequently that the securities were illiquid and not collateralized by residential mortgages, but rather, by complex derivative instruments, and that the securities had become worthless.  SGC’s suit seeks $5 million in damages.

Item 4. Submission of Matters to a Vote of Security Holders

Not Applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Not Applicable.

Item 6. Selected Financial Data

The selected consolidated financial data set forth below are derived from our audited financial statements and related notes for Fiscal 2007 through 2009. This information is only a summary and should be read in conjunction with “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our audited financial statements and related notes beginning on page F-1.

The results for past accounting periods are not necessarily indicative of the results expected for any future accounting period.

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(1)    Certain operating expenses from 2008, 2007 and 2006 have been reclassified between the Lodging and Retail, Entertainment and Other categories to conform to the current year presentation.

(2)    EBITDA represents earnings before interest and depreciation, and for Fiscal 2009, the impairment of property and equipment. We are not subject to U.S. federal income taxation under current interpretations of the U.S. federal tax code. EBITDA is presented to provide additional information that our management uses to assess our business and because we believe it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. However, other companies in our industry may calculate EBITDA differently than we do. EBITDA is not a measurement of financial condition or profitability under generally accepted accounting principles and should not be considered as an alternative to cash flow from operating activities or as a measure of liquidity or an alternative to net income as indicators of our operating performance or any other measures of performance derived in accordance with generally accepted accounting principles.

EBITDA includes pre-opening costs of approximately $0.4 million, $0.3 million, $15.4 million, $9.5 million and $1.5 million for Fiscal 2009, Fiscal 2008, Fiscal 2007, Fiscal 2006 and Fiscal 2005, respectively.

The following table sets forth a reconciliation of net income to EBITDA, which management believes is the most nearly equivalent measure under U.S. generally accepted accounting principles. The adjustments set forth below are those relevant to the periods presented.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis in conjunction with the section titled “Selected Consolidated Financial and Other Data” and the financial statements and related notes included elsewhere in this Annual Report. References herein to years are to fiscal years of Seneca Gaming Corporation unless otherwise noted. Our fiscal year is from October 1 through September 30.

Overview

The Nation and sgc

SGC is wholly-owned by the Nation and chartered to develop, manage and direct all of the Nation’s Class III gaming operations on the Nation’s territories in Western New York. SGC was chartered by the Nation in August 2002.  In August 2002, the Nation entered into the Compact with New York State that provides the Nation with the right to establish and operate three Class III gaming facilities in Western New York.  Class III gaming, the most heavily regulated of the gaming classes includes, among other things, slot machines and table games.   We currently operate three Class III gaming facilities in Western New York—Seneca  Niagara Casino and Hotel, which is located in the City of Niagara Falls, New York (Niagara Territory) and operated by SNFGC, approximately 20 miles north of Buffalo, New York; Seneca Allegany Casino and Hotel, which is located in the City of Salamanca, New York (Allegany Territory) and operated by STGC, approximately 75 miles northeast of Erie, Pennsylvania; and Seneca Buffalo Creek Casino, which is located in the inner harbor district of Buffalo, New York (Buffalo Creek Territory) and operated by SEGC. Seneca Niagara Casino and Hotel opened on December 31, 2002 (initially, as the Seneca Niagara Casino).  Seneca Allegany Casino and Hotel opened on May 1, 2004 (initially, as the Seneca Allegany Casino).  Seneca Buffalo Creek Casino commenced operations on July 3, 2007 in a temporary facility.  Our three casinos are located on land held in restricted fee by the Nation, which, together with the rights under the Compact, allows us to conduct Class III gaming operations at these locations in New York State and are the only casino resort gaming facilities in Western New York State to offer both Class III slot machines and table games.

As of September 30, 2009, Seneca Niagara Casino and Hotel featured over 147,000 square feet of gaming space, 4,062 slot machines, 104 table games and 604 hotel rooms; Seneca Allegany Casino and Hotel featured over 63,500 square feet of gaming space, 2,265 slot machines, 41 table games and 212 hotel rooms; and the Seneca Buffalo Creek Casino temporary facility featured 244 slot machines and no table games.

As of September 30, 2009, we had approximately 560,000 active members in the Seneca Link Player’s Card database each with at least one rated trip to our properties during Fiscal 2009. As of September 30, 2009, approximately 52% of the 560,000 active Seneca Link Player’s Card members live in New York State, and approximately 17%, 16%, and 9% lived in Pennsylvania, Ohio and Canada, respectively.

Executive Summary

Our Current Operations.    We currently operate three Class III gaming facilities, Seneca Niagara Casino and Hotel, in the City of Niagara Falls, New York (Niagara Territory), the Seneca Allegany Casino and Hotel, in the City of Salamanca, New York (Allegany Territory), and the Seneca Buffalo Creek Casino (slots only temporary facility), in the City of Buffalo, New York (Buffalo Creek Territory). Our casino operations include gaming, lodging, dining, entertainment, retail and spa and salon services. For both Fiscal 2009 and Fiscal 2008, approximately 92% of our net revenue was derived from our Class III gaming activities.

Recent Developments.  The ongoing recession has continued to negatively impact our operating performance and results, primarily due to reduced consumer discretionary spending on gaming and entertainment.  Over the past eighteen months, we have attempted to mitigate the effects of the economic recession through implementation of expense reduction measures and efforts to increase operational efficiencies.

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As previously noted, on August 27, 2008, the construction activities at Seneca Allegany Casino and Hotel and Seneca Buffalo Creek Casino and Hotel were suspended for reasons including:  the economic recession; inability to obtain construction financing at reasonable interest rates; and operating and other demands on our available cash, such as our payments to the Nation.  As of September 30, 2009, due to the continuation of weak economic conditions, adverse credit market conditions and an uncertain economic outlook, such construction remains suspended indefinitely.  Furthermore, certain planning efforts related to the future expansion of the Seneca Niagara property have been suspended for the same reasons.  As a result of these circumstances an impairment charge of $107.6 million was recognized during Fiscal 2009.

In December 2008, we implemented a multifaceted plan to further reduce expenses, including, but not limited to: an approximate five percent temporary workforce reduction; a wage freeze for all employees earning in excess of $70,000 per year; voluntary temporary salary reductions for senior management; and suspension of our bonus program, historically paid in December of each year.  While we have successfully reduced certain expenses and increased certain operational efficiencies, we anticipate continuing to take measures to help preserve SGC’s financial condition, maintain adequate liquidity and position us for future growth and success, and endeavor to do so in a manner that will not compromise the quality or levels of our offerings and services provided at each of our properties.

Following discussions with the Nation in February 2009, our payments and distributions to the Nation were reduced in an effort to enhance our liquidity position, provide cash for priority maintenance capital expenditures and to begin to fund a reserve for potential repurchase or repayment of our senior debt.  The measures resulting from the joint planning initiatives with the Nation included principally, rescission of a Fiscal 2008 Council request for $20.0 million relating to certain capital improvement projects of the Nation, a reduction in monthly distributions to the Nation from the then-current level of $4.0 million per month to $3.0 million per month commencing in March 2009, the application of $5.0 million previously distributed to the Nation for the capital improvement projects described above as a credit against SGC’s monthly distribution obligations, and a $5.0 million reduction in rent for Fiscal 2009 under our Head Leases with the Nation.

In furtherance of improving SGC’s liquidity, in October 2009 the Nation reduced anticipated 2010 monthly distributions, exclusive of amounts required under the Distribution Agreement, to $30.0 million for Fiscal 2010, compared to $42.0 million for Fiscal 2009. As a result of these efforts, combined with SGC’s efforts to create operating efficiencies, SGC repaid the $20.0 million outstanding balance under the Senior Secured Revolving Loan Agreement during the third quarter of Fiscal 2009 and SGC’s depository cash balances increased to approximately $61.8 million at September 30, 2009 from $18.8 million, net of the $20.0 million proceeds drawn under the Senior Secured Revolving Loan Agreement, as of March 31, 2009. SGC has implemented, and intends to continue to implement a strategy to fund a $125.0 million reserve prior to May 2012 to reduce its future borrowing costs, while also maintaining adequate operating cash reserves.

On October 19, 2009 we broke ground on a Buffalo Creek Casino temporary facility expansion, which will add approximately 5,300 square feet of gaming space to the facility and will accommodate 200 to 250 additional slot machines. The expansion is due to be completed in spring 2010.

The Nation has offered SEGC a $9.0 million unsecured loan for purposes of financing the Buffalo Creek facility expansion.  If utilized, the potential loan would carry an interest rate of 5% per annum with principal and interest payable over a 12 month period commencing on the 15th day of the calendar month following the opening of the expansion. The note would be prepayable at any time without penalty.

Effective December 18, 2009, SGC amended its Senior Secured Revolving Loan Agreement to extend the maturity date until December 31, 2011. Amounts borrowed under the Amended Senior Secured Revolving Loan Agreement continue to bear interest at either one, three or six-month LIBOR plus one and one quarter percent (1.25%), or the prime rate (as reported in The Wall Street Journal) plus one quarter percent (0.25%), with any outstanding principal balance to be paid by, or on, the new maturity date.  The $50.0 million commitment reduces in tandem with any reduction in the letter of credit requirement imposed by ESDC (as described below), up to an aggregate reduction of $10.0 million.  The Amended Senior Secured Revolving Loan Agreement requires that SGC maintain all of its deposit and investment accounts with the lender, subject to limited exceptions for certain existing accounts. The Amended Senior Secured Revolving Loan Agreement also modifies certain of the financial covenants contained in the Senior Secured Revolving Loan Agreement, including reducing the minimum consolidated EBITDA covenant from $160 million to $145 million (on a rolling 12 month basis) while modifying the total leverage ratio (of total funded debt to EBITDA) to a limit of 3.5 to 1.0.

Key Performance Indicators.    Our operating results are dependent on the volume of patrons at our casinos, our ability to

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attract them for repeat visits and the ability to increase patron revenue per trip.

Seneca Niagara Casino and Hotel.    Prior to the opening of our luxury hotel, Seneca Niagara Casino primarily relied on drive-in and bus patrons from the Buffalo, Niagara Falls, and Rochester areas in New York and secondarily from Erie, Pennsylvania, Ohio and other parts of New York.  Since the opening of the new luxury hotel and expanded gaming and related amenities during Fiscal 2006, Seneca Niagara Casino and Hotel had experienced steady growth in its patron base until Fiscal 2009 with the advent of the ongoing economic downturn, which has negatively impacted our operating performance.  The expansion of Seneca Niagara Casino and Hotel, including the addition of our luxury hotel and other amenities, has enabled us, apart from the impact of the current economic downturn, to increase the volume of patrons with higher gaming budgets, gaming activity, and length of stay and has extended our geographic market penetration and appeal to a more diverse demographic base.  During Fiscal 2009 and Fiscal 2008, our average hotel occupancy rates were approximately 95% and 94%, respectively.  During these periods, approximately 71% and 72% of our occupied rooms, respectively, were complimentary rooms provided to our gaming patrons.

We paid for substantially all of our completed expansion projects out of cash flow from operations and proceeds of our senior notes. Our completed expansion projects since the opening of the casino on December 31, 2002 include the addition of Turtle Island, a non-smoking casino room; a 2,130-space parking garage; the Western Door, an upscale steakhouse; our “Pennies From Heaven” slot room located on the mezzanine level overlooking our main casino, adding approximately 6,600 square feet of gaming space including 242 additional ticket-in/ticket-out slot machines; and our luxury hotel and related amenities.  We opened substantially all public areas and the first 10 floors of hotel rooms on December 15, 2005, and completely opened the remaining hotel rooms and all amenities on March 31, 2006.  The total cost of the luxury hotel expansion project was approximately $234.0 million.

In 2006, we began master planning activities for the remaining approximately 24 acres of undeveloped land contained in the Niagara Falls footprint.  During August 2008, these master planning activities were suspended due to the continuation of weak economic conditions, adverse credit market conditions and an uncertain economic outlook.  As a result of these circumstances an impairment charge of $3.5 million was recognized during Fiscal 2009 related to these activities.

Seneca Allegany Casino and Hotel.    Since its opening on May 1, 2004, Seneca Allegany Casino and Hotel has attracted patrons from the southern portion of Western New York, Erie and Pittsburgh, Pennsylvania and Ohio. As of September 30, 2009, approximately 67% of its patrons have come from outside New York State.  During Fiscal 2009 and 2008, our average occupancy rate was approximately 96% and 97%, respectively and of those occupied rooms, 81% and 79%, respectively, were complimentary rooms provided to our gaming patrons.

In July 2005, we opened our 1,850-space parking garage, which cost approximately $32.2 million.  In March 2007, we opened a 212-room resort hotel, including two fine dining restaurants, a 24-hour casual restaurant and certain additional amenities after officially opening a new permanent gaming floor in December 2006.  In March 2008, we completed the conversion of the former temporary casino structure into an events center with a seating capacity for 2,200 people, along with additional administrative office space.   We believe the new resort hotel, permanent casino and events center provide a first-class gaming experience for our patrons, increase their length of stay and maintain the competitive position of this facility in light of competition in Pennsylvania, consisting principally of Presque Isle Downs, a new gaming facility that opened in late February 2007 in Erie, Pennsylvania approximately  80 miles from the Seneca Allegany Casino and Hotel and 120 miles from the Seneca Niagara Casino and Hotel.  Presque Isle does not provide table games or lodging, but currently provides approximately 2,000 slots and dining and entertainment options that include a steakhouse, a buffet and four lounges.  Additionally, in August 2009, the Rivers Casino in downtown Pittsburgh, Pennsylvania (located approximately 240 miles and 190 miles from Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel, respectively) opened with 3,000 slot machines and various food, beverage and entertainment venues.

Construction on our next phase of development at Seneca Allegany Casino and Hotel, which was planned to include an additional 200 room hotel tower, and up to 30,000 square feet of additional gaming space and related amenities, for a total estimated cost of up to $130 million, was suspended in August 2008 for reasons including:  the continuing economic recession; inability to obtain construction financing at reasonable interest rates; and operating and other demands on our available cash, such as our payments and distributions to the Nation.  As of September 30, 2009, due to the continuation of weak economic conditions, adverse credit market conditions and an uncertain economic outlook, construction remained suspended indefinitely.  As a result of these circumstances an impairment charge was recognized related to these activities in Fiscal 2009, in the amount of

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approximately $17.1 million.

Seneca Buffalo Creek Casino.    On October 3, 2005, the Nation acquired approximately nine acres of land in the inner-harbor district of Buffalo, New York.  Initially, the nine acre parcel was bisected by a two-block section of a street owned by the City of Buffalo (Fulton Street).  In November 2006, we acquired the two-block section of Fulton Street from the City of Buffalo for a purchase price of $0.6 million to create a contiguous 9-acre parcel for development.  In order to meet the requirements of the Compact, on December 8, 2005 we began construction of a temporary Class III gaming facility on the Seneca Buffalo Creek Territory.  On July 3, 2007 we began operating the temporary Class III gaming facility (approximately 6,000 square feet) featuring 135 slot machines and a snack bar.  During the quarter ended March 31, 2008 the temporary facility was expanded to include an additional 109 slot machines.  The current temporary facility is approximately 8,600 square feet, and features 244 slot machines and a snack bar.

Construction on our next phase of development at Seneca Buffalo Creek Casino and Hotel, which was planned to include approximately 90,000 square feet of gaming space; 2,000 slot machines; 45 table games; a 22-story all-suite hotel; four restaurants; a full-service spa and salon; retail and other amenities; and a 2,200-space parking garage, for a total estimated cost of approximately $333.0 million, was suspended in August 2008 for reasons including:  the continuing economic recession; inability to obtain construction financing at reasonable interest rates; and operating and other demands on our available cash, such as our payments and distributions to the Nation.  As of September 30, 2009, due to the continuation of weak economic conditions, adverse credit market conditions and an uncertain economic outlook, construction remains suspended indefinitely.  As a result of these circumstances an impairment charge was recognized related to these activities in Fiscal 2009, in the amount of approximately $87.0 million.

As previously noted, on October 19, 2009 we broke ground on an expansion to the existing temporary facility, which will add approximately 5,300 square feet of gaming space and will accommodate 200 to 250 additional slot machines. The expansion is due to be completed in spring 2010.

Our ability to continue to operate the Seneca Buffalo Creek Casino temporary facility will depend on various factors, including existing legal challenges and the availability of financing on acceptable terms.  See “Item 3 — Legal Proceedings” for a discussion of existing legal challenges regarding our Seneca Buffalo Creek Casino.

Seneca Hickory Stick Golf Club — Lewiston, New York.  In March 2006, we acquired 257 acres of land with the intent to design and build a championship level golf course in Lewiston, New York, approximately eight miles from Seneca Niagara Casino and Hotel.  We selected the Robert Trent Jones II firm to design the golf course.  Construction of the golf course commenced in July 2007 and it is anticipated that the official opening of the course will occur in 2010. LGCC has engaged Kemper Sports Management, Inc. to manage and operate the course. The total cost to construct the golf course, clubhouse and related amenities is estimated to be approximately $25.5 million.

Class II Gaming Operations.  In January 2005, we transferred all Class II gaming operations to the Nation, which included our poker operations at the Seneca Niagara Casino and Hotel and Seneca Allegany Casino.  The transfer of the Class II operations in January 2005 was consistent with our understanding of the Seneca Nation Tribal Council’s (the Nation’s legislative body) intent that we manage and operate the Nation’s Class III operations and that Council directly manage and operate the Nation’s Class II operations.

The Nation, through its wholly-owned business enterprise, Seneca Gaming & Entertainment, operates the Class II poker operations at Seneca Niagara Casino and Hotel, in addition to two Class II gaming facilities located on the Nation’s Territories in Salamanca and Irving, New York, respectively. On November 9, 2009, Seneca Gaming and Entertainment relocated its poker operations at Seneca Allegany Casino to a new facility located within one mile of our property.

Current, Continued and Future Reliance on Cash Flow. We intend to fund the maintenance of our existing facilities from our future cash flow and current cash on hand. We currently rely and will continue to rely on our ability to generate cash flow from operations to satisfy our financial obligations and maintenance capital expenditure requirements.

Seasonality.  We have generally observed seasonal increases in gaming activity during the spring and summer months and decreases in gaming activity during the winter months associated with inclement weather.

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Overall Outlook. SGC believes that it is the premier gaming operator in Western New York State and in the areas of Northern Pennsylvania and Ohio located within its primary and secondary markets. Since the December 31, 2002 opening of the Seneca Niagara Casino, SGC has invested significantly in the development, expansion and maintenance of its gaming facilities, including the completion of the hotel and gaming expansion projects at Seneca Niagara Casino and Hotel and Seneca Allegany Casino and Hotel, and the opening of the temporary casino on the Seneca Buffalo Creek Territory.  These investments have enabled SGC to maintain its position as the premier gaming operator in the region described above.  To further that objective, and to provide for expanded opportunities in the convention and tourism markets, SGC will continue to explore opportunities with respect to the Niagara Falls, Allegany and Buffalo gaming and related facilities, subject to the availability of necessary funding. A principal goal is for the facilities to complement each other, offering diverse hotel, entertainment and gaming experiences for our guests.

The current economic recession and increased regional competition have presented operational challenges resulting in lower net revenues and impairment charges relating to certain construction activities, and we expect that such challenges may continue. We believe that we are positioned to weather such challenges and conditions, based in part upon our efforts, and those of the Nation in working with SGC to mitigate the impact of these adverse developments.  We also continue to believe, notwithstanding these challenges, the Class III gaming exclusivity provided by the Compact will continue to present us with a competitive advantage to serve the Western New York hotel, entertainment and gaming markets.  As highlighted above in “Recent Developments,” we continue to engage in joint financing planning initiatives with the Nation to assess our financial condition and liquidity needs, and to help ensure that appropriate strategic plans are being developed and implemented to meet our liquidity and maintenance capital expenditure requirements and the ongoing challenges presented by the current economic environment.  Management intends to continue to work closely with the Nation to help ensure cash generated from operations, available cash and cash equivalents and short-term investments are sufficient to service our debt, satisfy our other financial obligations and commitments and meet our working capital requirements for the upcoming fiscal year.

Explanation of Key Financial Statement Captions

Gross revenues.  Our gross revenues are derived primarily from the following four sources:

Our largest component of revenues is gaming revenues, which is recognized as amounts wagered less prizes paid out, and is comprised primarily of revenues from our slot machines and table games. Revenues from slot machines are the largest component of our gaming revenues. Gross slot revenues, also referred to as gross slot win, represent all amounts played in the slot machines reduced by both (1) winnings paid out and (2) slot tickets issued but not redeemed.

Other commonly used terms in the discussion of revenues from slot machines include progressive slot machines, progressive jackpots, net slot revenues, slot handle, gross slot hold percentage and net slot hold percentage. Progressive slot machines retain a portion of each amount wagered and aggregate these amounts with similar amounts from other slot machines in order to create one-time winnings that are substantially larger than those paid in the ordinary course of play. We refer to such aggregated amounts as progressive jackpots. Wide-area progressive jackpot amounts are paid by a third party vendor and we remit a weekly payment to the vendor based on a percentage of the slot handle for each wide-area progressive slot machine. We accrue in-house progressive jackpot amounts until paid, and such accrued amounts are deducted from gross slot revenues, along with wide-area progressive jackpot amounts, to arrive at net slot revenues, also referred to as net slot win. Net slot revenues are included in gaming revenues in the accompanying consolidated statements of operations. Slot handle is the total amount wagered by patrons on slot machines during the period. Gross slot hold percentage is the gross slot win as a percentage of slot handle. Net slot hold percentage is the net slot win as a percentage of slot handle.

Commonly used terms in the discussion of revenues from table games include table games revenues, table games drop and table games hold percentage. Table games revenues represents the closing table games inventory plus table games drop and credit slips for coins or chips returned to the casino cage, less opening table games inventory, discounts provided on patron losses, free bet coupons and chip fills to the tables. Table games drop is the total amount of cash, free bet coupons, cash advance drafts, customer deposit withdrawals, safekeeping withdrawals and credit issued at the table contained in the locked container at each gaming table. Table games hold percentage is the table games revenues as a percentage of table games drop.

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Revenues from food and beverage, hotel, retail, spa and salon, entertainment events and other services are recognized at the time the service is performed.

Promotional allowances.  We operate a program for our guests, without membership fees, called the Seneca Link Player’s Card. This program provides complimentary food, beverages, hotel, retail, entertainment and other services to guests based on points that are awarded for guests’ gaming activities. These points may be used to purchase, among other things, items at the retail stores, spa and salon and restaurants located within our properties. Points also may be used to purchase hotel services and tickets to entertainment events. The retail value of points are included in gross revenues when redeemed at our facilities and then deducted as promotional allowances to arrive at net revenues.

Gaming expenses.  The largest component of gaming expenses is the percentage of slot machine net drop (money dropped into the machines after payout but before our expenses) which must be paid to the State of New York, pursuant to the Compact, which is referred to as the exclusivity payment.  The exclusivity payment was 18% for the first four calendar years (January 1, 2002 through December 31, 2006), has been 22% for years 5-7 (January 1, 2007 through December 31, 2009), and will be 25% for the remainder of the current term of the Compact (beginning January 1, 2010).

Gaming expenses also include, among other things, expenses associated with operation of slot machines, table games, keno, certain marketing expenses, and promotional expenses for the Seneca Link Player’s Card points redeemed at our hotel, restaurants and retail outlets, as well as a third party tenant retail shop.

Advertising, general and administrative.  The largest components of advertising, general and administrative expenses are those charges related to: advertising, marketing, regulatory oversight, insurance, utilities, legal services and the Head Leases with the Nation, which represent amounts paid to the Nation for the use of the land and certain improvements on which our operations are located.

Operating Income.  We calculate income from operations as net revenues less total operating costs and expenses. Income from operations represents only those amounts that relate to our consolidated operations and excludes interest income, interest expense and other non-operating income and expense.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of our financial condition, results of operations and liquidity and capital resources are based on our consolidated financial statements. To prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States, we must make estimates and assumptions that affect the amounts reported in the consolidated financial statements. We regularly evaluate these estimates and assumptions, particularly in areas we consider to be critical accounting estimates, where changes in the estimates and assumptions could have a material impact on our results of operations, financial position and, to a lesser extent, cash flows. Actual results may differ from our estimates, which could materially affect the reported results. To provide an understanding of the methodology we apply, our significant accounting policies and basis of presentation are summarized in Note 2 to our audited consolidated financial statements included in this Annual Report. We believe the accounting policies described below involve a higher degree of management judgment:

Liability for Unredeemed Seneca Link Player’s Card Points.    Patrons who are members of our Seneca Link Player’s Card rewards program earn promotional points based on the volume and type of their gaming activity. The Seneca Link Player’s Card accumulates points that are redeemable for food and beverage at our restaurants, lodging, spa and salon services, free slot play and products offered at our retail stores. Points are accrued and reflected as a current liability on our consolidated balance sheets based upon expected redemption rates and the estimated cost of the service or merchandise to be provided. Management reviews the adequacy of the accrual for unredeemed points by periodically evaluating the historical redemption and projected trends. Actual results could differ from our estimates.

Self-Insurance Reserves.    We have financial exposure for portions of our employee benefits programs and general liability reserves. We accrue for liabilities based on filed claims and estimates of claims incurred but not reported. We believe the accruals to cover these costs are adequate, but actual results may vary from the amount accrued on our consolidated balance sheets.

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Property and Equipment.    We have a significant amount of capital invested in our property and equipment, which is stated at cost less accumulated depreciation. We use judgment in determining if, or when, assets have been impaired and the estimated useful lives of assets. The accuracy of these estimates affects whether or not impairment exists, and the depreciation expense recognized in our results of operations. Leasehold improvements represent a significant portion of our property and equipment balance. These assets are amortized over the related lease term or depreciable life, whichever is shorter. The useful lives assigned to our other property and equipment assets are based on our standard policy, which we believe represents the useful life of each category of asset. In accordance with the Financial Accounting Standards Board’s, or FASB’s, Accounting Standards Codification, or ASC 360,  Property, Plant, and Equipment, the carrying values of our long-lived assets are reviewed when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Assets are grouped at the property level when estimating future undiscounted cash flows for determining whether an asset has been impaired. Management assesses the possibility of asset impairment by using the estimates of future undiscounted cash flows, which are affected by current operating results, trends and prospects, as well as the effect of obsolescence, demand, competition and other economic factors.

Our analysis of undiscounted cash flows represents our best estimates at the time of the review. However, changes in these assumptions due to actual market conditions that cause less favorable results than our estimates may result in impairment in the future.

Regulatory Costs.    We have financial exposure for regulatory costs related to oversight provided by the New York State Police (State Police) billed but not paid.  There is an ongoing dispute between the Nation and the State Police as to the appropriate amount of costs that are due to the State Police for their regulatory oversight.  As of September 30, 2009, we have accrued approximately $30.1 million to cover such costs.  We believe this accrual is adequate, but actual results may differ from the amount accrued on our consolidated balance sheets.

Operating Results

Summary of Operating Results

As of September 30, 2009, we own and operate the Seneca Niagara Casino and Hotel in Niagara Falls, New York; the Seneca Allegany Casino and Hotel in Salamanca, New York; and the Seneca Buffalo Creek Casino in Buffalo, New York.  In addition, Lewiston Golf Course Corporation was established to operate a golf course that is currently under construction.  All of our revenues are derived from our operations at our completed facilities.

The following table summarizes our results from operations by corporation and/or facility:

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The most important factors and trends contributing to our operating performance during Fiscal 2009 were:

·                                          The ongoing economic recession, which has reduced consumer spending and encouraged an apparent transition to gaming of logistical convenience;

·                                          Adverse credit market conditions which have reduced the availability, and increased the cost, of capital for expansion projects to generate additional revenues;

·                                          Recognition of an impairment charge in the amount of $107.6 million related to costs incurred on certain construction and development projects;

·                                          Limited maintenance capital investment in both our Niagara Falls and Allegany properties;

·                                          Additional marketing by New York racinos which may be attributable, in part, to recent New York State legislation providing financial support for marketing to racinos;

·                                          Recruitment and retention issues pertaining to key members of the management team, including, but not limited to, recruitment of a new Chief Executive Officer, General Manager of the Seneca Niagara Casino and Hotel and General Counsel.

·                                          The reduction of expenses attributable to implementation of operating initiatives, which included:  a   continued focus on hotel yield management; reduced food and beverage costs as a percentage of food and beverage revenue; repricing of our food and beverage products; initiatives to increase our cash paying patrons; reduced marketing costs; and labor efficiencies achieved through active monitoring of scheduling activities and a reduction in workforce;

·                                          The rescission of a Fiscal 2008 Council request for $20 million, a reduction in monthly distributions to the Nation from the current level of $4 million per month to $3 million per month commencing in March 2009, and a reduction in Head Leases payments for Fiscal 2009 from $81 million to $76 million;

·                                          Extension of hours of operation of the Buffalo Creek facility, effective February 2009;

·                                          Increased promotional room rates offered to casino hotel guests, designed to maintain occupancy levels to support gaming and non-gaming revenues; and

·                                          The effects of increased Head Lease payments to the Nation from $62 million to $76 million, which have reduced our cash reserves and funds available for construction, capital reinvestment and liquidity reserves;

The most important factors and trends contributing to our operating performance during Fiscal 2008 were:

·                                          The opening of our temporary facility on the Buffalo Creek Territory in July 2007, which was in operation for all of Fiscal 2008, compared to approximately three months during Fiscal 2007;

·                                          Expansion of our temporary facility on the Buffalo Creek Territory during the second quarter of 2008 to include an additional 109 slot machines;

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·                                          Our ability to enroll patrons in our cross-property Seneca Link Player’s Card program, which continues to facilitate the use of effective direct mail and targeted marketing programs to establish patron loyalty to the Seneca brand at a profitable level;

·                                          Our mix of slot machines, which we believe is superior to our competition and includes the latest product offerings by leading slot manufacturers, and promotes the ongoing development of a Seneca brand inter-property progressive link;

·                                          Operating initiatives which include:  continued focus on hotel yield management; reduced food and beverage costs as a percent of food and beverage revenue; repricing of our food and beverage products; initiative to increase our cash paying patrons; and labor efficiencies achieved through active monitoring of scheduling activities;

·                                          A four percentage point increase in the slot exclusivity fee rate paid to the State of New York from 18% to 22%, effective January 1, 2007, pursuant to the Compact;

·                                          The opening in February 2007 of a competing gaming facility at Presque Isle Downs in Erie, Pennsylvania, approximately 80 miles from the Seneca Allegany Casino and Hotel and 120 miles from the Seneca Niagara Casino and Hotel, offering approximately 2,000 slot machines;

·                                          Tumultuous and volatile economic conditions and general consumer uncertainty leading to reduced consumer spending and an apparent transition to gaming of logistical convenience;

·                                          Adverse credit market conditions which have negatively impacted availability of funding sources to complete construction at a borrowing rate which provides for a desirable return on investment;

·                                          Increases in payments to the Nation, which have limited our cash reserves and funds available for construction, capital reinvestment and liquidity reserves; and

·                                          Reduced capital reinvestment in both our Niagara Falls and Allegany properties.

Gross Revenues

Gross revenues consisted of the following: