ALPHA HOSPITALITY CORP, DEFM14A, 1998-02-13

ALPHA HOSPITALITY CORP
DEFM14A, 1998-02-13
MISCELLANEOUS AMUSEMENT & RECREATION

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________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
------------------------

SCHEDULE 14A INFORMATION
------------------------

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

Filed by Registrant [x]

Filed by a Party Other than Registrant [ ]

Check the Appropriate Box:

[ ] Preliminary Proxy Statement

[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))

[X] Definitive Proxy Statement

[ ] Definitive Additional Materials

[ ] Soliciting Material Pursuant to Exchange Act Rule 14a-11(c) or 14a-12

ALPHA HOSPITALITY CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
------------------------

Payment of Filing Fee (Check the appropriate box):

[ ] No Fee Required.

[x] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate Number of Securities to which transaction applies:

(3) Per unit price or the underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it is determined):

(4) Proposed maximum aggregate value of transaction: $40,200,000.

(5) Total fee paid: $8,040.00

[x] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing:

(1) Amount Previously Paid: $__________________.
(2) Form, Schedule or Registration Statement No.:__________________
(3) Filing Party:

(4) Date Filed:
------------------------

COPIES OF ALL COMMUNICATIONS TO:

CRAIG S. LIBSON, ESQ.
PARKER DURYEE ROSOFF & HAFT
529 FIFTH AVENUE
NEW YORK, NEW YORK 10017
------------------------

THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
________________________________________________________________________________

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ALPHA HOSPITALITY CORPORATION
12 EAST 49TH STREET
NEW YORK, NEW YORK 10017

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PROXY STATEMENT
---------------------------------

COMBINED ANNUAL AND SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD AT 11:00 A.M AT LOEWS NEW YORK HOTEL,
LEXINGTON AVENUE AT 51ST STREET, NEW YORK, NEW YORK
ON FEBRUARY 23, 1998

This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Alpha Hospitality Corporation (the
'Company') for use at the combined Annual and Special Meeting of Stockholders of
the Company (the 'Meeting') to be held at 11:00 a.m. at Loews New York Hotel,
Lexington Avenue at 51st Street, New York, New York, on February 23, 1998, and
at all adjournments and postponements thereof. Anyone giving a proxy may revoke
it at any time before it is exercised by giving the Chairman of the Board of
Directors of the Company written notice of the revocation, by submitting a proxy
bearing a later date or by attending the Meeting and voting by ballot. This
Proxy Statement, with the accompanying form of proxy, is first being sent to the
stockholders on or about February 12, 1998.

Each properly executed, unrevoked proxy on the enclosed form that is
received prior to the Meeting will be voted in accordance with the stockholder's
directions, and unless contrary directions are given, will be voted in
accordance with the Board of Directors' recommendations. However, proxies which
direct a vote against any of the proposals at the Meeting will not be voted in
favor of any adjournment or postponement for the purpose of soliciting
additional proxies.

At the Meeting, the Company's stockholders are being asked to vote upon the
matters customarily addressed at the Company's Annual Meeting of Stockholders,
namely, the election of Directors and the ratification of the Company's
independent certified public accountants. In addition, at the Meeting, the
Company's stockholders will be asked to vote upon a proposal (the 'Sale
Proposal') to approve an extraordinary transaction in which substantially all of
the Company's operating assets would be sold in consideration for cash, the
assumption of certain liabilities and an equity interest in the purchaser.
Specifically, the Company and its operating subsidiaries, Alpha Gulf Coast, Inc.
('Gulf Coast') and Alpha Greenville Hotel, Inc. ('Greenville Hotel'), have
executed an Asset Purchase Agreement (the 'Sale Agreement'), dated December 17,
1997, pursuant to which Greenville Casino Partners, L.P. ('Buyer') has agreed to
acquire the Company's Bayou Caddy's Jubilee Casino and related assets,
comprising substantially all of the Company's currently operating assets, in
consideration for (i) approximately $11.8 million in cash, (ii) a 25% limited
partnership interest in Buyer, (iii) the assumption of approximately $2 million
of liabilities of Gulf Coast and (iv) the assumption of an additional
approximately $23.9 million of indebtedness (inclusive of loan costs and loan
discounts aggregating approximately $6 million, which was not received by the
Company) owed by Gulf Coast and Greenville Hotel to Credit Suisse First Boston
Mortgage Capital L.L.C. (the 'Pre-Closing Lender'), which indebtedness has been
incurred by Gulf Coast and Greenville Hotel in anticipation of the proposed
sale. A copy of the Sale Agreement is attached to this proxy statement as
Appendix A, which is incorporated herein by reference. It is contemplated (as
described more fully below) that upon consummation of the proposed transaction,
the nature of the Company's business will change significantly. However, the
stockholders of the Company will not have an opportunity to vote separately on
the proposed transaction and the change in the nature of the Company's business.
Consequently, a vote in favor of the proposed transaction will effectively
constitute a vote in favor of changing the nature of the Company's business.

If the proposed sale is consummated, the Company anticipates receiving
aggregate consideration (including the assumption of indebtedness aggregating
$23.9 million (inclusive of loan costs and loan discounts aggregating
approximately $6 million, which was not received by the Company) and other

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liabilities) of approximately $40.2 million (which includes an assumed value of
$8.5 million attributed to the 25% limited partnership interest in Buyer to be
issued to the Company as part of such consideration). Such consideration
represents approximately $2.79 per outstanding share of the Company's common
stock ($1.14 per outstanding share of the Company's common stock after netting
out the aggregate liquidation value of the Company's outstanding shares of
preferred stock).

The approximate aggregate book value (as of September 30, 1997 and net of
depreciation, except for the hotel casino -- which, for these purposes, is
valued at its total estimated cost of completion of $3.2 million) of the assets
proposed to be sold is $31,168,000, or approximately $2.16 per outstanding share
of the Company's common stock (approximately $.51 per outstanding share of the
Company's common stock after netting out the aggregate liquidation value of the
Company's outstanding shares of preferred stock).

As of September 30, 1997, the net book value of a share of the Company's
outstanding common stock was $0.08 ($0 after netting out the aggregate
liquidation value of the Company's outstanding shares of preferred stock), and
as of February 6, 1998, the closing bid price of a share of the Company's common
stock was $2.00.

If the proposed sale is consummated, the Company will have disposed of
substantially all of its currently operating assets. Consequently, upon
consummation of the proposed sale, the Company's business and operations would
change dramatically. Management currently anticipates that the Company may
continue to pursue a gaming opportunity that the Company has in the initial
stages of development in New York State or other gaming opportunities that might
arise in the future. Additionally, following consummation of the proposed sale,
it is anticipated that the Company will investigate and, as deemed advisable,
pursue the acquisition (by merger or otherwise) of one or more other operating
businesses.

The Board of Directors believes that the proposed sale is fair and in the
best interests of the Company and its stockholders and unanimously recommends a
vote FOR the proposed sale. In connection with such recommendation, the Board of
Directors retained Appraisal Economics, Inc. to evaluate the proposed sale, and
Appraisal Economics, Inc. issued its opinion that the consideration to be
received by the Company in the proposed sale would be fair to the stockholders
of the Company.

The Company has been advised by various members of management and the Board
of Directors and others who, in the aggregate, hold or otherwise have voting
power with respect to 8,196,243 shares of the Company's common stock
(representing approximately 57% of such shares outstanding) and 821,496 shares
of the Company's preferred stock (representing 100% of such shares outstanding)
that they intend to vote such shares in favor of the proposed sale, and such
persons have executed and delivered to Buyer irrevocable proxies, exercisable by
designees of Buyer, to vote their shares in favor of the proposed sale. If such
proxies are exercised in favor of the proposed sale, which such designees have
committed to Buyer to do, the proposed sale will be approved at the Meeting.

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TABLE OF CONTENTS

<TABLE>
<S> <C>
SUMMARY.......................................................................................... 1
THE MEETING...................................................................................... 5
Time and Place.............................................................................. 5
Purpose..................................................................................... 5
Voting and Solicitation..................................................................... 5
Shares Entitled to Vote..................................................................... 5
Vote Required............................................................................... 6
Shares Committed............................................................................ 6
No Appraisal Rights......................................................................... 6
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................................... 6
ELECTION OF DIRECTORS............................................................................ 9
RATIFICATION OF ACCOUNTANTS...................................................................... 10
THE SALE TRANSACTIONS............................................................................ 11
Summary of the Consequences of the Proposed Sale............................................ 11
Background of the Proposed Sale............................................................. 11
Company's Reasons for the Proposed Sale..................................................... 13
Possible Disadvantages of the Proposed Sale................................................. 14
Recommendation of the Board of Directors.................................................... 14
Use of Proceeds............................................................................. 16
Potential Effect of the Sale Upon the Stockholders.......................................... 17
Terms of the Sale Agreement................................................................. 18
Accounting and Tax Treatment of the Sale.................................................... 24
Business Plan for the Post-Sale Company..................................................... 24
Risk Factors................................................................................ 26
SELECTED FINANCIAL DATA OF THE COMPANY........................................................... 31
SELECTED CONSOLIDATED PRO-FORMA FINANCIAL DATA................................................... 32
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE
COMPANY......................................................................................... 33
THE COMPANY...................................................................................... 43
MARKET PRICES AND DIVIDENDS...................................................................... 54
PROPERTIES....................................................................................... 55
EXECUTIVE COMPENSATION........................................................................... 55
BOARD COMPENSATION REPORT........................................................................ 57
CERTAIN PROCEEDINGS INVOLVING MANAGEMENT......................................................... 58
CERTAIN TRANSACTIONS............................................................................. 59
SELECTED FINANCIAL DATA OF BUYER................................................................. 63
SELECTED CONSOLIDATED PRO-FORMA FINANCIAL DATA................................................... 64
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF BUYER... 65
BUYER............................................................................................ 68
Management of Buyer......................................................................... 68
Buyer's Accounting and Tax Treatment of the Sale............................................ 69
STOCKHOLDER PROPOSALS............................................................................ 69
AVAILABLE INFORMATION............................................................................ 69
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.................................................. 70
FINANCIAL STATEMENTS OF THE COMPANY AND BUYER.................................................... F-1 - F-60
ANNEXES
A: ASSET PURCHASE AGREEMENT
B: FAIRNESS OPINION OF APPRAISAL ECONOMICS, INC.
</TABLE>

iii

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SUMMARY

The following summary is qualified in its entirety by reference to the more
detailed information set forth elsewhere in this proxy statement, including the
appendices hereto, which stockholders are urged to read in its entirety. Certain
capitalized terms used in this summary are defined elsewhere in this proxy
statement.

THE MEETING

TIME, PLACE, AND PURPOSE OF SPECIAL MEETING

The Meeting is scheduled to be held at 11:00 a.m., local time, on the 23rd
day of February 1998, at Loews New York Hotel, Lexington Avenue at 51st Street,
New York, New York, (a) to vote to elect six members to the Board of Directors,
(b) to vote upon the ratification of Rothstein, Kass & Company, P.C. as the
Company's independent certified public accountants, (c) to vote upon the Sale
Proposal (as defined below) and to approve the Sale Transactions (as defined
below) and (d) to transact such other business as may properly come before the
Meeting or any postponement or adjournment thereof.

THE PROPOSALS

ELECTION OF DIRECTORS

At the Meeting, the Company's stockholders will be asked to vote on the
election of six members to the Company's Board of Directors for the ensuing
year. Stanley S. Tollman, Sanford Freedman, Thomas W. Aro, Brett G. Tollman,
James A. Cutler and Matthew B. Walker have been nominated by the Board of
Directors to serve and be elected as members of the Board of Directors, each to
hold office (subject to his earlier resignation or removal) until the next
annual meeting of stockholders and until his respective successor is elected and
qualified. The stockholders are being invited to elect such individuals to the
Board of Directors.

None of the nominees for election to the Board of Directors, nor any of the
executive officers, has any direct or indirect interest in the proposed Sale (as
defined below), other than as stockholders in the Company. See 'Ownership Of
Securities.' However, Bryanston Group, Inc., an affiliate, has been repaid, from
financing obtained by the Company in anticipation of the Sale, approximately
$1.5 million that had been advanced to the Company by Bryanston Group, Inc. to
fund construction of the casino hotel that is contemplated to be sold to Buyer
as part of the Sale. See 'The Sale Transactions -- Use of Proceeds; Conduct of
Business after the Sale.'

RATIFICATION OF ACCOUNTANTS

The stockholders will also be asked to vote to ratify the appointment by
the Company of Rothstein, Kass & Company, P.C., as independent certified public
accountants for the Company for the ensuing year.

THE SALE TRANSACTION

At the Meeting, the Company's stockholders will also be asked to consider
and vote upon a proposal (the 'Sale Proposal') to sell substantially all of the
Company's operating assets (such sale and the related transactions being
referred to herein collectively as the 'Sale'). A vote in favor of the Sale
Proposal shall be deemed to be a vote of approval or ratification of: (A) the
Sale Agreement, (B) such other agreements as may be required or contemplated
under the Sale Agreement to be executed or entered into by the Company, Gulf
Coast and/or Greenville Hotel (such other agreements being hereinafter referred
to collectively as the 'Collateral Agreements') and (C) the transactions
contemplated by the Sale Agreement and the Collateral Agreements, including the
sale by the Company (through Gulf Coast and Greenville Hotel) of substantially
all of the Company's operating assets, for aggregate consideration (subject to
certain conditions and adjustments as more fully

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described herein or set forth in the relevant agreements) consisting of: (i)
approximately $11.8 million in cash, (ii) a 25% limited partnership interest in
Buyer, (iii) the assumption of approximately $2 million of liabilities of Gulf
Coast and (iv) the assumption of an additional approximately $17.9 million of
indebtedness (net of loan costs and loan discounts aggregating approximately $6
million) owed by Gulf Coast and Greenville Hotel to the Pre-Closing Lender,
which indebtedness has been incurred by Gulf Coast and Greenville Hotel in
anticipation of the proposed Sale. A copy of the Sale Agreement is attached to
this proxy statement as Appendix A, which is incorporated herein by reference.
It is contemplated (as described more fully below) that, upon consummation of
the Sale, the nature of the Company's business will change significantly.
However, the stockholders of the Company will not have an opportunity to vote
separately on the Sale Proposal and the change in the nature of the Company's
business. Consequently, a vote in favor of the Sale will effectively constitute
a vote in favor of changing the nature of the Company's business. See, 'The Sale
Transactions -- Use of Proceeds -- Conduct of Business after the Sale' and
' -- Business Plan for the Post-Sale Company.'

The Sale, if consummated, will not constitute a change of control or
trigger any change of control payments.

NATURE OF BUSINESS AFTER THE SALE

If the Sale is consummated, the Company will have disposed of substantially
all of its currently operating assets. Consequently, upon consummation of the
Sale, the Company's business and operations would change dramatically.
Management anticipates that the Company may continue to pursue a gaming
opportunity that the Company has in the initial stages of development in New
York State (see 'The Company -- Casino Operations and Gaming
Activities -- Development Activities') or other gaming opportunities that might
arise in the future. Additionally, following consummation of the Sale, it is
anticipated that the Company will investigate and, as deemed advisable, pursue
the acquisition (by merger or otherwise) of one or more other operating
businesses. The Company's current intention is to first explore a business
combination in an industry in which current management has experience. See 'The
Sale Transactions -- Use of Proceeds; Conduct of Business after the Sale' and
' -- Business Plan for the Post-Sale Company.'

THE BUYER

Buyer operates the Las Vegas Casino, which is one of three riverboat
casinos currently operating at the Marina on Lake Ferguson in downtown
Greenville, Mississippi. The Las Vegas Casino is a 1-story barge with a
mezzanine level containing approximately 18,000 square feet of gaming space. The
Las Vegas Casino currently has 649 slot machines and 19 table games. Buyer
employs approximately 550 full-time personnel. The Las Vegas Casino has a buffet
restaurant and lounge, the C&G Restaurant, located on the city side of the
levee. The Key West Inn, located next to the C&G, is a 56-room hotel, which
opened December 1997.

RECOMMENDATION AND APPROVAL BY THE BOARD

The Company's Board of Directors (the 'Board of Directors') unanimously
nominates, and recommends for election, Stanley S. Tollman, Sanford Freedman,
Thomas W. Aro, Brett G. Tollman, James A. Cutler and Matthew B. Walker as
candidates for membership on the Board of Directors. The Board of Directors also
unanimously recommends a vote in favor of the ratification of Rothstein, Kass &
Company, P.C. as independent certified public accountants for the Company.
Additionally, the Board of Directors has unanimously approved the Sale Proposal,
the Sale, the Sale Agreement and the Collateral Agreements and unanimously
recommends that the Company's stockholders approve the Sale Proposal and the
Sale and approve or ratify the Sale Agreement and the Collateral Agreements (the
Sale Agreement, the Collateral Agreements and the Sale and other transactions
contemplated thereunder to be performed by the Company, Gulf Coast and/or
Greenville Hotel are herein referred to collectively as the 'Sale
Transactions').

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REQUIRED VOTE, PROXIES

VOTING AND SOLICITATION OF PROXIES

All shares of Common Stock (as defined below) and Preferred Stock (as
defined below) represented at the Meeting by properly executed proxies received
prior to the vote at the Meeting, unless previously revoked (as described
immediately below), will be voted in accordance with the instructions thereon.
Where a properly signed proxy is returned and no instructions are given, proxies
will be voted FOR (i) election of the candidates nominated for election as
members of the Board of Directors, (ii) ratification of Rothstein, Kass &
Company, P.C. as the Company's independent certified public accountants and
(iii) approval of the Sale Proposal. No matters other than those referred to
above are presently scheduled to be considered at the Meeting. A broker who
holds shares in street name will not be entitled to vote on the Sale Proposal
without instructions from the beneficial owner of such shares. This inability to
vote is referred to as a broker non-vote. Stockholder abstentions and broker
non-votes will be counted for purposes of determining the existence of a quorum
at the Meeting. However, because, under the General Corporation Law of the State
of Delaware and the Company's certificate of incorporation and by-laws, the Sale
Proposal, in order to be approved, must be approved by vote of holders of a
majority of all of the outstanding shares of capital stock of the Company,
abstentions and broker non-votes will have the same effect as a vote against
such Proposal.

Any proxy may be revoked by the person giving it at any time before it is
voted. A proxy may be revoked by filing with the Chairman of the Board of
Directors of the Company (12 East 49th Street, New York, New York 10017) either
(i) a written notice of revocation or (ii) a subsequent proxy relating to the
same shares bearing a date later than the date of such proxy, or by attending
the Meeting and voting in person (although attendance at the Meeting will not in
and of itself constitute revocation of a proxy).

SHARES ENTITLED TO VOTE

The close of business on January 5, 1998, has been fixed as the record date
(the 'Record Date') for determining the stockholders entitled to notice of and
to vote at the Meeting. As of the Record Date, there were 14,406,204 shares of
the common stock (the 'Common Stock') of the Company, $0.01 par value per share,
issued and outstanding and entitled to vote and 821,496 shares of the preferred
stock (the 'Preferred Stock') of the Company, $29.00 liquidation value per
share, issued and outstanding and entitled to vote.

Each share of Common Stock entitles the holder thereof to one vote, and
each share of Preferred Stock entitles the holder thereof to one vote. The
holders of a majority of all shares of Common Stock and Preferred Stock, taken
together, outstanding, present in person or represented by proxy at the Meeting,
shall constitute a quorum. Abstentions and broker non-votes are counted as
present in determining whether the quorum requirement is satisfied.

VOTE REQUIRED

A quorum being present at the Meeting, the directors shall be elected by a
plurality of the votes cast and ratification of Rothstein, Kass & Company, P.C.
as the Company's independent certified public accountants shall require a
majority of the votes cast. The affirmative vote of the holders of a majority of
the shares of Common Stock and Preferred Stock, taken together, outstanding will
be necessary for the approval of the Sale Proposal and the Sale Transactions.

SHARES COMMITTED

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has also been advised by Bryanston Group, Inc. ('Bryanston') that it intends to
vote all of its shares of Preferred Stock in favor of the Sale Proposal and the
Sale Transactions and by BP Group Inc. ('BP') that it intends to vote all of its
shares of Preferred Stock in favor of the Sale Proposal and the Sale
Transactions.

Further, as a condition to the Pre-Closing Financing (as hereinafter
defined) and in anticipation of consummation of the Sale Transactions, certain
record holders (being all of those who had, as indicated above, previously
advised management of their intention to vote their shares in favor of the Sale
Proposal and Sale Transactions) owning an aggregate of 8,196,243 shares of
Common Stock and 821,496 shares of Preferred Stock executed and delivered to
Buyer irrevocable proxies, exercisable by designees of Buyer, to vote their
shares in favor of the Sale Proposal and Sale Transactions. If such proxies are
exercised in favor of the Sale Proposal and Sale Transactions, which such
designees have committed to Buyer to do, the Sale Proposal and Sale Transactions
will be approved at the Meeting.

NO APPRAISAL RIGHTS

Under the General Corporation Law of the State of Delaware, stockholders of
the Company do not have appraisal rights in connection with the Sale
Transactions or the Sale Proposal.

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THE MEETING

TIME AND PLACE OF THE MEETING

The Meeting is scheduled to be held at 11:00 a.m., local time, on the 23rd
day of February 1998, at Loews New York Hotel, Lexington Avenue at 51st Street,
New York, New York.

PURPOSE OF THE MEETING

At the Meeting, the Company's stockholders will be asked (a) to vote to
elect six members to the Board of Directors, (b) to vote upon the ratification
of Rothstein, Kass & Company, P.C. as the Company's independent certified public
accountants, (c) to vote upon the Sale Proposal (as defined below) and to
approve the Sale Transactions (as defined below) and (d) to transact such other
business as may properly come before the Meeting or any postponement or
adjournment thereof.

VOTING AND SOLICITATION OF PROXIES

Proxies are being solicited by and on behalf of the Company. The Company
will solicit proxies by mail, and the directors, officers and employees of the
Company may also solicit proxies by telephone, telegram or personal interview.
These persons will receive no additional compensation for these services but
will be reimbursed for reasonable out-of-pocket expenses. The Company will bear
the costs of preparing and mailing the proxy materials to stockholders in
connection with the Meeting. Management currently anticipates that the total
amount to be spent by the Company for, in furtherance of or in connection with
the solicitation of stockholders (exclusive of the amount normally expended by
the Company for a solicitation for an election of directors in the absence of a
contest and exclusive of costs represented by salaries and wages of regular
employees) will be approximately $80,000; of such amount, approximately $10,000
has been expended to date. Arrangements will be made to furnish copies of the
proxy materials to fiduciaries, custodians and brokerage houses for forwarding
to beneficial owners of shares of Common Stock. Such persons will be paid
reasonable out-of-pocket expenses.

SHARES ENTITLED TO VOTE

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value per share, issued and outstanding and entitled to vote and 821,496 shares
of the preferred stock (the 'Preferred Stock') of the Company, $29.00
liquidation value per share, issued and outstanding and entitled to vote.

VOTE REQUIRED

SHARES COMMITTED

The Company has been advised by various members of management and the Board
of Directors and others who, in the aggregate, hold or otherwise have voting
power with respect to 8,196,243 shares of Common Stock (representing
approximately 57% of the shares of Common Stock outstanding) that they intend to
vote such shares in favor of the Sale Proposal and the Sale Transactions. The
Company has also been advised by Bryanston Group, Inc. ('Bryanston') that it
intends to vote all of its shares of Preferred Stock in favor of the Sale
Proposal and the Sale Transactions and by BP Group Inc. ('BP') that it intends
to vote all of its shares of Preferred Stock in favor or the Sale Proposal and
the Sale Transactions. If the shares of Common Stock referred to above are
voted, as management has been advised they will be, in favor of the Sale
Proposal and the Sale Transactions and if Bryanston (which, as of the Record
Date, owned of record 777,238 shares of Preferred Stock or approximately 94.6%
of the outstanding shares of Preferred Stock) and BP (which, as of the Record
Date, owned of record 44,258 shares of Preferred Stock or approximately 5.4% of
the outstanding shares of Preferred Stock) vote all of their respective shares
of Preferred Stock in favor of the Sale Proposal and the Sale Transactions, then
the Sale Proposal and Sale Transactions will be approved notwithstanding the
manner in which votes are cast by holders of any other shares of the Company's
capital stock.

NO APPRAISAL RIGHTS

Under the General Corporation Law of the State of Delaware, stockholders of
the Company do not have appraisal rights in connection with the Sale
Transactions or the Sale Proposal.

OWNERSHIP OF SECURITIES

Only stockholders of record at the close of business on January 5, 1998
(the 'Record Date'), the date fixed by the Board of Directors in accordance with
the Company's By-Laws, are entitled to notice of, and to vote at, the Meeting.
As of such date, there were issued and outstanding 14,406,204 shares of Common
Stock and 821,496 shares of Preferred Stock.

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Each outstanding share of each class of stock is entitled to one vote on
all matters properly coming before the Meeting. A majority of all outstanding
shares of Common Stock and Preferred Stock, taken together, present in person or
represented by proxy at the Meeting, is necessary to constitute a quorum for the
Meeting.

The following table sets forth certain information as of the Record Date
with respect to each beneficial owner of five (5%) percent or more of the
outstanding shares of Common Stock and Preferred Stock, each officer, director
and nominee for director of the Company and all officers and directors as a
group. Unless otherwise indicated, the address of each such person or entity is
c/o Alpha Hospitality Corporation, 12 East 49th Street, New York, New York
10017, except for Patricia Cohen, whose address is 6 Danton Lane South,
Lattington, NY.

<TABLE>
<CAPTION>
TITLE OF CLASS NAME AND ADDRESS NO. OF SHARES(1) PERCENT OF CLASS PERCENT OF VOTE(2)
- ----------------------- ------------------------------- ---------------- ---------------- ------------------
<S> <C> <C> <C> <C>
Common Stock Beatrice Tollman(3)(9) 1,815,890 12.6 11.9
$.01 par value Sanford Freedman(4) 271,158 1.9 1.4
Thomas W. Aro(5) 100,000 .7 .3
Brett G. Tollman(6) 1,619,875 11.2 10.2
James A. Cutler(7) 116,000 .8 .7
Patricia Cohen(8) 1,030,146 7.2 4.4
Matthew B. Walker 199,879 1.4 1.3
Bryanston Group(9) 6,565,730 45.6 0.0
1886 Route 52
Hopewell Junction, N.Y.
All Officers and Directors
as a group (6 persons)(4-7) 2,202,512 15.3 6.5
Preferred Stock Bryanston Group, Inc.(9) 777,238 94.6 5.1
$29.00 liquidation BP Group, Ltd.(10) 44,258 5.4 .3
value 6 Danton Lane South
Lattington, N.Y.
</TABLE>

- ------------

(1) Each person exercises sole voting and dispositive power with respect to the
shares reflected in the table, except for those shares of Common Stock that
are issuable upon the exercise of options or the conversion of Preferred
Stock, which shares cannot be voted until the options are exercised or such
Preferred Stock is converted by the holders thereof. Includes shares of
Common Stock that may be acquired upon exercise of options or conversion of
convertible securities that are presently exercisable or convertible or
become exercisable or convertible within 60 days.

(2) Represents the vote, as a percentage of the total votes that may be cast at
the Meeting by holders of both Common Stock and Preferred Stock, that may
be cast by the holder of the relevant shares. For these purposes, no vote
is attributable to any shares of Common Stock not issued and outstanding as
of the Record Date (e.g., on account of outstanding options having not been
exercised or shares of Preferred Stock having not been converted into
shares of Common Stock).

(3) Stanley S. Tollman, the Chairman of the Board, Chief Executive Officer and
President of the Company, is the spouse of Beatrice Tollman. Stanley S.
Tollman disclaims beneficial ownership of the shares beneficially owned by
Beatrice Tollman.

(4) Includes 60,000 shares of Common Stock issuable upon the exercise of
options granted to Mr. Freedman, all of which options are currently
exercisable.

(5) Includes 60,000 shares of Common Stock issuable upon the exercise of
options granted to Mr. Aro, all of which options are currently exercisable.

(6) Includes 60,000 shares of Common Stock issuable upon the exercise of
options granted to Mr. Brett G. Tollman, all of which options are currently
exercisable and 1,000,000 shares held in the Tollman

(footnotes continued on next page)

<PAGE>

<PAGE>
(footnotes continued from previous page)
Family Trust of which Brett G. Tollman is the sole Trustee. Brett G.
Tollman is the son of Stanley S. Tollman and Beatrice Tollman. Each of
Brett G. Tollman, Stanley S. Tollman and Beatrice Tollman disclaims
beneficial ownership of the shares beneficially owned by any of the other
of them.

(7) Includes 4,000 shares of Common Stock issuable upon the exercise of options
granted to Mr. Cutler, all of which options are currently exercisable. Does
not include 4,000 shares owned by Mr. Cutler's children, of which shares he
disclaims beneficial ownership.

(8) Represents (i) 676,082 shares of Common Stock owned by Patricia Cohen, who
was a Director of the Company during the period February 1, 1994 to
December 12, 1997, and (ii) 354,064 shares of Common Stock issuable upon
conversion of 44,258 shares of Preferred Stock owned by BP Group, LTD
('BP'), a company of which Patricia Cohen is the sole stockholder. All of
such shares of Preferred Stock are currently convertible into shares of
Common Stock.

(9) Includes (i) 6,217,904 shares of Common issuable upon conversion of 777,238
shares of Preferred Stock owned by Bryanston Group, Inc. ('Bryanston') and
(ii) 347,826 shares of Common Stock issuable upon the exercise of options
granted to Bryanston; all of such options are currently exercisable for,
and all of such shares of Preferred Stock are currently convertible into,
shares of Common Stock. The Company is also obligated to issue 730,331
shares of Common Stock to Bryanston with respect to, and in lieu of the
cash dividend accrued on, the outstanding shares of Preferred Stock held by
Bryanston in 1996. Additionally, as of January 30, 1998, the Company became
obligated to issue to Bryanston approximately 934,000 additional shares of
Common Stock in lieu of the cash dividend payable with respect to
Bryanston's shares of Preferred Stock for the 1997 calendar year. None of
such shares of Common Stock is included in the table above as they have not
yet been issued. Bryanston is an affiliate of the Company, and Beatrice
Tollman, Stanley S. Tollman's spouse, is a 50% stockholder of Bryanston.
Each of Bryanston and Beatrice Tollman disclaims beneficial ownership of
the shares beneficially owned by the other of them.

(10) Patricia Cohen is the sole stockholder of BP. The Company is obligated to
issue 46,581 shares of Common Stock to BP with respect to, and in lieu of
the cash dividend accrued on, the outstanding shares of Preferred Stock
held by BP in 1996. Additionally, as of January 30, 1998, the Company
became obligated to issue to BP approximately 55,000 additional shares of
Common Stock in lieu of the cash dividend payable with respect to BP's
shares of Preferred Stock for the 1997 calendar year. None of such shares
of Common Stock is included in the table above as they have not yet been
issued.

<PAGE>

<PAGE>
PROPOSAL 1

ELECTION OF DIRECTORS

Six (6) directors are to be elected at the Meeting to serve (subject to
their respective earlier removal or resignation) until the next annual meeting
of stockholders and until their respective successors are elected and qualified.
Unless such authority is withheld, proxies will be voted for the election of the
six (6) persons named below, all of whom are now serving as directors and each
of whom has been designated as a nominee. If, for any reason not presently
known, any said person is not available to serve as a director, another person
who may be nominated will be voted for in the discretion of the proxies.

<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ----------------------------- --- --------------------------------------------------

<S> <C> <C>
Stanley S. Tollman........... 66 Chairman of the Board and Chief Executive Officer
Sanford Freedman............. 61 Vice President, Secretary and Director
Thomas W. Aro................ 55 Vice President and Director
Brett G. Tollman............. 36 Vice President and Director
James A. Cutler.............. 46 Treasurer, Chief Financial Officer and Director
Matthew B. Walker............ 47 Director
</TABLE>

Stanley S. Tollman has served as Chairman of the Board of Directors and
Chief or Co-Chief Executive Officer of the Company since its formation. Since
March 1995, Mr. Tollman has served as President. He served as Chairman of the
Tollman-Hundley Hotel Group from 1979 to June 1996. He currently serves as
Chairman of Bryanston Group, Inc. ('Bryanston'), a hotel management company, and
of Trafalgar Tours International, a tour operator. He has also served as
Chairman of the Board of Directors of Buckhead American Corporation, which was
formerly the franchiser of Days Inns Hotels. The business addresses of Bryanston
and Trafalgar Tours International are, respectively, 1886 Route 52, Hopewell
Junction, New York and 5 Reid Street, Hamilton, Bermuda. See 'Certain
Proceedings Involving Management.'

Sanford Freedman served as a Director, Vice-President and Secretary of the
Company from its formation until October 29, 1993, and was re-elected to those
positions on February 1, 1994. He has served as Executive Vice President of the
Tollman-Hundley Hotel Group since 1993 and served as a Director, Executive Vice
President and Secretary of Bryanston from 1993 through March 1996. See 'Certain
Proceedings Involving Management.'

Thomas W. Aro has served as a Director of the Company since February 1,
1994 and a Vice President of the Company since its formation. Mr. Aro also
serves as Chief Operating Officer of the Company's subsidiary Alpha Gulf Coast,
Inc. He has served as Executive Vice President of the Tollman-Hundley Hotel
Group since 1982 and as Executive Vice President of Bryanston from 1989 through
March 1996. See 'Certain Proceedings Involving Management.'

Brett G. Tollman served as a Vice President of the Company from its
formation until October 29, 1993, and was re-elected to that position and was
elected a Director of the Company on February 1, 1994. He served as Executive
Vice President of the Tollman-Hundley Hotel Group from 1984 to June 1996, and
currently serves as Executive Vice President and Secretary of Bryanston. Mr.
Tollman is the son of Stanley S. Tollman, the Chairman of the Board and Chief
Executive Officer of the Company. See 'Certain Proceedings Involving
Management.'

James A. Cutler has served as Treasurer and Chief Financial Officer of the
Company since its formation. He also served as Secretary of the Company from
October 29, 1993 to February 1, 1994. Mr. Cutler was elected a Director of the
Company on June 12, 1995. He served as Senior Vice President and Treasurer of
the Tollman-Hundley Hotel Group until June 1996 and currently serves as
Executive Vice President and Chief Financial Officer of Bryanston. See 'Certain
Proceedings Involving Management.'

Matthew B. Walker has served as a Director of the Company since December
1995. He is an independent businessman involved in international business
ventures, including the Brazilian based Walker Marine Oil Supply Business, to
which he has been a consultant since 1988. Mr. Walker co-founded the Splash
Casino in Tunica, Mississippi, in February 1993, where he remained employed
until October 1995. In February 1994, he co-founded the Cotton Club Casino in
Greenville, Mississippi,

<PAGE>

<PAGE>
where he remained employed and as a shareholder until October 1995. In addition,
since 1972, Mr. Walker has been involved in numerous real-estate transactions as
a consultant and has managed E.B. Walker & Son Lumber Company, a family-owned
lumber business in Alabama.

COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS

The Board has four committees, the Executive Committee, the Audit
Committee, the Compensation Committee and the Stock Option Committee. The
Executive Committee, which is comprised of Stanley S. Tollman and Sanford
Freedman, has the same authority to act as the Board of Directors (with certain
limitations prescribed by the General Corporation Law of the State of Delaware).
The Audit Committee, which is comprised of Matthew B. Walker and Stanley S.
Tollman, is responsible for reviewing with the Company's independent certified
public accountants and management the Company's accounting and reporting
principles, policies and practices, as well as the Company's accounting,
financial and operating controls and staff. The Compensation Committee, which is
comprised of Stanley S. Tollman and Sanford Freedman, is responsible for
establishing and reviewing the appropriate compensation of directors and
officers of the Company and for reviewing employee compensation plans. The Stock
Option Committee, which is comprised of Stanley S. Tollman and Matthew B.
Walker, is responsible for considering and making grants and awards under, and
administering, the Company's 1993 Stock Option Plan.

During the 1996 fiscal year, there were three meetings of the Board of
Directors, on March 17, March 31 and December 17, 1997, at which all of the
Directors were present. There were seven unanimous written consents of the Board
of Directors, pursuant to Section 141 of the General Corporation Law of
Delaware, dated January 29, March 3, May 1, June 2, August 2, August 8 and
December 2, 1997. During the 1997 fiscal year, there were no formal meetings of
any of the Company's committees other than the Executive Committee, and there
was no unanimous written consent of any of the Company's committees. During
1997, the Executive Committee held 3 meetings (at which both members of such
Committee were present) and advised the other members of the Board of Directors
of the matters discussed at such meetings.

STOCKHOLDER VOTE REQUIRED

A quorum being present, the election of the Directors will require the
affirmative vote of the holders of a plurality of the shares present in person
or represented by proxy at the Meeting and entitled to vote on the election of
Directors.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION TO THE BOARD OF
DIRECTORS OF THE COMPANY OF EACH OF THE NOMINEES.

PROPOSAL 2

RATIFICATION OF ROTHSTEIN, KASS & COMPANY, P.C.
AS THE COMPANY'S INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.

The Board of Directors has unanimously approved and unanimously recommends
that the stockholders approve the appointment of Rothstein, Kass & Company,
P.C., as the Company's independent certified public accountants for the ensuing
year. A member of Rothstein, Kass & Company, P.C. will be available to answer
questions and will have the opportunity to make a statement if he or she so
desires at the Meeting.

STOCKHOLDER VOTE REQUIRED

Ratification of the appointment of Rothstein, Kass & Company, P.C. as
independent certified public accountants requires the affirmative vote of the
holders of a majority of the shares present in person or represented by proxy at
the Meeting and entitled to vote thereon.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF ROTHSTEIN, KASS & COMPANY, P.C. AS THE COMPANY'S INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS.

<PAGE>

<PAGE>
PROPOSAL 3
THE SALE TRANSACTIONS

SUMMARY OF THE CONSEQUENCES OF THE PROPOSED SALE

The Company, through its subsidiaries Gulf Coast and Greenville Hotel, has
entered into a agreement, which, when consummated, will result in (A) the sale
by the Company of its Bayou Caddy's Jubilee Casino in Greenville, Mississippi
and substantially all of its other operating assets to Greenville Casino
Partners, L.P. ('Buyer'), (B) the discharge and reduction of approximately
$20,000,000 of Company indebtedness (on a consolidated basis), (C) an increase
of approximately $12,300,000 in the Company's working capital (on a consolidated
basis) and (D) the acquisition of a 25% limited partnership interest in Buyer.
In addition, the Company has entered into a contract with Buyer for hotel
supervisory management services for which the Company will be paid $100,000 per
year for ten years following the closing of the Sale.

BACKGROUND OF THE PROPOSED SALE

The terms of the Sale are the result of arm's-length negotiations between
the Company (and its subsidiaries Gulf Coast and Greenville Hotel), on the one
hand, and Buyer, a Mississippi limited partnership unrelated to the Company, on
the other hand. The following is a brief description of the negotiations leading
to the execution of the Sale Agreement.

Buyer operates a casino under the name Las Vegas Casino in Greenville,
Mississippi, the location of the Company's primary operating asset, the Bayou
Caddy's Jubilee Casino (the 'Bayou Caddy's Jubilee Casino' or the 'Casino'), and
as a consequence Buyer and the Company have been competitors for the past two
years. In 1996, once it was certain that a third casino vessel was going to
enter the Greenville, Mississippi market, Buyer and the Company made informal
inquiries of one another as to whether a joint operating agreement between them
could be arranged or whether one was interested in being purchased by the other.
The Company and Buyer negotiated the terms of a joint operating agreement in
mid-1996, but, as a result of significant financing and gaming licensing
obstacles, the proposed joint operation faced, this agreement was never
consummated. In response to Buyer's inquiries as to whether the Company or its
assets might be purchased, the Company generally responded that it had no
interest in pursuing such a proposal unless Buyer were to make a firm offer and
could confirm that it had financial resources (internally or by means of a
financing commitment) to support such a proposal.

During the first quarter of 1997 the Company began to experience market
dilution as a result of the entry of the third gaming vessel into the Greenville
market. The Company engaged a financial advisor (HNY Associates) to assist it in
refinancing its debt and to provide financing for its Greenville hotel project,
which was required to satisfy its infrastructure requirements under the
regulations of the Mississippi Gaming Commission. After several months of
negotiating with financial institutions, it became clear that the amount of
financing and the terms available to the Company would not satisfy the needs of
the Company.

In or about September 1997, Buyer approached the Company with an offer to
purchase the Company's casino operations and assets in Greenville, Mississippi
for approximately $40 million, consisting of approximately $30 million in cash,
$8.5 million in unsecured, subordinated notes and $2 million of assumed
liabilities and demonstrated that it had a developed financing that would
support such offer. Of the $8.5 million of subordinated debt, it was proposed
that $2 million would be convertible into a 5% limited partnership interest in
Buyer. Based upon information known to management from its experience in
operating its casino in the Greenville market, management believed that the
conversion ratio proposed by Buyer was reasonable. However, the Company
determined that the unsecured notes, proposed as part of the consideration by
Buyer, would be deeply subordinated under the terms of the financing that Buyer
had obtained and might, accordingly, provide the Company with limited likelihood
of realizing any significant return on such notes. Thus, because the risk
inherent in such notes was likened to an equity holding in Buyer, management
determined to propose that the transaction be simplified to eliminate the
subordinated debt portion of the consideration and replace it

<PAGE>

with a direct equity interest in Buyer. The Company proposed, and Buyer
accepted, that, in lieu of the unsecured notes, the Company would receive a 25%
equity position in the combined operations of Buyer, after the sale of the
Company's Greenville assets. This equity position would be in the form of a
limited partnership interest in Buyer. Management determined that the $8.5
million of subordinated notes would have equated to a 21.25% equity interest in
Buyer, utilizing the originally proposed conversion ratio of a $2 million note
being convertible into a 5% equity interest. Accordingly, management determined
that acceptance of the transaction on such revised terms would be in the best
interests of the Company and its stockholders. Notwithstanding such
determination at such time, management ensured that any transaction, when
ultimately agreed to, would be conditioned upon the receipt by the Company's
Board of Directors of a fairness opinion from an independent valuation firm.

In mid-November 1997, the parties furthered the negotiations beyond the
basic financial terms of the transactions and engaged in a series of discussions
relating to the terms and structure of the proposed financing arrangements for
the transaction and the conditions precedent to the consummation of the
transaction, including approval by the Company's stockholders and the consent of
regulatory authorities. In early December 1997, it became apparent that it would
be impossible for all conditions precedent to the closing of such transaction to
be effected prior to December 31, 1997 (the expiration of the financing
commitment of Credit Suisse First Boston Mortgage Capital, L.L.C. (the
'Pre-Closing Lender'), Buyer's proposed lender. Therefore the Company and Buyer
proceeded to negotiate terms with the lender to lend funds to both Buyer and the
Company on or before December 31, 1997 in contemplation of the sale taking place
thereafter.

As a condition to its negotiations with Buyer, the Company agreed to
maintain confidentiality with respect to those negotiations and the proposed
transactions. As a consequence, during such negotiations the Company was
precluded from soliciting or otherwise investigating other or competing offers
for the Company or its casino business and assets. Prior to agreeing to maintain
confidentiality with respect to the negotiations, the Board of Directors
considered its fiduciary duty to the Company and its stockholders. Although the
commitment to confidentiality would restrict the Company's ability to solicit
competing bids for the Company's business, the Board of Directors judged that
the alternative of meeting Buyer's demand for confidentiality was in the best
interests of the Company and its stockholders. This judgment was based upon a
number of considerations, including the following: (1) since its inception, the
Company had not received any other offer to purchase the Company's business; (2)
in light of certain economies of scale and joint operating efficiencies that
could be obtained by Buyer, the Company's gaming operations in Greenville would
be more valuable to Buyer than to another party that was not already operating
gaming activities in Greenville; (3) any outside third party would likely
experience the same difficulties the Company had experienced in achieving
profitable operations from the Bayou Caddy's Jubilee Casino and would therefore
be unlikely to match or exceed Buyer's offer; (4) to confirm that, in the
absence of any competing bids, the offer from Buyer was fair and reasonable, the
Board of Directors intended to obtain an independent opinion from a financial
advisor to confirm that the terms of the Sale were fair to the Company and its
stockholders; and (5) the maintenance of confidentiality would also benefit the
Company, since disclosure of the negotiations could have adversely affected the
Company's relations with its employees and invited interference from the other
competing casino in Greenville.

As noted above, during the process of the negotiations with Buyer, the
Company was able to obtain certain modifications of the initially offered terms
that were considered more beneficial to the Company. However, certain
alternative structures that the Company might otherwise have pursued, such as an
exchange of stock or a cash out merger, were not viable or available since Buyer
was a limited partnership (unable to issue stock) and was not a public company.
Although the Company considered alternative structures without tax implications,
such structures were not considered viable (such as a tax free reorganization,
in light of Buyer's status as a limited partnership) or desirable, or both.
Additionally, in view of the Company's substantial net operating loss
carryforward position, a tax-free restructuring of the transaction with Buyer
would have provided no, or only very limited, additional benefits to the
Company.

During December 1997, the company's management negotiated with each of
Buyer and by Pre-Closing Lender with respect to the terms and conditions of (i)
the proposed Asset Purchase Agreement,

<PAGE>

(ii) the agreements relating to the pre-closing financing, and (iii) the
agreements relating to Buyer's assumption of the pre-closing financing. In an
effort to increase the certainty that the conditions precedent to consummation
of the proposed sale (particularly, the approval by the Company's stockholders)
would be satisfied prior to the deadline for closing the proposed sale, Buyer
requested that certain members of management and of the board of directors, as
well as certain other significant stockholders of the Company, grant to Buyer
irrevocable proxies to vote the shares of the Company held by such stockholders
in favor of the proposed sale. As a result, Buyer was granted proxies to vote an
aggregate of 8,196,243 shares of the Company's common stock and 821,496 shares
of the Company's preferred stock, representing in excess of 50% of the votes
that may be cast at the Meeting. On December 17, 1997, the Company and Buyer
executed the Sale Agreement. On December 17, 1997, management received oral
confirmation from Appraisal Economics, Inc. that, based upon its analysis to
date, it would issue to the Company's Board of Directors a 'fairness opinion' as
contemplated by the conditions to closing contained in the Sale Agreement. On
December 30, 1997, the Company, Buyer and the Pre-Closing Lender executed the
financing agreements and the Pre-Closing Financing was effected. By letter dated
December 30, 1997, Appraisal Economics, Inc. delivered to the Company its
fairness opinion.

COMPANY'S REASONS FOR THE PROPOSED SALE

The Company has historically suffered substantial operating deficits since
its inception. And although the Company has in recent years been able to take
various steps and implement various measures (including the sale of the
Company's hotel management operations and the relocation of the Bayou Caddy's
Jubilee Casino from Lakeshore, Mississippi to its present location in
Greenville, Mississippi) to curb the Company's losses, the Company's inability
to achieve positive net income has resulted in the Company's default with
respect to approximately $23 million of outstanding indebtedness and the
Company's having (as of September 30, 1997) a working capital deficit of
approximately $34.5 million and an accumulated deficit of approximately $61
million. Consequently, the Company found itself in a position where its ability
to continue as a going concern was, or in the foreseeable future might be, in
jeopardy. Further, the Company lacks the financial resources that would be
necessary to fund its anticipated commitments with respect to its gaming
operation that is under development in New York State and in which it has
already invested significant time, money and other resources. In light of the
Company's current financial condition, the Company could not be assured of being
able to raise additional funds to meet such commitments. Accordingly, the
Company's management believed that there was a substantial risk that the Company
would default on such commitments and thereby forfeit its investment in such
gaming operation and potentially expose itself to additional liabilities.

The Company's management believed it was making considerable progress
towards achieving profitable operations from the Company's active gaming
operation in Greenville, Mississippi as demonstrated by reducing losses before
intercompany charges and deferred income taxes from approximately $13 million in
1995 to approximately $640,000 in 1996 (see 'Management's Discussion And
Analysis Of Financial Condition And Results Of Operations Of The
Company -- Results Of Operations -- Gulf Coast'). However, in 1997 the
Greenville operation began to sustain significant losses due to dilution of the
Greenville market as the consequence of commencement of the operations by an
additional competing casino in the Greenville market. Accordingly, management
recognized that there could be no assurance that it would be able to achieve
profitable operations from the Bayou Caddy's Jubilee Casino and, even if
profitable operations could be achieved, whether such objective would be
obtained prior to the time that constraints on cash and/or working capital
compelled the Company to cease operations.

Additionally, if the Sale Transaction should not be consummated, the
Company (unless it were otherwise able to increase its stockholders' equity)
would, in all likelihood, fall below the minimum requirements for continued
listing of its Common Stock on NASDAQ and the Boston Stock Exchange, and thus be
subject to delisting, which could have a materially adverse effect on the value
of shares of Common Stock. Under NASDAQ rules, a company listed with NASDAQ is
currently required to have, alternatively, net tangible assets (calculated as
total assets less total liabilities and goodwill) of at least $2

<PAGE>

<PAGE>
million, market capitalization of at least $35 million or $500,000 in net income
for two of the last three years. The Boston Stock Exchange (on which the Common
Stock is traded) similarly requires that a listed company maintain minimum
stockholders' equity of $500,000. As of September 30, 1997, the Company's
stockholders' equity and net tangible assets were each approximately $1,145,000,
and during the fiscal quarter then ended the Company had experienced a loss of
approximately $2,249,000. If the Company were, after such date, to continue to
experience aggregate net losses of in excess of $145,000, the Company
stockholders' equity and net tangible assets would fall below $1,000,000 and the
Company could fail to comply with minimum listing requirements, unless the
Company, through an infusion of additional equity or otherwise, were to increase
its stockholders' equity and net tangible assets. And as a consequence thereof,
the Common Stock could be subject to delisting or suspension of trading. If the
Sale Transactions are consummated, the Company will have stockholders' equity
and net tangible assets significantly in excess of the minimum maintenance
requirements of NASDAQ and the Boston Stock Exchange. More particularly, if the
Sale is consummated, the Company's equity and net tangible assets will, as a
consequence thereof and the related Pre-Closing Financing (with the
corresponding extinguishment of Company debt), be increased by approximately $10
million, which would provide the Company with a level of equity and net tangible
assets significantly in excess of the minimum listing requirements referred to
above.

POSSIBLE DISADVANTAGES OF THE PROPOSED SALE

Although management of the Company recommends approval of the Sale Proposal
and the Sale Transactions, management recognized that there may be certain
uncertainties or other disadvantages associated with the Sale Transactions.
Among those uncertainties or other disadvantages considered by management are
the following (see, also, 'Risk Factors'):

1. If the Sale Transactions are consummated, the Company will have
disposed of substantially all of its gaming business and assets, excluding
only (a) the Jubilation Casino -- its casino in Lakeshore, Mississippi
(which ceased operations in July 1996) and (b) its management of a casino
project in the early stages of development in New York State (see 'The
Company -- Casino Operations and Gaming Activities -- Development
Activities'). Consequently, unless the Company should reopen and revive the
Jubilation Casino, its other casino project currently under development
should come to fruition or some other casino project should be developed by
the Company, the Company will no longer be involved in the gaming or casino
business, other than through its holding of a 25% limited partnership
interest in Buyer.

2. After the Sale Transactions are consummated, it is anticipated that
(except for the possible continued involvement of the Company in gaming or
casino operations, as referred to above) the Company will attempt to
acquire, and engage in, a new business venture. There can be no assurance
that the Company will be able to find and acquire any new business or that,
if a new business is found and acquired, it will be profitable (see, also,
'Business Plan for the Post-Sale Company').

3. Any new business the Company may acquire or otherwise come to
engage in may be subject to substantial risks. There can be no assurance
that management of the Company will have the necessary experience and
skills to run any new business or that any new business will be profitable.

RECOMMENDATION OF THE BOARD OF DIRECTORS

The Board of Directors believes that the Sale Transactions are in the best
interests of, and are fair to, the Company and its stockholders. In reaching its
decision to approve the Sale Transactions, the Board of Directors considered all
material factors, including, (i) the amount and nature of the consideration to
be received by the Company, (ii) the financial results of the Company since its
inception in 1993 and the prospects for the Company, (iii) the lack of
additional sources to fund the Company's operations for the next year, (iv) the
outstanding obligations of the Company, particularly significant lease
obligations and liabilities already in default, (v) the current and historical
stock prices of the Common Stock; (vi) the absence of any better offer, (vii)
the risks associated with the operation of gaming activities generally and the
Company's gaming activities in particular, and (viii) the absence of

<PAGE>

<PAGE>
other viable alternatives for the Company. Additionally, the Board of Directors
sought the advice of Appraisal Economics, Inc. an independent financial adviser,
to evaluate the terms of the Sale Transactions and obtained from such firm a
'Fairness Opinion' as to the fairness to the Company of the Sale Transactions. A
copy of that 'Fairness Opinion' is attached hereto as Appendix B.

In considering Buyer's offer and the proposed Sale Transactions, the Board
of Directors discussed and considered the following material factors, as well as
others noted above:

(a) The Company has not been profitable since its inception in 1993
(see the accompanying audited financial statements of the Company for the
years ended December 31, 1994, 1995 and 1996, reflecting annual losses from
continuing operations of approximately $11 million, $19.3 million and $26.3
million, respectively, and the accompanying unaudited financial statements
of the Company for the nine months ended September 30, 1997, reflecting a
loss from continuing operations of approximately $5.5 million), and there
was no assurance that the Company would become sufficiently profitable in
the future to service all of the Company's liabilities and obligations. The
Board of Directors determined that the Company should seek an opportunity
to conduct future operations in a related or new industry so as to provide
an improved potential for a return for stockholders.

(b) The proposed Sale Transactions would generate funds sufficient to
enable the Company to satisfy or pay substantially all of its currently
outstanding and past due liabilities and obligations (including an
aggregate of approximately $14,000,000 which had been in default) and still
have a significant cash balance for future operations and opportunities.
See 'Use of Proceeds; Conduct of Business after the Sale' and 'Business
Plan for the Post-Sale Company.' As of September 30, 1997, the Company had
total liabilities in the aggregate amount of approximately $39 million.
Interest alone accrues annually in the amount of approximately $3.3
million, and the Company is contractually obligated to pay debt service in
the amount of approximately $22 million with respect to such indebtedness
during 1998. Consequently, as the Board of Directors noted, the Company
would be required to achieve cash flow of at least $22 million in 1998 just
to meet its debt service obligations, and there appeared to be little
likelihood that the Company would be able to achieve such results in 1998.

(c) No party had indicated an interest in matching or exceeding
Buyer's offer, and no other party had approached the Company with an offer
equal to or greater than Buyer's offer. Buyer is the most likely purchaser
of the Casino due to its current ownership of a competing casino in the
locality.

(d) As a substantial majority (approximately 70%) of the sale proceeds
are anticipated to be in cash, there is limited risk involved to the
Company or the stockholders with respect to the form of consideration being
received by the Company.

(e) The consummation of the Sale Transactions would create a greater
probability that the Company will be able to generate returns for its
stockholders in the future through its development of other gaming
activities and/or its post-Sale acquisition strategy. See 'Use of Proceeds;
Conduct of Business after the Sale' and 'Business Plan for the Post-Sale
Company.'

As noted above (see 'The Sale Transactions -- Background of the Proposed
Sale'), as part of the negotiation with Buyer, the Company was able to obtain a
25% limited partnership interest in Buyer in lieu of, as initially offered, (a)
a $6.5 million deeply subordinated note from Buyer and (b) a $2 million deeply
subordinated note from Buyer that would have been convertible (at the election
of either the Company or Buyer) into a 5% (subject to adjustment) limited
partnership interest in Buyer. Accordingly, in evaluating Buyer's offer,
management has attributed a value of approximately $8.5 million to such 25%
limited partnership interest. Among the considerations supporting such valuation
were the following: (1) under the initial offer, a $2 million note was
convertible into a 5% limited partnership interest, which would equate a 25%
limited partnership interest to a $10 million note; (2) the Pre-Closing Lender,
as part of its financing with Buyer, had originally negotiated to receive a 20%
limited partnership interest in Buyer as part of its consideration for providing
the financing and subsequently agreed to accept a $6.5 million note from Buyer
in lieu of such 20% limited partnership interest; (3) upon consummation of the
Sale, Buyer is anticipated to have total capital of approximately

<PAGE>

$13.8 million; and (4) although Buyer had, for the most recent nine months,
experienced a loss ($946,000 for the nine months ended September 30, 1997;
$7,579,000 on a pro forma basis combined with operations of Gulf Coast), during
each of the prior calendar years Buyer had been profitable and it was
anticipated that, with certain economies of scale, the removal of redundant
expenses and operations and other efficiencies, Buyer would be able to obtain
profitable operations from the Bayou Caddy's Jubilee Casino and its Las Vegas
Casino on a combined basis.

Based upon such considerations and other matters, the Board of Directors
believes that Buyer's offer is the best offer available to satisfy the Company's
liabilities and obligations and to improve the Company's position and the
prospects for future returns to its stockholders.

After considering these factors and the additional factors discussed above
(to which the Board of Directors did not assign specific weights), the Board of
Directors unanimously approved the Sale Transactions and unanimously recommends
that the stockholders approve the Sale Proposal and approve and ratify the Sale
Transactions.

USE OF PROCEEDS; CONDUCT OF BUSINESS AFTER THE SALE

As a result of the Pre-Closing Financing and the consummation of the sale
of the Casino Assets (as defined below) pursuant to the Sale Agreement, the
Company anticipates receiving approximately $26.5 million in cash (inclusive of
the net loan proceeds from the Pre-Closing Financing received by the Company in
anticipation of the proposed Sale Transactions). See 'The Sale
Transactions -- Terms of the Sale Agreement -- Sale of Casino Assets and
Purchase Price Thereof' and ' -- The Pre-Closing Financing.' In addition, the
Company anticipates receiving approximately $3.2 million upon sale of the Hotel
Assets (as defined below). As set forth more fully in the following table, the
Company has used, or intends to use, approximately $15.7 million of such amount
to retire and discharge outstanding obligations of approximately $20 million.
Management currently intends to retain the balance of approximately $12.3
million for working capital purposes, including the development of other gaming
operations and/or the acquisition and operation of a new business.

USE OF PROCEEDS

<TABLE>
<CAPTION>
(IN MILLIONS)
-------------
<S> <C>
Extinguishment of debt:
Mortgage note payable to Caterpillar Financial....................................... $ 2.1
Equipment notes payable, including amount due under redemption agreement............. 8.8
Note payable secured by assignment of interest in the mortgage note payable to
Bryanston........................................................................... .6
Capital lease obligation............................................................. .3
Revolving bank line of credit........................................................ .4
Accounts payable, construction payable and other accrued expenses.................... 1.7
Accrued payroll and related liabilities.............................................. .3
Non-revolving promissory note with Bryanston(1)(2)................................... 1.5
------
Total Applied to Extinguishment of Debt......................................... $15.7
Escrowed for hotel construction........................................................... $ 1.7
Amount available for working capital purposes(3).......................................... $ 9.1
------
Total cash proceeds from sale of Casino Assets............................................ $26.5
Proceeds from sale of Hotel Assets (to be added to working capital)....................... $ 3.2
------
Total Cash Proceeds............................................................. $29.7
------
------
</TABLE>

(footnotes on next page)

<PAGE>

<PAGE>
(footnotes from previous page)

(1) Bryanston is 50% owned by Mrs. Beatrice Tollman, the wife of Stanley S.
Tollman, Chairman of the Board, President and Chief Executive Officer of the
Company. As of the Record Date, Bryanston owned 777,238 shares of Preferred
Stock (representing approximately 94.6% of the shares of Preferred Stock
outstanding) and an option for 347,826 shares of Common Stock. Additionally,
the Company is obligated to issue to Bryanston 730,331 shares of Common
Stock with respect to, and in lieu of the cash dividend accrued for 1996 on,
the shares of Preferred Stock held by Bryanston in 1996, and as of January
30, 1998, the Company became obligated to issue to Bryanston approximately
934,000 additional shares of Common Stock in lieu of a cash dividend with
respect to Bryanston's shares of Preferred Stock for 1997. Except for the
approximate $1.5 million amount reflected above as having been repaid to
Bryanston from the net proceeds of the Pre-Closing Financing, no portion of
such proceeds have been paid to any affiliate of the Company. Additionally,
management does not currently intend to use such proceeds or any other
proceeds of the Sale to repay any other amounts owed to affiliates.

(2) As of September 30, 1997, the Company was indebted to Bryanston for
approximately $.6 million with respect to funding provided for construction
of the Casino Hotel (as defined below). Since September 30, 1997 and prior
to the Pre-Closing Financing, Bryanston advanced additional funds in the
aggregate amount of approximately $.9 million to finance the continuing
construction of such Hotel.

(3) Of such amount, pursuant to the terms of the Pre-Closing Financing and/or
the Sale Agreement, approximately $500,000 has been placed in a separate
escrow account to fund contingent liabilities with respect to existing
litigations.

Upon consummation of the sale of the Hotel Assets pursuant to the Sale
Agreement, the Company anticipates receiving additional cash in the approximate
amount of $3.2 million, which will be added to the Company's working capital, to
be used for the development of gaming operations and/or the acquisition and
operation of a new business and other general corporate purposes.

To the extent cash may be realized from or on account of the Partnership
Interest (as defined below), the Company currently anticipates that such cash
will likewise be added to the Company's working capital.

Consummation of the proposed Sale Transactions will terminate the Company's
only currently operating gaming operations. Consequently, exclusive of the
collection of the Company's accounts receivable and payment of its accounts
payable, the Company will have no active operating business. The Company intends
to continue to investigate and, to the extent deemed advisable, pursue other
gaming opportunities, including one in New York State that is already under
development by the Company. Additionally, the Company intends to look for
acquisition candidates for a new business for the Company. See 'Business Plan
for the Post-Sale Company.'

The Board of Directors will explore any opportunities that arise in the
future and that it believes are in the best interests of the Company's
stockholders. Such opportunities may include selling the stock of the Company to
raise capital to make an acquisition of, or to merge with, another company. Any
such acquisition would depend on the availability of attractive acquisition
candidates and the Company's ability to finance any such acquisition. The
Company has not identified any acquisition candidates or the availability of
financing arrangements, and there can be no assurance that any acquisition will
be accomplished.

POTENTIAL EFFECT OF THE SALE UPON THE STOCKHOLDERS

The Company does not plan to make any distribution to stockholders as a
result of the Sale Transactions.

<PAGE>

<PAGE>
TERMS OF THE SALE AGREEMENT

The following summarizes the material terms and conditions of the Sale
Agreement. Reference is made to the entire Sale Agreement (which is attached as
Appendix A) for a full description of such terms and conditions.

Sale of Casino Assets and Purchase Price Therefor. The Sale Agreement
provides for Gulf Coast to sell the Bayou Caddy's Jubilee Casino and certain
related assets (collectively, the 'Casino Assets'), including the casino barge,
boarding barge, related gaming and other equipment, furniture and improvements
and related permits, licences, leases and other agreements, and the related
business. Excluded from the assets to be sold are (a) cash, accounts receivable,
notes receivable and other amounts due from any third party arising from the
operation of the Bayou Caddy's Jubilee Casino prior to the closing, (b) certain
specified gaming equipment and other specified equipment and assets, (c) Gulf
Coast's stock records, books, tax returns, minute books and financial, tax and
accounting records, (d) Gulf Coast's rights under the Sale Agreement, (e) tax
refunds, (f) certain lease agreements with Mosow Real Estate, Inc. and (g)
certain option and lease agreements, as assigned to Gulf Coast, relating to
property in Greenville, Mississippi.

Upon closing of such sale, Buyer is obligated under the Sale Agreement to
(a) pay Gulf Coast approximately $8.6 million in cash or other immediately
available funds, (b) issue to Gulf Coast a limited partnership interest (the
'Partnership Interest') equal to 25% of all outstanding partnership interests in
Buyer, (c) assume up to $2 million of specified liabilities related to the
business and assets being purchased (such liabilities being hereinafter referred
to as the 'Assumed Liabilities'), (d) assume Gulf Coast's and Greenville Hotel's
obligations to repay the Pre-Closing Financing.

In connection with its evaluation of the proposed Sale Transactions, the
Board of Directors sought and obtained advice from Appraisal Economics, Inc.
with respect to the fairness of the terms of the Sale Transactions. Appraisal
Economics, Inc. has issued an opinion (a copy of which is annexed to this Proxy
Statement as Appendix B) that such terms are fair to the Company and its
stockholders, without assigning any specified value to the Partnership Interest.
Management of the Company believes that the Partnership Interest will have
substantial value in view of the fact that, upon consummation of the sale of the
Casino Assets, Buyer will be able to operate two casinos in Greenville,
Mississippi, which should permit Buyer to achieve significant savings,
particularly in general operating expenses and advertising costs.

The Assumed Liabilities, which are provided to be in an amount of up to $2
million, are to consist of (i) liabilities for accrued vacation and health
insurance due as of the closing to Gulf Coast's employees, (ii) Gulf Coast's
chip liability as of the closing, (iii) Gulf Coast's accounts incurred as of the
closing in the ordinary course of its business that are not older than 45 days
past their respective due dates, (iv) non-delinquent taxes and special
assessments prorated to the date of the closing, (v) the gross amount of slot
machine and table games progressive meter liability, (vi) the gross amount of
poker 'bad beat' liability, and (vii) the slot club points and unredeemed
promotional coupon liability (the liability described in this clause (vii) being
hereinafter referred to as the 'Promotional Liability'). For purposes of
determining the value of the Promotional Liability assumed by Buyer, at closing
the same is to be calculated at 60% of the face amount thereof. In the event a
subsequent accounting (to be performed six months after the closing) discloses
that the actual dollar amount of Promotional Liability is at variance with the
60% valuation applied as of the closing, an appropriate payment (in the amount
of such variance) is to be made by Gulf Coast or Buyer, as appropriate.

Pre-Closing Financing. In conjunction with and in anticipation of the
proposed Sale Transactions, on December 30, 1997, Gulf Coast and Greenville
Hotel obtained certain financing (the 'Pre-Closing Financing') from Credit
Suisse First Boston Mortgage Capital, L.L.C. (the 'Pre-Closing Lender'),
pursuant to which Gulf Coast and Greenville Hotel borrowed $17.9 million ($23.9
million less loan costs and loan discounts of approximately $6 million), and
concurrently therewith Gulf Coast applied the net proceeds therefrom to the
payment and discharge of approximately $20 million of the Company's
indebtedness, including $16 million of secured debt. Such borrowing is herein
referred to as the 'Pre-Closing Principal Loan.' Since, under the terms of the
Sale Agreement, it is contemplated that (a) Buyer will assume the Pre-Closing
Principal Loan upon closing the sale of the Casino Assets and (b) the
outstanding principal amount of such Loan is to be applied and credited against
$26.5 million in cash

<PAGE>

<PAGE>
that would otherwise be payable to Gulf Coast at such closing, and since Gulf
Coast concurrently with obtaining the Pre-Closing Principal Loan applied the net
proceeds therefrom to pay and discharge liabilities that would otherwise be paid
and discharged out of sale proceeds upon consummation of the sale of the Casino
Assets, such net proceeds are equivalent to, and in lieu of, sale proceeds and
the application thereof has been treated above under 'Use of Proceeds.'

Additionally, in conjunction with and as part of the Pre-Closing Financing,
Gulf Coast and Greenville Hotel executed and delivered to the Pre-Closing Lender
an unsecured, zero-coupon promissory note (the 'Pre-Closing Subordinated Debt')
in the stated principal amount of approximately $4.9 million, representing
additional unfunded financing. Although no proceeds were received by Gulf Coast
or Greenville Hotel in conjunction with such promissory note, under the terms of
the Sale Agreement, Buyer is to assume such promissory note upon consummation of
the sale of the Casino Assets. The Pre-Closing Lender has agreed to the
assumption by Buyer of the Pre-Closing Principal Loan and the Pre-Closing
Subordinated Debt upon and in conjunction with the consummation of the Sale.
Consequently, if the Sale is consummated, Gulf Coast and Greenville Hotel will
be relieved of any further obligations with respect to the Pre-Closing Principal
Loan and the Pre-Closing Subordinated Debt.

Sale of Hotel Assets and Purchase Price Therefor. Under the Sale Agreement,
Greenville Hotel has agreed to sell Buyer a 41-room and suite hotel (the 'Casino
Hotel') currently under construction on land adjacent to the Bayou Caddy's
Jubilee Casino and certain related assets (the Casino Hotel and such assets
being herein referred to collectively as the 'Hotel Assets') and Buyer has
agreed to purchase the Hotel Assets upon substantial completion of the Casino
Hotel's construction in accordance with the construction contract with W.G.
Yates and Sons Construction Company, Inc., the related construction plans and
specifications and the related specifications for furnishings (the foregoing,
collectively, the 'Hotel Plans'). The Hotel Assets shall include, in addition to
the Casino Hotel, all of Greenville Hotel's furniture, fixtures and equipment
located or used in connection with the Casino Hotel and various permits,
consents, licenses and leases relating to such Hotel. The cash price (the 'Hotel
Purchase Price') to be paid by Buyer for the Hotel Assets will be Greenville
Hotel's cost of construction and furnishing of the Casino Hotel in compliance
with the Hotel Plans, subject to a maximum purchase price of $3.2 million and
subject to adjustment as referred to below. Buyer is also obligated to pay (A)
interest at 11% per annum on the Hotel Purchase Price from the date Buyer
receives written notice from Greenville Hotel of substantial completion of the
construction and furnishing of the Casino Hotel ('Substantial Completion') until
closing of purchase of the Hotel Assets and (B) $112,500 (subject to reduction
in the amount of $4,166.67 per month for each month or part thereof after
December 1, 1997, during which the purchase of the Hotel Assets does not close)
with respect to certain advance lease payments made by Greenville Hotel. The
Hotel Purchase Price is subject to reduction to the extent of any items of work
necessary to complete construction and furnishing the Casino Hotel after the
closing. On February 5, 1998, the Company received a certificate of substantial
completion with respect to the Casino Hotel, and it is anticipated that the
Casino Hotel will open on or about February 12, 1998.

Closing Dates. Closing of the purchase and sale of the Casino Assets is
provided under the Sale Agreement to occur on the earlier to occur of (a) the
fifth business day after all conditions precedent have been met or (b) February
25, 1998 or on such other date as Gulf Coast and Buyer may agree.

The closing for the purchase of the Hotel Assets is provided under the Sale
Agreement to occur as soon as practically possible after written notice by
Greenville Hotel of Substantial Completion and the other conditions precedent
have been fulfilled. If Substantial Completion has not occurred by February 6,
1998, Gulf Coast shall be obligated to pay Buyer, as liquidated damages, $1,000
per day until the date the Casino Hotel is opened for business. Further, if the
failure to complete the Casino Hotel (including any failure caused by a casualty
loss) should result in the suspension of Buyer's gaming license at the Bayou
Caddy's Jubilee Casino, Gulf Coast will be obligated to pay, as liquidated
damages, an additional $100,000 per day for each day such suspension is in
effect. Any such liquidated damages obligations shall be secured by a pledge of
the Partnership Interest. If Buyer (subject to fulfillment of the applicable
conditions precedent and in the absence of any fault by Gulf Coast or its
agents) should fail to close on the purchase of the Hotel Assets within fifteen
days after receipt of notice of Substantial Completion,

<PAGE>

<PAGE>
Buyer shall be obligated to pay (in addition to interest, as referred to above)
$1,000 per day for each day such closing is delayed, and if such delay shall
extend beyond 60 days, Gulf Coast and/or Greenville Hotel may seek (in addition
to other remedies) specific performance of Buyer's obligations to purchase the
Hotel Assets.

Conditions Precedent to Closings. Each party's obligation to consummate the
purchase and sale of the Casino Assets is subject to several customary
conditions precedent, including (a) the truth and accuracy of the other party's
representations and warranties, (b) the performance by the other party of all
obligations required under the Sale Agreement to be performed by such party at
or prior to the closing, (c) the absence of any suit, proceeding or
investigation seeking to restrain, enjoin or hinder, or seeking material damages
on account of, the consummation of such purchase and sale, and (d) the delivery
of legal opinions by such other party's counsel, and also to (i) approval by
Final Order of the Mississippi Gaming Commission of such sale and the other
transactions contemplated by the Sale Agreement and of the post-closing
operation of the Bayou Caddy's Jubilee Casino by Buyer and (ii) the Pre-Closing
Financing and parallel financing from the Pre-Closing Lender to Buyer having
closed and been funded. Buyer's obligation to close on the purchase of the
Casino Assets is also conditioned on (I) certain specified approvals having been
obtained (including proper corporate actions by Gulf Coast and the Company and
written approvals by the City of Greenville, Mississippi, the Greenville Yacht
Club, the Greenville Port Commission and the Board of Mississippi Levee
Commission to the assignment (and/or collateral assignment) of certain
agreements and permits included in the Casino Assets and/or Hotel Assets), (II)
the assignment or issuance to Buyer of certain permits from the U.S. Army Corps
of Engineers relating to the moorage of the casino barge and boarding barge
included in the Casino Assets, (III) there having been no materially adverse
change with respect to certain specified matters, (IV) the Company having
delivered its guaranty of Gulf Coast's and Greenville Hotel's obligations under
the Sale Agreement, (V) Gulf Coast having delivered to Buyer a copy of a
'Fairness Opinion' relating to the transactions contemplated by the Sale
Agreement, (VI) all necessary licenses, permits, approvals, waivers,
authorizations, consents, waiting period expirations and clearances having been
issued by, or obtained from, the appropriate governmental authorities for the
acquisition of the Casino Assets, the conduct of Buyer's business as conducted
or proposed to be conducted and the issuance of the Partnership Interest to Gulf
Coast, (VII) the absence of any pending or threatened action or proceeding
against the Company or Gulf Coast that would have a materially adverse effect on
their ability to perform their obligations under the Sale Agreement, (VIII) Gulf
Coast having delivered evidence of acceptance by the City of Greenville of
utility, water and sewer lines to be installed in partial payment of rent
payable to the City of Greenville, (IX) Gulf Coast having delivered to Buyer a
pledge of the Partnership Interest to secure certain of its obligations under
the Sale Agreement, (X) there having been no bankruptcy filing of Gulf Coast or
the Company and (XI) the terms of the Pre-Closing Financing being acceptable to
Buyer.

The sole condition to Greenville Hotel's obligation to close on the sale of
the Hotel Assets is the execution and delivery of the Supervisory Management
Agreement referred to below. Buyer's obligation to close on the purchase and
sale of the Hotel Assets is subject to the same customary conditions precedent
as apply to closing on the purchase and sale of the Casino Assets and also to
the further condition precedent that the closing of the purchase and sale of the
Casino Assets shall have occurred or shall be occurring simultaneously.
Additionally, the Buyer is not required to close with respect to the purchase of
the Hotel Assets unless (I) certain specified matters shall have been cured to
the satisfaction of Buyer, (II) there shall have not been any materially adverse
changes with respect to certain matters, (III) Gulf Coast or Greenville Hotel
shall have provided Buyer with a certificate of approval from the building
inspector of the City of Greenville or his designated agent (if such certificate
is customarily issued or required by the relevant governmental authority)
evidencing inspection and approval for occupancy with respect to the Casino
Hotel and an architect's certificate evidencing substantial completion of the
Casino Hotel in compliance with the Hotel Plans and plans submitted to and
approved by the Mississippi Department of Archives and History ('MDAH') subject
to punch list items that do not exceed in the aggregate $10,000, (IV) Gulf Coast
or Greenville Hotel shall have provided Buyer with copies of all documents,
invoices and agreements related to the construction and furnishing of the Casino
Hotel and the cost of same, (V) the Casino Hotel shall be ready in all material
respects to receive guests in the ordinary course of such Hotel's business, (VI)
the Company and a

<PAGE>

<PAGE>
wholly-owned subsidiary of Buyer shall have entered into a Supervisory
Management Agreement (the 'Supervisory Management Agreement') relating to
supervising management of the Casino Hotel and providing for annual payments to
the Company of $100,000 for ten years, (VII) the MDAH shall have consented, in
writing, to the granting of a leasehold deed of trust by Buyer's wholly-owned
subsidiary to the Pre-Closing Lender and to the assignment of the MDAH permit to
such subsidiary and (VIII) Buyer and its wholly-owned subsidiary shall have
received an architect's certificate confirming that there has been no violations
of the MDAH permit.

Indemnification. Gulf Coast has agreed to indemnify Buyer with respect to
certain losses and liabilities, including those arising from (a) certain
specified legal proceedings, (b) any of Gulf Coast's liabilities or obligations,
other than the Assumed Liabilities, (c) the operation, use or occupancy of the
Casino Assets and/or the Hotel Assets by Gulf Coast or its predecessor prior to
the closing (except for Assumed Liabilities) and (d) any breach by Gulf Coast of
any of its obligations, representations, warranties, covenants and agreements
made in the Sale Agreement. However, Gulf Coast's liability with respect to such
indemnification shall apply only with respect to losses and/or liabilities in
excess of an aggregate of $10,000 with respect to the Casino Assets and an
aggregate of $10,000 with respect to the Hotel Assets, and Gulf Coast's total
liability under such indemnity shall not exceed, in the aggregate, with respect
to the Casino Assets, an amount equal to the total amount of debt assumed by
Buyer upon consummation of the sale of the Casino Assets plus the cash portion
of the purchase price therefor and, with respect to the Hotel Assets, the amount
of $3.2 million. Additionally, the Sale Agreement contains further limitations
on Gulf Coast's liability with respect to the breach of certain specified
representations.

Distribution of Sale Proceeds and Litigation Escrow Account. The Sale
Agreement provides that, at the closing of the purchase and sale of the Casino
Assets, the closing agent, on behalf of Gulf Coast, will distribute and disburse
to third parties from the cash portion of the purchase price such funds as may
be necessary to satisfy all outstanding liens, mortgages and encumbrances
(excluding, however, certain specified encumbrances, such as those in favor of
the Pre-Closing Lender) against any of the Casino Assets and Hotel Assets and
certain other specified liabilities. Additionally, at such closing Gulf Coast
shall also be required to deposit with such agent an aggregate of approximately
$500,000 to be held subject to the satisfaction of certain pending litigations.

Representations and Warranties. The Sale Agreement contains various
representations and warranties of Gulf Coast and/or Greenville Hotel including,
among others, representations and warranties related to: organization and
similar corporate matters; authorization, performance, enforceability and
related matters; requisite consents; the accuracy of financial statements and
other financial information provided to Buyer; litigation; ownership, condition
and title to assets and properties and absence of liens; contracts; compliance
with applicable laws and regulations and environmental matters; licenses and
permits; and absence of brokers. The Sale Agreement also contains various
representations and warranties of Buyer, including, among others,
representations and warranties related to: organization and similar corporate or
partnership matters; authorization, performance, enforceability and related
matters; requisite consents; and absence of brokers.

The representations and warranties of each of the parties generally survive
the closing for a period of 18 months from the closing date; provided, that,
with respect to Gulf Coast's representations relating to the lack of any
disturbance or termination of Buyer's mooring and occupancy of the Bayou Caddy's
Jubilee Casino at its location in Greenville, Mississippi and relating to
environmental matters, such representations shall survive for five (5) years
from closing, and Buyer's covenant to indemnify Gulf Coast and/or Greenville
Hotel for losses suffered as the result of the operation, use or occupancy by
Buyer (or its successors-in-interest) of the Casino Assets and/or Hotel Assets
shall survive for five (5) years or such longer period for any agreement that
was assigned to and assumed by Buyer and for which Gulf Coast and/or Greenville
Hotel (or any affiliates) remain liable.

Termination. The Sale Agreement may be terminated by mutual written consent
of Gulf Coast and Buyer. Additionally, either party may, by written notice to
the other, terminate the Sale Agreement if the closing of the sale of the Casino
Assets shall not have occurred within five (5) business day after all conditions
precedent therefor have been fulfilled or, if earlier, by February 25, 1998 (or
such later date as Gulf Coast and Buyer may mutually agree): and provided,
further, however, that such right to

<PAGE>

<PAGE>
terminate the Sale Agreement shall not be available to any party whose failure
to fulfill any material obligation such party has responsibility for under the
Sale Agreement has been the cause of or resulted in the failure of the closing
to occur on or prior to the aforesaid dates.

Penalty for Failure to Close. If all conditions precedent to Gulf Coast's
or Greenville Hotel's obligation to close on the sale of the Casino Assets or
Hotels Assets, respectively, have been timely satisfied and Gulf Coast or
Greenville Hotel, respectively, shall fail to close on such sale, Buyer, in
addition to the remedy of specific performance, shall be entitled to recover all
of its reasonable costs and expenses incurred in pursuing its remedies and to
pursue monetary damages up to the amount of the Pre-Closing Subordinated Debt
and, if such closing should not occur due to (a) the failure of Gulf Coast,
Greenville Hotel or the Company to obtain stockholder approval, (b) the
bankruptcy of Gulf Coast, Greenville Hotel and/or the Company or (c) Gulf
Coast's failure to deliver the Casino Assets at closing, Buyer shall be entitled
to seek additional damages in the amount of $1 million. If all conditions
precedent to Buyer's obligation to close on the purchase of the Casino Assets or
Hotel Assets have been timely satisfied and Buyer shall fail to close on such
purchases, then Gulf Coast or Greenville Hotel, as appropriate, in addition to
the remedy of specific performance, shall be entitled to pursue monetary damages
up to the amount of the Pre-Closing Subordinated Debt and shall be entitled to
recover all of its reasonable costs and expenses incurred in pursuing its
remedies.

THE FORGOING DESCRIPTION OF THE SALE AGREEMENT IS NOT INTENDED TO BE
COMPLETE OR DETAILED. STOCKHOLDERS ARE DIRECTED TO THE ENTIRE SALE AGREEMENT,
WHICH IS ATTACHED TO THIS PROXY STATEMENT AS APPENDIX A AND INCORPORATED HEREIN
BY REFERENCE, FOR A COMPLETE AND DETAILED UNDERSTANDING OF THE SALE AGREEMENT.
THE ABOVE DESCRIPTION OF SELECTIVE PORTIONS OF THE SALE AGREEMENT IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO THE ACTUAL SALE AGREEMENT.

THE PARTNERSHIP INTEREST AND RIGHTS OF THE COMPANY UNDER THE PARTNERSHIP
AGREEMENT

As part of the Sale, the Company is to receive an interest equal to 25% of
all partnership interests ('Units') of Buyer. At present there are 1,033,333
Units (including 33,333 Series A Special Units) outstanding. The material terms
of Buyer's limited partnership agreement are summarized below.

The general partner of Buyer will have the right to issue additional Units
on terms established by the general partner, for which the existing partners
will (except as noted below) have preemptive rights, except for (a) those Units
issued to employees of Buyer, (b) those Units issued in connection with the
incurrence of debt obligations, unless the general partner also purchases the
subject debt, or (c) Units issued in connection with any acquisition of an
entity by Buyer.

The general partner may not enter into any financing transaction for an
amount greater than $1 million (exclusive of the financing for the Sale) without
the written consent of the holders of 67% of all outstanding Units.

The general partner may issue up to 200,000 Series B Special Units at $15
each or such higher amount as the general partner shall determine, which
issuance shall not be subject to preemptive rights. The Series A and Series B
Special Units shall be entitled to preferential distribution rights, including
interest at 10%, until the purchase amount is repaid in full, after which such
Special Units such be deemed regular Units of Buyer.

Subject to the requirements of any financing, the general partner shall
determine whether and in what amount distributions shall be made to the
partners, which distributions, except as described above, shall be made on a pro
rata basis; provided, however, that, the general partner is required to
distribute to the partners an amount equal to 45% of Buyer's annual taxable
income attributable to each partner.

Partnership allocations for tax purposes shall be made on a pro rata basis.

The general partner shall have exclusive management and control of the
conduct of the business of Buyer except as to the limitation on financing
referred to above and except as to the following items, which require the
written consent of limited partners holding at least 67% of the outstanding
Units: (i) a sale of all or substantially all of Buyer's assets; (ii) the merger
or consolidation of Buyer with another

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entity; (iii) a termination or liquidation of Buyer (except in certain specified
instances involving termination or dissolution); (iv) causing Buyer to engage in
any business other than its dockside casinos in Greenville, Mississippi and
related activities; (v) the issuance of more than 60,000 Units (or options,
warrants or the like for such Units) to employees of the Partnership or
affiliates of the general partner of Buyer; (vi) the issuance of Units or other
securities, or other participation, in a public offering; and (vii) the issuance
of additional Units to affiliates. Additionally, any filing for relief under the
U.S. Bankruptcy Code requires the written consent of limited partners holding a
majority of the outstanding Units.

The Partnership Agreement imposes certain restrictions on competing
activities of the principals of the general partner (generally prohibiting
engaging in a competing business within a 150 mile radius of Greenville,
including Tunica, Helena and Vicksburg, Mississippi). The Partnership Agreement
also provides for certain restrictions on the transferability of Units, but it
is anticipated that the Partnership Agreement will be modified to permit any
corporate limited partner to transfer its interest to any corporate parent or
wholly-owned subsidiary of such limited partner. If the holders of 50% or more
of the then outstanding Units propose to transfer their interests, the other
partners shall have tag-along rights with regard to such other partners' Units.
If the holders of 67% or more of the then outstanding Units propose to transfer
their interests for cash or for securities of a publicly-traded entity, then
such holders shall have the right to require the remaining limited partners to
also so transfer their Units on the same terms.

The Partnership Agreement further provides that if the Mississippi Gaming
Commission objects to the equity holding of any partner, such partner's interest
shall be converted to a loan, which shall be subject to terms established in the
Partnership Agreement.

APPRAISAL ECONOMICS, INC. AND THE 'FAIRNESS OPINION'

Prior to retaining Appraisal Economics, Inc. to evaluate the fairness of
the Sale Transactions, the Company had retained that company to evaluate the
terms of the proposed sale of Alpha Hotel to Bryanston. The Company had
originally been referred to Appraisal Economics, Inc. by the Company's
accountants. Appraisal Economics, Inc. is not affiliated with the Company or
Buyer.

Appraisal Economics, Inc. has been involved in evaluating business and
business transactions since 1989 and has provided services to many Fortune 500
companies, as well as smaller companies. Particularly, Appraisal Economics, Inc.
has done evaluation work in the gaming and/or hospitality industries for CSX
Corp. (evaluating The Greenbriar), Days Inn, Alcoa (evaluating a casino hotel in
the Caribbean), Bally Entertainment, ITT and HFS Gaming Corp.

The amount and form of consideration to be paid in conjunction with the
Sale was determined based upon negotiations between the Company and Buyer, and
Appraisal Economics, Inc. was then asked to evaluate the fairness of such
consideration. More particularly, Appraisal Economics, Inc. was provided with
the terms of the proposed Sale, was asked to evaluate such terms and, based upon
such evaluation, to advise the Company as to whether such terms were fair to the
Company and its stockholders. Appraisal Economics, Inc. was not retained to, and
did not, act as an investment banking firm or other financial advisor for the
purpose of assisting the Company during the negotiating process with Buyer or
provide valuation information during such process. The familiarity of the
Company's management with the range of valuations for the assets, obtained as a
result of intervening financing attempts and the investigation of a cooperative
operating arrangement, together with a somewhat unconventional buyer-seller
relationship due to the nature of the assets and the market therefor, made the
retention of a third party to provide such services unnecessary. Rather, the
Board retained Appraisal Economics, Inc. solely for the purpose of providing a
determination by a qualified, independent third party as to whether the terms of
the proposed Sale, when finally agreed upon, were fair to the Company and its
stockholders. As the purpose of such retention was the confirmation of fairness,
rather than negotiating support, Appraisal Economics, Inc. made no presentation
to the Board and provided no board books or other related written analysis of
their appraisal to the Company; nor did the Board ask questions of Appraisal
Economics, Inc. or review its analysis, other than the analysis set forth in its
opinion letter.

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In its opinion letter (see Appendix B), Appraisal Economics, Inc. reported
that, in rendering its opinion as to the fairness of the Sale Transactions it
considered the principal terms of the Sale Transactions, as well as the nature
and history of the Company, Alpha Gulf, the Casino Assets and Hotel Assets and
reviewed (a) the economic outlook in general (and the economic outlook for the
industry in particular), (b) the prospective earnings and cash flows of the
Casino Assets, (c) the book value of the Casino Assets, (d) the overall
financial condition and dividend-paying capacity of the Bayou Caddy's Jubilee
Casino, and (e) any past transactions involving the Casino Assets. Additionally
Appraisal Economics, Inc. indicated that it inspected the Casino Assets and
Buyer's Las Vegas Casino, as well as other gaming operations of competitors in
the area, examined prices of assets similar to the Casino Assets and of the
stock of the Company and certain guideline publicly traded companies and
performed such valuation tests and procedures as it considered appropriate as
they related to the Casino Assets. Further, Appraisal Economics, Inc. advised
the Company, that in rendering its opinion, it relied upon certain documents,
including financial statements of the Company and Buyer and information
contained in an appraisal report provided to the Pre-Closing Lender, and
analyzed financial statements and other material regarding comparative public
companies, acquisition data of companies in the same industry, required rates of
return on common stocks in general, material discussing the general economic
outlook and the specific industry outlook and other material it deemed
appropriate.

The specific results of the foregoing analyses undertaken by Appraisal
Economics, Inc. were not identified in the opinion letter. Rather, such letter
set forth such firm's opinion that such transaction is fair to the stockholders
of the Company.

ACCOUNTING AND TAX TREATMENT OF THE SALE

Accounting Treatment of the Sale Transactions. It is anticipated that, for
accounting purposes, the gain on debt extinguished will be treated as an
extraordinary item for the year ended December 31, 1997. Additionally, it is
anticipated that, for accounting purposes, the sale of the Casino Assets will be
presented as a discontinued operation in the first quarter of Fiscal 1998(1) and
will result in a gain to the Company of approximately $6.0 million. The Company
also expects to incur approximately $200,000 of legal costs and other expenses
relating to the Sale Transactions. See 'Unaudited Pro Forma Financial
Information.'

Federal Income Tax Consequences of the Sale. It is anticipated that the
sale of Casino Assets and the sale of Hotel Assets will each be reported as a
sale of assets for federal income tax purposes in the fiscal year in which such
respective sale shall occur. The federal income tax effect of these transactions
is not anticipated to be material because the Company will utilize net operating
loss carryforwards to offset the resulting gain, as well as the gain referred to
above from the extinguishment of debt. The Company has not received an opinion
of counsel regarding the tax consequences of the Sale Transactions or the
extinguishment of Company debt. The foregoing description of the tax
consequences of the Sale Transactions and extinguishment of Company debt is
based upon the Company's review of its current tax status and its review of
applicable tax law and regulations.

It is not anticipated that the Company will receive any further benefit of
the net operating loss carryforwards unless profitable operations are attained.

BUSINESS PLAN FOR THE POST-SALE COMPANY

Introduction. In addition to its operation of the Bayou Caddy's Jubilee
Casino in Greenville, Mississippi, the Company (through its subsidiaries) also
owns a casino (the Jubilation Casino) located in Lakeshore, Mississippi (which
casino has been inoperative since July 1996) and (through its subsidiary Alpha
Monticello, Inc.) has under development a prospective gaming activity in New
York State (such prospective gaming activity being hereinafter sometimes
referred to as the 'Proposed Gaming Development'). See 'The Company -- Casino
Operations and Gaming Activities -- Current Operations'

- ------------
(1) In the event consummation of the Sale should be postponed or delayed until a
subsequent quarter, it is anticipated that, for accounting purposes, the
Sale will be presented as discontinued operations in that quarter.

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and ' -- Development Activities.' The Company does not currently have plans to
re-open or operate the Jubilation Casino; however, subject to the Company's
confirmation that the Proposed Gaming Development is financially viable, the
Company intends to pursue the same, subject to obtaining the requisite licenses
and other approvals and the availability of such appropriate financing (either
from the Company's own resources or from third parties) as may be necessary to
further develop the same. Although the Company believed, at the time it
investigated and made its initial investment of time and money in developing the
Proposed Gaming Development, that such Development would be financially viable,
the Company's final decision to continue with its development will depend upon
the results of a reevaluation to be undertaken when and if the requisite
licenses and necessary approvals are obtained. Among the factors that will
require confirmation or reevaluation would be the following: (1) the cost to
complete and develop the project; (2) the demand for gaming facilities in the
area where the project is to be located and the location and success of any
competing gaming facilities; (3) the adverse effect of any new legislation or
regulation; (4) the availability, and the terms and conditions, of necessary
financing; and (5) the projected profitability of the project upon completion.
There can be no assurance that the Company will elect to pursue further the
Proposed Gaming Development, that (even if the Company elects to pursue the
same) the Proposed Gaming Development will be brought to fruition or that (even
if brought to fruition) the Proposed Gaming Development will be successful and
profitable.

Additionally, proposals or prospects for new casinos or other gaming
activities may be presented to the Company, or the Company may otherwise become
aware of such opportunities (any such new casino or other gaming activity being
hereinafter sometimes referred to as a 'New Gaming Opportunity'). The Company
will continue to investigate and evaluate New Gaming Opportunities and, subject
to available resources, may choose to pursue and develop one or more New Gaming
Opportunities if the same is deemed to be in the best interest of the Company
and its stockholders. However, there can by no assurance that any New Gaming
Opportunity will be presented to, or otherwise come to the attention of, the
Company, that the Company will elect to pursue or develop any New Gaming
Opportunity or that any New Gaming Opportunity that the Company may elect to
pursue or develop will actually come to fruition or (even is brought to
fruition) will be profitable.

Except to the extent the Company may pursue and develop the Proposed Gaming
Development or any New Gaming Opportunity, upon consummation of the Sale, the
Company will be effectively transformed to serve as a holding company and a
vehicle to effect acquisitions, whether by merger, exchange of capital stock,
acquisition of assets or other similar business combination (a 'Business
Combination') with an operating business (an 'Acquired Business'). To the extent
the Company's financial and other resources are not devoted to, or reserved for,
the development of the Proposed Gaming Development and/or any New Gaming
Opportunity, the business objective of the Company (hereinafter, the 'Post-Sale
Company') after the Sale will be to effect a Business Combination with an
Acquired Business that the Post-Sale Company believes has significant growth
potential. The Post-Sale Company intends to seek to utilize available cash,
equity, debt or a combination thereof in effecting a Business Combination. While
the Post-Sale Company may, under certain circumstances, explore possible
Business Combinations with more than one prospective Acquired Business, in all
likelihood, until other financing provides additional funds, or its stature
matures, the Post-Sale Company may be able to effect only a single Business
Combination in accordance with its business objective, although there can be no
assurance that any such transaction will be effected. See 'Risk Factors' below
for other important factors that should be considered in connection with the
realization of the Post-Sale Company's business objective.

Although in certain circumstances (such as the merger of the Company with
another company or a transaction involving the issuance of in excess of 20% of
the Company's outstanding Common Stock) a vote of stockholders of the Company
would be required by law or regulations to approve or authorize a Business
Combination, there can be no assurance that any future Business Combination will
be structured in a manner which requires stockholders approval. Management does
not currently anticipate seeking stockholder approval for any prospective
Business Combination unless such approval is required by applicable law or
regulation (including Nasdaq listing requirements).

Initial Transactions. No agreements, commitments or understandings have
been made with any Acquired Business candidates. No assurances can be made that
future discussions will result in

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definitive agreements, although it is the Company's intention (subject to
consummation of the Sale Transactions) to proceed with the Post-Sale Company's
business plan.

Funding of the Business Plan. In view of the limited tangible net worth of
the Post-Sale Company following the Sale and the prospect that some portion of
the net proceeds of the Sale (after deductions to extinguish debts of the
Company) will be expended or reserved for the development of the Proposed Gaming
Development or New Gaming Opportunities, consideration may be given to
additional private or public equity or debt placements to fund its merger and
acquisition activities, as well as to fund working capital for general corporate
purposes that might be required to effectuate the business plan.

It is anticipated that, in the event a Business Combination is effected,
the Post-Sale Company would use cash, equity, debt or a combination of these to
achieve a Business Combination.

The Post-Sale Company may borrow funds to increase the amount of capital
available for a Business Combination or otherwise finance the operation of an
Acquired Business. The amount and nature of any borrowings by the Post-Sale
Company would depend on numerous considerations, including its capital
requirements, its perceived ability to service such debt and prevailing
conditions in the financial markets and the general economy.

RISK FACTORS

IF THE SALE IS CONSUMMATED, THE POST-SALE COMPANY WILL (EXCEPT TO THE
EXTENT THE COMPANY PURSUES AND DEVELOPS THE PROPOSED GAMING DEVELOPMENT OR ANY
NEW GAMING OPPORTUNITIES) BECOME AN ACQUISITION COMPANY. THE STOCKHOLDERS OF THE
COMPANY WILL NOT GET TO VOTE SEPARATELY ON WHETHER TO CHANGE THE NATURE OF THE
BUSINESS TO AN ACQUISITION COMPANY. CONSEQUENTLY, THE FOLLOWING RISK FACTORS
SHOULD BE TAKEN INTO CONSIDERATION BY EACH STOCKHOLDER IN DETERMINING WHETHER TO
APPROVE THE SALE.

Additional Financing Required. The funds available to the Post-Sale Company
may not be adequate for it to acquire an interest in any chosen property,
business or opportunity. Without raising additional funds, the Post-Sale Company
may also not have sufficient capital to exploit fully any property, business or
opportunity that is acquired. Accordingly, the ultimate success of the Post-Sale
Company may depend upon its ability to raise additional capital or to have other
parties bear a portion of the required costs to further develop or exploit any
business venture in which the Post-Sale Company may become involved. There is no
assurance that funds will be available from any source, and if not available, it
will be necessary for the Post-Sale Company to limit its operations to those
that can be financed from existing assets.

Limited Assets. Exclusive of the dormant Jubilation Casino (and related
assets) and the Company's investment in the Proposed Gaming Development and the
Partnership Interest, the Company's only material assets after the Sale will be
cash and minor furniture and equipment, and any remainder of net proceeds of the
Sale will be used for general corporate purposes and to develop the Proposed
Gaming Development and/or New Gaming Opportunities and/or to seek acquisition
candidates. Any business activity that the Post-Sale Company eventually
undertakes may require substantial capital, which may be difficult to obtain or
not available in light of the Post-Sale Company's financial condition. The
success of the Post-Sale Company may, accordingly, depend upon its ability to
acquire additional capital. Since the Company does not know the type of
business, if any, in which it will eventually engage, the Company does not know
what its ultimate capital needs will be.

It is currently anticipated that, following consummation of the Sale, the
Company will incur annual expenditures of approximately $300,000 for selling,
general and administrative expenses, plus any development requirements that
management determines to be necessary. It is anticipated that the Company's
working capital will be sufficient to fund these requirements at least for the
foreseeable future. Mr. Tollman has agreed to defer his contractual compensation
until such time that these amounts can be paid from operations of the Company.

Lack of Ongoing Operations. Immediately following the consummation of the
Sale, the Post-Sale Company will have no operating business to generate any
income, exclusive of the $100,000 per annum

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fee anticipated to be earned by the Company under the Supervisory Management
Agreement. The Company's ongoing ability to meet its general and administrative
obligations (to the extent not funded from net proceeds from the Sale or income
earned thereon) will be dependent on its ability to achieve profitable
operations from the Proposed Gaming Development or a New Gaming Opportunity or
to complete successfully a business combination with an entity having sufficient
cash flow to meet the Company's obligations.

No Operating History. Except to the extent the Post-Sale Company develops
any Proposed Gaming Development or a New Gaming Opportunity, the Post-Sale
Company will change the nature of its business if the Sale is approved and
consummated. The Post-Sale Company has no operating history with respect to the
Proposed Gaming Development or any New Gaming Opportunity or any new line of
business in which it may engage after the Sale. Although management currently
intends to concentrate its investigation of potential business acquisitions in
the areas of hotel, timeshare and related hospitality ventures (in which
affiliates of the Company and/or members of management have prior experience),
there can be no assurance that the Company will be able to locate and consummate
a transaction with any business in such areas. There can be no assurance that
the Post-Sale Company's activities will be profitable. As of the date of this
proxy statement, the Company has not entered into any arrangement to participate
in any business ventures or purchase any assets, property or business.

Speculative Nature of Company's Proposed Operations. Except to the extent
the Post-Sale Company develops the Proposed Gaming Development or any New Gaming
Opportunity or another business in which management has significant experience,
the success of the Post-Sale Company will depend heavily on the operations,
financial condition and management of such company or companies, if any, that
the Post-Sale Company acquires or with which the Post-Sale Company merges. It is
management's current intent to cause the Post-Sale Company to merge with, or to
acquire, one or more privately held entities with established operating
histories, preferably in the areas of hotel, timeshare or other related
hospitality ventures. However, there can be no assurance that the Post-Sale
Company will be successful in locating any acquisition candidate meeting such
criteria. In the event the Post-Sale Company completes a merger or acquisition
transaction, the success of its operations may be dependent, wholly or partly,
upon management of the successor firm and numerous other factors beyond the
Post-Sale Company's control. After the acquisition or merger has taken place,
management from the acquired or merged entity may operate the Post-Sale Company.
There is, however, also a possibility that the Post-Sale Company may seek to
operate an ongoing business, in which case the Post-Sale Company's management
might be retained.

Change of Control. The consummation of a Business Combination may involve a
change in officers and directors of the Post-Sale Company. There are not
currently extant any obligation of the Company to make any payments to officers
or directors as a consequence of any such change of control.

Uncertainty as to Value of Partnership Interest. Although, in evaluating
Buyer's offer for the Bayou Caddy's Jubilee Casino and related business and
assets, management ascribed a value of $8.5 million to the Partnership Interest,
the Partnership Interest represents an illiquid and speculative investment and
there can be no assurance that the Company will realize $8.5 million or any
other amount from such investment. Although the Company will hold a 25% limited
partnership interest in Buyer, decisions respecting Buyer and its operations are
generally vested in its corporate general partner and the Company will have
limited or no right to vote with respect to, or otherwise influence, Buyer or
its operations. See, 'The Sale Transactions -- The Partnership Interest and
Rights of the Company under the Partnership Agreement.' The value of the
Partnership Interest will depend upon the success and profitability of Buyer,
and although, as the holder of the Partnership Interest, the Company will
generally be entitled to 25% of all distributions to be made to limited partners
of Buyer, there can be no assurance that Buyer will not experience losses or may
not otherwise fail to make any distributions to its limited partners.

Dilution in Merger or Acquisition Transaction. In order to merge with or
acquire another business, the Post-Sale Company may issue securities to the
stockholders of any such target business or to the public. The issuance of
previously authorized and unissued Common Stock and/or Preferred Stock of the
Post-Sale Company would result in dilution to present stockholders of the
Company, which may result in a change in control or management of the Post-Sale
Company.

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Management Commitment. The management of the Post-Sale Company will serve
at will and may seek other opportunities at any time. The loss of part or of the
entirety of its management could have a materially adverse impact on the success
and viability of the Post-Sale Company. Except for James Cutler (the Company's
Chief Financial Officer), who has indicated his intention to resign as an
officer (but not as a director) of the Company following consummation of the
Sale, no other member of management has indicated that he is currently seeking
other employment or intends to resign following consummation of the Sale. There
can, however, be no assurance that other members of management will not at any
time resign or otherwise seek other employment.

Dependence on Inexperienced Management. The success of the Post-Sale
Company will be dependent largely upon the active participation of its
management. In the event such management lacks experience or background in the
business in which the Post-Sale Company proposes to engage (for example, if the
Post-Sale Company, through a proposed Business Combination, acquires a business
in which management has no, or only limited, prior experience), it will probably
be required to obtain independent outside professionals effectively to evaluate
and appraise a potential Business Combination. The Company's current intention,
however, is to first explore a Business combination in an industry such as the
hospitality and travel industry or such other industry in which Current
management has experience. Certain of the post-Sale directors have other full
time employment and will be available to participate in management decisions
only on a part-time or as needed basis. If the Post-Sale Company acquires a new
business opportunity, the post-Sale management may resign. The amount of time
the post-Sale officers and directors will be required to devote to post-Sale
matters will probably increase if the Post-Sale Company operates a new active
business. The time that the post-Sale officers and directors devote to the
business affairs of the Post-Sale Company and the skill with which they
discharge their responsibilities will substantially affect the Post-Sale
Company's success.

Business Risks. The Company has not identified any business opportunities
in which it will attempt to obtain an interest. The Company therefore cannot
describe the specific risks presented by such business. Such business may
involve an unproven product, technology or marketing strategy, the ultimate
success of which cannot be assured. The acquired business opportunity may be in
competition with larger, more established firms over which it will have no
competitive advantage. To the extent required by law, the specific risks of a
proposed business opportunity will be disclosed to the Post-Sale Company's
stockholders prior to its acquisition and approval therefor will be obtained.
The Post-Sale Company's investment in a business opportunity may be highly
illiquid and could result in a total loss to the Post-Sale Company if such
opportunity is unsuccessful.

Conflicts of Interest. Certain of the directors and officers of the
Post-Sale Company will be associated with other firms or occupations involving
other business activities. Because of such affiliations, there are potential
inherent conflicts of interest in their acting as directors and officers of the
Post-Sale Company and of other entities. All of the Company's post-Sale
directors and officers may be directors or controlling stockholders of other
entities engaged in a variety of businesses that may in the future have various
transactions with the Post-Sale Company. Additional conflicts of interest and
non-arm's length transactions may also arise in the future in the event the
Company's post-Sale officers or directors are involved in the management of any
firms with which the Post-Sale Company transacts business. The Post-Sale Company
may pay finder's fees or other fees to its post-Sale officers, directors or
affiliates in connection with any potential business combination involving the
Post-Sale Company.

Dependence on Outside Advisors. In order to supplement the business
experience of post-Sale management, the Post-Sale Company may employ
accountants, technical experts, investment bankers, appraisers, attorneys or
other consultants or advisors. The selection of any such advisors will be made
by post-Sale management and without any control from stockholders. Additionally,
it is anticipated that such persons may be engaged by the Post-Sale Company on
an independent basis without a continuing fiduciary or other obligation to the
Post-Sale Company.

No Dividends Anticipated. At the present time management does not
anticipate that the Post-Sale Company will pay dividends, cash or otherwise, on
its Common Stock or cash dividends on its Preferred Stock in the foreseeable
future. Future dividends will depend on earnings, if any, of the Post-Sale
Company, its financial requirements and other factors.

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Scarcity of and Competition for Merger or Acquisition Prospects. Post-Sale
Company will be an insignificant participant in the business of seeking mergers
with and acquisitions of small entities. In addition, the Post-Sale Company will
have limited assets to support an acquisition. A large number of established and
well-financed entities, including venture capital firms, are active in mergers
and acquisitions of companies that may be desirable target candidates for the
Post-Sale Company. Nearly all such entities have significantly greater financial
resources, technical expertise and managerial capabilities than the Post-Sale
Company is expected to have, and consequently, the Post-Sale Company will be at
a competitive disadvantage in identifying and acquiring possible merger or
acquisition candidates.

No Agreement for Business Combination or Other Transaction. The Company has
no arrangement, agreement or understanding with respect to a merger with, or
acquisition of, any entity, private or public. There can be no assurance that
the Post-Sale Company will be successful in identifying and evaluating suitable
merger or acquisition candidates and in concluding a merger or acquisition
transaction on terms favorable to the Post-Sale Company; or, if concluded,
whether any such transaction will result in a financial return to its
stockholders.

Lack of Market Research. The Company has not conducted, or engaged other
entities to conduct, market research to determine what demand exists for any
transaction contemplated by the Post-Sale Company or for the business activity
in which a potential acquisition candidate engages. Even in the event demand is
identified for the business of an acquisition candidate, there is no assurance
that the Post-Sale Company will be successful in completing any such
transaction.

Possible Lack of Diversification. The Post-Sale Company may be unable to
diversify its business activities and, as a consequence, may suffer a total loss
to the Post-Sale Company and its stockholders should an acquisition by the
Post-Sale Company prove to be unprofitable. The Post-Sale Company's failure or
inability to diversify its activities into a number of areas may subject the
Post-Sale Company to economic fluctuations within a particular business or
industry and, therefore, increase the risks associated with its operations.

Issuance of Additional Shares. Approximately 1.7 million shares of Common
Stock (or approximately 7% of the total authorized shares of Common Stock),
exclusive of the number of shares of Common Stock underlying outstanding options
and warrants or subject to issuance upon conversion of outstanding shares of
Preferred Stock and approximately 1.8 million shares of Common Stock the Company
is obligated to issue in lieu of cash dividends accrued with respect to shares
of Preferred Stock, and approximately 180,000 shares of Preferred Stock (or
approximately 18% of the total authorized shares of Preferred Stock) have not
yet been issued and thus are available for sale. The Board of Directors has the
power to issue such shares. The Post-Sale Company may issue shares of Common
Stock or Preferred Stock to raise additional capital or to effect a merger or
acquisition with a target entity. Stockholders do not have preemptive rights
with respect to the issuance of shares of Common Stock or Preferred Stock. Any
additional issuance by the Post-Sale Company from its authorized but unissued
shares would have the effect of further reducing the percentage ownership of the
current stockholders.

Regulation. Although the Post-Sale Company will continue to be subject to
regulation under the Securities Act of 1933 and the Securities Exchange Act of
1934, management believes the Post-Sale Company will not be subject to
regulation under the Investment Company Act of 1940 insofar as the Post-Sale
Company will not be engaged in the business of investing or trading in
securities. In the event the Post-Sale Company engages in business combinations
or operations that result in the Post-Sale Company holding passive investment
interests in a number of entities, the Post-Sale Company could be subject to
regulation under the Investment Company Act of 1940. In such event, the
Post-Sale Company would be required to register as an investment company and
could be expected to incur significant registration and compliance costs.
Management has obtained no formal determination from the Securities and Exchange
Commission as to the status of the Post-Sale Company under the Investment
Company Act of 1940, and consequently, any violation of such Act could subject
the Post-Sale Company to materially adverse consequences.

Probable Change in Control and Management. Mergers or acquisitions
involving the issuance of the Post-Sale Company's stock may result in
stockholders of a target company obtaining a controlling

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interest in the Post-Sale Company. The resulting change in control of the
Post-Sale Company could result in removal of the post-Sale officers and
directors and a corresponding reduction or termination in their participation in
the future affairs of the Post-Sale Company.

Forward Looking Statements. The foregoing section and other portions of
this proxy statement contain forward-looking statements. Actual results could
differ materially from those projected herein. Such difference could occur
because of the application of factors referred to above, of competitive or
general business conditions or of some other and unforeseen factors.

Absence of Dissenters' Rights of Appraisal. The General Corporation Law of
the State of Delaware governs stockholders' rights in connection with the Sale.
Under the applicable provisions of Delaware law, the Company's stockholders will
have no right in connection with the Sale to dissent and seek appraisal of their
shares of Common Stock or Preferred Stock.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE SALE
PROPOSAL.

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SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY

The following table summarizes certain selected consolidated financial data
of the Company, which should be read in connection with the Company's
Consolidated Financial Statements and Notes thereto included elsewhere herein
and with 'Management's Discussion And Analysis Of Financial Condition And
Results Of Operations Of The Company.' The selected consolidated financial data
as of and for the years ended December 31, 1996, 1995 and 1994 and for the
period from inception (March 19, 1993) through December 31, 1993 have been
derived from the Company's audited consolidated financial statements. The
selected consolidated financial data as of and for the nine months ended
September 30, 1997 and 1996 have been derived from the Company's unaudited
consolidated financial statements included elsewhere herein.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- -------------------------------------------
1997 1996 1996 1995 1994 1993
------- -------- -------- -------- -------- -------
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

<S> <C> <C> <C> <C> <C> <C>
Revenues.......................... $24,337 $ 35,911 $ 44,520 $ 27,639 $ 43,265 $ 18
Loss from continuing operations... (5,456) (23,236) (26,309) (19,344) (11,026) (4,931)
Loss per common share from
continuing operations........... $ (.39) $ (1.75) $ (1.99) $ (1.82) $ (1.08) $ (.56)
</TABLE>

<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, AS OF DECEMBER 31,
------------------- -------------------------------------------
1997 1996 1996 1995 1994 1993
------- -------- -------- -------- -------- -------

<S> <C> <C> <C> <C> <C> <C>
Total assets...................... $39,972 $ 44,847 $ 43,954 $ 66,774 $ 45,490 $47,201
Long-term debt.................... 21,254 24,171 22,394 29,632 20,100 24,874
Redeemable preferred stock........ -- -- -- -- 565 --
Stockholders' equity.............. $ 1,145 $ 1,759 $ 1,506 $ 1,904 $ 13,143 $11,882
</TABLE>

<PAGE>

<PAGE>
SELECTED CONSOLIDATED PRO FORMA FINANCIAL DATA OF THE COMPANY

The following table summarizes certain selected consolidated pro forma
financial data, which should be read in conjunction with the Company's Condensed
Pro Forma Consolidated Financial Statements and Notes thereto included elsewhere
herein. The unaudited pro forma information is presented to reflect the pro
forma effect of the Sale (together with the Pre-Closing Financing and the
corresponding extinguishment of Company debt) as if it had been consummated on
September 30, 1997 for balance sheet presentation purposes and as of January 1,
1997, for the nine months ended September 30, 1997, for income statement
presentation purposes, pursuant to the assumptions and adjustments in the
accompanying notes to the Company's Unaudited Condensed Pro Forma Financial
Statements. The following pro forma information includes certain estimates and
is not necessarily indicative of the results of operations and financial
position of the Company as they may be in the future or they might have been had
the Sale (together with the Pre-Closing Financing and the corresponding
extinguishment of Company debt) occurred as of the dates assumed.

<TABLE>
<CAPTION>
PRO FORMA
-----------------------------
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(DOLLAR AMOUNTS IN THOUSANDS)

<S> <C> <C>
Statement of Operations Data:
Revenues............................................................ $ 78 $ 108
(Loss) from continuing operations................................... (4,769) (6,700)
(Loss) per common share from continuing operations.................. (.34) (.50)
</TABLE>

<TABLE>
<CAPTION>
PRO FORMA
AS OF
SEPTEMBER 30,
1997
-------------

<S> <C> <C>
Balance Sheet Data:
Cash................................................................ $ 9,418
Total assets........................................................ 28,034
Long-term debt...................................................... 7,800
Total stockholders' equity.......................................... 11,550
</TABLE>

<PAGE>

<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF THE COMPANY

CASINO OPERATIONS
MISSISSIPPI:

On May 14, 1993, the Company acquired certain of the assets of B.C.,
including B.C.'s leasehold interests under certain lease agreements, certain
other assets incidental to the development and ownership of the Bayou Caddy's
Jubilee Casino and B.C.'s interest in certain related license applications,
approvals and permits. The Bayou Caddy's Jubilee Casino commenced gaming
operations in Lakeshore, near Waveland, Hancock County, Mississippi on January
12, 1994. In October 1995, the Company consummated the acquisition of The Cotton
Club Casino (subsequently renamed the Jubilation Casino) in its original
location in Greenville, Mississippi. Immediately following such acquisition, the
Company relocated the Bayou Caddy's Jubilee Casino to Greenville and the
Jubilation Casino to Lakeshore. Management believed that these relocations were
appropriate in order to increase the return on the Company's gaming assets,
since management believed that the Bayou Caddy's Jubilee Casino would better
serve the larger Greenville market and that the Jubilation Casino would
adequately serve the smaller Lakeshore market. The Bayou Caddy's Jubilee Casino
reopened in Greenville on November 17, 1995, and the Jubilation Casino reopened
in Lakeshore on December 21, 1995. In July 1996, the Company began to implement
its plans to close the Jubilation Casino during August 1996 due to the
Jubilation Casino being unable to overcome operating deficits. Considering the
impact of the aforementioned factor, management updated its assessment of the
realizability of the leasehold improvements and related assets of the Jubilation
Casino. In accordance with its accounting policy for long-lived assets,
effective for the second quarter ended June 30, 1996, management recorded an
impairment loss of $14,507,000 to property and equipment. Since this recordation
would have resulted in the reduction of stockholders' equity to a level below
the requirements for continued listing of the Company's securities on NASDAQ,
the Company accepted proposals by Bryanston and BP to convert an aggregate of
$20,387,000 of debt owed by the Company to Bryanston and BP into shares of
Preferred Stock. See 'Certain Transactions -- Bryanston' and 'Certain
Transactions -- BP Group.' Thereafter, on July 16, 1996, operation of the
Jubilation Casino was suspended in compliance with a directive of the
Mississippi Gaming Commission, which asserted that the working capital of the
Jubilation Casino was not sufficient. The Mississippi Gaming Commission required
that the Jubilation Casino's working capital be increased. This working capital
requirement was reviewed by Jubilation Lakeshore in light of its previously
announced plan to close the Jubilation Casino during August 1996 and the costs
which would be incurred to reopen the Jubilation Casino. Based on this review,
Jubilation Lakeshore decided not to reopen the Jubilation Casino.

<PAGE>

<PAGE>
RESULTS OF OPERATIONS -- GULF COAST:

The following table sets forth the statements of operations for Gulf
Coast's Bayou Caddy's Jubilee Casino before intercompany charges and deferred
income tax for the years ended December 31, 1996, 1995 and 1994 and the nine
months ended September 30, 1997 and 1996 (dollar amounts in thousands):

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------------- -------------------------------
1997 1996 1996 1995 1994
-------- --------- ------- -------- --------

<S> <C> <C> <C> <C> <C>
Revenues:
Casino................................. $23,868 $27,901 $12,619 $ 25,623 $ 41,344
Food and beverage, retail and other.... 466 794 947 1,194 1,921
-------- --------- ------- -------- --------
Total revenues.................... 24,334 28,695 37,287 26,817 43,265
-------- --------- ------- -------- --------
Operating expenses:
Casino................................. 9,004 9,770 12,619 12,779 19,011
Food and beverage, retail and other.... 434 1,053 1,282 1,785 2,270
Selling, general and administrative.... 12,075 12,417 17,125 16,270 22,200
-------- --------- ------- -------- --------
Total operating expenses.......... 21,513 23,240 31,026 30,834 43,481
-------- --------- ------- -------- --------
Income (loss) from operations............... 2,821 5,455 6,261 (4,017) (216)
-------- --------- ------- -------- --------
Other expenses:
Depreciation and amortization.......... 3,841 3,622 4,874 4,151 3,763
Interest............................... 1,536 1,537 2,031 2,178 2,317
Other non-operating.................... -- -- -- 2,620 1,535
-------- --------- ------- -------- --------
Total other expenses.............. 5,377 5,159 6,905 8,959 7,615
-------- --------- ------- -------- --------
Income (loss) before intercompany charges
and deferred income tax................... $(2,556 ) 296 $ (644) $(12,976) (7,831)
-------- --------- ------- -------- --------
-------- --------- ------- -------- --------
</TABLE>

NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996:

Gulf Coast generated revenues of $24,334,000 and $28,695,000 in 1997 and
1996, respectively. Casino revenues were $23,868,000 and $27,90,0001 in 1997 and
1996, respectively. Food and beverage and other revenues were $466,000 and
$794,000 in 1997 and 1996, respectively. The decrease in casino revenues was
primarily the result of the entry of the third casino vessel to the Greenville
market in November 1996 and high water in the month of April 1997. The entry of
the third casino vessel in the Greenville market to date has not increased the
market volume to absorb the additional player positions. The market growth
during this period was 4.4% over last year during the first nine months. Gulf
Coast continues to achieve superior market share over its competition at 41.5%,
with 39.0% of the available player positions in the Greenville market. The high
water experienced in the month of April 1997 had a significant impact on
accessibility to the casinos by their patrons. The food and beverage revenues
are reflective of Gulf Coast's player development program, which focuses on
player parties showcasing the food and entertainment facilities of the Bayou
Caddy's Jubilee Casino. The player parties are by invitation only and are
complimentary to the casino's guests.

Gulf Coast's casino operating expenses were $9,004,000 and $9,770,000
(approximately 38% and 35% of casino revenues for each period) in 1997 and 1996,
respectively. Food, beverage and other expenses were $434,000 and $1,053,000 in
1997 and 1996, respectively. The decrease in casino expenses was due to reduced
payroll and related expenses of $451,000 resulting from management's personnel
efficiencies that were implemented during the second quarter of 1996 and a
reduction in expenses of $315,000 due to the reduced volume of casino guests as
a result of the opening of the third casino vessel mentioned above.

Food and beverage revenues do not include the retail value of food and
beverage of approximately $2,740,000 and $2,942,000 provided gratuitously to
customers in 1997 and 1996, respectively. This

<PAGE>

<PAGE>
decrease is due to the player development program discussed above. The operating
costs associated with these services are allocated to the casino costs, which in
turn reduced the food and beverage costs.

Selling, general and administrative expenses consisted of payroll and
related benefits of approximately $4,111,000 and $4,249,000, marketing and
advertising of approximately $4,923,000 and $4,985,000 occupancy costs of
approximately $1,790,000 and $1,914,000 and operating expenses of $1,251,000 and
$1,296,000 in 1997 and 1996, respectively. The reduced payroll and related costs
of $138,000 and operating expenses of $18,000 were a direct result of
management's cost-cutting measures completed during the second quarter of 1996.
The $62,000 decrease in marketing and advertising was the result of management's
target marketing towards specific casino customer groups.

The reduced occupancy costs from 1996 to 1997 of $124,000 were the result
of management's energy reduction and efficiency measures implemented in 1997.

Interest expenses were primarily related to the first mortgage on the
gaming vessel, equipment financing and various capitalized leases and were
consistent from 1996 to 1997.

Depreciation and amortization was $3,854,000 and $3,622,000 in 1997 and
1996, respectively. The increase was a direct result of capital expenditures for
the purchase of equipment and fixtures.

YEARS ENDED DECEMBER 31, 1996 AND 1995:

Gulf Coast generated revenues of $37,287,000 and $26,817,000 in 1996 and
1995, respectively. Casino revenues were $36,340,000 and $25,623,000 in 1996 and
1995, respectively. Food and beverage, retail and other revenues were $947,000
and $1,194,000 in 1996 and 1995, respectively. This increase in casino revenues
is primarily due to the relocation of the Bayou Caddy's Jubilee Casino from
Lakeshore, Mississippi to Greenville, Mississippi in November 1995. During this
period the Bayou Caddy's Jubilee Casino achieved 50% market share in the
Greenville market. In addition the Greenville market increased by approximately
5% from 1995 to 1996.

At the locations referred to above, Gulf Coast's casino operating expenses
were $12,619,000 and $12,779,000 (35% and 50% of casino revenues) in 1996 and
1995, respectively. Food and beverage, retail and other expenses were $1,282,000
and $1,785,000 (136% and 150% of food and beverage, retail and other revenues)
in 1996 and 1995, respectively.

The reduced casino expenses in 1996 when compared to 1995 of $160,000 was
the net result of reduced staffing levels ($379,000), the decrease in the costs
related to food and beverages provided gratuitously to customers ($842,000),
which is the direct result of the reduction of gratuitous food and beverages
provided to casino customers and the related costs thereto, an increase in
gaming taxes ($1,200,000) and an increase in customer slot payouts ($304,000),
which are directly related to increased revenues, and a decrease in operating
expenses ($448,000), which is the result of management operating more
efficiently.

Food and beverage revenue does not include the retail value of food and
beverage of approximately $3,011,000 and $3,446,000 provided gratuitously to
customers in 1996 and 1995, respectively.

The reduction of food and beverage, retail and other costs are directly
related to the reduced volume of food and beverage revenues.

Selling, general and administrative expenses consists of payroll and
related costs of approximately $5,494,000 and $6,231,000, marketing and
advertising expenses of approximately $6,746,000 and $4,572,000, occupancy costs
of approximately $2,751,000 and $3,030,000, and operating expenses of
approximately $2,134,000 and $2,436,000 in 1996 and 1995, respectively. The
reduced payroll and related costs of $737,000 was a direct result of
management's cost-cutting measures instituted during the first quarter of 1995.
The $2,174,000 increase in marketing and advertising is directly related to the
increased volume of business and management's introduction of marketing programs
focused on identifying new customers. The reduction of occupancy costs of
$279,000 is primarily due to reduced insurance costs. The decrease in operating
expenses of $302,000 was primarily due to the restructuring of capital lease
($268,000).

<PAGE>

<PAGE>
Interest expense was primarily related to the first mortgage on the gaming
vessel, equipment financing and various capitalized leases.

Depreciation and amortization was $4,874,000 and $4,161,000 in 1996 and
1995, respectively. The increase was the direct result of an increase in capital
expenditures related to the relocation of the gaming vessel to Greenville,
Mississippi and the purchase of equipment and fixtures.

YEARS ENDED DECEMBER 31, 1995 AND 1994:

Gulf Coast generated revenues of $26,817,000 and $43,265,000 in 1995 and
1994, respectively. Casino revenues were $25,623,000 and $41,344,000 in 1995 and
1994, respectively. Food and beverage, retail and other revenues were $1,194,000
and $1,921,000 in 1995 and 1994, respectively. The Company experienced declining
revenues during the year ended December 31, 1995. To overcome such declining
revenues, management attempted many different marketing programs, some of which
showed moderate results. However, upon the acquisition of the Jubilation Casino
and the leasehold interests incidental to the ownership of the Jubilation Casino
relating to its original location in Greenville, Mississippi, the Company
announced plans to relocate the Bayou Caddy's Jubilee Casino to Greenville so
that the larger Bayou Caddy's Jubilee Casino could better serve the larger
Greenville market and thereby combat the declining revenues. This relocation
caused the Bayou Caddy's Jubilee Casino to close for four weeks, reopening on
November 17, 1995 in Greenville. During its first six weeks of operations in
Greenville, the Bayou Caddy's Jubilee Casino had casino revenues of $5,270,000
compared to $3,787,000 of gaming revenues achieved by its predecessor's gaming
vessel at this site during the same period in 1994.

Gulf Coast's casino operating expenses were $12,779,000 and $19,011,000 for
the years ended December 31, 1995 and 1994, respectively, which amounts,
constituted 50% and 46% of casino revenues during each respective period. Food
and beverage, retail and other expenses were $1,785,000 and $2,270,000 for the
years ended December 31, 1995 and 1994, respectively, which amounts constituted
149% and 118% of food, beverage, retail and other revenues during each
respective period.

The reduced casino expenses in 1995 when compared to 1994 of $6,232,000 was
the net result of reduced staffing levels ($3,650,000), the decrease in the
costs related to food and beverages provided gratuitously to customers
($646,000), which is the direct result of the reduction of gratuitous food and
beverages provided to casino customers and the related costs thereto, a decrease
in gaming taxes ($1,777,000), which is directly related to decreased revenues,
and a decrease in operating expenses ($159,000), which is the result of
management operating more efficiently.

Food and beverage revenue does not include the retail value of food and
beverage of approximately $3,446,000 and $4,833,000 provided gratuitously to
customers in 1995 and 1994, respectively.

The reduction of food and beverage, retail and other costs are directly
related to the reduced volume of food and beverage revenues.

FUTURE OPERATIONS -- GULF COAST:

Gulf Coast's Bayou Caddy's Jubilee Casino operating results have improved
since its November 1995 relocation to Greenville. Although the Greenville gaming
market has experienced dilution due to the entry of the third casino vessel in
November 1996, the Bayou Caddy's Jubilee Casino currently has the casino
capacity, food and beverage and entertainment facilities that are unique to the
Greenville area.

In April 1997, Gulf Coast received approval from the Mississippi Gaming
Commission for its infrastructure investment requirement to build and operate a
hotel on property adjacent to its Greenville casino location. Greenville Hotel,
a newly formed, wholly-owned subsidiary of the Company, entered into a long term
lease with the Board of Mississippi Levee Commissioners to lease property,
including historical landmark buildings, for the development of a forty-one key
single room and suite hotel. It is anticipated that this hotel will add a new
dimension to the casino patron experience and will be an added amenity to the
player development program. In July 1997, construction commenced on the

<PAGE>

<PAGE>
hotel project with a projected completion date of January 31, 1998, and a total
estimated cost of $3.2 million. On February 5, 1998 a certificate of substantial
completion was received by Greenville Hotel. Construction costs incurred and
deposits made through September 30, 1997 amounted to $805,000 and $170,000,
respectively. Although the permanent source of financing this project has not
been identified at this time, Greenville Hotel has received interim financing
from Bryanston, an affiliate.

RESULTS OF OPERATIONS -- JUBILATION LAKESHORE:

The Company acquired the Cotton Club of Greenville, Inc. (d/b/a Cotton Club
Casino) on October 26, 1995. The Cotton Club Casino's operations in Greenville
was terminated on October 30, 1995. After its relocation to Lakeshore, the
Cotton Club, renamed the Jubilation Casino, reopened for business on December
21, 1995. The following table sets forth the statement of operations for the
Jubilation Casino before intercompany charges for the nine months ended
September 30, 1997 and 1996, for the year ended December 31, 1996 and for the
period October 26, 1995 (date of acquisition) to December 31, 1995 (dollar
amounts in thousands):

<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
--------------------- ---------------------
1997 1996 1996 1995
-------- --------- -------- -------

<S> <C> <C> <C> <C>
Revenues:
Casino........................................... $ -- $ 6,913 $ 6,913 $ 806
Food and beverage, retail and other.............. $ -- 303 313 16
-------- --------- -------- -------
Total revenues.............................. -- 7,216 7,226 822
Operating expenses:
Casino........................................... -- 3,559 3,564 797
Food and beverage, retail and other.............. 381 376 376
Selling, general and administrative.............. 796 6,641 7,419 1,718
-------- --------- -------- -------
Total operating expenses.................... 796 10,581 11,359 2,604
-------- --------- -------- -------
(Loss) from operations................................ (796 ) (3,365 ) (4,133) (1,782)
-------- --------- -------- -------
Other expenses:
Depreciation and amortization.................... -- 1,166 1,166 333
Interest......................................... 645 748 977 120
Other non-operating.............................. -- -- 223
Write-off of leasehold and improvements.......... -- 14,507 14,507 --
-------- --------- -------- -------
Total other expenses........................ 645 16,421 16,650 676
-------- --------- -------- -------
(Loss) before intercompany charges.................... $(1,441 ) $(19,786 ) $(20,783) $(2,458)
-------- --------- -------- -------
-------- --------- -------- -------
</TABLE>

YEAR ENDED DECEMBER 31, 1996:

The Jubilation Casino experienced a loss from operations of $4,133,000
during the year ended December 31, 1996. During the second quarter of 1996,
management became uncertain as to whether the Jubilation Casino would be
profitable during the remainder of fiscal 1996. Management reduced operating
costs and monitored the operation very closely. To overcome the Jubilation
Casino's declining revenues, the Company would have to construct additional
amenities, which would require a substantial investment of funds. Since revenues
did not improve during May and June 1996, which were part of the peak season, a
continued decline was expected by management in the third quarter. Therefore, on
July 2, 1996, the Company notified the Mississippi Gaming Commission and the
employees of the Jubilation Casino of its plans to close the Jubilation Casino
by the end of August 1996. In connection with the plan to close the Jubilation
Casino, the realizability of the capital leasehold and improvements related to
the Jubilation Casino was reassessed. As such, management recorded an impairment
loss of $14,507,000 to property and equipment, representing the unamortized
balance of these leasehold and improvements.

On July 16, 1996, operation of the Jubilation Casino was suspended in
compliance with a directive of the Mississippi Gaming Commission, which raised
certain issues with regard to the operation of the

<PAGE>

<PAGE>
Jubilation Casino and asserted that the working capital of the Jubilation Casino
was not sufficient. On July 17, 1996, representatives of Jubilation Lakeshore
met with the Mississippi Gaming Commission. As a result of that meeting, the
non-working capital issues raised by the Mississippi Gaming Commission were
resolved to such Commission's satisfaction, but such Commission required that
the Jubilation Casino's working capital be increased. This working capital
requirement was reviewed by Jubilation Lakeshore in light of its previously
announced plan to close the Jubilation Casino during August 1996 and the costs
that would be incurred to reopen the Jubilation Casino. Based on this review,
Jubilation Lakeshore decided not to reopen the Jubilation Casino.

NINE MONTHS ENDED SEPTEMBER 30, 1997:

The continuing costs incurred during the nine month period ended September
30, 1997 for continuing administration, insurance and compensation settlements
with former employees were $796,000. Interest expense, primarily related to the
debt on the idle gaming vessel and equipment, amounted to $645,000 for the
nine-month period ended September 30, 1997.

CASINO DEVELOPMENT

INDIANA -- ALPHA RISING SUN:

Alpha Rising Sun, Inc., a wholly-owned subsidiary of the Company, proposed
to build a destination resort hotel, entertainment and riverboat casino facility
located in Rising Sun, Ohio County, Indiana.

During 1994, $260,000 preopening costs were incurred on this project.

During 1995, Alpha Rising Sun, Inc. was not selected to be the casino
developer on its proposed site in Indiana. Accordingly, all costs (approximately
$914,000 in 1995) associated with this project have been expensed.

NEW YORK -- ALPHA ST. REGIS:

In 1994, Alpha St. Regis, Inc., a wholly-owned subsidiary of the Company,
incurred $509,000 in expenses related to a proposed Class 3 casino to be located
on the St. Regis Mohawk Reservation in Hogansburg, New York. Management does not
believe that the project in Hogansburg, New York will go forward.

NEW YORK -- ALPHA MONTICELLO:

On January 19, 1996, the Company, through one of its subsidiaries, entered
into a memorandum of understanding with Catskill Development, L.L.C.
('Catskill') regarding the development and management of a casino to be built
adjacent to the Monticello Raceway in Sullivan County, New York. On August 2,
1996, Mohawk Management L.L.C. executed an agreement with the St. Regis Mohawk
Tribe (the 'Tribe') for the management of the proposed casino. The Tribe has
submitted this agreement to the National Indian Gaming Commission for its
approval. The development and management of this casino will be undertaken by
Mohawk Management L.L.C., of which the Company's wholly-owned subsidiary, Alpha
Monticello, Inc., owns 50%. The terms of the proposed management agreement is
for seven years. Alpha Monticello, Inc. will be responsible for the day-to-day
casino operations. The agreement contemplates that the casino will be owned by
the Tribe and will be located on land to be placed in trust for the benefit of
the Tribe.

During 1996, Alpha Monticello, Inc. incurred $1,975,000 of costs, of which
$734,000 has been capitalized and the remaining $1,241,000, (which includes
$1,112,000 of general corporate overhead allocation) relates to expenditures for
casino development.

During the nine-month period ended September 30, 1997, Alpha Monticello,
Inc. incurred casino development costs of $276,000, which relate to a general
corporate overhead allocation.

<PAGE>

<PAGE>
MISSOURI -- ALPHA MISSOURI:

Alpha Missouri, Inc., another wholly-owned subsidiary of the Company, has
not commenced operations. Alpha Missouri, Inc. has applications pending for site
approval and a gaming license with respect to the development of a riverboat
gaming facility in Louisiana, Missouri. It has incurred development costs of
approximately $243,000, $239,000 and $179,000 for the nine months ended
September 30, 1997 and the years ended December 31, 1996 and 1995, respectively,
related to its proposed development of a riverboat casino in Louisiana,
Missouri. These costs are substantially comprised of a general corporate
overhead allocation. Although existing law in Missouri does not restrict the
number of licenses the Missouri Gaming Commission may issue, that Commission has
effectively placed a moratorium on any new licenses in the Louisiana market
area. The Company believes such a restriction will remain in place for an
indeterminant time. As a consequence, Alpha Missouri, Inc. and the City of
Louisiana agreed to terminate the lease by Alpha Missouri, Inc. of city-owned
property that was anticipated to be used for the gaming project.

HOTEL MANAGEMENT -- ALPHA HOTEL

The following table sets forth the statements of income of Alpha Hotel for
the years ended December 31, 1996, 1995 and 1994 (dollar amounts in thousands):

<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------

<S> <C> <C> <C>
Management fees.................................................. $1,992 $2,863 $2,835
------ ------ ------
Operating expenses:
Direct payroll and related expenses......................... 1,285 1,236 1,474
Selling, general and administrative......................... 62 276 236
------ ------ ------
1,347 1,512 1,710
------ ------ ------
Income from management fees before intercompany charges.......... $ 645 $1,351 $1,125
------ ------ ------
------ ------ ------
</TABLE>

RESULTS OF OPERATIONS

GENERAL

Effective as of September 1, 1993, the Company, through its subsidiary
Alpha Hotel, entered into a Service Agreement with respect to hotels managed by
the Hotel Division of Bryanston. As of December 31, 1996, the Company sold 100%
of the stock of Alpha Hotel to Bryanston for consideration of $3,000,000.

DECEMBER 31, 1996 COMPARED TO DECEMBER 31, 1995:

Total management fees decreased during the year ended December 31, 1996
compared to the year ended December 31, 1995 by approximately $871,000 (30.4%).
The decrease was principally the result of a $125,000 decrease in fees from
continuing management agreements and a decrease of $746,000 related to the loss
of five management agreements (which related to hotels whose ownership changed)
and one management agreement that expired. The decrease in fees earned from
continuing agreements was attributable to an agreement that was restructured.

Direct payroll and related costs increased 4.0% to $1,285,000 for the year
ended December 31, 1996 from $1,236,000 for the year ended December 31, 1995.
This increase was the result of annual salary increases.

Selling, general and administrative expenses decreased to $62,000 for the
year ended December 31, 1996 from $276,000 for the year ended December 31, 1995.
This decrease is a result of office relocation to a less expensive area.

<PAGE>

<PAGE>
DECEMBER 31, 1995 COMPARED TO DECEMBER 31, 1994:

Total management fees increased during the year ended December 31, 1995
compared to the year ended December 31, 1994 by approximately $28,000 (1.0%).
The increase was principally the result of increases in the hotels' gross
revenues on which the management fees are based. The factors that influence such
gross revenues are general economic conditions, competitive changes in
geographic regions, foreign exchange rates relative to the strength of the U.S.
dollar, the price of gasoline, air fares and general weather conditions.

Direct payroll and related costs decreased 16.1% to $1,236,000 for the year
ended December 31, 1995 from $1,474,000 for the year ended December 31, 1994.
The decrease was the result of reduced central office staff due to operating
efficiencies achieved.

Selling, general and administrative expenses increased to $276,000 for the
year ended December 31, 1995 from $236,000 for the year ended December 31, 1994.
This increase is a result of travel to the managed hotels by regional and
corporate management and costs incurred to obtain additional management
contracts.

In 1995, Alpha Hotel entered into a management agreement for a Sheraton
Hotel in Myrtle Beach, South Carolina directly with the hotel owner.

LIQUIDITY AND CAPITAL RESOURCES

For the nine months ended September 30, 1997, the Company had net cash used
in operating activities of $2,647,000. These uses were the result of the net
loss of $5,456,000 less non-cash expenses of $3,854,000 (depreciation and
amortization) and a net decrease in working capital of $1,045,000. The decrease
in working capital consisted primarily of a decrease in prepaid expenses of
$539,000, a decrease in accounts payable and other accrued expenses of $268,000
and a decrease in payroll and related liabilities of $1,272,000.

Cash used in investing activities of $1,329,000 consisted of $201,000 in
purchases of property and equipment, $975,000 of Greenville Hotel construction
costs and deposits of $153,000 of other assets.

Cash provided by financing activities of $2,914,000 was attributable to
$3,190,000 in advances under the $20,000,000 non-revolving promissory note with
Bryanston, proceeds of $1,000,000 from the sale of Common Stock and the
$1,276,000 principal reduction of long term debt and notes payable. $500,000 of
the $1,000,000 proceeds from the sale of Common Stock was used in connection
with the March 1997 settlement of an operating lease relative to the real
property located in Lakeshore. The remaining $500,000 was used for working
capital requirements for development.

Although the Company is subject to continuing litigation, the ultimate
outcome of which cannot presently be determined at this time, management
believes any additional liabilities that may result from these cases will not be
in an amount that will materially increase the liabilities of the Company as
presented in the attached financial statements.

At September 30, 1997, the Company was in default of its notes payable to
Bryanston and former Cotton Club stockholders. The Company received a waiver of
default through December 31, 1997 on the Bryanston notes aggregating $1,399,000.

At September 30, 1997, the Company was in default for nonpayment on (i)
certain mortgage notes aggregating $11,456,000 and (ii) certain equipment notes
aggregating $3,433,000. In addition, the Company was in default of certain loan
covenants not relating to payments which pertained to equipment notes amounting
to $4,768,000. The Company received a waiver of the defaults on the $7,800,000
mortgage note payable to Bryanston through December 31, 1997. Accordingly, the
mortgage notes of $11,456,000 and the equipment notes aggregating $8,201,000 are
reflected in the current liabilities at September 30, 1997.

Notes payable at September 30, 1997 and December 31, 1996 were comprised of
the following:

<PAGE>

<TABLE>
<CAPTION>
INTEREST
RATES 1997 1996
-------- ---------- ----------

<S> <C> <C> <C>
Notes payable to Bryanston (an affiliate) and former Cotton Club
stockholders, of which $295,000 and $394,000 in 1997 and 1996,
respectively, are non-interest bearing................................... 10% $1,401,000 $1,885,000
Revolving bank line of credit owed to non-affiliate, with payments of
principal and interest due December 1997, collateralized by cash
advances................................................................. 25% 370,000 497,000
Other...................................................................... Various 18,000 18,000
---------- ----------
$1,789,000 $2,400,000
---------- ----------
---------- ----------
</TABLE>

Long-term debt at September 30, 1997 and December 31, 1996 was comprised of
the following:

<TABLE>
<CAPTION>
INTEREST
RATES 1997 1996
-------- ----------- -----------

<S> <C> <C> <C>
Mortgage note payable to Bryanston (an affiliate), principal and
interest due monthly through November 1998, collateralized by the
barge and certain other assets........................................ 10% $ 7,800,000 $ 7,800,000
Mortgage note payable in monthly installments of $70,000 plus interest
at 30-day commercial paper rate (5.5% at September 30, 1997) plus 3.5%
adjusted quarterly, collateralized by the boat and improvements....... 9% 3,656,000 3,656,000
Equipment notes payable monthly through November 1999 and collateralized
by certain assets..................................................... 11-14% 8,366,000 9,284,000
Note payable quarterly through March 2000 and secured by assignment of
interest in the mortgage note payable to Bryanston.................... 10% 1,100,000 1,200,000
Capitalized lease obligations, payable monthly, expiring in various
years through 2001.................................................... 10-15% 325,000 386,000
Other................................................................... 7-11% 7,000 68,000
----------- -----------
21,254,000 22,394,000
Less current portion.................................................... 20,293,000 14,528,000
----------- -----------
$ 961,000 $ 7,866,000
----------- -----------
----------- -----------
</TABLE>

Aggregate future required principal payments are approximately as follows:

<TABLE>
<CAPTION>
YEARS ENDING SEPTEMBER 30
- ---------------------------------------------------------------------

<S> <C>
1998................................................................. $20,293,000
1999................................................................. 518,000
2000................................................................. 397,000
2001................................................................. 44,000
2002................................................................. 1,000
Thereafter........................................................... 1,000
-----------
$21,254,000
-----------
-----------
</TABLE>

In June 1996, the Company issued 661,000 and 42,000 shares of Preferred
Stock in settlement of $19,165,000 and $1,222,000, respectively, of its
unsecured debt with Bryanston and an unrelated third party. The Company was
charged a five percent transaction fee of $1,019,000, which was converted into
approximately 35,000 shares of Preferred Stock. The conversion rate was based on
the fair market value of a share of Common Stock at the date of conversion
($3.625). Each share of Preferred Stock is convertible into eight shares of
Common Stock after December 31, 1996 and carries voting rights of one vote per
share. Each share of Preferred Stock also carries a dividend of $2.90, payable
quarterly, which increases to $3.77 per share if the cash dividend is not paid
within 30 days of the end of each fiscal year. In such event, the dividend will
be payable in shares of Common Stock.

<PAGE>

<PAGE>
CONTINUING OPERATIONS

The Company continues to suffer net losses from its operations and
development activities and had a working capital deficit of $37,448,000 and an
accumulated deficit of $60,870,000 at September 30, 1997. In addition, the
Company was not in compliance with certain long term debts that are included in
current liabilities. The Company's Greenville, Mississippi casino operation
continues to achieve positive income from operations despite the entry of a
third gaming vessel into the Greenville, Mississippi gaming market. Furthermore,
the Jubilation Lakeshore incurred continuing expenses of $797,000, in addition
to its continued interest expense of $645,000. Management is continuing to seek
resolution with the Jubilation Lakeshore creditors and continues to review other
venues to operate the Jubilation Casino and has reduced further its continuing
costs of maintaining the Jubilation Casino.

Management recognizes that these concerns raise substantial doubt about the
Company's ability to continue as a going concern. If the Sale is not approved
and consummated, management plans to attempt to correct these conditions by
taking various steps, including continuing to operate the Bayou Caddy's Jubilee
Casino generating positive cash flow, developing its Greenville hotel, selling
or relocating the Jubilation Casino and continuing to explore opportunities in
attaining more favorable financing or the sale of equity to meets its working
capital requirements. Accordingly, the Company's ability to continue as a going
concern will be dependent upon consummation of the Sale and/or the Company's
ability to develop working capital, maintain future profitable operations and
meet its creditors' demands. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

<PAGE>

<PAGE>
THE COMPANY

GENERAL

The Company, through its seven subsidiaries, is engaged in the ownership
and operation of a gaming vessel, the Bayou Caddy's Jubilee Casino (the 'Casino'
or the 'Bayou Caddy's Jubilee Casino'), located in Greenville, Mississippi,
which is operated by the Company's subsidiary Alpha Gulf Coast, Inc. ('Gulf
Coast'), and the construction of an adjacent hotel, which is being handled
through its subsidiary Alpha Greenville Hotel, Inc. ('Greenville Hotel'), and
has been engaged in the pursuit of gaming licenses for additional casinos in
various states (which has been accomplished through the Company's subsidiaries
Alpha Missouri, Inc. ('Alpha Missouri'), Alpha Monticello, Inc. ('Alpha
Monticello'), Alpha Rising Sun, Inc. ('Alpha Rising Sun'), Jubilation Lakeshore,
Inc. ('Jubilation Lakeshore') and Alpha St. Regis, Inc. ('Alpha St. Regis').
From September 1993 through December 1996, the Company, through its former
subsidiary, Alpha Hotel Management Company, Inc. ('Alpha Hotel'), provided
management services to hotels and motels owned by third-parties. Additionally,
from December 1995 to July 16, 1996, the Company, through its subsidiary
Jubilation Lakeshore (formerly known as the Cotton Club of Greenville Inc.),
operated a second gaming vessel, the Jubilation Casino.

The Company was incorporated in Delaware on March 19, 1993; Gulf Coast was
incorporated in Delaware on May 4, 1993; Jubilation Lakeshore was incorporated
in Mississippi on December 8, 1992; Alpha Missouri was incorporated in Delaware
on March 17, 1995; Alpha Monticello was incorporated in Delaware on May 30,
1996; Alpha Rising Sun was incorporated in Delaware on August 6, 1993; Alpha St.
Regis was incorporated in Delaware on June 24, 1994; and Greenville Hotel was
incorporated in Delaware on February 27, 1997. The Company's principal executive
offices are located at 12 East 49th Street, New York, New York 10017, and its
telephone number is 212-750-3500.

CASINO OPERATIONS AND GAMING ACTIVITIES

CURRENT OPERATIONS

The Bayou Caddy's Jubilee Casino. The Bayou Caddy's Jubilee Casino, located
in Greenville, Mississippi, is owned and operated by the Company's wholly-owned
subsidiary Gulf Coast. On May 14, 1993, pursuant to an asset purchase agreement
among Gulf Coast, B.C. of Mississippi, Inc. ('B.C.') (formerly known as Bayou
Caddy, Inc.), and certain shareholders of B.C., the Company acquired B.C.'s
leasehold interests under certain lease agreements and certain other assets
incidental to the development and ownership of the Bayou Caddy's Jubilee Casino.
The Company proceeded with this acquisition because it gave the Company the
opportunity to enter the casino business in Lakeshore, Mississippi, the original
site of the Bayou Caddy's Jubilee Casino. Moreover, B.C. had already initiated
the process of obtaining requisite approvals for casino operation in Lakeshore,
thereby expediting the Company's ability to conduct casino operations in
Mississippi.

The Company initiated the Bayou Caddy's Jubilee Casino's gaming operations
on January 12, 1994, subsequent to its construction on a marine vessel in 1993,
which construction received the requisite approvals from the U.S. Army Corps of
Engineers and the Mississippi Department of Natural Resources. Prior to the
initiation of the Bayou Caddy's Jubilee Casino's gaming operations, the Company
applied for and received the required license renewals and approvals from the
Mississippi Gaming Commission (the 'Mississippi Commission'). See
'Business -- Government Regulation -- Licensing -- Mississippi.'

Following the Company's acquisition (through Jubilation Lakeshore) of the
Cotton Club casino in October 1995 (see 'The Company -- Discontinued
Operations -- The Jubilation Casino') the Company transferred the Bayou Caddy's
Jubilee Casino from Lakeshore to Greenville. The Bayou Caddy's Jubilee Casino
reopened in Greenville on November 17, 1995. The movement of the Bayou Caddy's
Jubilee Casino to Greenville increased the capacity at Greenville and brought an
upscale facility to the Greenville market. Management believed that the
relocation of the Bayou Caddy's Jubilee Casino to Greenville was an appropriate
action designed to increase the return on the Company's gaming assets in
Mississippi.

The Bayou Caddy's Jubilee Casino has 844 slot machines and 29 table games.
In addition to its gaming activities, the Bayou Caddy's Jubilee Casino includes
a 175-seat buffet, a 350-seat showroom, a

<PAGE>

<PAGE>
98-seat restaurant and parking to accommodate 950 customer vehicles. In January
1996, the Company completed renovation of its leased restaurant facility at
Greenville in order to give customers a dining alternative, offering fine dining
in an elegant setting. Management believes that the Bayou Caddy's Jubilee
Casino, which offers an attractive casino environment and significant casino
capacity, will continue to at least capture its fair market share of the
Greenville gaming market.

In April 1997, Gulf Coast received approval from the Mississippi Commission
for its infrastructure investment requirement to build and operate a hotel on
property adjacent to the Bayou Caddy's Jubilee Casino location. Greenville Hotel
entered into a long term lease with the Board of Mississippi Levee Commissioners
to lease property, including historical landmark buildings, for the development
of a forty-one key single room and suite hotel. Management believes that this
hotel will add a new dimension to the Company's casino patron experience and
will be an added amenity to the Company's player development program. The total
cost of this project is estimated to be approximately $3.2 million. Although a
permanent source of financing for this project has not been identified at this
time, Greenville Hotel has received interim financing from Bryanston to fund
construction to date.

The Company concentrates its sales, marketing and promotional activities
for the Bayou Caddy's Jubilee Casino in its principal target market within a
50-mile radius of the casino. The target market is reached through a combination
of billboards, radio, television, newspaper advertising and direct mail. Also,
casino brochures are placed in tourist information areas, local and regional
hotels, restaurants and bars.

The Company has developed an in-house mailing list of in excess 130,000
casino customers. These customers are made up of table game players and 'Slot
Club' members. Table game customers are identified through the casino's
marketing representatives, and their play is monitored to evaluate whether the
customer warrants complimentary services provided by the casino. The award of
complimentary services is consistent with standard industry practices and is
based upon a customer's duration of play and average amount wagered. The 'Slot
Club' is an operation that allows the casino's computerized tracking system to
identify customers, amount of play and other pertinent characteristics. The
'Slot Club' is an ongoing promotion where members are issued cards and
accumulate points based on the amount of their play. Such points are redeemable
for food, beverages and merchandise. Tournaments for blackjack, craps and poker
are held, along with other special events and promotions.

There are currently 19 casinos located on the Mississippi River. In the
Greenville market, the Company's Bayou Caddy's Jubilee Casino competes with the
Las Vegas Casino (owned and operated by Buyer) and the Lighthouse Point Casino,
which opened in November 1996. The opening of the Lighthouse Point Casino
resulted in a decrease in the gaming revenues of the Bayou Caddy's Jubilee
Casino, which is expected to be corrected as the marketing programs of the new
Lighthouse Point Casino help to increase the total Greenville market.

Since the opening of the new casino, the Bayou Caddy's Jubilee Casino's
fair share of the market, based on the number of player positions in the market,
has improved. The Company believes that the Bayou Caddy's Jubilee Casino is
well-positioned to compete successfully with the two other casinos in the
Greenville market. Approximately 60 miles south of the Bayou Caddy's Jubilee
Casino is Vicksburg. Vicksburg has four casinos: the Isle of Capri, Harrahs
Vicksburg, Ameristar and Rainbow Casino. Approximately 110 miles south of the
Bayou Caddy's Jubilee Casino is Natchez with the Lady Luck Natchez Casino.
Approximately 90 miles north of the Bayou Caddy's Jubilee Casino is Coahoma
County with the Lady Luck Coahoma Casino. Tunica County is approximately 180
miles north of the Bayou Caddy's Jubilee Casino and has ten casinos -- Harrahs
(2 casinos), Sams Town, Fitzgeralds, Sheraton, Hollywood Casino, Circus Circus,
Horseshoe Casino, Grand Casino and Ballys. Since casinos outside a 50-mile
radius of the Bayou Caddy's Jubilee Casino are not considered by the Company to
be within its primary competitive market, the Company does not deem the casinos
in Vicksburg, Natchez, Coahoma County or Tunica County to be among its principal
competitors.

The Company has remained competitive in the markets affecting the Bayou
Caddy's Jubilee Casino by keeping its gaming vessel well-maintained and by
offering superior accommodations, entertainment programs and special events. In
addition, the Company's advertising and marketing efforts have focused on
maintaining the Company's presence in its market.

<PAGE>

<PAGE>
Although the Bayou Caddy's Jubilee Casino has remained competitive, the
Jubilation Casino, located on the Mississippi Gulf Coast, was unable to compete
satisfactorily with the major casino developments in the Biloxi and Gulfport
markets. This resulted in management's decision to close the Jubilation Casino
during August 1996. See 'Casino Operations and Gaming Activities -- Discontinued
Operations -- The Jubilation Casino.'

The results of the casinos' operations have been seasonal, with the
greatest activity occurring during the fair weather months of May through
September (for example, for the quarters ended June and September 1996, gross
revenues from operation of the Bayou Caddy's Jubilee Casino were approximately
$12.9 million and $9.8 million, respectively, as compared to gross revenues from
operation of the Bayou Caddy's Jubilee Casino for the following quarters ended
December 1996 and March 1997 of approximately $8.4 million and $8.3 million,
respectively). Consequently, the Company's operating results during the calendar
quarters ending in December and March are not as successful as those quarters
ending in June and September, and losses result from time to time. The seasonal
nature of a casino's operations increases the risk that natural disasters or the
loss of the casino for any other reason during the May through September period
would have a materially adverse effect on the Company's financial condition and
results of operations.

DEVELOPMENT ACTIVITIES

New York. In March 1994, the Company entered into a joint venture agreement
relating to the operation and development of a gaming facility located on the
reservation of the St. Regis Mohawk Tribe of Hogansburg, New York (the 'Tribe').
The Company subsequently decided not to proceed with the project at Hogansburg,
New York, since the Company and the Tribe began exploring a more suitable
arrangement relating to the development of a casino in Sullivan County, New
York, as discussed below.

On January 19, 1996, the Company, through its subsidiary, Alpha St. Regis,
entered into a memorandum of understanding with Catskill Development, L. L. C.
('Catskill') regarding the development and management of a casino to be built
adjacent to the Monticello Raceway in Sullivan County, New York. Bryanston is a
25% member of Catskill. This memorandum of understanding was assigned to Alpha
Monticello. Mohawk Management L.L.C. (a company of which the Company's
subsidiary Alpha Monticello owns 50%) has executed an agreement with the Tribe
for the management of such proposed casino, and subject to the obtaining of
requisite approvals, it is anticipated that Mohawk Management L.L.C. will
undertake the development and management of this casino and Alpha Monticello
will be responsible for the day-to-day operations of this casino. It is intended
that the casino will be owned by the Tribe and will be located on land to be
placed in trust for the benefit of the Tribe. The Monticello Raceway is located
90 miles from New York City.

This casino project is subject to approval by the U.S. Department of the
Interior and its Bureau of Indian Affairs, the National Indian Gaming Commission
and the Governor of the State of New York. Under the memorandum of
understanding, Catskill and the Company have committed to enter into a
definitive agreement on the terms established in the memorandum.

Catskill purchased the 225 acre Monticello Raceway in June 1996. The
Company is advised that Catskill plans to continue Monticello's racing program
and to explore other developments at the site in addition to the proposed casino
referred to above.

There can be no assurance that the project will receive all requisite
approvals. However, if such approvals are obtained, it is the Company's current
intention to proceed with the development of this gaming activity.

For the nine months ended September 30, 1997 and the year ended December
31, 1996, the Company incurred casino development costs of $315,000 and
$1,975,000 respectively, of which $39,000 and $734,000 have been capitalized and
the remaining expenditures of $276,000 and $1,241,000, respectively, are
substantially comprised of a general corporate overhead allocation.

DISCONTINUED OPERATIONS

Missouri. The City of Louisiana is currently competing with other cities in
Missouri for the next gaming license to be granted in that State. In the event
that the state gaming authorities select

<PAGE>

<PAGE>
Louisiana, Missouri as the locality to receive the next gaming license to be
granted, the Company intends to compete for the license to provide gaming
facilities. The City of Louisiana is located approximately 60 miles north of
metropolitan St. Louis and 70 miles from Springfield, Illinois, that state's
capital.

The Company anticipates that, if the license is granted, it will provide a
gaming vessel with a capacity of approximately 750 gaming positions. The project
cost is presently expected to be approximately $30 million. Subject to the
Company's receipt of requisite licenses and approvals and the availability of
any necessary financing, it is the Company's current intention, subject to
confirmation of the economic feasibility of this project, to continue with the
development of this project.

Alpha Missouri has applications pending for site approval and a gaming
license with respect to the development of a river boat gaming facility in
Louisiana, Missouri. Although existing law in Missouri does not restrict the
number of licenses the Missouri Gaming Commission may issue, the Commission has
effectively placed a moratorium on any new licenses in the Louisiana market. The
Company believes that such restriction will remain in place for an indeterminant
time. As a consequence, Alpha Missouri and the City of Louisiana agreed to
terminate the lease by Alpha Missouri of city-owned property that was
anticipated to be used for the gaming project.

The Company has incurred development costs of approximately $243,000 and
$87,000 in 1997 and 1996, respectively, related to its proposed development,
comprised of general corporate overhead allocation.

The Jubilation Casino. In October 1995 the Company (through its subsidiary
Lakeshore Jubilation) acquired the Cotton Club casino, a gaming vessel then
moored in Greenville, Mississippi. Such casino was renamed the Jubilation Casino
and was relocated from Greenville to Lakeshore, Mississippi, where it reopened
on December 21, 1995. Management believed that the smaller Jubilation Casino
could adequately service the existing Lakeshore market with substantially
reduced cost of operations. However, based upon the Jubilation Casino's limited
capacity, remote location and the increasing casino development in the Biloxi
and Gulfport markets (which proved to be more attractive to casino patrons), the
Jubilation Casino was unable to overcome operating deficits. As a result, in
July 1996 management began to implement its plans to close the Jubilation Casino
during August 1996. On July 16, 1996, operation of the Jubilation Casino was
suspended in compliance with a directive of the Mississippi Commission, which
asserted that the working capital of the Jubilation Casino was not sufficient
and required that the Jubilation Casino's working capital be increased.
Jubilation Lakeshore reviewed this working capital requirement in light of its
previously announced plan to close the Jubilation Casino during August 1996 and
the costs that would be incurred to reopen the Jubilation Casino. Based on this
review, Jubilation Lakeshore decided not to reopen the Jubilation Casino.

In connection with the plan to close the Jubilation Casino, management
believes that it took all appropriate action required by federal law with
respect to providing notice of such closing to its employees. In connection with
the closing of the Jubilation Casino, management updated its assessment of the
realizability of the leasehold improvements and related assets of the Jubilation
Casino. Since this would have resulted in an impairment loss of approximately
$14,507,000 and stockholders' equity below the requirements for continued
listing of the Company's securities on NASDAQ, the Company accepted proposals by
Bryanston and BP to convert approximately $19,165,000 and $1,222,000,
respectively, of debt in to 693,905 and 44,258 shares of Preferred Stock.

The Company has no current plans to reopen the Jubilation Casino and is
investigating other possible uses, including the possible sale thereof.

On January 25, 1995, the Company entered into an agreement to acquire all
of the outstanding common stock of Doc Holliday, Inc. ('Doc Holliday'), the
owner and operator of an 18,000 square foot casino in Central City, Colorado. In
the fall of 1995, the Company filed the requisite forms with the Colorado
Division of Gaming for approval of the Company's operation of Doc Holliday's
casino in Central City, Colorado. Since the Company's due diligence
investigation revealed that the acquisition was not in the best interests of the
Company, in early 1996 the Company decided not to proceed with the acquisition
and exercised its contractual right to terminate the agreement.

In February 1995, Alpha Rising Sun entered into two letters of intent with
subsidiaries of Bally Entertainment Corporation ('Bally') to develop and manage
a proposed casino and related upland

<PAGE>

<PAGE>
development at the City of Rising Sun. In connection with such arrangement, the
Company, through its subsidiary Alpha Rising Sun, filed an application for a
river boat gaming license for the County of Ohio, City of Rising Sun, with the
Indiana Gaming Commission in the first quarter of 1994. Since the license was
awarded to another entity, the Company has discontinued its efforts to expand
its casino operations in Indiana. See 'Management's Discussion And Analysis Of
Financial Condition And Results Of Operations Of The Company.'

Hotel Operations. As of December 31, 1996, the Company sold 100% of the
stock of its subsidiary, Alpha Hotel to Bryanston for consideration of
$3,000,000 (in the form of a reduction by such amount of the outstanding
indebtedness owed by the Company to Bryanston). Prior to agreeing to such sale,
the Company evaluated the projected cash flow stream from Alpha Hotel's
management contracts at $2.5 million on a present value basis. In light of this
analysis and the uncertainty of maintaining such contracts (as demonstrated by
the recent terminations of certain of the management contracts due to change in
ownership) and the increasing competition for additional contracts, management
of the Company determined that the $3.0 million in debt reduction was a fair
value for these assets and that the Company's resources would be better devoted
to the Company's other operations.

Through Alpha Hotel, the Company provided management services to 14 hotels
or motels. The Company provided management services to 13 of such hotels or
motels primarily under a certain Service Agreement with Bryanston. The Company
provided management services to these 13 hotels on behalf of Bryanston (which
was 50% owned by Mrs. Beatrice Tollman, the spouse of the Company's Chairman,
President and Chief Executive Officer, and 50% owned by a trust for the benefit
of a child of Mr. Monty D. Hundley, the Company's former President and Chief
Executive Officer), pursuant to certain individual management agreements. The
rights to provide the management services were acquired by the Company in
partial consideration for the issuance of the shares of Common Stock to
Bryanston. Such rights were recorded by the Company at no cost to the Company
based on its predecessor's cost, which was $0. Pursuant to the Service
Agreement, the Company was the sole provider to such hotels of management
services required of Bryanston and received substantially all fees due to
Bryanston under the above-referenced management agreements. In addition, the
Company provided management services to one hotel located in Myrtle Beach, South
Carolina, under an agreement with the hotel's owner. All of the 14 hotels were
'mid-priced,' ranging between $40 and $70 per night, and all but one were
operated as Days Inns.

The Company and Bryanston had designed a financial management system
whereby all accounting information was processed in a centralized accounting
office in Hopewell Junction, New York. The system included management of all
cash, accounts payable and receivable, and generated detailed monthly financial
statements. The Company provided each property with standardized forms and
procedures in order that all accounting in the management system was uniform. In
connection with the Service Agreement, effective September 1, 1993, the Company
entered into an expense reimbursement agreement (the 'Expense Reimbursement
Agreement') with Bryanston for the use of certain office space at its Hopewell
Junction, New York facility in connection with the Company's hotel management
operations. Pursuant to the terms of the Expense Reimbursement Agreement, the
Company reimbursed Bryanston on a monthly basis for its share of rent, office
expenses and direct payroll. The Expense Reimbursement Agreement allowed for
cost-effective centralization and management of the Company's operations, partly
based on the Service Agreement, and partly based on the fact that Bryanston,
which employed some of the Company's employees, was also based at the Hopewell
Junction office. See 'Certain Transactions.'

Under the Service Agreement, the Company was compensated for its services
in an amount equal to a percentage of total net revenues of the managed hotels
(net of 1% of aggregate revenue retained by Bryanston). Such percentages ranged
from 2% to 5%. Additional fees were earned from various incentive agreements and
accounting fees. The management agreements typically had a term of 10 years and
most had specified renewal terms. The majority of the initial terms were
scheduled to expire in the years 2001 and 2002. The management agreements
contained termination provisions that were consistent with hotel industry
practice and could be terminated by either party due to an uncured default by
the other party. One of the management agreements was terminable at the
discretion of the hotel owner and others were terminable if there was a material
decrease in the hotel operating results

<PAGE>

<PAGE>
or upon sale of the property. The management agreements could also be terminated
upon the sale of the managed hotels.

As indicated above, all but one of the managed hotels were operated as Days
Inns by arrangement with Bryanston, which was a Days Inns licensee. The terms of
Bryanston's license provided for a special, partial exemption from the Days Inns
license fees, which was ordinarily 8% of total net revenue for each of the
hotels for which the Company provided management services. Each of the managed
hotels was charged applicable fees for marketing and reservation service, but
was exempt from the so-called 'basic fee' of 5% since the elimination of the
'basic fee' reduced the license fee to 3%, such reduction was economically
significant to such hotels and was favorable to the Company since the
arrangement was an incentive for Days Inn licensees to enter into management
agreements with the Company. The term of the special exemption was equal to the
term of the related management agreement, including any extensions for which
provision was made therein, plus a further five-year term (intended to cover a
possible future extension). The discount was not available, however, for any
hotels other than those hotels operated by Bryanston. There was no discretion in
the licenser, absent breach, to eliminate or modify the discount.

The Company's hotel management operations were organized under a regional
management structure. The overall hotel operation was supervised by the
president of Alpha Hotel and regional executives were utilized to oversee and
monitor the operations. The Company believed this type of organization, coupled
with extensive operational systems and procedures, was the most effective way to
provide management services for the hotels. In addition to the regional
managers, the Company had a support staff comprised of accounting, marketing,
sales and supervisory personnel. This comprehensive support staff helped ensure
that all of the managed hotels maximized potential revenue and profit
opportunities by implementing financial controls, marketing the Company's
services to existing and potential clients and advising on programs related to
hotel management services.

The hotels for which the Company provided management services were:

<TABLE>
<CAPTION>
NAME AND LOCATION NO. OF ROOMS TERMINATION DATE RENEWAL
- ----------------------------------------------------------- ------------ ---------------- -------

<S> <C> <C> <C>
Days Inn-Scottsdale, Scottsdale, AZ........................ 167 2001 None
Days Inn-Clearwater, Clearwater, FL........................ 117 2001 None
Days Inn-Buena Vista, Orlando, FL.......................... 245 2002 None
Days Inn-Downtown, Atlanta, GA............................. 262 2012 2022
Days Inn-Savannah, Savannah Bay, GA........................ 253 2001 None
Days Inn-Lakeshore, Chicago, IL............................ 580 2006 2021
Days Inn-Kankakee, Kankakee, IL............................ 98 2007 None
Days Inn-Henderson, Henderson, KY.......................... 115 2002 None
Days Inn-University, Minneapolis, MN....................... 130 2001 None
Days Inn-Roseville, Roseville, MN.......................... 114 2001 None
Days Inn-Plymouth, Plymouth, MN............................ 113 2001 None
Days Inn-Butler, Butler, PA................................ 133 2001 None
Days Inn-Madisonville, Madisonville, KY.................... 141 2002 None
Sheraton-Myrtle Beach, SC.................................. 219 2004 None
------
Total................................................. 2,687
------
------
</TABLE>

The following table sets forth the statements of income (in thousands) of
Alpha Hotel for the years ended December 31, 1996, 1995 and 1994:

<TABLE>
<S> <C> <C> <C>
Management fees............................................................ $1,992 $2,863 $2,835
Operating expenses:
Direct payroll and related expenses................................... 1,285 1,236 1,474
Selling, general and administrative................................... 62 276 236
------ ------ ------
Total expenses................................................... 1,347 1,512 1,710
------ ------ ------
Income from management fees before intercompany charges.................... $ 645 $ 1,35 $1,125
------ ------ ------
------ ------ ------
</TABLE>

<PAGE>

<PAGE>
GOVERNMENT REGULATION

The Company's ownership and operation of its gaming properties are subject
to regulation by federal, state and local governmental and regulatory
authorities, including regulation relating to environmental protection. While
the Company has not been the subject of any complaints or other formal or
informal proceedings alleging any violations of government regulations, no
assurance can be given that the Company is, or in the future will be, able to
comply with, or continue to comply with, current or future governmental
regulations in every jurisdiction in which it conducts or will conduct its
business operations without substantial cost or interruption of its operations
or that any present or future federal, state or local regulations may not
restrict the Company's present and possible future activities. In the event that
the Company is unable to comply with any such requirements, the Company could be
subject to sanctions, which could have a materially adverse effect upon the
Company's business. See 'Business -- Government Regulation -- General,' and 'The
Company -- Casino Operations and Gaming Activities -- Current Operations.'

LICENSING

General. The gaming industry is highly regulated by each of the states in
which gaming is legal. The regulations vary on a state-by-state basis but
generally require that the operator, each owner of a substantial interest
(usually 5% or more) in the operator, members of the Board of Directors, each
officer and all key personnel be found suitable, and be approved, by the
applicable governing body. The failure of any present, or future, person
required to be approved to be, and remain, qualified to hold a license could
result in the loss of the license.

Mississippi. The ownership and operation of casino facilities in
Mississippi are subject to extensive state and local regulation, primarily the
licensing and regulatory control of the Mississippi Commission and the
Mississippi State Tax Commission (collectively, the 'Mississippi Authorities').

The laws, regulations and supervisory procedures of Mississippi and the
Mississippi Commission seek to (i) prevent unsavory or unsuitable persons from
having any direct or indirect involvement with gaming at any time or in any
capacity, (ii) establish and maintain responsible accounting practices and
procedures, (iii) maintain effective control over the financial practices of
licensees, including establishing minimum procedures for internal fiscal affairs
and safeguarding of assets and revenues, providing reliable record keeping and
making periodic reports to the Mississippi Authorities, (iv) prevent cheating
and fraudulent practices, (v) provide a source of state and local revenues
through taxation and licensing fees and (vi) ensure that gaming licensees, to
the extent practicable, employ Mississippi residents. The regulations are
subject to amendment and to extensive interpretation by the Mississippi
Commission in view of their recent adoption. Changes in Mississippi law or
regulations may limit or otherwise materially affect the types of gaming that
may be conducted and could have an adverse effect on the Company and the
Company's Mississippi gaming operations.

The Mississippi Act provides for legalized dockside gaming at the
discretion of the 14 counties that either border the Mississippi Gulf Coast or
the Mississippi River but only if the voters in a county have not voted to
prohibit gaming in that county. The law permits unlimited stakes gaming on
permanently moored vessels on a 24-hour basis and does not restrict the
percentage of space that may be utilized for gaming. There are no limitations on
the number of gaming licenses that may be issued in Mississippi.

The Company, a registered publicly-traded holding company under the
Mississippi Act, is required periodically to submit detailed financial and
operating reports to the Mississippi Authorities and to furnish any other
information that the Mississippi Authorities may require. The Company and any
subsidiary of the Company that operates a casino in Mississippi (a 'Gaming
Subsidiary') are subject to the licensing and regulatory control of the
Mississippi Commission. If the Company is unable to continue to satisfy the
registration requirements of the Mississippi Act, the Company and its Gaming
Subsidiaries cannot own or operate gaming facilities in Mississippi. Each Gaming
Subsidiary must obtain gaming licenses from the Mississippi Commission to
operate casinos in Mississippi. A gaming license is issued by the Mississippi
Commission subject to certain conditions, including continued compliance with
all applicable state laws and regulations and physical inspection of casinos
prior to opening.

<PAGE>

<PAGE>
Gaming licenses are not transferable, are initially issued for a two-year
period and are subject to periodic renewal. No person may receive any percentage
of profits from a gaming subsidiary of a holding company without first obtaining
licenses and approvals from the Mississippi Commission.

LICENSING OF OFFICERS, DIRECTORS AND EMPLOYEES

Officers, directors and certain key employees of the Company and its Gaming
Subsidiaries must be found suitable or be licensed by the Mississippi
Commission, and employees associated with gaming must obtain work permits that
are subject to immediate suspension under certain circumstances. In addition,
any person having a material relationship or involvement with the Company may be
required to be found suitable or be licensed, in which case such person must pay
the costs and fees associated with the related investigation. The Mississippi
Commission may deny an application for a license for any cause that it deems
reasonable. Changes in licensed positions must be reported to the Mississippi
Commission. In addition to its authority to deny an application for a license,
the Mississippi Commission has jurisdiction to disapprove a change in corporate
officers. The Mississippi Commission has the power to require any gaming
subsidiary and the Company to suspend or dismiss officers, directors and other
key employees or sever relationships with other persons who refuse to file
appropriate applications or whom the authorities find unsuitable to act in such
capacities.

INVESTIGATION OF HOLDERS OF SECURITIES AND OTHERS

Mississippi law requires any person who acquires beneficial ownership of
more than 5% of the Common Stock to report the acquisition to the Mississippi
Commission, and such person may be required to be found suitable. Also, any
person who becomes a beneficial owner of more than 10% of the Common Stock, as
reported in filings under the Exchange Act, must apply for a finding of
suitability by the Mississippi Commission and must pay the costs and fees that
the Mississippi Commission incurs in conducting the investigation. The
Mississippi Commission has generally exercised its discretion to require a
finding of suitability of any beneficial owner of more than 5% of a company's
stock. If a stockholder who must be found suitable is a corporation, partnership
or trust, it must submit detailed business and financial information, including
a list of beneficial owners. Representatives of the Mississippi Commission have
indicated that institutional investors may only be required to file summary
information in lieu of a suitability finding.

Any person who fails or refuses to apply for a finding of suitability or a
license within 30 days after being ordered to do so by the Mississippi
Commission may be found unsuitable. Any person found unsuitable and who holds,
directly or indirectly, any beneficial ownership of the securities of the
Company beyond such time as the Mississippi Commission prescribes may be guilty
of a misdemeanor. The Company is subject to disciplinary action if, after
receiving notice that a person is unsuitable to be a stockholder or to have any
other relationship with the Company or its Gaming Subsidiaries, the Company: (i)
pays the unsuitable person any dividend or other distribution upon the voting
securities of the Company; (ii) recognizes the exercise, directly or indirectly,
of any voting rights conferred by securities held by the unsuitable person;
(iii) pays the unsuitable person any remuneration in any form for services
rendered or otherwise, except in certain limited and specific circumstances; or
(iv) fails to pursue all lawful efforts to require the unsuitable person to
divest himself of the securities, including, if necessary, the immediate
purchase of the securities for cash at a fair market value.

The Company may be required to disclose to the Mississippi Commission upon
request the identities of the holders of any debt securities. In addition, the
Mississippi Commission under the Mississippi Act may, in its discretion, (i)
require disclosure of holders of debt securities of corporations registered with
the Mississippi Commission, (ii) investigate such holders and (iii) require such
holders to be found suitable to own such debt securities. Although the
Mississippi Commission generally does not require the individual holders of
obligations such as notes to be investigated and found suitable, the Mississippi
Commission retains the discretion to do so for any reason, including, but not
limited to, a default or where the holder of the debt instrument exercises a
material influence over the gaming operations of the entity in question. Any
holder of debt securities required to apply for a finding of suitability must
pay all investigative fees and costs of the Mississippi Commission in connection
with such an investigation.

<PAGE>

<PAGE>
REQUIRED RECORDS

The Company must maintain a current stock ledger in Mississippi that the
Mississippi Commission may examine at any time. If any securities of the Company
are held in trust by an agent or by a nominee, the record holder may be required
to disclose the identity of the beneficial owner to the Mississippi Commission.
A failure to make such disclosure may be grounds for finding the record holder
unsuitable. The Company must also render maximum assistance in determining the
identity of the beneficial owner.

The Mississippi Act requires that the certificates representing securities
of a publicly-traded corporation (as defined in the Mississippi Act) bear a
legend to the general effect that such securities are subject to the Mississippi
Act and the regulations of the Mississippi Commission. The Mississippi
Commission has the power to impose additional restrictions on the holders of the
Company's securities at any time.

APPROVAL OF CORPORATE MATTERS AND FOREIGN GAMING OPERATIONS

Substantially all loans, leases, sales of securities and similar financing
transactions by a Gaming Subsidiary must be reported to and/or approved by the
Mississippi Commission. Changes in control of the Company through merger,
consolidation, acquisition of assets, management or consulting agreements or any
form of takeover cannot occur without the prior approval of the Mississippi
Commission.

The Mississippi legislature has declared that some corporate acquisitions
opposed by management, repurchases of voting securities and other takeover
defense tactics that affect corporate gaming licensees in Mississippi and
corporations whose stock is publicly-traded that are affiliated with those
licensees may be injurious to stable and productive corporate gaming. The
Mississippi Commission has established a regulatory scheme to ameliorate the
potentially adverse effects of these business practices upon Mississippi's
gaming industry and to further Mississippi's policy to: (i) assure the financial
stability of corporate gaming operators and their affiliates; (ii) preserve the
beneficial aspects of conducting business in the corporate form; and (iii)
promote a neutral environment for the orderly governance of corporate affairs.
Approvals are, in some circumstances, required from the Mississippi Commission
before the Company may make exceptional repurchases of voting securities above
the current market price of its Common Stock (commonly called 'greenmail') or
before a corporate acquisition opposed by management may be consummated.
Mississippi's gaming regulations also require prior approval by the Mississippi
Commission if the Company adopts a plan of recapitalization proposed by its
Board of Directors opposing a tender offer made directly to the stockholders for
the purpose of acquiring control of the Company.

Neither the Company nor any subsidiary may engage in gaming activities in
Mississippi while also conducting gaming operations outside of Mississippi
without approval of the Mississippi Commission. The Mississippi Commission may
require determinations that, among other things, there are means for the
Mississippi Authorities to have access to information concerning the
out-of-state gaming operations of the Company and its affiliates.

SANCTIONS

If the Mississippi Commission were to decide that a Gaming Subsidiary had
violated a gaming law or regulation, the Mississippi Commission could limit,
condition, suspend or revoke the license of the Gaming Subsidiary. In addition,
the Gaming Subsidiary, the Company and the persons involved could be subject to
substantial fines for each separate violation. Because of such violation, the
Mississippi Commission could appoint a supervisor to operate the casino
facilities, and under certain circumstances, earnings generated during the
supervisor's appointment (except the reasonable rental value of the casino
facilities) could be forfeited to the State of Mississippi. Limitations,
conditioning or suspension of any gaming license or the appointment of a
supervisor could (and revocation of any gaming license would) materially and
adversely affect the Company's and the Gaming Subsidiary's gaming operations.

On July 16, 1996, operation of the Jubilation Casino was suspended in
compliance with a directive of the Mississippi Commission, which raised certain
issues with regard to the operation of the Jubilation

<PAGE>

<PAGE>
Casino and asserted that the working capital available to the Jubilation Casino
was not sufficient. See 'The Company -- Casino Operations and Gaming
Activities -- Discontinued Operations -- The Jubilation Casino.' The Company
does not believe that the issues raised by the Mississippi Commission regarding
the operation of the Jubilation Casino will adversely affect the license to
operate the Bayou Caddy's Jubilee Casino since the Bayou Caddy's Jubilee Casino
is operating in compliance with applicable regulations, including regulations
relating to issues raised by the Mississippi Commission regarding the operation
of the Jubilation Casino. There can be no assurance, however, that the issues
raised by the Mississippi Commission will not adversely affect the license, or
the renewal of the license, to operate the Bayou Caddy's Jubilee Casino or any
future licenses for which applications may be submitted in Mississippi.

On October 23, 1997, the Company received renewal of its casino license
through October 1999, conditioned upon the opening of the Casino Hotel by no
later than February 26, 1998. During its compliance review, in connection with
the Company's license renewal, the Mississippi Gaming Commission noted several
administrative reporting deficiencies. A show cause hearing was held on December
2, 1997, at which management explained its position to the Mississippi Gaming
Commission staff. This issue has been settled by the Company agreeing to address
the noted deficiencies in future reporting and by payment of a fine of $40,000.

FEES AND TAXES

License fees and taxes, computed in various ways depending on the type of
gaming involved, are payable to the State of Mississippi and to the counties and
cities in which a Gaming Subsidiary's operations will be conducted. Depending
upon the particular fee or tax involved, these fees and taxes are payable either
monthly, quarterly or annually and are based upon (i) a percentage of the gross
gaming revenues received by the casino operation, (ii) the number of slot
machines operated by the casino or (iii) the number of tables games operated by
the casino. The license fee payable to the State of Mississippi based upon
'gaming receipts' (generally defined as gross receipts less payouts to customers
as winnings) equals 4% of gaming receipts of $50,000 or less per month, 6% of
gaming receipts over $50,000 and less than $134,000 per month, and 8% of gaming
receipts over $134,000 per month. The foregoing license fees are allowed as a
credit against the Company's Mississippi income tax liability for the year paid.

MISSOURI AND NEW YORK

Missouri law and the Federal Indian Gaming Law (as it relates to the
Company's proposed operation in New York State) each provide for a
comprehensive, detailed scheme for the control of gaming operations in the state
and the issuance of licenses for gaming, both to gaming facilities and to
persons involved in certain gaming related activities. With respect to the
Company's compact with the Tribe relating to the proposed casino to be built in
Sullivan County, New York, the State of New York has provided for regulation of
Indian gaming casinos through the New York State Racing and Wagering Board. Each
of the supervising governmental agencies is authorized to promulgate rules and
regulations applicable to the administration of gaming related laws. In
connection with its proposed operations in New York State, the required
documentation has been filed with the National Indian Gaming Commission. In
connection with its proposed operations in Missouri, the Company has commenced
the application and approval process with the Missouri Gaming Commission.

EMPLOYEES

In connection with its casino operations, as of December 31, 1997, the
Company employed approximately 540 employees, of which 470 were full-time
employees. Management considers its employment relations to be satisfactory. In
connection with the closing of the Jubilation Casino and pursuant to the Workers
Adjustment and Retraining Notification Act, the Company provided the 320
employees of the Jubilation Casino with notice of its plans to close the
Jubilation Casino at least 60 days prior to the anticipated closing date, as
required under such Act. Therefore, management believes it has

<PAGE>

<PAGE>
taken all appropriate action required by federal law with respect to providing
notice of the closing of the Jubilation Casino to the employees of the
Jubilation Casino.

LEGAL PROCEEDINGS

In January 1996, the Company was named as a defendant in an action brought
in the Circuit Court of Hinds County, Mississippi (Amos vs Alpha Gulf Coast,
Inc.; Batiste vs Alpha Gulf Coast, Inc.; Dycre vs Alpha Gulf Coast, Inc.;
Johnston vs Alpha Gulf Coast, Inc.; Rainey vs Alpha Gulf Coast, Inc.). Based on
the theory of 'liquor liability' for the service of alcohol to a customer,
plaintiffs alleged that on January 16, 1995, a vehicle operated by Mr. Amos
collided with a vehicle negligently operated by Mr. Rainey, an individual who
was served alcoholic beverages by the Company. Plaintiffs alleged that they
suffered personal injuries and seek compensatory damages aggregating $17.1
million and punitive damages aggregating $37.5 million. The ultimate outcome of
this litigation cannot presently be determined as this case is presently in the
early phases of discovery. Accordingly, no provision for liability to the
Company that may result upon adjudication has been made in the accompanying
consolidated financial statements. The Company believes that the risk referred
to in this paragraph is adequately covered by insurance.

In August 1996, Gulf Coast was named as a defendant in an action brought in
the United States District Court for the Southern District of Mississippi
(Joseph R. Cure, Joseph E. Cure, Jr., Cynthia Cure Rutherford, Michael Cure and
Susan Cure Gollot vs. Alpha Gulf Coast, Inc.) for alleged past due and future
accelerated rentals and other costs under an operating lease relative to real
property located in Lakeshore, Mississippi. In March 1997, the Company reached
settlement terms in the action. In the settlement the lease terminates, the
Company will pay $500,000 at closing and $1,200,000 in the form of a three year,
ten percent note payable quarterly. The settlement and early termination of the
operating lease resulted in a $541,000 charge to operations for the year ended
December 31, 1996. The note was secured by assignment of an interest in the
mortgage note payable to Bryanston. Additionally, the Company had as option to
buy out the remaining obligations at reduced principal amounts at accelerated
dates, as specified in the settlement agreement, which option the Company
exercised when it discharged its remaining obligations thereunder with a portion
of the loan proceeds from the Pre-Closing Financing.

In September 1996, the Company and Gulf Coast were named as defendants in
an action brought in the Circuit Court of Hancock County, Mississippi (Durward
Dunn, Inc. vs. Alpha Hospitality Corporation; Durward Dunn, Inc. vs. Alpha Gulf
Coast, Inc.) for alleged failure to make payments pursuant to a construction
contract. Plaintiff seeks actual and compensatory damages of approximately
$1,200,000. The consolidated financial statements include a provision for the
liability of $928,000 for this contract at December 31, 1996 and September 30,
1997. This litigation was subsequently settled by the payment of $750,000 from
the proceeds of the Pre-Closing Financing.

In December 1996 the Company, Jubilation Lakeshore and Gulf Coast were
named as defendants in an action brought in the United States District Court for
the Southern District of New York (Bally Gaming, Inc. v. Alpha Hospitality Corp.
and Alpha Gulf Coast, Inc.) for allegedly engaging in conduct that would impair
the collateral held as security for certain financial obligations. Such conduct
includes the failure to pay certain monetary obligations unrelated to the
obligations secured by the collateral. Plaintiffs seek specific performance of
particular actions plaintiffs believe are necessary to protect the collateral
that secures the financial obligations, unspecified damages and attorney's fees,
among other things. In July 1997, Jubilation Lakeshore, Gulf Coast and the
Company were named as third party defendants in a related action brought in the
United States District Court for the Northern District of Mississippi,
Greenville Division (General Electric Capital Corporation vs. Bally Gaming,
Inc.), wherein Bally Gaming, Inc. alleged the same complaints as it asserted in
the above-mentioned action. The claims against the Company and its affiliates in
both of these actions have been liquidated and the actions dismissed.

<PAGE>

<PAGE>
MARKET PRICES AND DIVIDENDS

MARKET PRICES

The Company's Common Stock and its Redeemable Common Stock Purchase
Warrants (the 'Warrants') are traded on the Automated Quotation System of the
National Association of Securities Dealers, Inc. ('NASDAQ') under the symbols
'ALHY' and 'ALHYW' and the Boston Stock Exchange under the symbols 'ALH' and
'ALHW.'

The following table sets forth the high and low sale prices for Common
Stock and Warrants as reported by NASDAQ.

<TABLE>
<CAPTION>
COMMON STOCK WARRANTS
---------------- --------------
HIGH LOW HIGH LOW
------ ------ ----- -----
<S> <C> <C> <C> <C>
1997 Quarters:
Fourth........................................................ $3.639 $2.000 $.599 $.547
Third......................................................... 3.628 3.197 .691 .599
Second........................................................ 4.045 2.658 .692 .616
First......................................................... 2.714 2.207 .563 .474
1996 Quarters:
Fourth........................................................ $2.375 1.25 .563 .25
Third......................................................... 4.125 2.00 .594 .25
Second........................................................ 4.75 2.00 .875 .344
First......................................................... 3.25 2.375 .438 .125
</TABLE>

As of January 5, 1998, 14,406,204 shares of Common Stock and 821,496 shares
of Preferred Stock were issued and outstanding. The outstanding shares of Common
Stock were held of record by approximately 800 persons, including ownership by
nominees who may hold for multiple beneficial owners. On February 6, 1998, the
high and low sale prices for a share of Common Stock were $2.00 and $1.97,
respectively.

DIVIDENDS

The Company has not, since its inception, declared or paid any dividends on
its shares of Common Stock. Under Section 170(a) of the General Corporation Law
of Delaware (the 'GCL'), the Corporation is, and has been, proscribed from
declaring or paying any dividends upon any shares of its capital stock except to
the extent of (1) its surplus (as defined under the GCL) or (2) in the case of
no such surplus, its net profits for the fiscal year in which the dividend is
declared and/or the preceding fiscal year. As the Company has no surplus (as
defined under the GCL) or net profits, the Company is foreclosed from declaring
or paying any dividends even if it had otherwise been inclined to do so.
Additionally, the Company is, and since its inception in 1993 has been, subject
to loan covenants that have generally prohibited the declaration or payment of
any cash dividends.

Although proceeds from the Pre-Closing Financing were used to discharge
those loans with respect to which the Company was prohibited from declaring or
paying any cash dividends on its shares of capital stock, such prohibition was
replaced with restrictive covenants with respect to the Pre-Closing Financing
that effectively reinstated such prohibition. Upon consummation of the Sale, the
Pre-Closing Financing is to be assumed by Buyer, effectively relieving the
Company from such prohibition; however, there can be no assurance that the
Company will, following consummation of the Sale, declare or pay any dividends
of the shares of its capital stock. There can be no assurance that the Company
will have any surplus (as defined in the GCL) upon or following consummation of
the Sale or that the Company will achieve any net profits and (b) even if the
Company has such a surplus or achieves net profits, the Company will not
determine to retain all available funds to expand the Company's business or for
other corporate purposes. Management has no current intent to declare or pay any
dividends on the shares of Common Stock.

The shares of Preferred Stock (which were first issued in June 1996) accrue
cash dividends at ten (10%) percent; provided that if the cash dividend for a
fiscal year is not paid within 30 days of the end of such year, the amount of
the dividend shall increase to thirteen (13%) percent and shall be payable in
shares of Common Stock valued at the market price. Since shares of Preferred
Stock were first issued by

<PAGE>

<PAGE>
the Company, the Company (for reasons set forth above) has been precluded from
paying any cash dividends on the shares of Preferred Stock. Consequently, the
Company is obligated to issue to holders of shares of Preferred Stock, an
aggregate of approximately 777,000 shares of Common Stock as the dividend due
thereon with respect to 1996 and an additional approximately 990,000 shares of
Common Stock with respect to the dividend accrued on the outstanding shares of
Preferred Stock in 1997.

Although, as noted above, it is not anticipated that the Company will be
subject, after consummation of the Sale, to loan covenants restricting its right
to declare or pay cash dividends on shares of Preferred Stock, there can be no
assurance that the Company will be able to do so or, even if able to do so, will
elect to do so. Management anticipates that, even if the Company has sufficient
surplus and/or net profits to declare and pay a cash dividend on shares of
Preferred Stock, its decision whether to do so will depend upon its
determination as to whether it is in the best interests of the Company to pay,
per share of Preferred Stock, such dividend in cash at $2.90 or in shares of
Common Stock valued at $3.77.

PROPERTIES

The Company maintains its executive office at leased premises located at 12
East 49th Street, New York, New York, 10017. This lease expires December 31,
2004.

CASINO OPERATIONS

<TABLE>
<CAPTION>
LOCATION PRINCIPLE USE APPROXIMATE AREA OWNED/LEASED EXPIRES
- ------------------ ------------------------- ---------------- ------------ -------------------------

<S> <C> <C> <C> <C>
Hancock County Sign location, 3 acres Lease 4/30/03 with option to
Waveland, MS warehousing and parking purchase
Hancock County Accounting office 1 acre Leased 6/30/98 with option to
Waveland, MS extend 3 five-year terms
and right of first
refusal to purchase
Washington County Customer parking 2 acres Owned --
Greenville, MS*
Washington County Mooring site of casino 1,000 Leased 12/29/02 with option to
Greenville, MS* vessel waterfront feet extend 2 five-year terms
Washington County Accounting offices and 10,000 Leased 12/1/98 with option to
Greenville, MS warehouse square feet extend two years
</TABLE>

- ------------

* If the Sale Transactions are approved and consummated, these properties or
leasehold interests will be transferred to Buyer as part of the Casino
Assets.

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth all cash compensation for services rendered
in all capacities to the Company and its subsidiaries for the fiscal years ended
December 31, 1997, December 31, 1996 and December 31, 1995 paid to the Company's
Chief Executive Officer, the four other most highly compensated executive
officers (the 'Named Executive Officers') at the end of the above fiscal years
whose total compensation exceeded $100,000 per annum, and up to two persons
whose compensation exceeded $100,000 during the above fiscal years, although
they were not executive officers at the end of such years.

<PAGE>

<TABLE>
<CAPTION>
RESTRICTED
STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS AWARDS OPTION/SARS COMPENSATION
- -------------------------------------------------- ---- --------- ------ ---------- ----------- ------------

<S> <C> <C> <C> <C> <C> <C>
Stanley S. Tollman ............................... 1997 $ 250,000 -- -- -- --
Chairman of the Board of Directors, Chief 1996 $ 250,000 -- -- -- --
Executive Officer and President 1995 $ 250,000 -- -- -- $ 31,250(2)
1997 -- -- -- -- --
Monty D. Hundley ................................. 1996 -- -- -- -- --
President and Co-Chief Executive Officer(2) 1995 $ 62,500 -- -- -- --
</TABLE>

- ------------

(1) No portions of the cash salaries to which either of the above officers were
entitled during the periods indicated have been paid; the expense and
liability have been accrued without interest.

(2) As of March 23, 1995, Mr. Hundley resigned as an officer and Director of the
Company, at which time Mr. Hundley waived any claim for future compensation
under his contract with the Company.

------------------------

Option/SAR Grants in Last Fiscal Year. During the last completed fiscal
year, the Company did not grant any options or stock appreciation rights to any
Named Executive Officer.

Compensation of Directors. Directors do not receive compensation for
serving as Directors but are reimbursed for expenses incurred in connection with
the performance of their duties.

Employment Agreements. The Company and Mr. Stanley S. Tollman entered into
an Employment Agreement dated June 1, 1993, whereby Mr. Tollman agreed to serve
as Chairman of the Board and Co-Chief Executive Officer of the Company for a
term of three (3) years from the date of the Agreement. Thereafter, such
Agreement is automatically renewable for successive twelve (12) month periods,
unless either party shall advise the other on ninety (90) days' written notice
of his or its intention not to extend the term of the employment. In the event
of a termination of his employment, under the terms of such Agreement Mr.
Tollman is to be retained for two years to provide consulting services for
$175,000 per year. Such Agreement has been renewed until June 1, 1998. Mr.
Tollman's Employment Agreement provides for a salary in the amount of $250,000
per year, none of which has been paid under such Agreement since the date
thereof. The unpaid salary accumulates, and the Company does not pay any
interest or other penalty thereon. Such Agreement provides for Mr. Tollman to
devote no less than 20% of his business time to the affairs of the Company and
its subsidiaries. Such Agreement contains a non-disclosure provision pursuant to
which Mr. Tollman agrees not to use or disclose any information, knowledge or
data relating to or concerning the Company's operations, sales, business or
affairs to any individual or entity, other than the Company or its designees,
except as required in connection with the business and affairs of the Company.
Prior to the sale of Alpha Hotel to Bryanston, that Agreement also contained a
limited non-competition clause pursuant to which Mr. Tollman agreed not to own,
manage, operate or otherwise be connected with any entity or person (other than
Bryanston) or Alpha Hotel (i) that renders management services to hotels of the
same kind, class and character as the hotels for which Alpha Hotel provided
management services or (ii) that owns, manages or operates a gaming casino
within a 100 mile radius of the Jubilation Casino.

Consulting Agreement. The Company and Mr. Sanford Freedman entered into a
Consulting Agreement dated March 1, 1996, whereby Mr. Freedman agreed to render
consulting services to the Company with respect to development activities
relating to the Company's casino and hotel operations. Mr. Freedman's services
as Secretary and a Director of the Company do not relate to the Company's
development activities and are not compensated under the Consulting Agreement.
Mr. Freedman serves as an independent contractor at will pursuant to the
Consulting Agreement and will be compensated at the rate of $350 per hour. The
Consulting Agreement may be terminated at any time by either party. The Company
has agreed to indemnify Mr. Freedman against any claims, losses, expenses or
liabilities, including reasonable attorneys' fees, Mr. Freedman may incur
arising out of his performance of any services pursuant to the Consulting
Agreement. Mr. Freedman was paid an aggregate of $195,000 of consulting fees
during the year ended December 31, 1997.

<PAGE>

<PAGE>
BOARD COMPENSATION REPORT

EXECUTIVE COMPENSATION POLICY

Cash Compensation. The Company's executive officers, other than Stanley S.
Tollman, are not directly compensated by the Company based upon the Compensation
Committee's determination that compensation is not prudent at this time given
the Company's financial position. When, and if, the Company's financial position
improves, the Compensation Committee would establish and review the compensation
of executive officers and employee compensation plans. However, all of the
Company's executive officers previously provided management, financial and
administrative services, through the Company's subsidiary Alpha Hotel, on behalf
of Bryanston. Bryanston directly compensated the Company's executive officers
for such services, and pursuant to the terms of an expense reimbursement
agreement between the Company and Bryanston (the 'Expense Reimbursement
Agreement'), the Company reimbursed Bryanston on a monthly basis for direct
payroll. The Compensation Committee does not determine the compensation paid by
Bryanston to the Company's executive officers for providing these services on
behalf of Bryanston, as such compensation is solely determined by Bryanston.
Subsequent to the sale of Alpha Hotel to Bryanston in December 1996, Bryanston
has continued directly to provide salaries and benefits to the Company's
executive offices without seeking reimbursement therefor from the Company.

Equity Compensation. The grant of stock options to executive officers
constitutes an important element of long term compensation for the executive
officers. The grant of stock options increases management's equity ownership in
the Company with the goal of ensuring that the interest of management remains
closely aligned with those of the Company's stockholders. The Board of Directors
believes that stock options in the Company provide a direct link between
executive compensation and stockholders' value. By attaching vesting
requirements, stock options also create an incentive for an executive officer to
remain with the Company for the long term.

Chief Executive Officer Compensation. The compensation of Stanley S.
Tollman, the Chief Executive Officer, is set forth in an Employment Agreement
between the Company and Mr. Tollman, which provides for a salary in the amount
of $250,000 per year, none of which has been paid under such Agreement. The
unpaid salary accumulates, and the Company does not pay any interest or other
penalty thereon. The terms of the Employment Agreement were determined based
upon Mr. Tollman's ability to establish and retain a strong management team and
to develop and implement the Company's business plans. The Company also
appraised its financial position and reviewed compensation levels of Chief
Executive Officers at comparable companies within the Company's industry.

Corporate Performance Graph. The following graph shows a comparison of
cumulative total stockholders' returns from November 5, 1993 through December
31, 1997 for the Company, the Russell 2000 Index ('Russell') and the Dow Jones
Entertainment and Leisure -- Casino Index ('DJ Casino').

<TABLE>
<CAPTION>
ALPHA RUSSELL DOW JONES

<PAGE>

<PAGE>
The graph assumes the investment of $100 in shares of Common Stock on
November 5, 1993 and the investment of $100 in Russell and DJ Casinos on October
31, 1993, and that all dividends were reinvested. No dividends have been
declared or paid on the Common Stock.

Section 16(a) Reporting. Under the securities laws of the United States,
the Company's directors, its executive (and certain other) officers, and any
persons holding ten percent or more of the Common Stock must report on their
ownership of the Common Stock and any changes in that ownership to the
Securities and Exchange Commission and to the National Association of Securities
Dealers, Inc. Automated Quotation System. Specific due dates for these reports
have been established. During the year ended December 31, 1997, all reports for
all transactions were filed on a timely basis.

CERTAIN PROCEEDINGS INVOLVING MANAGEMENT

Bryanston was formerly known as Buckhead Hotel Management Company, Inc.
('BHMC'), and prior to February 1, 1992, BHMC was known as Days Inns Management
Company, Inc. BHMC was formerly a subsidiary of Buckhead America Corp. ('BAC'),
which, prior to February 1, 1992, was known as Days Inn of America, Inc. Messrs.
Stanley S. Tollman, Thomas W. Aro, Brett G. Tollman, Sanford Freedman and James
A. Cutler, each a director and/or officer of the Company, were officers and/or
directors of BAC and certain of its subsidiaries.

On September 27, 1991, BAC, BHMC and certain affiliates and subsidiaries
thereof filed petitions for protection from creditors under the Bankruptcy Code,
commencing proceedings in the United States Bankruptcy Court, in the District of
Delaware. (In re Buckhead American Corporation, et al., f/k/a Days Inn of
America, Inc., et al., Debtors case numbers 91-978 through 91-986.) The Plan of
Reorganization for BAC and its subsidiaries was filed and approved in December
1992 and became effective on December 28, 1992. Under the Plan of
Reorganization, BHMC assigned certain assets related to its business of hotel
management and was relieved of certain obligations not related to its business
of hotel management.

Messrs. Stanley S. Tollman, Brett G. Tollman and Sanford Freedman were
limited partners of six limited partnerships, each of which was the owner of an
individual hotel, which filed Chapter 11 proceedings in 1991. Mr. Stanley S.
Tollman was the stockholder of the corporate general partners of the limited
partnerships. Messrs. Stanley S. Tollman, Brett G. Tollman, Sanford Freedman and
James A. Cutler were directors and/or officers of such corporate general
partners. Faced with the threat of foreclosure, the six limited partnerships
filed for protection under the Bankruptcy Code. With regard to five of the
bankruptcy proceedings, the Bankruptcy Court lifted the bankruptcy stay and
permitted foreclosure sales of the hotels. With regard to the sixth hotel, a
Plan of Reorganization has been approved by the Bankruptcy Court, which approval
has been appealed by the lender to the U.S. District Court. The U.S. District
Court confirmed the decision below, and the lender appealed to the Court of
Appeals for the Fifth Circuit, which affirmed the decision of the U.S. District
Court. The Plan of Reorganization has been implemented.

Kissimmee Lodge, Ltd. ('KLL'), a Florida limited partnership, filed a
Chapter 11 proceeding in the United States Bankruptcy Court for the Middle
District of Florida. The proceeding was filed to prevent the imminent
foreclosure of the Days Suites hotel owned by KLL. Messrs. Stanley S. Tollman,
Brett G. Tollman and Sanford Freedman hold limited partnership interests in KLL,
and Mr. Stanley S. Tollman is a stockholder of the corporate general partner of
KLL. Messrs. Stanley S. Tollman and James A. Cutler were directors and/or
officers of such corporate general partner. A Plan of Reorganization for KLL was
confirmed by the Bankruptcy Court and has been declared effective.

Emeryville Days Limited Partnership ('Emeryville'), a California limited
partnership, filed a Chapter 11 proceeding in the United States Bankruptcy Court
for the Eastern District of California in May 1996. The proceeding was filed to
prevent the imminent foreclosure of the Days Inn hotel owned by Emeryville.
Messrs. Stanley S. Tollman, Brett G. Tollman and Sanford Freedman hold limited
partnership interests in Emeryville, and Mr. Stanley S. Tollman is a stockholder
of the corporate general partner of Emeryville. Messrs. Stanley S. Tollman and
James A. Cutler were directors and/or officers of such corporate general
partner. Subsequent to the filing of the proceeding, the subject hotel property
was sold, and as a result, funds became available to pay all creditors, other
than the holder of the

<PAGE>

<PAGE>
second deed of trust, which holder agreed to settle its claim for a reduced
amount, which has been paid. As a consequence of the foregoing, this proceeding
was dismissed.

T.H. Orlando, Ltd. ('Orlando') and T.H. Resorts Associates, Ltd.
('Resorts'), filed a Chapter 11 proceeding in the United States Bankruptcy Court
for the Middle District of Florida, Orlando Division in February 1997. The
proceeding was filed to prevent the imminent foreclosure of three Days Inn
hotels owned by Orlando and Resorts. Messrs. Stanley S. Tollman and Sanford
Freedman hold limited partnership interest in Orlando and Resorts, Mr. Stanley
S. Tollman is a stockholder of the corporate general partners of Orlando and
Resorts, and Messrs. Stanley S. Tollman, Brett G. Tollman and James A. Cutler
were directors and/or officers of such corporate general partners. In August
1997, Orlando and Resorts agreed to a settlement with its secured lender
resulting in the sale of the hotel properties and dismissal of the proceeding.

CERTAIN TRANSACTIONS

BAYOU CADDY ACQUISITION

Pursuant to an asset purchase agreement, dated as of May 14, 1993, among
Alpha Gulf Coast, Inc. ('Gulf Coast'), B.C. of Mississippi, Inc. ('B.C.')
(formerly known as Bayou Caddy, Inc.) and certain stockholders of B.C., the
Company acquired certain of the assets of B.C., including B.C.'s leasehold
interests under certain lease agreements, certain other assets incidental to the
development and ownership of the Bayou Caddy's Jubilee Casino (the 'Bayou
Caddy's Jubilee Casino' or the 'Casino') and B.C.'s interest in certain related
license applications, approvals and permits. As part of the purchase, the
Company assumed liabilities aggregating approximately $1,100,000. The purchase
price was $3,500,000, which was evidenced by a promissory note (the 'B.C. Note')
that bore interest at the rate of 10% per annum and was convertible into shares
of Gulf Coast. Pursuant to an agreement, also dated May 14, 1993, among B.C.,
the Company, Stanley S. Tollman and Monty D. Hundley, the Gulf Coast shares into
which the B.C. Note was convertible were further convertible into shares of
Common Stock upon the happening of certain events. On November 15, 1995, the
Company, Gulf Coast and B.C. entered into an agreement (the 'B.C. Agreement')
under which (i) the B.C. Note was deemed converted on February 1, 1994 and (ii)
B.C. received rights that entitled B.C. to receive 791,880 shares of Common
Stock. As contemplated by the B.C. Agreement, B.C. subsequently distributed
rights to receive 700,000 shares of Common Stock to its shareholders and
retained rights to receive 91,880 of such shares. The conversion of the B.C.
Note into 791,880 shares of Common Stock was determined in accordance with a
formula contained in the May 14, 1993 agreements that allowed for conversion of
the note into 12% of the shares of Common Stock held by Messrs. Tollman and
Hundley at the time the Company notified B.C. of its election to convert. In
order to avoid further dilution to the Company's stockholders and to enhance its
position in the Company, Bryanston agreed to contribute a number of its shares
of Common Stock to the Company in order to help satisfy the number of shares of
Common Stock into which the B.C. Note converted. In accordance therewith,
Bryanston made a capital contribution to the Company of 716,881 shares of Common
Stock owned by Bryanston, which were held by the Company as treasury stock. In
September 1996, the Company issued the 791,800 shares of Common Stock to B.C.
and the B.C. shareholders, and in October 1996, the shares previously held in
treasury stock were canceled.

BRYANSTON

In connection with the formation of the Company and the initial
capitalization of the Company, Bryanston (i) contributed $626,004 in cash to the
Company in exchange for 3,564,987 shares of Common Stock, valued at 17.6[c] per
share, (ii) entered into certain service agreements and (iii) loaned the Company
$4,009,740 (the 'Bryanston Loan'). The Company utilized the $626,004 and the
proceeds of the Bryanston Loan for the development and construction of the Bayou
Caddy's Jubilee Casino.

Under a service agreement, effective as of September 1, 1993, between Alpha
Hotel and Bryanston (the 'Service Agreement'), the Company (through Alpha Hotel)
provided management, financial, administrative and marketing services to hotels
and motels on behalf of Bryanston. Bryanston is an affiliate of the Company, and
Beatrice Tollman, Mr. Stanley S. Tollman's spouse, is a 50% stockholder

<PAGE>

<PAGE>
of Bryanston. The Service Agreement, which was co-terminus with the last to
expire of individual management agreements between Bryanston and 13 hotels (the
'Management Agreements'), stated that the Company would provide certain
management services for hotels managed by Bryanston for certain unaffiliated
owners. Pursuant to the Service Agreement, Bryanston received a fee of 1% of the
aggregate compensation paid to the Company pursuant to the Management
Agreements. The Hotel Division of Bryanston is the provider of direct services
to all managed hotels pursuant to the Management Agreements with the individual
hotels. Through its subsidiary Alpha Hotel, the Company provided management,
financial, administrative and marketing services on behalf of Bryanston.
Pursuant to the Management Agreements, the Company was compensated for its
services in an amount equal to a percentage of total net revenues of the managed
hotels, ranging between 2% and 5%. In connection with the Service Agreement,
effective September 1, 1993, the Company entered into the Expense Reimbursement
Agreement with Bryanston for the use of certain office space at its Hopewell
Junction, New York facility in connection with the Company's hotel management
operations. Pursuant to the terms of the Expense Reimbursement Agreement, the
Company reimbursed Bryanston on a monthly basis for its share of rent, office
expenses and direct payroll.

The Bryanston Loan had an initial interest rate of 12% per annum, and
payment thereunder was subordinated to payment of the Term Loan, described
below. A portion of principal and accrued interest in the aggregate amount of
$1,012,500 was repaid from the proceeds of the Company's initial public offering
('IPO') and principal and accrued interest in the aggregate amount of $1,206,355
was repaid from the proceeds of the underwriters' over-allotment option
exercised in connection with the IPO. The balance of the Bryanston Loan
($1,972,532) accrued interest at the rate of 12% per annum, which accrued until
the second anniversary of the opening of the Bayou Caddy's Jubilee Casino, and
thereafter, together with such accrued interest amount ($501,294), interest
accrued at the rate of 9% per annum, payable quarterly in equal installments
over a 10-year period, and was subject to prepayment pro rata with the BP Loan,
described below, from the proceeds of the exercise, if any, of the Company's
outstanding warrants and certain options (the 'HFS Options') granted to HFS
Gaming Corp. ('HFS'), provided the Company is current under the Term Loan
(described below). At September 30, 1997, the principal balance (which included
accrued interest through the second anniversary) was $1,398,622 and accrued
interest of $117,612.

In August and October 1993, Bryanston advanced a bridge loan (the
'Bryanston Bridge Loan') in the aggregate amount of $7,419,000, which was also
applied to the development and construction of the Bayou Caddy's Jubilee Casino.
The Bryanston Bridge Loan bore interest at the rate of 10% per annum from the
date advanced and was originally due and payable on the earlier of October 31,
1993 or the closing of the IPO. A portion of the principal and accrued interest
on the Bryanston Bridge Loan, in the aggregate amount of $3,625,000, was repaid
from the proceeds of the Term Loan (described below) and a $4,000,000 bridge
loan from HFS (which was repaid from the proceeds of the IPO), and the balance
was repaid from the proceeds of the IPO.

As of January 1, 1994, Bryanston agreed to loan the Company up to
$9,000,000 (the 'Initial Working Capital Loan') to meet working capital
requirements of the Company. The note bore interest at prime rate plus 2% per
annum and had a maturity date of December 31, 1995. On December 31, 1994, the
Company authorized the issuance of 625,222 shares of its convertible preferred
stock, valued at $6.625 per common share, in settlement of $8,284,196 due
Bryanston pursuant to the Initial Working Capital Loan, which amount included
approximately $349,000 of accrued interest. In October 1995, those 625,222
shares of preferred stock were converted into 1,250,444 shares of Common Stock.

On November 15, 1995, the Company, Gulf Coast and B.C. entered into the
B.C. Agreement under which (i) the B.C. Note was deemed converted on February 1,
1994 and (ii) B.C. received rights that, upon exercise, entitled B.C. to receive
791,880 shares of Common Stock. Bryanston agreed to contribute 716,881 of its
shares of Common Stock to the Company in order to help satisfy the number of
shares of Common Stock into which the B.C. Note converted. Bryanston agreed to
make this capital contribution to the Company in order to avoid further dilution
to the Company's stockholders.

As of January 5, 1995, Bryanston agreed to loan the Company up to
$20,000,000 (the 'Working Capital Loan') to meet the working capital
requirements of the Company. Thus, the Company is

<PAGE>

<PAGE>
obligated under a $20,000,000 non-revolving promissory note ($2,936,000 and
$1,746,000 outstanding at September 30, 1997 and December 31, 1996,
respectively) with Bryanston. The note, which bears interest at prime rate (8.5%
at September 30, 1997 and 8.25% at December 31, 1996) plus 2%, is payable at the
lesser of the outstanding principal amount or $2,000,000 per annum through
December 31, 1999. Beginning in 1996, interest accrued monthly and was due and
payable by the following month. All remaining principal and accrued interest
(approximately $503,000) shall be due on December 31, 2000. Additionally,
commencing May 1, 1996 and for each of the next succeeding three years
thereafter, the Company is required to make additional principal payments equal
to 'Available Cash Flow of Maker' as defined in the note to mean an amount equal
to the consolidated annual net income of the Company before depreciation but
after provision for taxes and principal payments on account of all debt, less an
amount equal to the sum of (a) an annual replacement reserve equal to 3% of the
consolidated revenues of the Company and its subsidiaries, excluding Alpha
Hotel, and (b) $1,000,000.

On September 22, 1995, Bryanston purchased from HFS an outstanding loan to
the Company (the 'Term Loan'), which was then in default and was then held by
HFS, having an outstanding balance of $7,816,000. In October 1993, the Company
had issued the Term Loan to HFS in the original principal amount of $8,000,000
for a five-year term. The Term Loan bears interest at a rate of 10% per annum
and requires monthly payments of principal and interest through November 1998.
The Term Loan is secured by a first preferred ship mortgage on the Bayou Caddy's
Jubilee Casino. As consideration for Bryanston purchasing the Term Loan (which
was then in default) and for Bryanston agreeing to make the Working Capital
Loan, in October 1995, the Company issued to Bryanston 347,826 shares of Common
Stock, valued at $4.50 per share, and an option to purchase 347,826 shares of
Common Stock at an exercise price of $4.50 per share. In addition, Bryanston
acquired 96,429 shares of Common Stock from an affiliate of HFS. At September
30, 1997 and December 31, 1996, the balance due on the Term Loan was $7,800,000
and $7,800,000, plus accrued interest of $1,812,000 and $1,226,789,
respectively.

Since the Company began to implement its plans to close the Jubilation
Casino in July 1996, the Company updated its assessment of the realizability of
the leasehold improvements and related assets of the Jubilation Casino. This
resulted in an impairment loss of approximately $14,507,000 and would have
reduced stockholders' equity below certain requirements for continued listing of
the Company's securities on NASDAQ. In order to avoid the delisting of the
Company's securities from NASDAQ, Bryanston proposed that the Company convert
the Working Capital Loan into shares of Preferred Stock, which would enable the
Company to maintain its NASDAQ listing. Therefore, effective June 26, 1996,
Bryanston converted the amount due on the Working Capital Loan (approximately
$19,165,000) into shares of Preferred Stock. The Company was charged a 5%
transaction fee (approximately $958,000), which was also converted into shares
of Preferred Stock. The conversion was effective June 26, 1996, and the total of
approximately $20,123,000 converted into 693,905 shares of Preferred Stock based
on the fair market value of a share of Common Stock on the date of conversion
($3.625).

In addition, on September 30, 1997, the Company issued 83,333 shares of
Preferred Stock in settlement of $2,000,000 due to Bryanston under a
continuation of the Working Capital Loan. Each share of outstanding Preferred
Stock (i) entitles the holder to one vote, (ii) has a liquidation value of
$29.00 per share, (iii) has a cash dividend rate of 10% of liquidation value,
which increases to 13% of liquidation value if the cash dividend is not paid
within 30 days of the end of each fiscal year and in such event is payable in
shares of Common Stock valued at the market price, and (iv) is convertible into
eight shares of Common Stock.

Since June 1996, Bryanston (without any obligation to do so) has continued
to advance funds to the Company under a continuation of the Working Capital Loan
for working capital and similar purposes, including funding for construction of
the Hotel Casino. As noted above, effective as of September 30, 1997, $2,000,000
of such financing was converted into shares of Preferred Stock issued to
Bryanston, and net of such conversion of indebtedness into shares of Preferred
Stock, as of September 30, 1997, a principal balance of approximately $3 million
remained owing to Bryanston plus accrued interest of approximately $500,000.

<PAGE>

<PAGE>
As of December 31, 1996, the Company sold 100% of the stock of Alpha Hotel
to Bryanston for consideration of $3,000,000.

BP GROUP

BP advanced $1,927,759 to the Company, representing the proceeds of the BP
loan (the 'BP Loan'). The BP Loan had an initial interest rate of 12% per annum,
and payment thereunder was subordinated to payment of the Term Loan. Principal
and accrued interest in the aggregate amount of $487,500 was repaid from the
proceeds of the IPO, and principal and accrued interest in the aggregate amount
of $575,560 was repaid from the proceeds of the underwriters' over-allotment
option. The balance of the BP Loan ($864,699) accrued interest at the rate of
12% per annum through the second anniversary of the opening of the Bayou Caddy's
Jubilee Casino, and thereafter, together with such accrued interest, at the rate
of 9% per annum, payable quarterly in equal installments over a 10-year period,
and is subject to prepayment, pro rata with the Bryanston Loan, from the
proceeds of the exercise, if any, of the Company's outstanding warrants and the
HFS Options.

BP also advanced a bridge loan (the 'BP Bridge Loan') in the amount of
$2,200,000, which was applied to the development of the Bayou Caddy's Jubilee
Casino. The BP Bridge Loan bore interest at the rate of 10% per annum from the
date advanced and was originally due and payable on the earlier of October 31,
1993 or the closing of the IPO. The BP Bridge Loan was repaid in full, from the
proceeds of the Term Loan and the HFS Bridge Loan, which was repaid by the
Company from the proceeds of the IPO.

In July 1993 Ms. Cohen, a director of the Company from February 1, 1994 to
December 12, 1997 and the sole shareholder of BP, contributed $511,961 to the
capital of the Company, for which she was issued 1,544,182 shares of Common
Stock valued at 33.2[c] per share. Ms. Cohen was also a principal stockholder of
Westfield Financial Corporation, one of the underwriters of the IPO. Westfield
Financial Corporation is no longer operating as a broker-dealer.

Since the Company began to implement its plans to close the Jubilation
Casino in July 1996, the Company updated its assessment of the realizability of
the leasehold improvements and related assets of the Jubilation Casino. This
resulted in an impairment loss of approximately $14,507,000 and would have
reduced stockholders' equity below certain requirements for continued listing of
the Company's securities on NASDAQ. In order to avoid delisting the Company's
securities from NASDAQ, BP proposed that the Company convert the BP Loan into
shares of Preferred Stock, which would enable the Company to maintain its NASDAQ
listing. Therefore, effective June 26, 1996, BP converted the amount due on the
BP Loan (approximately $1,222,000) into shares of Preferred Stock. The Company
was charged a 5% transaction fee (approximately $61,000), which was also
converted into shares of Preferred Stock. The conversion was effective June 26,
1996, and the total of approximately $1,283,000 was converted into 44,258 shares
of Preferred Stock based on the fair market value of a share of Common Stock on
the date of conversion ($3.625). The terms of the shares of Preferred Stock
issued to BP are identical to those of the shares of Preferred Stock issued to
Bryanston in June 1996 and September 1997.

All current transactions between the Company, and its officers, directors
and principal stockholders or any affiliates thereof are, and in the future such
transactions will be, on terms no less favorable to the Company than could be
obtained from unaffiliated third parties.

<PAGE>

<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF BUYER

The following table summarizes certain selected consolidated financial data
of Buyer, which should be read in connection with Buyer's Consolidated Financial
Statements and Notes thereto included elsewhere herein and with 'Management's
Discussion and Analysis of Financial Condition and Results of Operations.' The
selected financial data as of and for the years ended December 31, 1996, 1995
and 1994 and for the period from inception (October 15, 1993) through December
31, 1993 have been derived from Buyer's audited consolidated financial
statements included elsewhere herein. The selected consolidated financial data
as of and for the nine months ended September 30, 1997 and 1996 have been
derived from unaudited consolidated financial statements.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------
1997 1996
------- -------
(UNAUDITED)
(DOLLAR AMOUNTS IN
THOUSANDS)

<S> <C> <C>
Statement of Operations
Data:
Net revenues:
Casino......... $21,587 $27,068
Non-casino..... 3,628 4,231
------- -------
25,215 31,299
Less promotional
allowance......... (1,658) 1,657
------- -------
23,557 29,642
Operating expenses:
Casino......... 8,386 10,709
Noncasino...... 1,621 2,434
General and
administrative... 4,521 5,747
Other.......... 6,385 5,116
Depreciation
and
amortization... 2,241 2,351
------- -------
Operating income
(loss)............ 303 3,285
Interest (expense)
income, net....... (1,136) (1,300)
------- -------
Net income (loss)... $ (833) $ 1,985
------- -------
------- -------

YEAR ENDED DECEMBER 31,
--------------------------------------
1996 1995 1994(A) 1993(A)
------- ------- ------- ------

<S> <C> <C> <C> <C>
Statement of Operations
Data:
Net revenues:
Casino.........$34,761 $40,286 $27,270 $ --
Non-casino..... 3,247 3,447 2,958 --
------- ------- ------- ------
38,008 43,733 30,228 --
Less promotional
allowance......... (2,162) (2,215) (1,956) --
------- ------- ------- ------
35,846 41,518 28,272 --
Operating expenses:
Casino......... 13,185 14,142 11,108 --
Noncasino...... 3,047 2,900 2,240 --
General and
administrative... 5,410 5,025 4,534 --
Other.......... 8,353 8,055 7,354 --
Depreciation
and
amortization... 3,359 4,213 3,469 --
------- ------- ------- ------
Operating income
(loss)............ 2,492 7,183 (433) --
Interest (expense)
income, net....... (1,665) (2,312) (2,197) --
------- ------- ------- ------
Net income (loss)...$ 827 $ 4,871 $(2,630) --
------- ------- ------- ------
------- ------- ------- ------
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------
1997 1996
------- -------
(DOLLAR AMOUNTS IN
THOUSANDS)

<S> <C> <C>
Balance Sheet Data:
Cash and cash
equivalents....... $ 1,846 $ 1,805
Total assets........ 19,655 22,899
Long-term debt,
including current
maturities........ 11,115 10,945
Total partners'
capital........... 5,268 7,506

AS OF DECEMBER 31,
--------------------------------------
1996 1995 1994 1993
------- ------- ------- ------

<S> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash
equivalents.......$ 2,125 $ 3,748 $ 2,475 $ 39
Total assets........ 19,732 23,848 25,758 4,599
Long-term debt,
including current
maturities........ 10,577 14,353 18,171 500
Total partners'
capital........... 6,348 5,719 1,729 3
</TABLE>

- ------------

(a) The Las Vegas Casino opened on March 14, 1994; thus, it had no operations
during 1993.

<PAGE>

<PAGE>
SELECTED CONSOLIDATED PRO FORMA DATA OF BUYER

The following table summarizes certain selected consolidated pro forma
financial data of Buyer, which should be read in conjunction with Buyer's
Condensed Pro Forma Consolidated Financial Statements and Notes thereto included
elsewhere herein. The following pro forma information includes certain estimates
and is not necessarily indicative of the results of operations and financial
position of Buyer as they may be in the future or they might have been had the
Sale occurred as of the dates assumed.

<TABLE>
<CAPTION>
PRO FORMA
-----------------------------
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(DOLLAR AMOUNTS IN THOUSANDS)

<S> <C> <C>
Statement of Operations Data:
Net revenues:
Casino................................................................... $45,455 $ 71,101
Non-casino............................................................... 2,436 2,032
------------- ------------
47,891 73,133
Operating expenses:
Casino................................................................... 17,391 25,804
Non-casino............................................................... 2,055 4,329
General and administrative............................................... 23,080 30,149
Depreciation and amortization............................................ 6,882 9,547
------------- ------------
Operating income (loss)....................................................... (1,517) 3,304
Interest (expense) income, net................................................ (6,062) (8,732)
------------- ------------
Net income (loss)............................................................. $(7,579) $ (5,428)
------------- ------------
------------- ------------
</TABLE>

<TABLE>
<CAPTION>
PRO FORMA
NINE MONTHS ENDED
SEPTEMBER 30, 1997
------------------

<S> <C>
Balance Sheet Data:
Cash and cash equivalents................................................................ $ 5,667
Total assets............................................................................. 62,674
Long-term debt, including current maturities(a).......................................... 43,952
Total Buyer's capital.................................................................... 13,768
</TABLE>

- ------------

(a) Long-term debt, including current maturities is net of $8,500 in
unamortized discount.

<PAGE>

<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS OF BUYER

INTRODUCTION

RESULTS OF OPERATIONS

Nine Months Ended September 30, 1997 and 1996

The Las Vegas Casino contributed net revenues and operating income of $23.6
million and $.3 million, respectively, for the nine months ended September 30,
1997 and net revenues and operating income of $29.6 million and $3.2 million,
respectively, for the nine months ended September 30, 1996.

The decline in Buyer's operating results for the nine months ended
September 30, 1997, compared with the prior period ended September 30, 1996, is
directly related to the timing of the opening of the Lighthouse Casino and
competition with the Bayou Caddy's Jubilee Casino. Buyer's market share of
gaming revenues decreased in 1997 to 37% as compared to 49% during 1996, based
on the gaming markets for 1997 and 1996 of $58.4 million and $55.6 million,
respectively.

The Las Vegas Casino's net revenues include casino revenues and non-casino
revenues of $21.6 million and $2.0 million, respectively, for the nine months
ended September 30, 1997 and $27.1 million and $2.6 million, respectively, for
the nine months ended September 30, 1996. The decrease in net revenues for the
nine months ended September 30, 1997 compared to the prior period is due to a
decrease in total casino volume for table games and slots of 14% and 20%,
respectively. The decrease in total volume was accompanied by a slight reduction
in overall win percentage of less than 1%. Casino revenue per day decreased
approximately 20% for the nine months ended September 30, 1997 to $79,000 from
$99,000 for the nine months ended September 30, 1996.

The reduction in operating margin of 10.2% was caused by the decrease in
gaming revenues in addition to increases in marketing and advertising of $.3
million. The overall reduction was offset by decreases in gaming taxes (a
function of gaming revenues) and general and administrative expenses.

Year Ended December 31, 1996 and 1995

In 1996, the Las Vegas Casino held 47% of the estimated $74.8 million
Greenville gaming market share as compared to 58% of the total estimated $70.7
million Greenville gaming market in 1995. The decrease in Buyer's gaming market
share for the year ended December 31, 1996, compared with the prior year, is
related primarily to the relocation of the Jubilee Casino in November 1995. The
Bayou Caddy's Jubilee Casino barge replaced the existing Cotton Club Casino
barge and has a larger gaming area, in addition to providing food and beverage
amenities.

The Las Vegas Casino contributed net revenues and operating income of $35.8
million and $2.5 million, respectively, for the year ended December 31, 1996 and
$41.5 million and $7.2 million, respectively, for the year ended December 31,
1995.

The Las Vegas Casino's net revenues include casino revenues and non-casino
revenues of $34.8 million and $1.1 million, respectively, for the year ended
December 31, 1996 and $40.3 million and $1.2 million, respectively, for the year
ended December 31, 1995. The decrease in net revenues for the year ended
December 31, 1996 compared to the prior year period is due to a decrease in
total casino volume for table games and slots, respectively, of 22% and 10%. The
decrease in total volume was accompanied by a slight reduction in overall win
percentage of less than 1%. Casino revenue per day decreased approximately 13.6%
in 1996 to $95,000 from $110,000 during 1995.

The Las Vegas Casino's operating margin for the year ended December 31,
1996 was 7.0% compared with 17.3% for the year ended December 31, 1995. The
reduction in operating margin of

<PAGE>

<PAGE>
10.3% was caused by the decrease in gaming revenues in addition to increases in
marketing and advertising expenses of $.7 million. The overall reduction was
offset by decreases in gaming taxes (a function of gaming revenues) and
depreciation and amortization expense.

General and administrative expenses were $5.4 million and $5.0 million for
the years ended December 31, 1996 and 1995, respectively. This increase was
principally attributable to $.7 million increase in costs incurred related to a
failed refinancing effort during 1996, which are believed to be of a
nonrecurring nature.

The decrease in interest expense of $.6 million to $1.7 million in 1996, as
compared to $2.3 million in 1995, was primarily due to the repayment of Senior
Secured Notes from excess cash flow during December 31, 1996.

Year Ended December 31, 1995 and 1994

The significant improvement in Buyer's operating results for the year ended
December 31, 1995, compared with the year ended December 31, 1994, is directly
related to the timing of the opening of the Las Vegas Casino on March 14, 1994.
Additionally, Buyer increased its market share of gaming revenues in 1995 to 58%
as compared to 48% during 1994.

The Las Vegas Casino contributed net revenues and operating income of $41.5
million and $7.2 million, respectively, for the year ended December 31, 1995 and
net revenues and operating loss of $28.3 million and $ (.4) million,
respectively, for the year ended December 31, 1994.

The Las Vegas Casino's net revenues include casino revenues and non-casino
revenues of $40.3 million and $1.2 million, respectively, for the year ended
December 31, 1995 and $27.3 million and $1.0 million, respectively, for the year
ended December 31, 1994. The increase in net revenues for the year ended
December 31, 1995 compared to the prior year period is due to an increase in
total casino volume for table games and slots of 27% and 59%, respectively. The
increase in total volume was offset by a reduction in overall win percentage of
less than 1%. The Casino operated for a full year in 1995 compared to 293 days
in 1994. Casino revenue per day increased approximately 20% in 1995 to $110,000
from $92,000 during 1994.

The increase in operating margin to 17.3% in 1995 resulted from an increase
in gaming revenues in addition to the decrease in 1994 preopening costs of $1.7
million. Operating expenses were approximately 83% of net revenues in 1995
compared to 95% of net revenues (excluding preopening costs) in 1994.

General and administrative expenses were $5.0 million and $4.5 million for
the years ended December 31, 1995 and 1994, respectively. This increase is
principally attributable to operating the casino for the full year in 1995 as
compared to 293 days in 1994.

The increase in interest expense is due primarily to additional equipment
notes as well as amortization of $.3 million of Senior Secured debt discounts.

LIQUIDITY AND CAPITAL RESOURCES

In February 1994, Buyer issued $14 million of 11% Senior Secured Notes (the
'11% Notes'), which included 140,000 limited partnership units. The proceeds
were used to complete the acquisition of the casino operations, to repay certain
indebtedness and to provide the necessary casino cash and working capital.
Interest on the 11% Notes is payable semi-annually on January 1 and July 1.
Effective January 1, 1997, the interest rate on the 11% Notes increased to 11.5%
and further increases by 50 basis points each six months thereafter until the
11% Notes are paid in full. The 11% Notes are due November 30, 2000, subject to
mandatory semi-annual prepayments equal to excess cash flow. Through September
30, 1997, Buyer made principal prepayments totaling $3.4 million. The 11% Notes
are secured by a first mortgage on the riverboat, a pledge of common stock of
Casino Gaming International Limited and a security interest in other collateral.
Buyer is subject to certain covenants, including restrictions on distributions
by Buyer, the making of other investments, prepayments of indebtedness other
than the 11% Notes and the incurrence of additional indebtedness.

<PAGE>

<PAGE>
On April 14, 1997, Buyer obtained a construction loan from a bank in the
amount of $1.4 million to facilitate the funding of costs associated with the
construction of the Key West Inn. The loan is secured by a deed of trust on land
and the hotel. Principal and interest at a rate of 8.75% is due on or before
April 16, 1998. As of September 30, 1997, $.6 million had been drawn on the
construction loan. On July 29, 1997, Buyer entered into a loan agreement with a
bank in the amount of $250,000. The note is secured by a deed of trust on
furniture. Principal and interest at a rate of 9.5% is due on or before January
25, 1998.

Buyer has aggressively pursued alternative capital structures, including
refinancing its existing debt facilities. Currently, management of Buyer
believes that Buyer's working capital needs will be met from its operating cash
flows.

As of September 30, 1997, Buyer had cash and cash equivalents of
approximately $1.8 million.

Development

During 1996, Buyer became the general partner in Greenville Hotel, L.L.C.,
which was formed for the purpose of developing and owning a hotel, the Key West
Inn. As of September 30, 1997 Buyer incurred construction costs of approximately
$.8 million and anticipates the total construction cost of the hotel to be
approximately $2.2 million. The hotel opened in December 1997.

Other Items

On April 1, 1997, Buyer entered into an agreement with Marina Casino,
Limited, ('Marina'), PMD Trust and D.W. Trust to purchase all of the capital
stock of Marina for $1.3 million pursuant to the Second Amendment to a Moorage
Agreement dated September 29, 1993. Buyer is currently making monthly payments
of $100,000 towards the purchase price. Per an agreement dated August 27, 1992,
Marina, successor by assignment from The Marina, Inc., has leased from the City
Council of the City of Greenville, certain property and moorage rights for a
period of 10 years commencing on June 30, 1988 and ending June 30, 1998. In
addition, the lease agreement provides for a first option to renew for a term of
ten years from July 1, 1998 to June 30, 2008 and a second option to renew for a
term of 9 years from July 1, 2008 to June 30, 2017. Prior to this agreement,
Buyer under the Moorage Agreement was paying approximately $25,000 a month for
the moorage rights from Marina. The purchase was completed in December 1997.

<PAGE>

<PAGE>
THE BUYER

THE COMPANY

Buyer is engaged in the ownership and operation of a gaming vessel, the Las
Vegas Casino, located in Greenville, Mississippi. Buyer, a Mississippi limited
partnership, was formed on October 18, 1993. On January 12, 1996, Greenville
Hotel, LLC, a Mississippi limited liability company wholly-owned by Buyer, was
formed for the purpose of developing and owning a 56 room hotel, the Key West
Inn, located in Greenville, Mississippi. Greenville CP, Inc. (the 'Greenville
Partner'), was incorporated in Delaware on September 24, 1993 and serves as the
general partner in Buyer.

The Buyer is also the sole shareholder of Casino Gaming International
Limited, which was incorporated in Mississippi on December 7, 1992 and is the
sole shareholder of Marina Casino, Limited, which was incorporated in
Mississippi on August 31, 1992. Marina Casino, Limited holds the lease at
moorage location of the Las Vegas Casino.

Buyer currently operates the Las Vegas Casino in Greenville, Mississippi.
The Las Vegas Casino is a 1-story barge with a mezzanine level containing
approximately 18,000 square feet of gaming space. The Las Vegas Casino currently
has 649 slot machines and 19 table games. Buyer employs approximately 550
full-time personnel. The Las Vegas Casino has a buffet restaurant and lounge,
the C&G Restaurant, located on the city side of the levee.

Buyer's principal executive offices are located at 242 South Walnut,
Greenville, Mississippi, and its telephone number is 601-335-5800.

MANAGEMENT

The principals, management and other key professionals involved in the
day-to-day management of the Las Vegas Casino are as follows:

Michael J. Jacobson (age 45) is the Chairman and CEO of the General
Partner, with over 22 years of experience in business management, new
company start-ups, buyouts, and turnarounds. He co-founded Greenville
Casino Partners, L.P. in 1993. He is also involved in other casino
operations: the Aspen Mine & Casino Limited in Cripple Creek, Colorado, and
Casino Rio in Rio, Greece. He is currently licensed for gaming in Colorado
and Mississippi. He has been involved in a variety of industries, including
gaming, textiles, steel, pharmaceuticals, bio-technology, insurance, oil
field services, roofing and power transmission cable.

John R. O'Donnell (age 42) is the President of the General Partner and
is responsible for overseeing all of the Las Vegas Casino's operations,
with an emphasis on the development and implementation of the marketing
strategies for such Casino. In addition to the Las Vegas Casino, Mr.
O'Donnell has been involved in the successful opening of three other
casinos since November 1992; one in Colorado, one in South Dakota and one
in the Country of Greece. During this time he also successfully reorganized
the marketing strategies for a major casino in Illinois. At this time Mr.
O'Donnell is devoting his full time to the Las Vegas Casino. Prior to these
projects, from September, 1990 through mid-1992, Mr. O'Donnell was the
Chief Operating Officer and Executive Vice-President of Merv Griffin's
Resort Casino and Hotel in Atlantic City, New Jersey. From February 1987 to
April, 1990, Mr. O'Donnell was the President and Chief Operating Officer at
Trump Plaza Hotel and Casino in Atlantic City. Mr. O'Donnell worked for the
Golden Nugget Casino from 1985 through early 1987 as Senior Vice-President
of Marketing. Mr. O'Donnell is licensed for gaming in Mississippi and
Colorado and was licensed as a key employee in New Jersey for 13 years.

Jack Newton (age 53) is the General Manager. He has over 24 years of
experience in the gaming industry in a variety of management positions. He
is currently licensed for gaming in Colorado and Nevada, as well as
Mississippi. He presently sits on the Board of Directors of the Mississippi
Gaming Association as Secretary/Treasurer. Until June, 1993, he was the
Assistant Casino Manager of the Indian gaming casino known as Foxwoods
Casino in Ledyard, Connecticut. Foxwoods was founded in 1992 and is a
highly successful 139,000 square foot casino with over 7,000 employees. Mr.
Newton's 24 year experience in casino operations include 20 years of upper

<PAGE>

<PAGE>
management positions. In addition to his experience at Foxwoods, Mr. Newton
was also Casino Manager at the Aladdin Hotel and Casino in Las Vegas, Shift
Manager at the Golden Nugget in Las Vegas, and 21 Games Manager and
Director of Special Projects at the Tropicana Casino in Las Vegas.

Lupe Goodman (age 46) has been employed with the Las Vegas Casino
since October 18, 1993 as the Chief Financial Officer. Ms. Goodman has over
22 years of experience in the gaming industry. Prior to joining the
executive management staff at the Las Vegas Casino, she held the position
of Chief Controller at the Aladdin Hotel and Casino Resort in Las Vegas,
Nevada. Ms. Goodman's gaming industry financial experience include ten
years at the Aladdin Hotel and Casino Resort, Las Vegas, Nevada, and ten
years at the Showboat Hotel and Casino, Las Vegas, Nevada.

Lori Taylor (age 41) is Marketing Director for the Las Vegas Casino.
Ms. Taylor has 18 years of experience in the gaming industry. Prior to her
involvement in the Las Vegas Casino, Ms. Taylor held the positions of Vice
President Casino Marketing for both Merv Griffin's Resorts and Trump Plaza
Casino Hotel and Assistant Treasurer and Casino Controller for the Golden
Nugget Casino Hotel in Atlantic City, New Jersey. In addition, Ms. Taylor
has served as a consultant to the Casino Queen in East St. Louis, Illinois
and the Casino Rio in Patras, Greece.

ACCOUNTING AND TAX TREATMENT OF THE SALE

For tax purposes, the Sale will be treated as an acquisition of assets. The
purchase price of the Casino Assets will be allocated among the assets
comprising same using the residual method under I.R.C. sec. 1060. The residual
method requires that the taxpayer group the assets into four different classes.
The four classes are as follows: Class I -- cash and demand deposits; Class
II -- certificates of deposit, U.S. government securities, marketable securities
and foreign currency; Class III -- tangible and intangible assets (whether or
not depreciable, depletable or amortizable); and Class IV -- goodwill and going
concern value.

Per Treasury Reg. Sec. 1.1060T(d), the amount of consideration paid for the
Casino Assets and Hotel Assets will be reduced by the amount of Class I assets.
The remaining consideration is then allocated to Class II, III and IV assets (in
that order) in proportion to the fair market values of each asset on the
purchase date.

To finance the acquisition, Buyer will borrow approximately $44,000,000 and
incur approximately $1,500,000 in finance costs. These funds will be used to
retire (to the extent it has not already done so) existing senior debt and to
fund the purchase. The terms of the financing will result in original issue
discount ('OID'), which will alter the terms for income tax purposes. The
ultimate effect of the rules will be to characterize more of the payments as
interest, which will be ratably accrued over time. The retirement of the senior
notes will also have OID consequences resulting in additional interest expense
to Buyer.

After the acquisition, results from operation of the acquired assets will
be included in Buyer's total income or expense and allocable to the partners
pursuant to the partnership agreement of Buyer.

STOCKHOLDER PROPOSALS

In order to be included in the proxy materials for the Company's next
annual meeting of stockholders, stockholder proposals must be received by the
Company on or before October 15, 1998.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the 'Exchange Act'), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the 'SEC'). Proxy statements, reports and
other information can be inspected and copied at the public reference facilities
of the SEC at its principal office at Judiciary Plaza, 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, and at its regional offices at Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and
7 World Trade Center, 13th Floor, New York, New York 10048. Any interested party

<PAGE>

<PAGE>
may obtain copies of such material at prescribed rates from the Public Reference
Section of the SEC at its principal office at Judiciary Plaza, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549. The SEC also maintains a web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents previously filed by the Company with the SEC
pursuant to the Exchange Act are incorporated by reference into this document:

(1) the Company's annual report for the fiscal year ending December
31, 1996 on Form 10-K filed March 31, 1997; and

(2) the Company's quarterly reports on Form 10-Q filed May 15, August
14, and November 10, 1997;

(3) the Company's current report on Form 8-K filed March 12, 1997; and

(4) the Company's current report on Form 8-K filed February 9, 1998.

All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Proxy Statement and prior to
the date of the Special Meeting shall be deemed to be incorporated by reference
in this Proxy Statement and to be a part hereof from the respective dates of
filing of such documents. Any statement contained herein or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Proxy Statement to the extent
that a statement contained in any subsequently filed document that also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Proxy
Statement.

The Company will provide, without charge, to each stockholder to whom this
proxy statement is delivered and who so requests, a copy of any or all of the
information that has been incorporated by reference in this proxy statement
(exclusive of exhibits to such information unless such exhibits are specifically
incorporated by reference into such information) and/or of the Partnership
Agreement of Buyer. Any such request should be made orally or in writing to
Alpha Hospitality Corporation, Secretary, 12 East 49th Street, New York, New
York 10017, telephone (212) 750-3500. Within one business day of receipt of such
a request, the Company will provide, by first class mail or other equally prompt
means, a copy of the information as requested.

<PAGE>

<PAGE>
FINANCIAL STATEMENTS

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----

<S> <C>
ALPHA HOSPITALITY CORPORATION
Independent Auditor's Report.......................................................................... F-2
Financial Statements for the Years Ending December 31, 1996, 1995 and 1994............................ F-3
Financial Statements for the Periods Ending September 30, 1997 and 1996............................... F-21
Pro Forma Financial Statements........................................................................ F-33

GREENVILLE CASINO PARTNERS, L.P.
Report of Independent Public Accountants.............................................................. F-39
Financial Statements for the Years Ending December 31, 1996 and 1995.................................. F-40
Historical Financial Statements for the Periods Ending September 30, 1997 and 1996.................... F-50
Pro Forma Financial Statements........................................................................ F-56
</TABLE>

F-1

<PAGE>

<PAGE>
INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholders
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
New York, New York

We have audited the accompanying consolidated balance sheets of Alpha
Hospitality Corporation and Subsidiaries as of December 31, 1996 and 1995, and
the related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the three year period ended December 31, 1996.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Alpha
Hospitality Corporation and Subsidiaries as of December 31, 1996 and 1995, and
the results of their operations and their cash flows for each of the years in
the three year period ended December 31, 1996, in conformity with generally
accepted accounting principles.

The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
15 to the consolidated financial statements, the Company has suffered
significant losses from operations and has a working capital deficit and an
accumulated deficit at December 31, 1996. In addition, the Company was not in
compliance with certain long-term debt covenants, therefore requiring the
obligations to be classified as current liabilities. Management's plans in
regard to these matters are also described in Note 15. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
The consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

ROTHSTEIN, KASS & COMPANY, P.C.

Roseland, New Jersey
February 14, 1997, except for Note 16 as
to which the date is March 21, 1997

F-2

<PAGE>

<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995

<TABLE>
<CAPTION>
1996 1995
-------- --------
(IN THOUSANDS,
EXCEPT
FOR PER SHARE DATA)

<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash, including restricted cash of $270 and $64 in 1996 and 1995, respectively....... $ 1,350 $ 2,316
Accounts receivable, less allowance for doubtful accounts of $527 and $354 in 1996
and 1995, respectively.............................................................. 73 703
Inventories.......................................................................... 297 536
Prepaid insurance.................................................................... 615 1,796
Other current assets................................................................. 195 1,350
-------- --------
Total current assets............................................................ 2,530 6,701
PROPERTY AND EQUIPMENT, less accumulated depreciation and amortization of $17,475 and
$13,385 in 1996 and 1995, respectively.................................................. 39,660 59,255
DEPOSITS AND OTHER ASSETS................................................................. 1,764 818
-------- --------
$ 43,954 $ 66,774
-------- --------
-------- --------

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Long-term debt, current maturities................................................... $ 14,528 $ 27,320
Notes payable........................................................................ 2,400 3,816
Accounts payable and other accrued expenses.......................................... 9,911 10,474
Accrued payroll and related liabilities.............................................. 3,755 2,849
Due to affiliate, current maturity................................................... 1,746 2,000
-------- --------
Total current liabilities....................................................... 32,340 46,459
-------- --------
LONG-TERM DEBT, less current maturities................................................... 7,866 2,312
-------- --------
DUE TO AFFILIATE, less current maturity, including accrued interest of $503 in 1996 and
1995.................................................................................... 503 15,864
-------- --------
AMOUNTS DUE UNDER REDEMPTION AGREEMENT, including accrued interest of $286 and $235 in
1996 and 1995, respectively............................................................. 1,739 235
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, authorized 1,000 shares, 738 shares issued.......... 7
Common stock, $.01 par value, 25,000 and 17,000 shares, authorized in 1996 and 1995,
respectively, 13,478 and 12,354 shares issued in 1996 and 1995, respectively........ 135 124
Capital in excess of par value....................................................... 56,778 32,779
Common stock subscribed.............................................................. 1,600
Accumulated deficit.................................................................. (55,414) (32,599)
-------- --------
Total stockholders' equity...................................................... 1,506 1,904
-------- --------
$ 43,954 $ 66,774
-------- --------
-------- --------
</TABLE>

See accompanying notes to consolidated financial statements

F-3

<PAGE>

<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
(IN THOUSANDS, EXCEPT
FOR PER SHARE DATA)

<S> <C> <C> <C>
REVENUES:
Casino................................................................... $ 43,252 $ 26,429 $ 41,344
Food and beverage, retail and other...................................... 1,268 1,210 1,921
-------- -------- --------
Total revenues...................................................... 44,520 27,639 43,265
-------- -------- --------
COSTS AND EXPENSES:
Casino................................................................... 16,184 13,493 19,011
Food and beverage, retail and other...................................... 1,657 1,877 2,270
Selling, general and administrative...................................... 24,973 18,069 22,200
Interest................................................................. 4,421 3,213 3,015
Depreciation and amortization............................................ 6,059 4,508 3,776
Pre-opening and development costs........................................ 1,468 1,290 2,303
Debt conversion fee...................................................... 1,019
Write-off of leasehold and improvements.................................. 14,507
Settlement and termination of lease agreement............................ 541
Financial advisory services fees......................................... 1,690
Relocation expense....................................................... 412
Buy-out of marketing agreement........................................... 1,500
Write-off of unamortized debt discount................................... 931
--------
Total costs and expenses............................................ 70,829 46,983 52,575
-------- -------- --------
LOSS FROM CONTINUING OPERATIONS BEFORE DEFERRED INCOME TAX EXPENSE............ (26,309) (19,344) (9,310)
DEFERRED INCOME TAX EXPENSE................................................... 1,716
LOSS FROM CONTINUING OPERATIONS............................................... (26,309) (19,344) (11,026)
-------- -------- --------
DISCONTINUED OPERATIONS:
Income from operations of discontinued hotel management segment.......... 645 1,351 1,125
Gain on disposal of hotel management segment............................. 2,849
--------
Total income from discontinued operations........................... 3,494 1,351 1,125
-------- -------- --------
NET LOSS...................................................................... $(22,815) $(17,993) $ (9,901)
-------- -------- --------
-------- -------- --------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING.................................... 13,248 10,617 10,225
-------- -------- --------
-------- -------- --------
EARNINGS (LOSS) PER COMMON SHARE:
From continuing operations............................................... $ (1.98) $ (1.82) $ (1.08)
From discontinued operations............................................. .26 .13 .11
-------- -------- --------
Net loss............................................................ $ (1.72) $ (1.69) $ (.97)
-------- -------- --------
-------- -------- --------
</TABLE>

See accompanying notes to consolidated financial statements

F-4

<PAGE>

<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK CAPITAL IN COMMON
---------------- ---------------- EXCESS OF STOCK ACCUMULATED
SHARES AMOUNT SHARES AMOUNT PAR VALUE SUBSCRIBED DEFICIT
------ ------ ------ ------ ---------- ---------- -----------
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

<S> <C> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1994................... -- $-- 10,225 $102 $ 16,484 $-- $ (4,705)
Conversion of long-term debt............ 2,883
Preferred stock issued in settlement of
note payable and accrued interest..... 625 6 8,278
Mandatorily redeemable common stock
accretion............................. (6)
Net loss............................ (9,901)
-----------
Balances, December 31, 1994................. 625 6 10,225 102 27,639 (14,606)
Conversion of preferred stock to common
stock................................. (625) (6) 1,250 13 (6)
Common stock issued pursuant to
acquisition........................... 783 8 4,492
Common stock exchanged for financial
advisory services..................... 90 1,600
Mandatorily redeemable common stock
accretion............................. (51)
Exercise of put option.................. 96 1 615
Net loss............................ (17,993)
-----------
Balances, December 31, 1995................. 12,354 124 32,779 1,600 (32,599)
Common stock issued for payment of
long-term debt........................ 701 7 2,446
Issuance of subscribed common stock..... 348 3 1,597 (1,600)
Issuance of common stock on converted
long-term debt........................ 75 1 (1)
Preferred stock issued in settlement of
long-term debt........................ 42 1,222
Preferred stock issued in settlement of
due to affiliate...................... 661 7 19,158
Preferred stock issued in settlement of
debt conversation fee................. 35 1,019
Adjustment of amount due under
redemption agreement.................. (1,453)
Stock sold under redemption agreement... 11
Net loss............................ (22,815)
-----------
Balances, December 31, 1996................. 738 $ 7 13,478 $135 $ 56,778 $-- $ (55,414)
--
--
------ ------ ------ ---------- ---------- -----------
------ ------ ------ ---------- ---------- -----------
</TABLE>

See accompanying notes to consolidated financial statements

F-5

<PAGE>

<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
(IN THOUSANDS, EXCEPT FOR PER
SHARE DATA)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................................... $(22,815) $(17,993) $ (9,901)
-------- -------- --------
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization............................................ 6,059 4,508 3,776
Provision for losses on accounts receivable.............................. 211 255 35
Write-off of deferred costs.............................................. 460
Common stock/options issued in exchange for financial advisory
services............................................................... 1,690
Deferred income tax expense.............................................. 1,716
Imputed interest on long-term debt....................................... 337
Gain on disposal of hotel management segment............................. (2,849)
Forgiveness of indebtedness.............................................. (290)
Debt conversion fee...................................................... 1,019
Write-off of leasehold and improvements.................................. 14,507
Other.................................................................... (301)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable............................. 370 248 (886)
(Increase) decrease in inventories..................................... 239 201 (488)
(Increase) decrease in prepaid insurance............................... 1,187 (231) 968
(Increase) decrease in other current assets............................ 975 (814) 515
Increase in accounts payable and other accrued expenses................ 1,795 2,032 3,893
Increase (decrease) in accrued payroll and related liabilities......... 848 (187) 2,431
-------- -------- --------
Total adjustments................................................... 23,770 8,162 12,297
-------- -------- --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES........................... 955 (9,831) 2,396
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment......................................... (1,460) (3,717) (3,139)
Cash acquired in connection with business combination....................... 543
Proceeds from sales of property and equipment............................... 70
Proceeds from (payments for) deposits and other assets...................... (1,047) 300 (713)
-------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES......................................... (2,437) (2,874) (3,852)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from affiliate..................................................... 3,813 21,209
Payments to affiliate....................................................... (282) (3,848)
Payments on construction and equipment notes payable........................ (281) (4,845)
Proceeds from stock sold pursuant to escrow agreement....................... 11
Proceeds from notes payable................................................. 296 248 12,279
Payments on notes payable................................................... (1,262) (857) (3,995)
Proceeds from long-term debt................................................ 43 8,191
Payments on long-term debt.................................................. (2,103) (10,821) (1,999)
-------- -------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES..................................... 516 13,841 1,440
-------- -------- --------
NET INCREASE (DECREASE) IN CASH............................................... (966) 1,136 (16)
CASH, beginning of year....................................................... 2,316 1,180 1,196
-------- -------- --------
CASH, end of year............................................................. $ 1,350 $ 2,316 $ 1,180
-------- -------- --------
-------- -------- --------
</TABLE>

See accompanying notes to consolidated financial statements

F-6

<PAGE>

<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT FOR
PER SHARE DATA)
1996 1995 1994
------- ------- ------

<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION, cash paid for interest during
the year........................................................................ $ 2,903 $ 1,035 $1,889
------- ------- ------
------- ------- ------

SUPPLEMENTAL SCHEDULES OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued in settlement of long-term debt.......................... $ 2,453 $2,883
------- ------
------- ------
Amounts due under redemption agreement....................................... $ 1,739 $ 235
------- -------
------- -------
Preferred stock issued in settlement of obligations.......................... $21,406 $8,284
------- ------
------- ------
Note payable incurred in connection with lease settlement arrangement........ $ 1,200
-------
-------
Accrued interest capitalized to debt......................................... $ 1,765 $ 213
------- ------
------- ------
Common stock/options exchanged for financial advisory services............... $ 1,690
-------
-------
Acquisition of casino:
Fair value of net assets acquired.......................................... $21,881
Fair value of liabilities assumed.......................................... 17,381
-------
Equity investment.......................................................... $ 4,500
-------
-------
Capitalization of accounts payable for common stock............................... $ 559
------
------
Equipment recorded pursuant to obligations under capital lease and financing
agreements...................................................................... $ 89
------
------
</TABLE>

See accompanying notes to consolidated financial statements

F-7

<PAGE>

<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

NOTE 1. NATURE OF BUSINESS

Alpha Hospitality Corporation (the Company), incorporated in Delaware on
March 19, 1993, through its subsidiaries, is engaged in (i) the ownership and
operation of a gaming vessel, located in Greenville, Mississippi, which is
operated by the Company's subsidiary Alpha Gulf Coast, Inc. (Alpha Gulf) and
(ii) the pursuit of gaming licenses for additional casinos in various states,
which is accomplished through the Company's subsidiaries Alpha Missouri, Inc.
(Alpha Missouri), Alpha Monticello, Inc. (Alpha Monticello), Alpha Rising Sun,
Inc. (Alpha Rising Sun), Jubilation Lakeshore, Inc. (Jubilation Lakeshore) and
Alpha St. Regis, Inc. (Alpha St. Regis). From September 1993 through December
1996, the Company, through its former subsidiary, Alpha Hotel Management
Company, Inc. (Alpha Hotel) (see Note 14), provided management services to
hotels owned by third parties. Additionally, from December 1995 to July 1996,
Jubilation Lakeshore, formerly known as the Cotton Club of Greenville, Inc. (the
Cotton Club) (see Note 3), operated a second gaming vessel located in Lakeshore,
Mississippi.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation. The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in consolidation.

Cash. The Company maintains its cash in bank deposit accounts which, at
times, may exceed federally insured limits. The Company has not incurred any
losses in such accounts and believes it is not exposed to any significant credit
risk on cash.

Inventories. Inventories, which primarily consist of food and beverage, are
stated at the lower of cost or market, with cost being determined on the
first-in, first-out (FIFO) method.

Property and Equipment. Property and equipment is stated at cost, less
accumulated depreciation and amortization. The Company provides for depreciation
and amortization using the straight-line method over the following estimated
useful lives:

<TABLE>
<CAPTION>
ESTIMATED
ASSETS USEFUL LIVES
- ------------------------------------------------------------------------------- ------------

<S> <C>
Boat, barge and improvements................................................... 20 years
Leasehold and improvements..................................................... 10-20 years
Gaming equipment............................................................... 5-7 years
Furniture, fixtures and equipment.............................................. 5-7 years
Transportation equipment....................................................... 3 years
</TABLE>

Pre-opening and Development Costs. The Company incurs costs in connection
with start-up casino operations and joint ventures. The Company's policy is to
expense pre-opening and development costs as incurred.

Earnings (Loss) Per Common Share. Earnings (loss) per common share is based
on the weighted average number of common shares outstanding. The Company's
common stock subscribed is included in the computation.

Additionally, in March 1997, the Financial Accounting Standards Board
released Statement No. 128, (SFAS 128), 'Earnings Per Share', which requires
dual presentation of basic and diluted earnings per share on the face of the
statements of operations. Basic earnings per share excludes dilution and is
computed by dividing income available to common stockholders by the
weighted-average common shares outstanding for the period. Diluted earnings per
share reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the earnings of the
entity. Diluted earnings per share is computed similarly to fully diluted
earnings per share pursuant to

F-8

<PAGE>

<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

Accounting Principles Bulletin No. 15. SFAS 128 is effective for fiscal years
ending after December 15, 1997 and, when adopted, will require restatement of
prior years' earnings (loss) per common share.

Since the effect of outstanding options is antidilutive, they have been
excluded from the Company's computation of earnings (loss) per common share.
Accordingly, management does not believe that SFAS 128 will have an impact upon
historical earnings (loss) per common share as reported.

Income Taxes. The Company complies with Statement of Financial Accounting
Standards No. 109 (SFAS 109), 'Accounting for Income Taxes', which requires an
asset and liability approach to financial accounting and reporting for income
taxes. Deferred income tax assets and liabilities are computed quarterly for
differences between financial statement and tax bases of assets and liabilities
that will result in future taxable or deductible amounts, and based on enacted
tax laws and rates to the periods in which the differences are expected to
affect taxable income. Valuation allowances are established, when necessary, to
reduce deferred tax assets to the amount expected to be realized.

The Company does not provide for deferred taxes on the unremitted earnings
of its wholly-owned subsidiaries since, under existing tax laws, its investment
could be liquidated tax-free. As a result, any excess outside financial basis
over tax basis will not be expected to result in taxable income upon reversal
and thus will not be a temporary difference.

Casino Revenue. Casino revenue is the net win from gaming activities, which
is the difference between gaming wagers less the amount paid out to patrons.

Promotional Allowances. Promotional allowances primarily consist of food
and beverage furnished gratuitously to customers. Revenues do not include the
retail amount of food and beverage of $3,721, $3,456 and $4,833 for the years
ended December 31, 1996, 1995 and 1994, respectively, provided gratuitously to
customers. The cost of these items of $3,317, $3,410 and $4,046 for the years
ended December 31, 1996, 1995 and 1994, respectively, are included in casino
expenses.

Amortization of Debt Discount. The Company amortized the debt discount on
the 1993 convertible promissory note (see Note 5) using the interest method,
which yielded a constant rate of interest over the life of the note.

Interest Capitalization. Interest costs incurred during the construction
and development of the dockside casino and related facilities was capitalized as
part of the cost of such assets.

Loan Fees. Loan fees, included in other assets, are being amortized over
the life of the equipment notes payable.

Fair Value of Financial Instruments. The fair values of the Company's
assets and liabilities which qualify as financial instruments under SFAS No. 107
approximate their carrying amounts presented in the consolidated balance sheets
at December 31, 1996 and 1995.

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

Impairment of Long-Lived Assets. The Company periodically assesses the
recoverability of the carrying amounts of long-lived assets. A loss is
recognized when expected undiscounted future cash flows are less then the
carrying amount of the asset. An impairment loss is the difference by which the
carrying amount of an asset exceeds its fair value.

Reclassifications. Certain amounts have been reclassified in prior years to
conform to the 1996 presentation.

F-9

<PAGE>

<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

NOTE 3. BUSINESS COMBINATION

Effective October 30, 1995, the Company acquired all of the outstanding
capital stock of Cotton Club of Greenville, Inc. ('CCG'), the owner and operator
of a dockside gaming casino in Greenville, Mississippi, in a business
combination accounted for as a purchase. Accordingly, the results of operations
of CCG are included in the accompanying financial statements from the date of
acquisition. In addition to its dockside gaming vessel, CCG owned interests in
certain real estate in Greenville, which was primarily used for automobile
parking and certain rights granted by the City of Greenville and the Greenville
Yacht Club to locate its vessel at its present site on Lake Ferguson (an inlet
of the Mississippi River).

The capital stock was acquired from a group of sixteen stockholders (former
CCG stockholders), none of whom had any material relationship to the Company or
any of its affiliates, directors or officers.

Consideration for the acquisition consisted of: (a) cash at closing of
$2,404; (b) notes due six months after closing of $1,397, bearing interest at
10% per annum; (c) notes due nine months after closing of $1,897, bearing
interest at 10% per annum; and (d) 783 shares of the common stock of the Company
valued at $5.75 per share. The cash paid at the closing was borrowed by the
Company from Bryanston Group, Inc. (Bryanston), an affiliate.

As part of the acquisition, all debt and accrued interest owed by CCG to
its former stockholders, of approximately $9,600, is included in the
consideration above and has been assigned to the Company.

Subsequent to the sale and pursuant to approvals granted by the Mississippi
Gaming Commission and certain lenders to CCG and Alpha Gulf, Alpha Gulf
transferred its casino gaming barge and its related operations to the CCG site
in Greenville, Mississippi and CCG transferred its riverboat casino to Alpha
Gulf's former site at Lakeshore, Mississippi on the Gulf Coast. The casinos
commenced operations at their new sites in November and December 1995,
respectively.

The excess of the purchase price over the net assets of CCG of
approximately $2,593, net of a $450 1996 purchase price adjustment, was
allocated to property and equipment and will be depreciated and amortized over
the estimated remaining useful lives of the assets.

In September 1996, Bryanston purchased the notes aggregating $1,897 from
the former CCG stockholders and assigned its interest in notes aggregating $475
and $23 (of which $475 and $11 is due at December 31, 1996) to a director of the
Company and an affiliate, respectively.

The following summarized unaudited pro forma information assumes the
acquisition had occurred on January 1, 1994:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
1995 1994
-------- -------

<S> <C> <C>
Total revenues..................................................... $ 55,927 $83,432
-------- -------
-------- -------
Net loss........................................................... $(18,518) $(8,561)
-------- -------
-------- -------
Loss per common share.............................................. $ (1.64) $ (.78)
-------- -------
-------- -------
</TABLE>

The unaudited pro forma results are not necessarily indicative of what
actually would have occurred if the CCG acquisition had been in effect for the
years presented. Further, the pro forma results are not intended to be a
projection of future results and do not reflect any integration costs, cost
savings resulting from synergistic opportunities or the results of operations of
other businesses acquired or disposed of in 1995 and 1994.

The above amounts reflect adjustments for interest on notes payable issued
as part of the purchase price and depreciation and amortization on revalued
property and equipment.

F-10

<PAGE>

<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

NOTE 4. PROPERTY AND EQUIPMENT

At December 31, 1996 and 1995, property and equipment is comprised of the
following:

<TABLE>
<CAPTION>
1996 1995
-------- --------

<S> <C> <C>
Land and building..................................................... $ 214 $ 214
Boat, barge and improvements.......................................... 24,261 23,590
Leasehold and improvements............................................ 14,215 30,001
Gaming equipment...................................................... 10,221 10,042
Furniture, fixtures and equipment..................................... 7,414 7,264
Transportation equipment.............................................. 810 1,034
Construction in progress.............................................. 495
-------- --------
57,135 72,640
Less accumulated depreciation and amortization........................ (17,475) (13,385)
-------- --------
$ 39,660 $ 59,255
-------- --------
-------- --------
</TABLE>

Included in equipment at December 31, 1996 and 1995 is $1,225 and $1,386,
respectively, related to assets recorded under capital leases. Included in
accumulated depreciation and amortization at December 31, 1996 and 1995 is $498
and $450, respectively, of amortization related to assets recorded under capital
leases.

In 1993, the Company capitalized approximately $900 of interest, of which
approximately $327 is included in Alpha Gulf's barge and improvements and $573
is included in Jubilation Lakeshore's leasehold and improvements.

In light of Jubilation Lakeshore's July 1996 closure and in accordance with
its policy on impaired long-lived assets, the Company recorded an impairment
loss of $14,507 representing Jubilation Lakeshore's leasehold and improvements
of $16,284 (which included the $573 of capitalized interest) and its related
accumulated amortization of $1,777.

NOTE 5. LEASEHOLD INTEREST

On May 14, 1993, in connection with the development of a dockside casino in
Lakeshore, Mississippi, Alpha Gulf acquired from an unrelated third party
(Seller), a leasehold interest (the Leasehold) and certain other assets, net of
assumption of certain liabilities. The net purchase price was $3,500 and the
Company issued a convertible promissory note with a stated interest rate of 10%
and an effective rate of 30%. The difference in the interest rates represented
the implicit economic risks inherent in the transaction.

Effective in February 1994, the Company exercised its right to convert the
Seller's note and accrued interest (carrying amount of $2,883) into 792 shares
of the Company's common stock, of which 717 shares were contributed to the
Company by a stockholder and the remaining 75 shares were issued in 1996.

F-11

<PAGE>

<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

NOTE 6. NOTES PAYABLE

At December 31, 1996 and 1995, notes payable are comprised of the
following:

<TABLE>
<CAPTION>
INTEREST
RATE 1996 1995
-------- ------ ------

<S> <C> <C> <C>
Revolving line of credit with payments of principal and interest due monthly,
collateralized by funds held at the Company's casino and guaranteed by an Prime
affiliate........................................................................ +2% $ -- $ 145
Revolving line of credit of $500 with payments of principal and interest due in
March 1997, collateralized by cash advances...................................... 25% 497 200
Note payable to third party with payments of principal and interest due monthly,
collateralized by certain vehicles............................................... 11% 103
Notes payable to Bryanston and former CCG stockholders, of which $394 and $793 in
1996 and 1995, respectively, are non-interest bearing (see Note 3)............... 10% 1,885 3,293
Others............................................................................. Various 18 75
------ ------
$2,400 $3,816
------ ------
------ ------
</TABLE>

The $500 revolving line of credit, originally due in March 1997, was
extended to June 1997 (see Note 16).

At December 31, 1996, the Company was in default of its notes payable to
affiliates aggregating $1,885. The Company received a waiver through December
31, 1997 of the default of the Bryanston notes aggregating $1,399.

NOTE 7. LONG-TERM DEBT

At December 31, 1996 and 1995, long-term debt is comprised of the
following:

<TABLE>
<CAPTION>
INTEREST
RATE 1996 1995
-------- ------- -------

<S> <C> <C> <C>
Mortgage note payable, Bryanston, principal and interest due monthly through
November 1998, collateralized by the barge and certain other assets......... 10% $ 7,800 $ 7,800
Mortgage note payable in monthly installments of $70 plus interest at 30-day
commercial paper rate (5.95% at December 31, 1996) plus 3.5%, adjusted
quarterly, funded with weekly deposits of $25 into a restricted cash
account, collateralized by the boat and improvements........................ 9% 3,656 3,736
Equipment notes payable monthly through November 1999 and collateralized by
certain assets.............................................................. 10-14% 9,284 13,432
Capitalized lease obligations, payable monthly, expiring in various years
through 2001................................................................ 10-14% 386 925
Loans payable, Bryanston ($2,474) and an unrelated third party ($1,181)....... 12% 3,655
Note payable quarterly through March 2000 and secured by assignment of
interest in the mortgage note payable to Bryanston (see Note 16)............ 10% 1,200
Other......................................................................... 7-11% 68 84
------- -------
22,394 29,632
Less current portion.......................................................... 14,528 27,320
------- -------
$ 7,866 $ 2,312
------- -------
------- -------
</TABLE>

F-12

<PAGE>

<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

Aggregate future required principal payments of long-term debt are as
follows:

<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31:
- -----------------------------------------------------------------------------------

<S> <C>
1997..................................................................... $14,528
1998..................................................................... 7,155
1999..................................................................... 491
2000..................................................................... 200
2001..................................................................... 18
Thereafter............................................................... 2
-------
$22,394
-------
-------
</TABLE>

In August 1995, Bryanston purchased the mortgage of $7,800 on the Lakeshore
barge from a third party. The transaction resulted in a write-off on the
unamortized discount on the original note of approximately $931. In connection
with the agreement, Bryanston also acquired 96 shares of common stock owned by
the third party (see Note 11).

In October 1995, the Company restructured certain equipment notes,
aggregating approximately $9,000, with unrelated parties, whereby the Company
will pay approximately $6,500 in forty-eight monthly installments of $166 (which
includes interest of 10% per annum) commencing December 15, 1995. The balance of
approximately $2,500 bears interest at 10% per annum, is due on November 15,
1999, and may either be partially or fully repaid, pursuant to an escrow
agreement, from the net proceeds of the sale of 701 shares of the Company's
common stock held in escrow. To the extent that the net proceeds exceeds $2,500
plus accrued interest ($286 at December 31, 1996), the excess will be applied to
the $6,500 portion of the debt. However, if the net proceeds are less than the
$2,500 plus accrued interest, then the Company will be required to remit the
balance due at maturity (see Note 10). The escrow agreement provides for the
unrelated party to have full voting rights pertaining to the escrowed shares and
the right to sell any or all of the shares. The Company has the right of first
refusal to purchase the shares that the unrelated party desires to sell. The
debt is collateralized by the Company's barge and certain gaming equipment.

In October 1995, the Company restructured a certain equipment note of
approximately $800 with an unrelated party. The amended terms provide for
thirty-six monthly installments of approximately $26 (which includes interest at
11.5% per annum), commencing November 24, 1995.

In April 1996, the Company restructured its capital sign lease of $745 with
an unrelated party. The terms of the restructure reduces the lease principal
amount to $475 and forgives $74 of accrued interest. The effective interest rate
of the restructured lease is 10% per annum, with a four-year term. In June 1996,
the Company issued 42 shares of its preferred stock in settlement of a certain
loan payable of $1,181, plus accrued interest of $41. As a result, the Company
was charged a five percent transaction fee of $61, which was converted into 2
shares of the Company's preferred stock.

In December 31, 1996, the Company was relieved of its loan payable to
Bryanston for $2,694 (which includes accrued interest of $270), in partial
consideration for Bryanston's purchase of 100% of Alpha Hotel's common stock
owned by the Company (see Note 14).

At December 31, 1996, the Company was in default of nonpayment of (i) the
mortgage notes aggregating $11,456, and (ii) the equipment notes aggregating
$9,284, as well as the breach of several loan covenants. The Company received a
waiver of the defaults on the $7,800 mortgage note payable to Bryanston and on a
$257 equipment note (see Note 16), through December 31, 1997. Accordingly, the
mortgage note of $3,656 and the equipment notes aggregating $9,027 are reflected
in current liabilities at December 31, 1996.

At December 31, 1995, the Company was in default of (i) its mortgage notes
aggregating $11,536 for nonpayment, (ii) the equipment notes aggregating $13,432
for the breach of several loan covenants

F-13

<PAGE>

<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

and (iii) a capital lease of $745 for nonpayment. Certain loans payable,
aggregating $3,655, went into default in 1996 due to nonpayment. The Company
received a waiver of the default on the loan payable of $2,474 to Bryanston.
Accordingly, the mortgage notes payable, equipment notes payable, capital lease
and a certain loan payable of $1,181 were reflected in current liabilities at
December 31, 1995.

NOTE 8. ACCOUNTS PAYABLE AND OTHER ACCRUED EXPENSES

At December 31, 1996 and 1995, accounts payable and other accrued expenses
are comprised of the following:

<TABLE>
<CAPTION>
1996 1995
------ -------

<S> <C> <C>
Construction........................................................... $1,121 $ 1,218
Insurance financing.................................................... 585 1,585
Accrued professional fees.............................................. 983 851
Accrued property taxes................................................. 708 843
Accrued interest....................................................... 2,196 738
Other.................................................................. 4,318 5,239
------ -------
$9,911 $10,474
------ -------
------ -------
</TABLE>

NOTE 9. COMMITMENTS, CONTINGENCIES AND RELATED PARTY TRANSACTIONS

In September 1993, Alpha Hotel entered into a Service Agreement and an
Expense Reimbursement Agreement with Bryanston. Under the Service Agreement,
Alpha Hotel supplied services for the management of hotels and motels. Service
fees were generated based upon a percentage of hotel and motel revenues, as
defined in the respective agreements. Between 1994 and 1996, Alpha Hotel managed
approximately fourteen to twenty hotels and motels. Pursuant to the terms of the
Expense Reimbursement Agreement, the Company reimbursed Bryanston for direct
payroll and related costs for use of certain office space and its share of
office expenses. In December 1996, the Company sold 100% of the common stock of
Alpha Hotel to Bryanston for $3,000 (see Note 14).

In 1993, the Company entered into an agreement with a third party, under
which the third party would provide marketing services. The agreement was for
ten years and could be canceled by the Company after five years. In September
1995, the Company arranged for the early termination of the agreement. The funds
required to terminate this agreement ($1,500) and to pay amounts due under the
agreement through the date of the termination were settled by Bryanston and
through the issuance of 96 shares of the Company's stock (see Note 11). Expenses
incurred under this marketing agreement were $564 and $1,665 for the years ended
December 31, 1995 and 1994, respectively.

The Company is obligated under a $20,000 non-revolving promissory note with
Bryanston. The note, which bears interest at prime (8.25% at December 31, 1996)
plus 2%, is payable at the lesser of the outstanding principal amount or $2,000
per annum through December 31, 1999. Beginning in 1996, interest is due and
payable monthly and the 1995 interest accrued on the note ($503) is payable on
the note's maturity date, December 2000. Additionally, commencing May 1, 1996
and for each of the next succeeding three years thereafter, the Company is
required to make additional principal payments equal to 'Available Cash Flow of
Maker' as defined in the note. In June 1996, the Company issued 661 shares of
its preferred stock in settlement of $19,165 of the note. As a result, the
Company was charged a five percent transaction fee of $958, which was converted
into 33 shares of the Company's preferred stock. Additionally, in December 1996,
the Company was relieved of $306 (which includes accrued interest of $90) of the
note, in partial consideration for Bryanston's purchase of Alpha Hotel (see Note
14). The outstanding principal balance at December 31, 1996 and 1995 is $1,746
and $17,361, respectively.

F-14

<PAGE>

<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

The Company was obligated under an operating lease relative to real
property located in Lakeshore, Mississippi. In August 1996, the Company was
named as a defendant in an action brought in the United States District Court
for the Southern District of Mississippi (Joseph R. Cure, Jr., Cynthia Cure
Rutherford, Michael Cure and Susan Cure Gollot v. Alpha Gulf Coast, Inc.) for
alleged past due and future accelerated rentals and other costs under this
lease. Subsequent to December 31, 1996, the Company reached settlement terms
with the plaintiffs (see Note 16). Rent expense under this lease for the years
ended December 31, 1996, 1995 and 1994 was $800 (excluding a $541 settlement and
early termination charge), $576 (including a $500 credit as a result of
renegotiated lease terms), and $2,030, respectively.

The Company was obligated under a tideland lease which provided for a
mooring site for the Company's Lakeshore, Mississippi vessel. In December 1996,
the State of Mississippi (State) terminated the lease for nonpayment of rent.
The State offered to abate past due rents if the vessel is removed and the
improvements to the leasehold are conveyed to the State. The State has allowed
until March 31, 1997 (subsequently extended on a month to month basis) for
removal of the vessel. Rent expense in 1996 was $96 and in 1995 and 1994 was
$200 under this lease.

The Company is obligated under other operating leases relative to real
property and equipment.

Future aggregate minimum annual rental payments under all of these leases
are as follows:

<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31:
- -------------------------------------------------------------------------------------

<S> <C>
1997....................................................................... $ 796
1998....................................................................... 385
1999....................................................................... 358
2000....................................................................... 357
2001....................................................................... 362
Thereafter................................................................. 729
------
$2,987
------
------
</TABLE>

In January 1995, the Company, through its subsidiary, Alpha St. Regis,
entered into a memorandum of understanding with Catskill Development, L.L.C.
(Catskill) pursuant to which Alpha St. Regis is to participate in the
development of, and thereafter manage, a casino to be built adjacent to the
Monticello Raceway in Sullivan County, New York. It is intended that the casino
will be owned by the St. Regis Mohawk Indian Tribe (Tribe) and will be located
on land to be placed in trust for the benefit of the Tribe. The casino project
is subject to approval by the U.S. Department of Interior, the National Indian
Gaming Commission and the State of New York, as well as the execution of
definitive agreements with the Tribe. As of December 31, 1996, the Company has
contributed $734 toward the design, architecture and other costs of development
plans for the casino. Under the memorandum of understanding, Catskill and Alpha
St. Regis committed to enter into a definitive agreement on the terms
established in the memorandum, but there can be no assurance that such an
agreement will ever be consummated. Bryanston is a 25% member of Catskill.

In 1996, Alpha St. Regis assigned its interest, under the memorandum of
understanding with Catskill, to Alpha Monticello.

The Company is obligated under an employment contract with a principal
stockholder/officer. Under this agreement, the Company will accrue deferred
compensation of $250 per year. The agreement is automatically renewable for
successive twelve month periods, unless either party shall advise the other on
ninety days written notice of his or its intention not to extend the term of the
employment. In the event of termination of employment, the terminated officer
will be retained to provide consulting services for two years at $175 per annum.

F-15

<PAGE>

<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

In accordance with Mississippi law, the Company's casino licenses had
initial terms of two years and would be subject to periodic renewal. In October
1995, the Company received renewals of their casino licenses through October
1997. In July 1996, the Company closed its Lakeshore casino and surrendered its
casino license for that location. Failure to retain the Greenville license could
have a material adverse effect on the Company's operations.

In October 1994, Alpha Gulf was named as a defendant in an action brought
in the United States District Court for the Southern District of Mississippi
(Susan E. Wolff, et al v. James C. Zamecnik, et al) on the theory of 'liquor
liability' for the service of alcohol to a customer, who subsequently was
involved in an automobile collision with the Plaintiff. The Plaintiff also
initiated a declaratory judgment action in the same court against Alpha Gulf and
its insurance carriers seeking a determination as to the liability of such
carriers under the insurance policies issued by the carriers to Alpha Gulf and
the Company for any damages found against Alpha Gulf in the primary litigation
up to the policy limits. The declaratory judgment action instituted by Plaintiff
was dismissed in June 1996. In addition, a settlement has been reached between
Plaintiff and Alpha Gulf's insurance carrier, with respect to the underlying
personal liability action, in the amount of $5,125. The principal insurance
carrier, which has paid the settlement, has asserted that Alpha Gulf has an
obligation to reimburse it for payment of the settlement amount. This matter was
settled in March 1997 (see Note 16).

In January 1996, Alpha Gulf was named as a defendant in an action brought
in the Circuit Court of Hinds County, Mississippi (Amos v. Alpha Gulf Coast,
Inc.; Batiste v. Alpha Gulf Coast, Inc., Ducre v. Alpha Gulf Coast, Inc.;
Johnston v. Alpha Gulf Coast, Inc.; Rainey v. Alpha Gulf Coast, Inc.). Based on
the theory of 'liquor liability' for the service of alcohol to a customer,
Plaintiffs alleged that on January 16, 1995, a vehicle operated by Mr. Amos
collided with a vehicle negligently operated by Mr. Rainey, an individual that
was allegedly served alcoholic beverages by Alpha Gulf. Plaintiffs alleged that
they suffered personal injuries and seek compensatory damages aggregating
$17,100 and punitive damages aggregating $37,500. The ultimate outcome of this
litigation cannot presently be determined, as this case is presently in the
early phases of discovery. Accordingly, no provision for liability to the
Company, that may result upon adjudication, has been made in the accompanying
consolidated financial statements. The Company believes that the risk referred
to in this paragraph is adequately covered by insurance.

In December 1996, Alpha Gulf and the Company were named as defendants in an
action brought in the United States District Court for the Southern District of
New York (Bally Gaming, Inc. v. Alpha Hospitality Corp. and Alpha Gulf Coast,
Inc.) for allegedly engaging in conduct which would impair the collateral held
as security for certain financial obligations. Such conduct includes the failure
to pay certain monetary obligations unrelated to the obligations secured by the
collateral. Plaintiffs seek specific performance of particular actions that
Plaintiffs believe are necessary to protect the collateral that secures the
financial obligations, plus unspecified damages and attorney's fees, among other
things. The ultimate outcome of this case cannot presently be determined, as it
is in its preliminary stages.

The Company is a party to various other legal actions which arise in the
normal course of business. In the opinion of the Company's management, the
resolution of these other matters will not have a material adverse effect on the
financial position of the Company.

In January 1995, the Company entered into an agreement to acquire all the
outstanding common stock of Doc Holliday, Inc. (Doc Holliday), the owner and
operator of a casino in Central City, Colorado. In May 1996, the Company
terminated its stock acquisition agreement with Doc Holliday.

NOTE 10. AMOUNTS DUE UNDER REDEMPTION AGREEMENT

The amounts due under redemption agreement (see Note 7) are adjusted for
changes in the market value of the Company's underlying common stock, not to
exceed the original debt incurred, until the common stock is sold by the
unrelated party.

F-16

<PAGE>

<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

At December 31, 1996, the amounts due under the redemption agreement is
$1,739, which includes $286 of accrued interest, resulting from the decrease in
the fair market value of the 696 shares of the Company's common stock in escrow
at December 31, 1996 ($1.44) and the price at the date of the escrow agreement
($3.50).

NOTE 11. STOCKHOLDERS' EQUITY

In December 1994, the Company issued 625 shares of its preferred stock in
settlement of $8,284 due Bryanston, which included $349 of accrued interest. In
November 1995, the Company converted the 625 shares of preferred stock to 1,250
shares of common stock in a 2 for 1 exchange.

In November 1994, the Company entered into an agreement with a third party
to settle $559 owed pursuant to a marketing agreement by issuing 96 shares of
its common stock. The third party was given a put option which was exercisable
during the thirty day period commencing one year from the date of the agreement
at $6.50 per share. The common stock was recorded at $5.80 per share, its fair
value at the issuance date. The carrying amount was periodically increased for
the amount which would be payable upon redemption. The accretion to the carrying
amount of $51 and $6 in 1995 and 1994, respectively, was determined using the
straight-line method (which did not materially differ from the interest method)
and resulted in a corresponding decrease to capital in excess of par value. In
October 1995, the third party exercised their put option, purchased 96 shares of
common stock for $616, and subsequently sold the shares to Bryanston.

In consideration for 1995 services provided to the Company, the Company
issued options to a third party with a fair value of $90.

In 1995, the Company issued 783 shares related to the CCG acquisition (see
Note 3).

In consideration for 1995 services provided to the Company, the Company
issued 348 shares to Bryanston, with a fair value of $1,600 in 1996 (such shares
are included in common stock subscribed at December 31, 1995).

In 1996, the Company issued 701 shares, to be held in escrow, related to
certain restructured equipment notes (see Note 7) and 75 shares related to a
convertible promissory note (see Note 5).

In June 1996, the Company issued 661 and 42 shares, respectively, of its
preferred stock, in settlement of $19,165 and $1,222, respectively, of its
unsecured debt with Bryanston and an unrelated third party (see Notes 7 and 9).
The Company was charged a five percent transaction fee of $1,019, which was
converted into 35 shares of the Company's preferred stock. The conversion rate
was based on the fair market value of the Company's common stock at the date of
conversion ($3.625). Each preferred share is convertible into eight shares of
the Company's common stock after December 31, 1996 and carries voting rights of
one vote per preferred share. The preferred stock also carries a dividend of
$2.90 per share, payable quarterly, which increases to $3.77 per share if the
cash dividend is not paid within thirty days of the end of each fiscal year. In
such event, the dividend will be payable in common stock. As of March 21, 1997,
the dividend has not been paid. Accordingly, the Company is obligated to declare
a stock dividend of approximately 968 shares.

In December 1996, the Company's Board of Directors approved to increase the
total number of common stock that the Company shall have the authority to issue
from 17,000 shares to 25,000 shares.

NOTE 12. STOCK OPTIONS AND WARRANTS

In June 1993, the Company's Board of Directors adopted the 1993 Stock
Option Plan (Plan) providing for incentive stock options ('ISO's') and
non-qualified stock options (NQSO's). The Company has reserved 900 shares of
common stock for issuance upon the exercise of options to be granted under the
plan. The exercise price of an ISO or NQSO will not be less than 100% of the
fair

F-17

<PAGE>

<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

market value of the Company's common stock at the date of the grant. The Company
granted options to purchase an aggregate of 385 shares of common stock at an
exercise price of $3.25 through December 31, 1995. In addition, effective
December 1993, the Company granted options to purchase an aggregate of 24 shares
of common stock at an exercise price of $11.50. In September 1994, the Company
granted to a director, options to purchase 50 shares of its common stock at an
exercise price of $5.00, which can be exercised any time up to October 1, 1999.
The maximum term of each option granted under the plan is ten years, however,
options granted to an employee owning greater than 10% of the Company's common
stock will have a maximum term of five years. As of December 31, 1996 and 1995,
no options under this plan were exercised.

In October 1993, the Company entered into an option agreement with an
unrelated third party whereby the unrelated third party received an option,
expiring on October 31, 1998, to purchase 600 shares of the Company's common
stock at an exercise price of $14 per share. As of December 31, 1996 and 1995,
the option was not exercised.

In conjunction with its November 1993 initial public offering, the Company
issued 863 redeemable common stock purchase warrants at $.10 per warrant. Each
warrant entitled the holder to purchase one share of common stock at the
exercise price of $12.00, commencing November 1993 until November 1998. As of
December 31, 1996 and 1995, no warrants were exercised.

In December 1995, the Company granted to Bryanston an option to acquire 348
shares of the Company's common stock at an exercise price per share equal to the
closing NASDAQ bid price as of December 4, 1995 ($5.375 per share). The option
expires on December 4, 2000. As of December 31, 1996 and 1995, the option was
not exercised.

The Company has adopted the disclosure-only provisions of SFAS 123,
'Accounting for Stock-Based Compensation'. Accordingly, no compensation cost has
been recognized for the Company's Plan. Had compensation cost for the Company's
Plan been determined based on the fair value at the grant date of awards in the
years ending December 31, 1996 and 1995 consistent with the provisions of SFAS
123, the Company's net loss from continuing operations and net loss per common
share from continuing operations would have been increased to the pro forma
amounts indicated below:

<TABLE>
<CAPTION>
1996 1995
-------- --------

<S> <C> <C>
Loss from continuing operations, as reported........................ $(26,309) $(19,344)
Loss from continuing operations, pro forma.......................... (26,634) (19,370)
Loss per common share from continuing operations, as reported....... (1.98) (1.82)
Loss per common share from continuing operations, pro forma......... (2.01) (1.82)
</TABLE>

Because the SFAS 123 method of accounting has not been applied to options
granted prior to January 1, 1995, the resulting pro forma compensation cost may
not be representative of that to be expected in future years.

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1996 and 1995: risk-free interest rates of six
percent; no dividend yields; option life of five years; and expected volatility
of eighty percent.

NOTE 13. INCOME TAXES

The Company and all of its subsidiaries file a consolidated federal income
tax return. Income tax expense is allocated pursuant to the separate tax return
attributes of each subsidiary. At December 31, 1996 and 1997, the Company's
deferred federal income tax asset is comprised of the tax benefit (cost)
associated with the following items based on the 35% tax rate currently in
effect:

F-18

<PAGE>

<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

<TABLE>
<CAPTION>
1996 1995
-------- -------

<S> <C> <C>
Pre-opening costs expensed for financial reporting and amortized over
five years for tax purposes......................................... $ 984 $ 1,477
Net operating loss carryforwards...................................... 14,153 10,376
Depreciation.......................................................... (805) 408
Differences between financial and tax bases of assets and
liabilities......................................................... 990 (3,833)
Other................................................................. 171 101
-------- -------
Deferred income tax asset............................................. 15,493 8,529
Valuation allowance................................................... (15,493) (8,529)
-------- -------
$ -- $ --
-------- -------
-------- -------
</TABLE>

For the year ended December 31, 1994, the federal statutory tax rate and
the Company's effective rate differs due to the reversal of the entire deferred
income tax asset recorded at December 31, 1993.

The Company has available for federal income tax purposes, a net operating
loss carryover of approximately $40,438, of which $883, $7,407, $21,354 and
$10,794 will expire in the years 2008, 2009, 2010 and 2011, respectively.

NOTE 14. DISCONTINUED OPERATIONS

On December 31, 1996, the Company sold its hotel management subsidiary,
Alpha Hotel, to Bryanston for $3,000 and realized a $2,849 gain after tax. Such
transaction resulted in a reduction of the Company's debts to Bryanston (see
Notes 7 and 9). Summary operating results of discontinued operations, excluding
the above gain, for the three years ended December 31, 1996 are as follows:

<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------

<S> <C> <C> <C>
Net sales........................................................ $1,992 $2,863 $2,835
Cost of sales.................................................... 1,347 1,512 1,710
------ ------ ------
Income from operations of discontinued hotel management segment,
before intercompany charge..................................... $ 645 $1,351 $1,125
------ ------ ------
------ ------ ------
</TABLE>

The net assets of Alpha Hotel, included in the December 31, 1995
consolidated balance sheet, are summarized as follows:

<TABLE>
<S> <C>
Current assets........................................................................ $ 419
Current liabilities................................................................... (20)
Other long-term liabilities, net...................................................... (219)
-----
Net assets............................................................................ $ 180
-----
-----
</TABLE>

NOTE 15. CONTINUING OPERATIONS

The consolidated financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has suffered significant
losses from operations and has a working capital deficit of $29,810 and an
accumulated deficit of $55,949 at December 31, 1996. In addition, the Company
was not in compliance with certain long-term debt covenants, therefore requiring
the obligations to be classified as current liabilities.

Management of the Company recognizes that these conditions raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans include continuing to operate the Greenville Casino
profitably, sell certain assets located in Lakeshore, develop future casino
locations in Missouri and New York and continue to reduce and monitor operating
expenses. Accordingly, the

F-19

<PAGE>

<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

Company's ability to continue as a going concern is dependent upon its ability
to develop working capital, attain future profitable operations and meet its
creditors' demands. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

NOTE 16. SUBSEQUENT EVENTS

In March 1997, the Company received a waiver through December 31, 1997 on
an equipment note of $257 (see Note 7).

On March 12, 1997, the Company sold 571 shares of its $.01 par value common
stock for $1,000.

In March 1997, the Company entered into a renewal and extension agreement
related to its $500 revolving line of credit, whereby the Company received an
extension through June 1997 (see Note 6).

In March 1997, the Company reached settlement terms in an action brought
against it for alleged past due and future accelerated rentals (see Note 9). In
the settlement, the Company will pay $500 at closing and $1,200 in the form of a
three year, 10% note payable quarterly (see Note 7). The note will be secured by
assignment of an interest in the mortgage note payable to Bryanston.
Additionally, the Company will have the option to buy out the remaining
obligations at reduced principal amounts at accelerated dates, as specified in
the settlement agreement. The settlement and early termination of the operating
lease resulted in a $541 charge to operations for the year ended December 31,
1996.

As of March 21, 1997, the Company and the principal insurance carrier
reached a settlement on the Wolff case whereby each party will give a general
and final release discharging all claims that each may have against the other.

As of March 21, 1997, Bryanston has advanced $850 to the Company pursuant
to a non-revolving promissory note.

F-20

<PAGE>

<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------
SEPTEMBER 30,
1997
-------------
(UNAUDITED)
(IN THOUSANDS)

<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash, including restricted cash of $270 in 1996............................... $ 288 $ 1,350
Accounts receivable, less allowance for doubtful accounts of $474 and $527 in
1997 and 1996, respectively.................................................. 102 73
Inventories................................................................... 301 297
Prepaid insurance............................................................. 76 615
Other current assets.......................................................... 206 195
------------- ------------
Total current assets..................................................... 973 2,530
------------- ------------
PROPERTY AND EQUIPMENT, less accumulated depreciation and amortization of $21,300
and $17,475 in 1997 and 1996, respectively....................................... 36,812 39,660
OTHER ASSETS, deposits and other................................................... 2,087 1,764
------------- ------------
$ 39,872 $ 43,954
------------- ------------

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt.......................................... $ 20,293 $ 14,528
Notes payable................................................................. 1,789 2,400
Accounts payable and other accrued expenses................................... 8,920 9,911
Accrued payroll and related liabilities....................................... 2,483 3,755
Due to affiliate, current maturity............................................ 2,000 1,746
------------- ------------
Total current liabilities................................................ 35,485 32,340
------------- ------------
LONG-TERM DEBT, less current maturities............................................ 961 7,866
------------- ------------
DUE TO AFFILIATE, less current maturity, including accrued interest of $503........ 1,439 503
------------- ------------
AMOUNT DUE UNDER REDEMPTION AGREEMENT, including accrued interest of $237 and $286
in 1997 and 1996, respectively................................................... 842 1,739
------------- ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value, authorized 1,000 shares, 821 and 738 shares
issued in 1997 and 1996, respectively........................................ 8 7
Common stock, $.01 par value, 25,000 shares authorized, 14,406 and 13,478
shares issued in 1997 and 1996, respectively................................. 144 135
Capital in excess of par value................................................ 61,863 56,778
Accumulated deficit........................................................... (60,870) (55,414)
------------- ------------
Total stockholders' equity............................................... 1,145 1,506
------------- ------------
$ 39,872 $ 43,954
------------- ------------
------------- ------------
</TABLE>

See accompanying notes to consolidated financial statements

F-21

<PAGE>

<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1997 1996
------- --------
(UNAUDITED)
(IN THOUSANDS,
EXCEPT FOR PER
SHARE DATA)

<S> <C> <C>
REVENUES:
Casino................................................................................ $23,868 $ 34,814
Food and beverage, retail and other................................................... 469 1,097
------- --------
Total revenues................................................................... 24,337 35,911
------- --------
COSTS AND EXPENSES:
Casino................................................................................ 9,004 13,329
Food and beverage, retail and other................................................... 434 1,434
Selling, general and administrative................................................... 13,003 20,324
Interest.............................................................................. 2,469 3,529
Depreciation and amortization......................................................... 3,854 4,788
Development costs..................................................................... 1,029 217
Debt conversion fee................................................................... -- 1,019
Write-off of leasehold and improvements............................................... -- 14,507
------- --------
Total costs and expenses......................................................... 29,793 59,147
------- --------
LOSS FROM CONTINUING OPERATIONS............................................................ (5,456) (23,236)
DISCONTINUED OPERATIONS:
Income from operations of discontinued hotel management segment....................... -- 555
------- --------
NET LOSS................................................................................... $(5,456) $(22,681)
------- --------
------- --------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING................................................. 14,029 13,292
------- --------
------- --------
EARNINGS (LOSS) PER COMMON SHARE:
From continuing operations............................................................ $ (.39) $ (1.75)
From discontinued operations.......................................................... $ -- $ .04
------- --------
NET LOSS................................................................................... $ (.39) $ (1.71)
------- --------
------- --------
</TABLE>

See accompanying notes to consolidated financial statements

F-22

<PAGE>

<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS -- (CONTINUED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
------------------
1997 1996
------- -------
(UNAUDITED)
(IN THOUSANDS,
EXCEPT FOR PER
SHARE DATA)

<S> <C> <C>
REVENUES:
Casino................................................................................. $ 8,013 $ 9,493
Food and beverage, retail and other.................................................... 146 292
------- -------
Total revenues.................................................................... 8,159 9,785
------- -------
COSTS AND EXPENSES:
Casino................................................................................. 3,128 3,255
Food and beverage, retail and other.................................................... 154 325
Selling, general and administrative.................................................... 4,529 5,797
Interest............................................................................... 882 886
Depreciation and amortization.......................................................... 1,293 1,344
Development costs...................................................................... 422 60
------- -------
Total costs and expenses.......................................................... 10,408 11,667
------- -------
LOSS FROM CONTINUING OPERATIONS............................................................. (2,249) (1,882)
DISCONTINUED OPERATIONS:
Income from operations of discontinued hotel management segment........................ -- 125
------- -------
NET LOSS.................................................................................... $(2,249) $(1,757)
------- -------
------- -------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING.................................................. 14,294 13,478
------- -------
------- -------
EARNINGS (LOSS) PER COMMON SHARE:
From continuing operations............................................................. $ (.16) $ (.14)
From discontinued operations........................................................... $ -- $ .01
------- -------
NET LOSS.................................................................................... $ (.16) $ (.13)
------- -------
------- -------
</TABLE>

See accompanying notes to consolidated financial statements

F-23

<PAGE>

<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1997 1996
------- --------
(UNAUDITED)
(IN THOUSANDS)

<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss............................................................................... $(5,456) $(22,681)
Adjustments to reconcile net loss to net cash provided by (used in) operating
activities:
Depreciation and amortization..................................................... 3,854 4,788
Debt conversion fee............................................................... -- 1,019
Write-off of leasehold and improvements........................................... -- 14,507
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable................................... (29) 370
(Increase) decrease in inventories........................................... (4) 216
Decrease in prepaid insurance................................................ 539 1,670
(Increase) decrease in other current assets.................................. (11) 901
Decrease in accounts payable and other accrued expenses...................... (268) (1,068)
Increase (decrease) in accrued payroll and related liabilities............... (1,272) 1,137
------- --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES......................................... (2,647) 859
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment.................................................... (1,006) (1,421)
Payments for deposits and other assets................................................. (323) (869)
------- --------
NET CASH USED IN INVESTING ACTIVITIES....................................................... (1,329) (2,290)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from affiliate................................................................ 3,190 3,220
Proceeds from sale of common stock..................................................... 1,000 --
Payments on notes payable.............................................................. (136) (1,250)
Payments on long-term debt............................................................. (1,140) (1,494)
------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES................................................... 2,914 476
------- --------
NET DECREASE IN CASH........................................................................ (1,062) (955)
CASH, beginning of period................................................................... 1,350 2,316
------- --------
CASH, end of period......................................................................... $ 288 $ 1,361
------- --------
------- --------
</TABLE>

See accompanying notes to consolidated financial statements

F-24

<PAGE>

<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------
1997 1996
------ -------
(UNAUDITED)
(IN THOUSANDS)

<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION,
cash paid for interest during the period................................................... $ 707 $ 2,187
------ -------
------ -------
SUPPLEMENTAL SCHEDULES OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Increase (decrease) in amount due under redemption agreement, including accrued interest
of $237 and $235 in 1997 and 1996 respectively......................................... $ (897) $ 1,024
------ -------
------ -------
Preferred stock issued on September 30, 1997 in settlement of an affiliated loan........ $2,000 $ --
------ -------
------ -------
Common stock issued for payment of notes payable........................................ $ 475 $ --
------ -------
------ -------
Commons stock issued for settlement of certain accounts payable and accrued expenses.... $ 536 $ --
------ -------
------ -------
Common stock issued for payment of long-term debt....................................... $ -- $ 2,454
------ -------
------ -------
Preferred stock issued in settlement of long-term debt, includes $41 of accrued interest
and $1,019 of debt conversion fee...................................................... $ -- $21,407
------ -------
------ -------
</TABLE>

See accompanying notes to consolidated financial statements

F-25

<PAGE>

<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS)

NOTE 1. NATURE OF BUSINESS

Alpha Hospitality Corporation (the 'Company') was incorporated in Delaware
on March 19, 1993, through its subsidiaries is engaged in (i) the ownership and
operation of a gaming vessel located in Greenville, Mississippi, and (ii) the
pursuit of casino development and management opportunities in Missouri and New
York.

NOTE 2. BASIS OF PRESENTATION AND SUMMARY OF SELECTED SIGNIFICANT ACCOUNTING
POLICIES

Basis of Presentation. The accompanying unaudited consolidated financial
statements of Alpha Hospitality Corporation and subsidiaries have been prepared
in accordance with the instructions to Form 10-Q and do not include all of the
information and footnotes required by generally accepted accounting principals.
All adjustments which are of a normal and recurring nature and, in the opinion
of management, necessary for a fair presentation have been included. The
unaudited consolidated financial statements should be read in conjunction with
the audited consolidated financial statements as of December 31, 1996, included
in the Form 10-K.

Operations and Principles of Consolidation. The accompanying statements
include the accounts of the Company and all of its wholly-owned subsidiaries.
All intercompany transactions and balances have been eliminated in
consolidation.

Loss Per Common Share. Loss per common share is based on the weighted
average number of shares outstanding. The Company's outstanding stock options,
warrants and convertible preferred stock are excluded in the computation since
they would have an antidilutive effect on loss per common share. Certain shares
(616) being held in escrow are included in this calculation.

Promotional Allowances. Revenues do not include the retail amount of food
and beverage of approximately $2,740, $2,942, $845 and $790 provided
gratuitously to customers, for the nine months and three months ended September
30, 1997 and 1996, respectively.

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

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

Reclassifications. Certain amounts have been reclassified in 1996 to
conform to the 1997 presentation.

F-26

<PAGE>

<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS)

NOTE 3. PROPERTY AND EQUIPMENT

Details of property and equipment at September 30, 1997 and December 31,
1996 are as follows:

<TABLE>
<CAPTION>
1997 1996
------- -------

<S> <C> <C>
Land and building................................................................. $ 214 $ 214
Boat, barge and improvements...................................................... 24,341 24,261
Leasehold and improvements........................................................ 14,241 14,215
Gaming equipment.................................................................. 10,302 10,221
Furniture, fixtures and equipment................................................. 7,430 7,414
Transportation equipment.......................................................... 779 810
Construction in progress.......................................................... 805 --
------- -------
58,112 57,135
Less accumulated depreciation and amortization.................................... 21,300 17,475
------- -------
$36,812 $39,660
------- -------
------- -------
</TABLE>

Included in property and equipment at September 30, 1997 and December 31,
1996 is approximately $1,225 related to assets recorded under capital leases.
Included in accumulated depreciation and amortization at September 30, 1997 and
December 31, 1996 was approximately $609 and $498, respectively, of amortization
related to assets recorded under capital leases.

NOTE 4. NOTES PAYABLE

Notes payable at September 30, 1997 and December 31, 1996 are comprised of
the following:

<TABLE>
<CAPTION>
INTEREST
RATES 1997 1996
-------- ------ ------

<S> <C> <C> <C>
Notes payable to Bryanston Group, Inc. (Bryanston), an affiliate and
former Cotton Club stockholders of which $295 and $394 in 1997 and
1996, respectively are non-interest bearing............................ 10% 1,401 1,885
Revolving bank line of credit with payments of principal and interest due
December 1997, collateralized by cash advances......................... 25% 370 497
Other.................................................................... Various 18 18
------ ------
$1,789 $2,400
------ ------
------ ------
</TABLE>

At September 30, 1997, the Company was in default of its notes payable to
Bryanston and a former Cotton Club stockholder. The Company received a waiver of
the default through December 31, 1997, on the Bryanston notes aggregating
$1,399.

F-27

<PAGE>

<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS)

NOTE 5. LONG-TERM DEBT

Long-term debt at September 30, 1997 and December 31, 1996 is comprised of
the following:

<TABLE>
<CAPTION>
INTEREST
RATES 1997 1996
-------- ------- -------

<S> <C> <C> <C>
Mortgage note payable, Bryanston, principal and interest due monthly
through November 1998, collateralized by the barge and certain other
assets.............................................................. 10% $ 7,800 $ 7,800
Mortgage note payable in monthly installments of $70 plus interest at
30-day commercial paper rate (5.5% at September 30, 1997) plus 3.5%
adjusted quarterly, collateralized by the boat and improvements..... 9% 3,656 3,656
Equipment notes payable monthly through November 1999 and
collateralized by certain assets.................................... 11-14% 8,366 9,284
Note payable quarterly through March 2000 and secured by assignment of
interest in the mortgage note payable to Bryanston.................. 10% 1,100 1,200
Capitalized lease obligations, payable monthly, expiring in various
years through 2001.................................................. 10-15% 325 386
Other................................................................. 7-11% 7 68
------- -------
21,254 22,394
Less current portion.................................................. 20,293 14,528
------- -------
$ 961 $ 7,866
------- -------
------- -------
</TABLE>

Aggregate future required principal payments are approximately as follows:

<TABLE>
<CAPTION>
YEARS ENDING SEPTEMBER 30
- -----------------------------------------------------------------------------------

<S> <C>
1998..................................................................... $20,293
1999..................................................................... 518
2000..................................................................... 397
2001..................................................................... 44
2002..................................................................... 1
Thereafter............................................................... 1
-------
$21,254
-------
-------
</TABLE>

In March 1997, the Company settled in an action brought against it for
alleged past due and future accelerated rentals in connection with its
Lakeshore, Mississippi, ground lease. In the settlement, the Company paid $500
at closing and $1,200 in the form of a three year, 10% note payable quarterly.
The note will be secured by assignment of an interest in the mortgage note
payable to Bryanston. Additionally, the Company will have the option to buy out
the remaining obligations at reduced principal amounts at accelerated dates, as
specified in the settlement agreement.

In October 1995, the Company restructured certain equipment notes,
aggregating approximately $9,000, with unrelated parties, whereby, the Company
will pay approximately $6,500 in forty-eight monthly installments of $166 (which
includes interest of 10% per annum) commencing December 15, 1995. The balance of
approximately $2,500 bears interest at 10% annum, is due on November 15, 1999,
and may either be partially or fully repaid, pursuant to an escrow agreement
from the net proceeds of the sale of 616 shares of the Company's common stock
held in escrow. To the extent that the net proceeds exceeds $2,500 plus accrued
interest ($237 at September 30, 1997), the excess will be applied to the $6,500
portion of the debt. However, if the net proceeds are less than the $2,500 plus
accrued interest, then the Company will be required to remit the balance due at
maturity (see Note 8). The escrow agreement provides for the unrelated party to
have full voting rights pertaining to the

F-28

<PAGE>

<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS)

escrowed shares and the right to sell any or all of the shares. The Company has
the right of first refusal to purchase the shares that the unrelated party
desires to sell. The debt is collateralized by the Company's barge and certain
gaming equipment.

At September 30, 1997, the Company was in default for nonpayment on (i) the
mortgage notes aggregating $11,456, and (ii) the equipment notes aggregating
$3,433. In addition, the Company was in default of certain loan covenants not
relating to payments which pertained to equipment notes amounting to $4,768. The
Company received a waiver of the defaults on the $7,800 mortgage note payable to
Bryanston through December 31, 1997. Accordingly, the mortgage notes of $11,456
and the equipment notes aggregating $8,201 are reflected in current liabilities
at September 30, 1997.

NOTE 6. ACCOUNTS PAYABLE AND OTHER ACCRUED EXPENSES

Accounts payable and other accrued expenses at September 30, 1997 and
December 31, 1996, are comprised of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------

<S> <C> <C>
Construction............................................................. $ 1,774 $2,121
Insurance financing...................................................... 20 585
Accrued professional fees................................................ 563 983
Accrued property taxes................................................... 508 708
Accrued interest......................................................... 3,699 2,196
Other.................................................................... 2,356 3,318
------------- ------------
$ 8,920 $9,911
------------- ------------
------------- ------------
</TABLE>

NOTE 7. COMMITMENTS, CONTINGENCIES AND RELATED PARTY TRANSACTIONS

The Company is obligated under a $20,000 non-revolving promissory note with
Bryanston. The note, which bears interest at prime (8.5% at September 30, 1997)
plus 2%, is payable at the lesser of the outstanding principal amount or $2,000
per annum through December 31, 1999. Beginning in 1996, interest is due and
payable monthly and the 1995 interest accrued on the note ($503) is payable on
the notes maturity date, December 2000. Additionally, commencing May 1, 1996,
and for each of the next succeeding three years thereafter, the Company is
required to make additional principal payments equal to 'Available Cash Flow of
Maker' as defined in the note. The outstanding principal balance at September
30, 1997 and December 31, 1996 is $2,936 and $1,746, respectively.

The Company was obligated under a tideland lease which provided for a
mooring site for the Company's Lakeshore, Mississippi vessel. In December 1996,
the State of Mississippi (State) terminated the lease for nonpayment of rent.
The State offered to abate past due rents if the vessel is removed and the
improvements to the leasehold are conveyed to the State. The State allowed until
March 31, 1997 for the removal of the vessel and has extended such arrangement
on a month to month basis.

The Company is obligated under other operating leases relative to real
property and equipment.

F-29

<PAGE>

<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS)

Indian Gaming Commission and the State of New York, as well as the execution of
definitive agreements with the Tribe. As of September 30, 1997, the Company has
contributed $773 toward the design, architecture and other costs of development
plans for the casino. Under the memorandum of understanding, Catskill and Alpha
Monticello, Inc. committed to enter into a definitive agreement of the terms
established in the memorandum, but there can be no assurance that such an
agreement will ever be consummated. Bryanston is a 25% member of Catskill.

The Company is obligated under an employment contract with its chief
executive officer. Under this agreement, the Company will accrue deferred
compensation of $250 per year. The agreement is automatically renewable for
successive twelve month periods, unless either party shall advise the other on
ninety days written notice of his or its intention not to extend the term of the
employment. In the event of termination of employment, the terminated officer
will be retained to provide consulting services for two years at $175 per annum.

In accordance with Mississippi law, the Company's casino license has a term
of two years and is subject to periodic renewal. In October 1997, the Company
received renewal of their casino license through October 1999 conditioned by the
opening of its Greenville hotel by no later than February 26, 1998. The
contractor has set a completion date of January 31, 1998 for the hotel. Failure
to retain the Greenville license could have a material adverse effect on the
Company's operations.

In January 1996, Alpha Gulf was named as a defendant in an action brought
in the Circuit Court of Hinds County, Mississippi (Amos v. Alpha Gulf Coast,
Inc.; Batiste v. Alpha Gulf Coast, Inc.; Ducre v. Alpha Gulf Coast, Inc.;
Johnston v. Alpha Gulf Coast, Inc.; Rainey v. Alpha Gulf Coast, Inc.). Based on
the theory of 'liquor liability' for the service of alcohol to a customer,
Plaintiffs alleged that on January 16, 1995, a vehicle operated by Mr. Amos
collided with a vehicle negligently operated by Mr. Rainey, an individual that
was allegedly served alcoholic beverages by Alpha Gulf. Plaintiffs alleged that
they suffered personal injuries and seek compensatory damages aggregating
$17,100 and punitive damages aggregating $37,500. The ultimate outcome of this
litigation cannot presently be determined, as this case is presently in the
early phases of discovery. Accordingly, no provision for liability to the
Company, that may result upon adjudication, has been made in the accompanying
consolidated financial statements. The Company believes that the risk referred
to in this paragraph is adequately covered by insurance.

In December 1996, Alpha Gulf and the Company were named as defendants in an
action brought in the United States District Court for the Southern District of
New York (Bally Gaming, Inc. v. Alpha Hospitality Corp. and Alpha Gulf Coast,
Inc.) for allegedly engaging in conduct which would impair the collateral held
as security for certain financial obligations. Such conduct includes the failure
to pay certain monetary obligations unrelated to the obligations secured by the
collateral. Plaintiffs seek specific performance of particular actions that
Plaintiffs believe are necessary to protect the collateral that secures the
financial obligations, plus unspecified damages and attorney's's fees, among
other things. On November 3, 1997, the Court granted the Company's motion to
dismiss with prejudice subject to the plaintiff's right to replead its complaint
within seven days.

In July 1997, Jubilation Lakeshore, Inc., Alpha Gulf Coast, Inc. and the
Company were named as third party defendants in an action brought in the United
States District Court for the Northern District of Mississippi, Greenville
Division (General Electric Capital Corporation vs. Bally Gaming, Inc.) whereas
Bally Gaming, Inc. is alleging the same complaints as they asserted in the above
mentioned action in the Southern District of New York. Although the ultimate
outcome of the action cannot be determined, the Company has been advised the
recent decision in the Southern District of New York will have a positive impact
on this case.

F-30

<PAGE>

<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS)

NOTE 8. AMOUNT DUE UNDER REDEMPTION AGREEMENT

The amount due under the redemption agreement (see Note 5) is adjusted for
changes in the market value of the Company's underlying common stock, not to
exceed the original debt incurred, until the common stock is sold by the
unrelated party.

At September 30, 1997, and December 31, 1996, the amount due under the
redemption agreement is $842 and $1,739, respectively, which includes $237 and
$286, respectively, of accrued interest, resulting from the decrease in the fair
market value of the shares of the Company's common stock in escrow at the
respective dates and the price at the date of the escrow agreement.

NOTE 9. STOCKHOLDERS' EQUITY

Changes in stockholders' equity during the nine months ended September 30,
1997, include the net loss of $5,456, the issuance on September 30, 1997 of 83
shares of the Company's preferred stock in settlement of $2,000 due to
Bryanston, the sale on March 12, 1997 of 571 shares of the Company's $.01 par
value common stock for $1,000, common stock sold under the redemption agreement
for $236, a decrease in the principal amount due under the redemption agreement
(see Note 8) of $848, stock issued in April 1997 as payment for notes payable of
$475 and stock issued in August 1997 and September 1997 for settlement of
certain accounts payable and accrued expenses of $211 and $325, respectively.

The Company's preferred stock has voting rights, is convertible to eight
shares of common stock for each share of preferred stock and carries a dividend
of $2.90 per share, payable quarterly, which increases to $3.77 per share if the
cash dividend is not paid within 30 days of the end of each quarter. In the
event the dividend is not paid at the end of the Company's fiscal year (December
31), the dividend will be payable in common stock. As of September 30, 1997, the
Company is obligated to declare a cash dividend of $1,927 and a stock dividend
of 777 shares. As a result of the dividend not being paid by November 7, 1997,
the dividend for the quarter ended September 30, 1997 increases from $2.90 per
share to $3.77 per share. Accordingly, as of November 7, 1997, the Company's
obligation to declare a cash dividend is increased to $2,087.

F-31

<PAGE>

<PAGE>
ALPHA HOSPITALITY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS)

NOTE 10. INCOME TAXES

The Company and all of its subsidiaries file a consolidated federal income
tax return. Income tax expense is allocated pursuant to the separate tax
attributes of each subsidiary. At September 30, 1997 and December 31, 1996, the
Company's deferred federal tax asset is comprised of the tax benefit (cost)
associated with the following items based on the 35% tax rate currently in
effect:

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------

<S> <C> <C>
Pre-opening costs currently deducted for financial reporting and
amortized over 5 years for tax purposes................................ $ 694 $ 984
Net operating loss carryforward.......................................... 15,452 14,153
Differences between financial and tax depreciation methods............... (725) (805)
Differences between financial and tax basis of assets and liabilities.... 850 990
Other.................................................................... 200 171
------------- ------------
Deferred tax asset....................................................... 16,471 15,493
Valuation allowance on deferred tax asset................................ (16,471) (15,493)
------------- ------------
$ -- $ --
------------- ------------
------------- ------------
</TABLE>

The Company has available for federal income tax purposes, a net operating
loss carryover of approximately $44,148 expiring in the years 2008 through 2012.

NOTE 11. DISCONTINUED OPERATIONS

On December 31, 1996, the Company sold its hotel management subsidiary,
Alpha Hotel Management Company, Inc., to Bryanston Group, Inc. Summary operating
results of discontinued operations for the nine and three months ended September
30, 1996 are as follows:

<TABLE>
<CAPTION>
NINE MONTHS THREE MONTHS
----------- ------------

<S> <C> <C>
Revenues.................................................................. $ 1,489 $440
Cost of revenues.......................................................... 934 315
----------- ------
Income from operations of discontinued hotel management segment, before
intercompany charges.................................................... $ 555 $125
----------- ------
----------- ------
</TABLE>

NOTE 12 -- CONTINUING OPERATIONS

The consolidated financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has suffered significant
losses from operations and has a working capital deficit of $37,448 and an
accumulated deficit of $60,870 at September 30, 1997. In addition, the Company
was not in compliance with certain long-term debt covenants, therefore requiring
the obligations to be classified as current liabilities.

Management recognizes that these concerns raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans to correct
these current conditions includes continuing to operate the Greenville casino
generating positive cash flow, developing its Greenville hotel, selling or
relocating the Jubilation Casino and continuing to explore opportunities in
attaining more favorable financing or the sale of equity to meet its working
capital requirements. Accordingly, the Company's ability to continue as a going
concern is dependent upon its ability to develop working capital, maintain
future profitable operations, and meet its creditors demands. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

F-32

<PAGE>

<PAGE>
ALPHA HOSPITALITY CORPORATION
CONDENSED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

The following unaudited condensed pro forma consolidated financial
statements are based on the historical financial statements of the Company
adjusted to give effect to the following (i) the sale of certain assets of the
Company's wholly-owned subsidiary, Gulf Coast, to Buyer, pursuant to the Sale
Agreement and (ii) the use of proceeds of such sale (and/or the Pre-Closing
Financing to be assumed by Buyer) to extinguish certain debts of the Company.
The sale of the Hotel Assets of Greenville Hotel is not reflected on such pro
forma financial statements since, as of September 30, 1997, substantial
construction of such Hotel still needed to be completed.

The unaudited pro forma information is presented to reflect the pro forma
effect of the Sale (together with the Pre-Closing Financing and the
corresponding extinguishment of Company debt) as if it had been consummated on
September 30, 1997 for balance sheet presentation purposes and as of January 1,
1996, for the year ended December 31, 1996 and for the nine months ended
September 30, 1997, for income statement presentation purposes, pursuant to the
assumptions and adjustments in the accompanying notes to the Company's Unaudited
Condensed Pro Forma Consolidated Financial Statements.

The following pro forma information is not necessarily indicative of the
results of operations and financial position of the Company as they may be in
the future or they might have been had the Sale (and the Pre-Closing Financing
with the corresponding extinguishment of Company debt) occurred as of the dates
assumed. This pro forma information should be read in conjunction with the
audited historical Consolidated Financial Statements of the Company as of
December 31, 1996 and 1995 and for each of the three years ended December 31,
1996, and the unaudited historical Consolidated Financial Statements of the
Company as of September 30, 1997 and 1996 and for the three and nine month
periods then ended, which are included elsewhere herein.

The unaudited condensed pro forma consolidated financial statements include
certain estimates. The Company's management does not believe that the effects of
any changes in these estimates, individually or in the aggregate, will have a
material effect on the unaudited condensed pro forma consolidated financial
statements.

F-33

<PAGE>

<PAGE>
ALPHA HOSPITALITY CORPORATION
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997

The following Unaudited Condensed Pro Forma Consolidated Balance Sheet is
based on the unaudited historical Consolidated Balance Sheet of the Company as
of September 30, 1997, and has been prepared to reflect the Sale (and the
Pre-Closing Financing with the corresponding extinguishment of Company debt)
after giving effect to the pro forma adjustments described in the Notes to
Unaudited Condensed Pro Forma Consolidated Financial Statements as if the Sale
(together with the Pre-Closing Financing and the corresponding extinguishment of
Company debt) had occurred on September 30, 1997.

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(DOLLAR AMOUNTS IN THOUSANDS)

<S> <C> <C> <C>
Cash........................................................................ $ 288 $ 9,130a $ 9,418
Cash-restricted............................................................. 1,700a 1,700
Accounts receivable......................................................... 102 102
Inventories................................................................. 301 301
Prepaid insurance........................................................... 76 76
Other current assets........................................................ 206 206
---------- ----------- ---------
Total current assets........................................................ 973 10,830 11,803
Property and equipment, net................................................. 36,812 (31,168)b 5,644
Other assets................................................................ 2,087 2,087
Investment.................................................................. 8,500a 8,500
---------- ----------- ---------
$ 39,872 $ (11,838) $28,034
---------- ----------- ---------
---------- ----------- ---------
Current maturities of long-term debt........................................ $ 20,293 $ (12,493)c $ 7,800
Notes payable............................................................... 1,789 (388)c 1,401
Accounts payable and other accrued expenses................................. 8,920 (1,047)c 3,661
(1,762)c
(1,500)a
(950)c
Accrued payroll and related liabilities..................................... 2,483 (500)a 1,683
(300)c
Due to affiliate, current maturity.......................................... 2,000 (1,500)c 500
---------- ----------- ---------
Total current liabilities................................................... 35,485 (20,440) 15,045
---------- ----------- ---------
Long-term debt, less current maturities..................................... 961 (961)c 0
---------- ----------- ---------
Due to affiliate, less current maturity..................................... 1,439 1,439
---------- ----------- ---------
Amount due under redemption agreement....................................... 842 (842)c 0
---------- ----------- ---------
Stockholders equity:
Preferred Stock........................................................ 8 8
Common Stock........................................................... 144 144
Capital in excess of par value......................................... 61,863 61,863
Accumulated deficit.................................................... (60,870) 4,573c (50,465)
5,832b
---------- ----------- ---------
Total Stockholders' equity............................................. 1,145 10,405 11,550
---------- ----------- ---------
$ 39,872 $ (11,838) $28,034
---------- ----------- ---------
---------- ----------- ---------
</TABLE>

The Unaudited Condensed Pro Forma Consolidated Balance Sheet
should be read in conjunction with the accompanying notes.

F-34

<PAGE>

<PAGE>
ALPHA HOSPITALITY CORPORATION
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1996

The following Unaudited Condensed Pro Forma Consolidated Income Statement
for the year ended December 31, 1996, is based on the audited historical
Consolidated Statement of Operations of the Company for the year ended December
31, 1996, after giving effect to the pro forma adjustments described in the
Notes to Unaudited Condensed Pro Forma Consolidated Financial Statements as if
the Sale (together with the Pre-Closing Financing and the corresponding
extinguishment of Company debt) had occurred on January 1, 1996.

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenues:
Casino................................................................ $ 43,252 $ (43,252)d $ 0
Food and beverage, retail and other................................... 1,268 (1,260)d 8
Supervisory management fee............................................ 100f 100
---------- ----------- ---------
Total revenues................................................... $ 44,520 $ (44,412) $ 108
---------- ----------- ---------
Costs and expenses:
Equity in losses of Greenville Casino Partners........................ 1,357f 1,357
Casino................................................................ 16,184 (16,184)d 0
Food and beverage, retail and other................................... 1,657 (1,657)d 0
Selling, general and administrative................................... 24,973 (23,805)d 1,168
Interest.............................................................. 4,421 (2,208)e 1,236
(977)d
Depreciation and amortization......................................... 6,059 (6,040)d 19
Debt conversion fee................................................... 1,019 1,019
Write-off of leasehold and improvements............................... 14,507 (14,507)d 0
Settlement and termination of lease agreement......................... 541 541
Development costs..................................................... 1,468 1,468
---------- ----------- ---------
70,829 (64,021) 6,808
---------- ----------- ---------
Loss from continuing operations....................................... (26,309) 19,609 (6,700 )
---------- ----------- ---------
Loss per common share from continuing operations........................... (1.98) (.50 )
---------- ---------
---------- ---------
</TABLE>

The Unaudited Condensed Pro Forma Consolidated Income Statement
should be read in conjunction with the accompanying notes.

F-35

<PAGE>

<PAGE>
ALPHA HOSPITALITY CORPORATION
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED INCOME STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997

The following Unaudited Condensed Pro Forma Consolidated Income Statement
for the nine months ended September 30, 1997 is based on the unaudited
historical Consolidated Statement of Operations of the Company for the nine
months ended September 30, 1997, after giving effect to the pro forma
adjustments described in the Notes to Unaudited Condensed Pro Forma Consolidated
Financial Statements as if the Sale (together with the Pre-Closing Financing and
the corresponding extinguishment of Company debt) had occurred on January 1,
1996.

<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT
FOR PER SHARE AMOUNTS)

<S> <C> <C> <C>
Revenues:
Casino................................................................. $ 23,868 $ (23,868)(i) $ 0
Food and beverage, retail and other.................................... 469 (466)(i) 3
Supervisory management fee............................................. -- 75(k) 75
---------- ----------- ---------
Total revenues.................................................... 24,337 (24,259) 78
---------- ----------- ---------
Costs and expenses:
Equity in losses of Greenville Casino Partners......................... 1,895(k) 1,895
Casino................................................................. 9,004 (9,004)(i) 0
Food and beverage, retail and other.................................... 434 (434)(i) 0
Selling, general and administrative.................................... 13,003 (12,075)(i) 928
Interest............................................................... 2,469 (1,487)(j) 982
Depreciation and amortization.......................................... 3,854 (3,841)(i) 13
Development............................................................ 1,029 1,029
---------- ----------- ---------
29,793 (24,946) 4,847
---------- ----------- ---------
Net loss.................................................................... $ (5,456) $ 687 $(4,769)
---------- ----------- ---------
---------- ----------- ---------
Weighted average common shares outstanding.................................. 14,029
---------
---------
Loss per common share....................................................... $(.34)
</TABLE>

The Unaudited Condensed Pro Forma Consolidated Income Statement
should be read in conjunction with the accompanying notes.

F-36

<PAGE>

<PAGE>
ALPHA HOSPITALITY CORPORATION
NOTES TO UNAUDITED CONDENSED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS)

BALANCE SHEET ADJUSTMENTS (as if the Sale (together with the Pre-Closing
Financing and the corresponding extinguishment of Company debt) occurred on
September 30, 1997)

The Unaudited Condensed Pro Forma Consolidated Balance Sheet gives effect to the
adjustments set forth below to reflect the Company's proposed sale of certain
assets (the Bayou Caddy's Jubilee Casino and other assets) to Buyer pursuant to
the Sale Agreement. For the purposes of this pro forma, it has been assumed that
the sale price will be approximately $37,000 (including proceeds from the Pre-
Closing Financing to be assumed and other liabilities to be assumed).
Additionally, the pro forma reflects the use of the proceeds to extinguish
certain debt of the Company.

<TABLE>
<S> <C>
(a) The total sale price of $37,000 is to be received and utilized as follows:
Cash................................................................................... $ 26,500
Assumed accounts payable and accrued expenses.......................................... 1,500
Assumed accrued payroll and related liabilities........................................ 500
25% equity interest in Buyer........................................................... 8,500
--------
Total sale price.................................................................. $ 37,000
--------
--------
Total cash received (per above)........................................................ $ 26,500
Applied to extinguishment of debt...................................................... (15,670)
Escrowed for hotel construction........................................................ (1,700)
--------
Excess cash............................................................................ $ 9,130
--------
--------
(b) The gain on the sale is calculated as follows:
Total sale price....................................................................... $ 37,000
Book value of assets sold.............................................................. (31,168)
--------
Gain on sale of assets................................................................. $ 5,832
--------
--------
</TABLE>

<TABLE>
<CAPTION>
APPLIED TO GAIN ON
BOOK VALUE EXTINGUISHMENT EXTINGUISHMENT
PRINCIPAL INTEREST OF DEBT OF DEBT OF DEBT
--------- -------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Mortgage note payable............... $ 3,656 $ 534 $ 4,190 $ 2,100 $2,090
Equipment notes payable............. 8,366 956 9,322 7,880 1,442
Note payable........................ 1,100 30 1,130 600 530
Capital lease obligation............ 332 7 339 300 39
Amount due under redemption
agreement......................... 842 235 1,077 902 175
--------- -------- ---------- -------------- -------
Totals.................... $ 14,296 $ 1,762 $ 16,058 $ 11,782 $4,276
--------- --------
--------- --------
Current maturities on long-term
debt.............................. $ 12,493
Long-term debt, less current
maturities........................ 961
Amount due under redemption
agreement......................... 842
---------
$ 14,296
---------
---------
Line of credit...................... 388 388
Construction payable................ 1,047 750 297
Accounts payable and other accrued
expense........................... 950 950
Accrued payroll and related
liabilities....................... 300 300
Due to affiliate.................... 1,500 1,500
---------- -------------- -------
$ 20,243 $ 15,670 $4,573
---------- -------------- -------
---------- -------------- -------
</TABLE>

F-37

<PAGE>

<PAGE>
ALPHA HOSPITALITY CORPORATION
NOTES TO UNAUDITED CONDENSED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

INCOME STATEMENT ADJUSTMENTS (as if the Sale, together with the Pre-Closing
Financing and the corresponding extinguishment of Company debt, occurred on
January 1, 1996)

The Unaudited Condensed Pro Forma Consolidated Income Statement for the
year ended December 31, 1996 gives effect to the following pro forma adjustments
necessary to reflect the proposed sale of the Casino Assets (together with the
Pre-Closing Financing) and related extinguishment of certain debt:

(d) Moves all casino operations to discontinued operations.

(e) Removes all interest relative to the debt extinguished from
proceeds of such sale and the Pre-Closing Financing.

(f) Record activity with Buyer:
-- 25% equity interest
-- Supervisory Management Fee ($100,000 per annum).

(g) Not used.

(h) Not used.

The Unaudited Condensed Pro Forma Consolidated Income Statement for the
nine months ended September 30, 1997 gives effect to the following pro forma
adjustments necessary to reflect the proposed sale of the Casino Assets
(together with the Pre-Closing Financing) and related extinguishment of certain
debt:

(i) Moves all casino operations to discontinued operations.

(j) Removes all interest relative to the debt extinguished from
proceeds of such sale and the Pre-Closing Financing.

(k) Record activity with Buyer:
-- 25% equity interest
-- Supervisory Management Fee ($100,000 per annum).

F-38

<PAGE>

<PAGE>
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Partners of
GREENVILLE CASINO PARTNER, L.P.:

We have audited the accompanying consolidated balance sheets of GREENVILLE
CASINO PARTNERS, L.P. (a Mississippi limited partnership) and subsidiaries dba
LAS VEGAS CASINO, as of December 31, 1996 and 1995, and the related consolidated
statements of operations, partners' capital and cash flows for the years then
ended. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Greenville Casino Partners,
L.P. and subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for the years then ended, in conformity with
generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Memphis, Tennessee
February 28, 1997

F-39

<PAGE>

<PAGE>
GREENVILLE CASINO PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31

<TABLE>
<CAPTION>
1996 1995
----------- -----------

<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents..................................................... $ 2,124,621 $ 3,747,534
Accounts receivable, net of allowance of $10,813 and $7,835, respectively..... 106,278 51,683
Inventories................................................................... 85,346 114,051
Related party receivable...................................................... 93,900 34,564
Prepaid expenses and other current assets..................................... 115,436 203,823
----------- -----------
Total current assets..................................................... 2,525,581 4,151,655
----------- -----------
PROPERTY AND EQUIPMENT, net........................................................ 15,164,011 17,387,975
NOTE RECEIVABLE.................................................................... 500,000 --
OTHER ASSETS, net.................................................................. 1,542,357 2,308,764
----------- -----------
Total assets........................................................... $19,731,949 $23,848,394
----------- -----------
----------- -----------

LIABILITIES AND PARTNERS' CAPITAL

CURRENT LIABILITIES:
Accounts payable.............................................................. $ 573,256 $ 574,408
Accrued interest payable...................................................... 443,728 269,012
Accrued payroll and related costs............................................. 995,676 1,279,410
Current portion of long-term debt............................................. 353,545 2,083,543
Other accrued liabilities..................................................... 794,838 521,046
----------- -----------
Total current liabilities................................................ 3,161,043 4,727,419
CONVERTIBLE NOTES PAYABLE.......................................................... -- 1,132,770
LONG-TERM DEBT, net of current portion............................................. 10,223,077 12,269,360
----------- -----------
Total liabilities........................................................ 13,384,120 18,129,549
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 8)
PARTNERS' CAPITAL, 1,200,000 units authorized, 1,033,333 units outstanding......... 6,347,829 5,718,845
----------- -----------
Total liabilities and partners' capital.................................. $19,731,949 $23,848,394
----------- -----------
----------- -----------
</TABLE>

The accompanying notes are an integral part of these balance sheets

F-40

<PAGE>

<PAGE>
GREENVILLE CASINO PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31

<TABLE>
<CAPTION>
1996 1995
----------- -----------

<S> <C> <C>
REVENUES:
Casino........................................................................ $34,761,368 $40,285,574
Food and beverage............................................................. 3,140,115 3,238,122
Other......................................................................... 107,176 209,182
----------- -----------
Gross revenues........................................................... 38,008,659 43,732,878
Less -- promotional expenses.................................................. (2,162,214) (2,215,118)
----------- -----------
Net revenues............................................................. 35,846,445 41,517,760
----------- -----------
COSTS AND EXPENSES:
Casino operating.............................................................. 9,043,399 9,233,048
Gaming taxes and fees......................................................... 4,141,700 4,909,353
Food and beverage............................................................. 3,047,299 2,900,199
Marketing and advertising..................................................... 4,584,535 3,875,399
General and administrative.................................................... 5,409,417 5,024,845
Depreciation and amortization................................................. 3,359,154 4,213,141
Facilities.................................................................... 2,591,343 2,819,737
Rent, property taxes and insurance............................................ 951,290 1,007,306
Other......................................................................... 225,983 351,300
----------- -----------
Total costs and expenses................................................. 33,354,120 34,334,328
----------- -----------
INCOME FROM OPERATIONS............................................................. 2,492,325 7,183,432
----------- -----------
OTHER INCOME (EXPENSE):
Interest expense.............................................................. (1,706,102) (2,354,273)
Interest income............................................................... 41,141 42,050
----------- -----------
Other income (expense), net.............................................. (1,664,961) 2,312,223
----------- -----------
----------- -----------
NET INCOME......................................................................... $ 827,364 $ 4,871,209
----------- -----------
----------- -----------
UNIT DATA:
Net income per unit........................................................... $ .80 $ 4.71
----------- -----------
----------- -----------
Average units outstanding..................................................... 1,033,333 1,033,333
----------- -----------
----------- -----------
</TABLE>

The accompanying notes are an integral part of these statements

F-41

<PAGE>

<PAGE>
GREENVILLE CASINO PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31,

<TABLE>
<CAPTION>
GENERAL PARTNER LIMITED PARTNERS
--------------------- -----------------------
UNITS AMOUNT UNITS AMOUNT TOTAL
-------- --------- --------- ---------- ----------

<S> <C> <C> <C> <C> <C>
Balance as of December 31, 1994................. 148,464 $(377,931) 884,869 $2,107,211 $1,729,280
Conversion of convertible notes payable to
partners' capital............................. 494,582 494,582
Distributions................................... (208,302) (1,167,924) (1,376,226)
Net income...................................... 699,870 4,171,339 4,871,209
-------- --------- --------- ---------- ----------
Balance as of December 31, 1995................. 148,464 113,637 884,869 5,605,208 5,718,845
Conversion of convertible notes payable to
partners' capital............................. 32,730 1,100,040 1,132,770
Distributions................................... (161,532) (1,169,618) (1,331,150)
Transfer of partnership units................... (138,130) (30,452) 138,130 30,452
Net income...................................... 63,573 708,493 827,364
-------- --------- --------- ---------- ----------
Balance as of December 31, 1996................. 10,334 $ 17,956 1,022,999 $6,329,873 $6,347,829
-------- --------- --------- ---------- ----------
-------- --------- --------- ---------- ----------
</TABLE>

The accompanying notes are an integral part of these statement.

F-41A

<PAGE>

<PAGE>
GREENVILLE CASINO PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31

<TABLE>
<CAPTION>
1996 1995
----------- -----------

<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income..................................................................... $ 827,364 $ 4,871,209
Adjustments to reconcile net income to net cash flows provided by operating
activities:
Depreciation and amortization............................................. 3,359,154 4,213,141
Loss on sale of equipment................................................. 58,220 3,030
Amortization of debt issuance costs and debt discount..................... 263,214 406,002
Changes in assets and liabilities:
Accounts receivable.................................................. (54,595) 16,588
Inventories.......................................................... 28,705 26,373
Prepaid expenses and other assets.................................... 45,987 (72,715)
Related party receivable............................................. (59,336) (34,564)
Account payable and accrued liabilities.............................. 163,622 (970,894)
----------- -----------
Net cash flows provided by operating activities................. 4,632,335 8,458,170
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in note receivable.................................................... (500,000) --
Purchases of property and equipment............................................ (595,822) (548,628)
Proceeds from sale of equipment................................................ 31,130 9,698
----------- -----------
Net cash flows used in investing activities............................... (1,064,692) (538,930)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Partner distributions.......................................................... (1,331,150) (1,376,226)
Repayments of convertible notes payable........................................ -- (326,865)
Repayments of long-term debt................................................... (3,859,406) (4,654,102)
Repayments of note payable to partner.......................................... -- (289,267)
----------- -----------
Net cash flows used in financing activities............................... (5,190,556) (6,646,460)
----------- -----------
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS................................ (1,622,913) 1,272,780
CASH AND CASH EQUIVALENTS, at beginning of period................................... 3,747,534 2,474,754
----------- -----------
CASH AND CASH EQUIVALENTS, at end of period......................................... $ 2,124,621 $ 3,747,534
----------- -----------
----------- -----------
</TABLE>

The accompanying notes are an integral part of these statement

F-42

<PAGE>

<PAGE>
GREENVILLE CASINO PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996

NOTE 1. THE PARTNERSHIP

ORGANIZATION AND BASIS OF PRESENTATION

Greenville Casino Partners, L.P., a Mississippi limited partnership
('GCPLP'), was formed on October 15, 1993 to acquire the common stock of Casino
Gaming International, Limited, a Mississippi corporation ('CGI'), and all of the
partnership interests of Doris Limited Partnership, a Nevada limited partnership
('Doris'), in order to develop and operate a dockside riverboat casino (the
'Casino') in Greenville, Mississippi. Prior to the formation of GCPLP, CGI and
Doris had begun acquiring and constructing the necessary assets for the Casino,
including a moorage agreement, parking and office facilities and a barge upon
which the Casino was being constructed. The acquisition of CGI and Doris (the
'Acquisition') was completed on February 23, 1994. Immediately thereafter, Doris
was merged into GCPLP. GCPLP and CGI will terminate December 31, 2049 unless
terminated earlier pursuant to the partnership agreement.

As of December 31, 1996, 1,033,333 partnership units were issued. Of this
total, 33,333 units are entitled to a preferred distribution of 10% per annum.

The 'General Partner' is Greenville CP, Inc., a Delaware Subchapter S
Corporation. Except as described in the preceding paragraph, GCPLP and CGI's
income or loss is to be allocated in accordance with the partnership interests
held by the partners. Distribution of cash flow is at the discretion of the
General Partner, however, distribution of 45% of the estimated taxable income is
required to be made on a quarterly basis. Distributions, other than the required
tax distributions, are subordinate to the mandatory prepayment provisions of the
Senior Secured Notes (see Note 5).

The Casino commenced operations on March 14, 1994, and is operated pursuant
to a license issued by the Mississippi Gaming Corporation ('MGC') and is subject
to rules and regulations established by the MGC and the Mississippi State Tax
Commission ('MSTC'). The activities of the Casino include casino gaming, food
and beverage and retail operations. The Casino operates within the competitive
Greenville, Mississippi market which consisted of two riverboat casinos during
most of 1996, until a third riverboat casino opened in November 1996. Management
believes that the Casino will withstand these increasing competitive factors but
does not anticipate a reduction in its 1997 net revenues related thereto.

Effective January 12, 1996, Greenville Hotel, L.L.C. ('GHLLC') was formed
for the purpose of developing and owning a hotel located near the Casino in
satisfaction of the infrastructure requirement of the MGC (see Note 8). GHLLC
has two members: GCPLP (99% owner), acting as general partner, and Greenville
CP, Inc. (1% owner). This partnership terminates on December 31, 2035 unless
terminated earlier pursuant to the partnership agreement.

The accompanying consolidated financial statements include the accounts of
GCPLP and its subsidiaries, CGI and GHLLC. All materials intercompany
transactions have been eliminated in consolidation. GCPLP, CGI and GHLLC are
collectively referred to as the 'Partnership.'

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of cash held in banks, currency in the
casino's vault, coins in slot machine hoppers and other cash used in daily
operations. A portion of the cash and cash equivalents balance ($239,045 and
$141,428 at December 31, 1996 and 1995, respectively) is required to be
maintained by the Partnership based on regulations promulgated by the MSTC.

The Partnership considers cash and all highly liquid investments with an
original maturity of three months or less to be cash equivalents.

F-43

<PAGE>

<PAGE>
GREENVILLE CASINO PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996

INVENTORIES

Inventories consist of food, beverage and gift shop supplies. Inventories
are stated at the lower of cost (first-in, first-out basis) or market.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost and are depreciated over the
estimated useful lives of the respective assets. Depreciation is computed using
the straight-line method for financial reporting purposes and prescribed
accelerated methods for tax purposes.

OTHER ASSETS

Other assets (at cost, less accumulated amortization) consisted of the
following at December 31:

<TABLE>
<CAPTION>
1996 1995
---------- ----------

<S> <C> <C>
Organization costs.......................................................... $ 427,031 $ 626,896
Debt issuance costs......................................................... 705,060 885,149
Purchase price over the fair value of net assets acquired................... 346,154 576,923
Consulting agreement........................................................ -- 166,667
Deposits and other.......................................................... 64,112 53,129
---------- ----------
$1,542,357 $2,308,764
---------- ----------
---------- ----------
</TABLE>

Debt issuance costs incurred related to the Senior Secured Notes are being
amortized over the facilities term. Organization costs associated with the
formation of the Partnership are being amortized over 60 months. The excess of
the purchase price over the fair value of net assets acquired in connection with
the CGI and Doris acquisition is being amortized over four years. The costs of
the consulting agreement paid to the prior owners of CGI are being amortized
over four years. The costs of the consulting agreement paid to the prior owners
of CGI are being amortized over the agreement's term of two years. Accumulated
amortization of other assets is $4,709,441 and $3,932,051 at December 31, 1996
and 1995, respectively.

CASINO REVENUES AND PROMOTIONAL ALLOWANCES

In accordance with industry practice, the Partnership recognizes as casino
revenues the net win from gaming activities, which is the difference between
gaming wins and gaming losses. The retail value of food and beverage furnished
to customers on a complimentary basis is included in gross revenues and then
deducted as promotional allowances. The estimated cost of providing such
promotional allowances is included in food and beverage expenses in the
accompanying consolidated statements of operations and totaled approximately
$710,000 and $690,000 for the years ended December 31, 1996 and 1995,
respectively.

INCOME TAXES

The Partnership qualifies as a partnership for income tax reporting
purposes. Distributive shares of gross income and deductions are included in the
respective tax returns of the partners. Accordingly, the accompanying financial
statements do not include any provisions for income taxes.

As of December 31, 1996 and 1995, the significant temporary differences
between financial reporting and tax bases of assets and liabilities of the
Partnership include accumulated depreciation on property and equipment,
accumulated amortization on other assets and the outstanding chip and token
liability included in other accrued liabilities.

F-44

<PAGE>

<PAGE>
GREENVILLE CASINO PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996

ESTIMATES

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

RECLASSIFICATIONS

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

NOTE 3. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION AND NONCASH ACTIVITIES

In connection with the issuance of the $14,000,000 of Senior Secured Notes
(see Note 5), the Partnership also issued Partnership units valued at $813,960
to the purchasers of the Notes (the 'Noteholders'). This amount has been
reflected as an offset to the Senior Secured Notes. Amortization of $83,125 and
$236,492 was recorded as interest expense during 1996 and 1995, respectively.
Accrued interest of $174,716 was added to the Senior Secured Notes and
outstanding balance during 1996.

During 1995, the Partnership issued notes payable totaling $600,000 for the
purchase of land and the attached building which were subsequently paid in 1995.

During 1996 and 1995, respectively, the Partnership converted $1,132,770
and $494,582 of convertible notes payable to partners' capital.

Additionally, the Partnership made interest payments of $1,254,841 and
$2,432,603 during 1996 and 1995, respectively.

NOTE 4. PROPERTY AND EQUIPMENT

Property and equipment were composed of the following at December 31:

<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES 1996 1995
------------ ----------- -----------

<S> <C> <C> <C>
Riverboat and improvements................................. 10 Years $10,784,177 $10,770,185
Furniture, fixtures and equipment.......................... 5-7 Years 8,115,922 7,821,798
Land and improvements...................................... 15 Years 2,375,600 2,361,065
Buildings and improvements................................. 31.5 Years 516,552 474,883
Construction in progress................................... -- 139,392 82,249
------------ ----------- -----------
21,931,643 21,510,180
Less -- accumulated depreciation........................... (6,767,632) (4,122,205)
----------- -----------
$15,164,011 $17,387,975
----------- -----------
----------- -----------
</TABLE>

F-45

<PAGE>

<PAGE>
GREENVILLE CASINO PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996

NOTE 5. LONG-TERM DEBT

Long-term debt consisted of the following at December 31:

<TABLE>
<CAPTION>
1996 1995
----------- -----------

<S> <C> <C>
11% Senior Secured Notes due 2000, net of unamortized debt discount of
$406,408 and $489,533(a)............................................... $10,193,592 $11,910,467
Equipment notes payable, interest at rates ranging from 7.25% to 12%,
monthly payments of principal and interest through December 1998,
secured by the equipment............................................... 383,030 2,442,436
----------- -----------
10,576,622 14,352,903
Less -- current portion.................................................. (353,545) (2,083,543)
----------- -----------
$10,223,077 $12,269,360
----------- -----------
----------- -----------
</TABLE>

- ------------

(a) In February 1994, the Partnership issued $14 million of 11% Senior Secured
Notes ('Notes'), which included 140,000 limited partnership units. The
proceeds were used to complete the acquisition of CGI and Doris, to repay
certain indebtedness and to provide the necessary casino cash and working
capital. Interest on the Notes is payable semi-annually on January 1 and
July 1. The Notes are due November 30, 2000, subject to mandatory
semi-annual prepayments equal to Excess Cash Flow (as defined). In 1996 and
1995, the Partnership made mandatory principal prepayments totaling
$1,800,000 and $1,600,000, respectively. The Notes are secured by a first
preferred ship mortgage on the riverboat, a pledge of the common stock of
CGI and a security interest in other collateral, as defined in the security
agreements. The Partnership is subject to certain covenants, as set forth
in the security agreement, including restrictions on Partnership
distributions (see Note 1), the making of other investments (as defined),
prepayments of indebtedness other than the Notes and the incurrence of
additional indebtedness.

In connection with the issuance of the Notes, the Noteholders also received
a total of 140,000 limited partnership units. The units were valued at
$813,960, which has been added to partners' capital and offset against the
Notes balance. This amount is being amortized as interest cost over the
term of the Notes. As of December 31, 1996, the Partnership has amortized
$407,552 of this discount.

As a condition for the Noteholders to agree to certain waivers, in 1996 the
Casino paid each Noteholder a fee equal to 3% of the unpaid principal
($318,000, included in general and administrative expenses in the
accompanying consolidated statement of operations). In addition, effective
January 1, 1997, the interest rate on the Notes will be increased to 11.5%
and further increased by 50 basis points each six months thereafter until
the Notes are paid in full.

During 1996, the Partnership attempted to refinance its existing Notes and
obtain additional funding for future expansion; however, the funding was not
completed. The Casino is currently in litigation with the underwriter in an
attempt to recover financing costs incurred and paid plus damages. The costs
associated with this attempted refinancing ($372,991) are included in the
accompanying consolidated statement of operations as general and administrative
expenses.

F-46

<PAGE>

<PAGE>
GREENVILLE CASINO PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996

The scheduled maturities of long-term debt subsequent to December 31, 1996
are as follows:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31
- -------------------------------------------------------------------------------

<S> <C>
1997........................................................................... $ 353,545
1998........................................................................... 29,485
1999........................................................................... --
2000........................................................................... 10,193,592
2001 and thereafter............................................................ --
-----------
$10,576,622
-----------
-----------
</TABLE>

NOTE 6. RELATED PARTY TRANSACTIONS

CONVERTIBLE NOTES PAYABLE

The Mississippi Gaming Control Act requires regulatory approval of every
general partner and limited partner of a limited partnership which holds a
Mississippi gaming license. Upon the Partnership receiving its gaming license in
February 1994, certain of the original partners who made contributions to the
Partnership in 1993 totaling $1,614,857 and who were not yet approved for
ownership by the MGC, were issued convertible notes payable for their
contributions and were granted options to reacquire the partnership units.
Additional convertible notes payable totaling $339,360 were issued in 1994 for
funds received from potential partners who were granted an option to purchase
additional partnership units. When such potential partners received the
necessary regulatory approvals from MGC, the convertible notes payable were
converted to partners' capital. In January 1995, convertible notes payable
totaling $494,582 were converted to partners' capital. In January 1996, the
remaining holder of the convertible notes received the necessary regulatory
approvals and, accordingly, the $1,132,770 balance of the convertible notes
payable was converted to partners' capital.

FEES PAID TO A PARTNER

During 1995, the Partnership paid one of the partners an underwriting fee
totaling $865,000 in connection with the issuance of the Notes (see Note 5). The
amount is included in other assets in the accompanying consolidated balance
sheets and is being amortized over the term of the Notes.

RELATED PARTY RECEIVABLE

At December 31, 1996, the Partnership had an outstanding receivable from an
entity with which two of its partners have an ownership interest, and are also
officers of the Partnership. The receivable resulted from services rendered by
the Partnership employees to the related entity, and is included in the
accompanying consolidated balance sheet as a related party receivable.

NOTE 7. NOTE RECEIVABLE

During 1996, the Partnership entered into negotiations with Gaming World
International ('GWI') to create a partnership for the purpose of developing and
operating an apartment complex, yacht club and casino (if gaming is legalized)
in Pennsylvania. Under the terms of the negotiations, the Partnership advanced
$500,000 to GWI and received a promissory note, which bears interest at 15%.
This note was originally due in September 1996; however, as the Partnership is
in the process of completing due diligence and feasibility studies, and no
agreement has been finalized, the note has been extended until April 15, 1997.
If a partnership is formed, the balance of the note will be converted into
equity of the newly formed partnership. This note is included in the
accompanying consolidated balance sheet as a long-term note receivable.

F-47

<PAGE>

<PAGE>
GREENVILLE CASINO PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996

NOTE 8. COMMITMENTS AND CONTINGENCIES

LEASES

The Partnership leases certain land, buildings and equipment pursuant to
three operating leases which expire (after applicable renewal periods) at
various dates through 2004. In addition to the specified rental payments, the
Partnership is also responsible for any and all costs associated with the leased
property, including taxes and assessments, utilities, insurance and
improvements.

Future minimum lease payments required under noncancelable operating leases
as of December 31, 1996 (including renewal periods), are as follows:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31
- ----------------------------------------------------------------------------------

<S> <C>
1997.............................................................................. $ 39,953
1998.............................................................................. 40,163
1999.............................................................................. 40,671
2000.............................................................................. 38,705
2001.............................................................................. 11,765
Thereafter........................................................................ 24,062
--------
$195,319
--------
--------
</TABLE>

The leases provide the Partnership with the right of first refusal to
purchase the leased land. A fourth lease expired in February 1995, at which time
the Partnership agreed to purchase the leased land, building and equipment for
$750,000.

MOORAGE AGREEMENT

The Partnership has a Moorage Agreement with a third party that provides
the Partnership with certain docking rights at the third party's marina
facility, which is leased by the third party from the City of Greenville. The
Moorage Agreement expires June 30, 1998, subject to two renewal option periods
which would extend the term until June 30, 2017, to coincide with the third
party's lease with the City of Greenville. Monthly rentals during the initial
term are $25,000, subject to adjustment during the renewal periods for increases
in the rental payments under the third party's lease with the City of
Greenville. The Partnership has an option to acquire the common stock of the
third party, whose primary assets are the lease with the City of Greenville and
the Moorage Agreement, for $1,400,000.

GAMING LICENSE

The Partnership is required to comply with laws and regulations promulgated
by the MGC to maintain its gaming license. The Partnership's initial gaming
license expired on February 17, 1996, and was renewed on February 18, 1996, for
two years, expiring February 18, 1998. MGC regulations require that gaming
operator licensees meet certain standards for land-based infrastructure
improvements. Accordingly, the Partnership intends to construct a hotel near the
existing casino property.

HOTEL CONSTRUCTION

As discussed above, the Partnership is required to construct a hotel. The
projected cost of the hotel is approximately $2,600,000. In order to fund the
construction costs, the Partnership obtained a commitment from a bank for a
$1,500,000 construction/permanent loan bearing interest at 9.25% and an
additional commitment from South Delta Planning and Development District, Inc.
for a $250,000 loan with a variable rate of interest (which was 7% at the time
of commitment). The remaining cost will be funded by the contribution of land
owned by the Partnership and the Casino's available working capital. The
Partnership plans to begin construction on the hotel in April 1997.

F-48

<PAGE>

<PAGE>
GREENVILLE CASINO PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1996

GAMING TAXES AND FEES

The Partnership operates the Casino as a licensed gaming establishment
pursuant to the Mississippi Gaming Control Act and, accordingly, is required to
make weekly gaming tax payments to the State of Mississippi. In addition,
various local and municipal governments are authorized to assess fees on the
operations of the Partnership. Gaming taxes and fees expense recognized by the
Partnership for the years ended December 31, 1996 and 1995, totaled $4,141,700
and $4,909,353, respectively.

LITIGATION

The Casino is the defendant in litigation involving certain employee and
other third party claims whereby the ultimate outcome at December 31, 1996 is
uncertain. However, management believes that any unfavorable outcomes will not
have a material adverse effect on the Partnership's financial position or
results of operations.

F-49

<PAGE>

<PAGE>
GREENVILLE CASINO PARTNERS, L.P.
CONSOLIDATED CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
SEPTEMBER 30, 1997
------------------
(UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS)

<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................... $ 1,846 $ 2,125
Accounts receivable, net............................................ 607 106
Inventories......................................................... 100 85
Prepaid expenses and other.......................................... 387 210
---------- -----------------
Total current assets........................................... 2,940 2,526
---------- -----------------
Property and equipment, net......................................... 15,568 15,164
Other Assets........................................................ 1,147 2,042
---------- -----------------
Total assets........................................................ $ 19,655 $19,732
---------- -----------------
---------- -----------------

LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable and accrued expenses............................... $ 3,272 $ 2,807
Current portion of long-term debt................................... 144 354
---------- -----------------
Total current liabilities........................................... 3,416 3,161
Long-term debt, net of unamortized discount.............................. 10,971 10,223
Partners' capital................................................... 5,268 6,348
---------- -----------------
Total liabilities and partners' capital............................. $ 19,655 $19,732
---------- -----------------
---------- -----------------
</TABLE>

The accompanying notes are an integral part of these consolidated condensed
financial statements.

F-50

<PAGE>

<PAGE>
GREENVILLE CASINO PARTNERS, L.P.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------ -------------------
1997 1996 1997 1996
------ ------ ------- -------
(DOLLAR AMOUNTS IN THOUSANDS,
EXCEPT PER UNIT DATA)

<S> <C> <C> <C> <C>
Revenues:
Casino................................................... $6,650 $8,433 $21,587 $27,068
Non-casino............................................... 1,082 1,266 3,525 4,137
Other.................................................... 36 16 103 94
------ ------ ------- -------
7,768 9,715 25,215 31,299
Less: promotional allowances.................................. (360) (481) (1,658) (1,657)
------ ------ ------- -------
Net revenues............................................. 7,408 9,234 23,557 29,642
------ ------ ------- -------
Costs and expenses:
Casino................................................... 2,885 3,247 8,386 10,709
Non-casino............................................... 627 710 1,621 2,434
General and administrative............................... 3,698 3,337 11,006 10,863
Interest, net............................................ 394 406 1,136 1,300
Depreciation and amortization............................ 750 730 2,241 2,351
------ ------ ------- -------
Total costs and expenses............................ 8,354 8,430 24,390 27,657
Net income (loss)........................................ $ (946) $ 804 $ (833) $ 1,985
------ ------ ------- -------
------ ------ ------- -------
Unit data:
Net income (loss) per unit............................... $(.92) $.78 $(.81) $1.92
Average units outstanding................................ 1,033,333 1,033,333 1,033,333 1,033,333
</TABLE>

The accompanying notes are an integral part of these consolidated condensed
financial statements.

F-51

<PAGE>

<PAGE>
GREENVILLE CASINO PARTNERS, L.P.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
------------------
1997 1996
------- -------
(DOLLAR AMOUNTS IN
THOUSANDS)

<S> <C> <C>
Cash provided by operating activities:
Net income (loss)....................................................................... $ 1,985 $ (833)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization........................................................... 2,351 2,241
Net change in current assets and liabilities............................................ (2,248) 171
Other................................................................................... -- 32
------- -------
Net cash provided by operating activities.......................................... 2,088 1,611
------- -------
Cash flows from investing activities:
Increase in property and equipment...................................................... (340) (2,037)
Increase in note receivable............................................................. (500) --
------- -------
Net cash provided by investing activities.......................................... (840) (2,037)
------- -------
Cash flows from financing activities
Borrowings, net......................................................................... (2,080) 394
Partner distributions................................................................... (1,311) (247)
------- -------
Net cash provided by financing activities.......................................... (3,391) 147
------- -------
Net change in cash and cash equivalents................................................. (2,143) (279)
Cash and cash equivalents, beginning of period.......................................... 3,748 2,125
------- -------
Cash and cash equivalents, end of period................................................ $ 1,605 $ 1,846
------- -------
------- -------
</TABLE>

The accompanying notes are an integral part of these consolidated condensed
financial statements.

F-52

<PAGE>

<PAGE>
GREENVILLE CASINO PARTNERS, L.P.
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1997

1. GENERAL

The accompanying unaudited Consolidated Condensed Financial Statements of
Buyer, a Mississippi limited partnership, have been prepared in accordance with
the instruction set forth in Regulation SK of the Securities Act of 1934, as it
pertains to Form 10Q and, therefore, do not include all information and
disclosures necessary for complete financial statements in conformity with
generally accepted accounting principles. The consolidated condensed balance
sheet at December 31, 1996 was derived from audited financial statements, but
does not include all disclosures required by generally accepted accounting
principles. The results for the three and nine month periods ended September 30,
1997 and 1996 are unaudited, but reflect all adjustments (consisting only of
normal recurring adjustments) that management considers necessary for a fair
presentation of operating results. Results of operations for interim periods are
not necessarily indicative of a full year of operations.

CASINO REVENUE AND PROMOTIONAL ALLOWANCES

In accordance with industry practice, Buyer recognized as casino revenues
the net win from gaming activities, which is the difference between gaming wins
and gaming losses. The retail value of food and beverage furnished to customers
on a complimentary basis is included in gross revenues and then deducted as
promotional allowances. The estimated cost of providing such promotional
allowances is included in non-casino expenses in the accompanying condensed
consolidated statements of operations and totaled approximately $530,000 and
$710,000 for the nine months ended September 30, 1997 and for the year ended
December 31, 1996, respectively.

INCOME TAXES

Buyer qualifies as a partnership for income tax reporting purposes.
Distributive shares of gross income and deductions are included in the
respective tax returns of the partners. Accordingly, the accompanying financial
statements do not include any provisions for income taxes.

2. CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of cash held in banks, currency in the
casino's vault, coins in slot machine hoppers and other cash used in daily
operations. A portion of the cash and cash equivalents balance ($276,000 and
$239,000 at September 30, 1997 and December 31, 1996, respectively) is required
to be maintained by Buyer based on regulations promulgated by the Mississippi
State Tax Commission.

3. PROPERTY AND EQUIPMENT

Property and equipment consists of the following (in thousands):

<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------

<S> <C> <C>
Riverboat and improvements........................ $ 10,817 $10,784
Furniture, fixtures and equipment................. 9,393 8,116
Land and improvements............................. 2,406 2,376
Buildings and improvements........................ 517 517
Construction in progress.......................... 835 139
---------- -----------------
23,968 21,932
Less accumulated depreciation..................... (8,400) (6.768)
---------- -----------------
Total................................... $ 15,568 $15,164
---------- -----------------
---------- -----------------
</TABLE>

F-53

<PAGE>

<PAGE>
GREENVILLE CASINO PARTNERS, L.P.
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
SEPTEMBER 30, 1997

4. LONG-TERM DEBT

Long-term debt consist of the following (in thousands):

<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------

<S> <C> <C>
11% Senior Notes due 2000, net of unamortized
discount........................................ $ 10,264 $10,194
Equipment notes payable, interest at rates ranging
from 7.25% to 12.0% monthly payments of
principal and interest through December, 1998... 288 383
Construction note payable to bank, 8.75%, due
April 1998...................................... 563 --
---------- -----------------
11,115 10,577
Less current portion.............................. (144) (354)
---------- -----------------
Total................................... $ 10,971 $10,223
---------- -----------------
---------- -----------------
</TABLE>

The construction note payable has a total commitment of $1,450,000. At
maturity, the construction note converts to a three-year term note with
principal amortizing over twenty years at an interest rate of 9.25%. At the end
of the three years, the unpaid pr incipal balance will amortize over a ten-year
period.

5. CONTINGENCIES

Buyer, during the normal course of operating its business, will become
engaged in various litigation and other legal disputes. In the opinion of
Buyer's management, the ultimate disposition of such disputes will not have a
material impact on Buyer's consolidated financial position or statement of
operations.

6. RECENT DEVELOPMENTS

Buyer, through its wholly owned subsidiary, Greenville Hotel L.L.C.
('GHLLC'), is constructing a 56-room hotel, the Key West Inn. At September 30,
1997, Buyer had incurred approximately $800,000 in construction costs and
anticipates total construction costs of the hotel to approximate $2,200,000. The
hotel opened in December, 1997.

On April 1, 1997, Buyer entered into an agreement with Marina Casino,
Limited ('Marina'), PMD Trust and D.W. Trust to purchase all of the capital
stock of Marina for $1.3 million pursuant to the Second Amendment to a Moorage
Agreement dated September 29, 1993. At September 30, 1997, Buyer reflected a
liability of $700,000 in accounts payable and accrued expenses in the
accompanying consolidated condensed balance sheet for amounts owed pursuant to
this agreement.

F-54

<PAGE>

<PAGE>
GREENVILLE CASINO PARTNERS, L.P.
CONDENSED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

The unaudited pro forma information is presented to reflect the pro forma
effect of the Sale as if it had been consummated on September 30, 1997 for
balance sheet presentation purposes and as of January 1, 1996 for the year ended
December 31, 1996 and for the nine months ended September 30,1997 for income
statement presentation purposes pursuant to the assumptions and adjustments in
the accompanying notes to Buyer and Subsidiaries Unaudited Condensed Pro Forma
Consolidated Financial Statements. The Sale will be accounted for as a purchase.
The allocation of the purchase price has been estimated, and accordingly, the
amounts reflected in the pro forma may differ when the final purchase price
allocation is determined.

The following pro forma information is not necessarily indicative of the
results of operations and financial position of Buyer and Subsidiaries as they
may be in the future or they might have been had the Sale occurred as of the
date assumed. This pro forma information should be read in conjunction with the
audited historical Consolidated Financial Statements of Buyer and Subsidiaries
as of December 31, 1996 and 1995 and for each of the three years ended December
31, 1996 and the unaudited historical Consolidated Financial Statements of Buyer
and Subsidiaries as of September 30, 1997 and 1996 and for the three and nine
month periods then ended, which are included elsewhere herein.

The unaudited condensed pro forma consolidated financial statements include
certain estimates (e.g., financing amounts and terms, purchase price
allocations, etc.). Buyer and Subsidiaries' management does not believe that the
effects of any changes in these estimates, individually or in the aggregate,
will have a material effect on the unaudited condensed pro forma consolidated
financial statements.

F-55

<PAGE>

<PAGE>
GREENVILLE CASINO PARTNERS, L.P.
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997

The following Unaudited Condensed Pro Forma Consolidated Balance Sheet is
based on (i) the unaudited historical Consolidated Balance Sheet of Buyer as of
September 30, 1997 and (ii) the unaudited historical balance sheet of Gulf Coast
as of September 30, 1997, and has been prepared to reflect the Sale after giving
effect to the pro forma adjustments described in the Notes to the Unaudited
Condensed Pro Forma Consolidated Financial Statements as if the Sale had
occurred on September 30, 1997.

<TABLE>
<CAPTION>
NET ASSETS
TO BE
ACQUIRED
FROM
BUYER GULF COAST PRO FORMA BUYER
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
---------- ---------- ----------- ---------
(DOLLAR AMOUNTS IN THOUSANDS)

<S> <C> <C> <C> <C>
Cash........................................................ $ 1,846 -- $ (27,250)(b) $ 5,667
44,000(c)
(1,448)(d)
(11,481)(e)
Accounts receivable......................................... 606 -- 606
Inventory................................................... 100 100
Prepaid and other........................................... 387 -- -- 387
---------- ---------- ----------- ---------
Total current assets................................... 2,939 -- 3,821 6,760
Property and equipment, net................................. 15,568 31,168 6,582(a) 53,318
Other assets................................................ 1,148 -- 1,448(b) 2,596
---------- ---------- ----------- ---------
Total assets................................................ $ 19,655 31,168 11,851 $ 62,674
---------- ---------- ----------- ---------
---------- ---------- ----------- ---------
Accounts payable and accrued expenses....................... $ 3,272 $ 2,000(b) 4,954
(318)(e)
Current portion of long-term debt........................... 144 -- 5,316(c) 5,460
---------- ---------- ----------- ---------
Total current liabilities.............................. 3,416 -- 6,998 10,414
Long-term debt, net of unamortized discount................. 10,971 -- 38,684(c) 38,492
(11,163)(e)
Shareholder Investment:
Partners' Capital...................................... 5,268 -- 8,500(b) 13,768
Parent Company's investment in subsidiary sold......... -- 31,168 (31,168)(a) --
---------- ---------- ----------- ---------
Total liabilities and partners' capital..................... $ 19,655 $ 31,168 $ 11,851 $ 62,274
---------- ---------- ----------- ---------
---------- ---------- ----------- ---------
</TABLE>

The Unaudited Condensed Pro Forma Consolidated Balance Sheet
should be read in conjunction with the accompanying notes.

F-56

<PAGE>

<PAGE>
GREENVILLE CASINO PARTNERS, L.P.
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED
INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1996

The following Unaudited Condensed Pro Forma Consolidated Income Statement
for the year ended December 31, 1996 is based on (i) the unaudited historical
Consolidated Statement of Operations of Buyer for the year ended December 31,
1996 and (ii) the unaudited historical Statement of Operations of Gulf Coast for
the year ended December 31, 1996, after giving effect to the pro forma
adjustments described in the Notes to the Unaudited Condensed Pro Forma
Consolidated Financial Statements as if the Sale had occurred on January 1,
1996.

<TABLE>
<CAPTION>
BUYER GULF COAST PRO FORMA BUYER
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
---------- ---------- ----------- ---------
(DOLLAR AMOUNTS IN THOUSANDS)

<S> <C> <C> <C> <C>
Revenues
Casino................................................... $ 34,761 $ 36,340 $71,101
Non-casino............................................... 1,085 947 2,032
---------- ---------- ---------
Net revenues........................................ 35,846 37,287 73,133

Costs and expenses
Casino................................................... 13,185 12,619 25,804
Non-casino............................................... 3,047 1,282 4,329
General and administrative............................... 13,763 16,386 30,149
Interest, net............................................ 1,665 4,952 2,115(g) 8,732
Depreciation and amortization............................ 3,359 4,874 1,314(f) 9,547
---------- ---------- ----------- ---------
Total costs and expenses............................ 35,019 40,113 3,429 78,561
---------- ---------- ----------- ---------

Net income (loss)............................................. $ 827 $ (2,826) $(3,429) $(5,428)
---------- ---------- ----------- ---------
---------- ---------- ----------- ---------
</TABLE>

The Unaudited Condensed Pro Forma Consolidated Income Statement
should be read in conjunction with the accompanying notes.

F-57

<PAGE>

<PAGE>
GREENVILLE CASINO PARTNERS, L.P.
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED
INCOME STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997

The following Unaudited Condensed Pro Forma Consolidated Income Statement
for the nine months ended September 30, 1997 is based on (i) the unaudited
historical Consolidated Statement of Operations of Buyer for the nine months
ended September 30, 1997 and (ii) the unaudited historical Statement of
Operations of Gulf Coast for the nine months ended September 30, 1997, after
giving effect to the pro forma adjustments described in the Notes to the
Unaudited Condensed Pro Forma Consolidated Financial Statements as if the Sale
met had occurred on January 1, 1996.

<TABLE>
<CAPTION>
BUYER GULF COAST PRO FORMA BUYER
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
---------- ---------- ----------- ---------
(DOLLAR AMOUNTS IN THOUSANDS)

<S> <C> <C> <C> <C>
Revenues
Casino................................................... $ 21,587 $ 23,868 $45,455
Non-casino............................................... 1,970 466 2,436
---------- ---------- ---------
Net revenues........................................ 23,557 24,334 47,891

Costs and expenses
Casino................................................... 8,387 9,004 17,391
Non-casino............................................... 1,621 434 2,055
General and administrative............................... 11,005 12,075 23,080
Interest, net............................................ 1,136 3,551 1,375(g) 6,062
Depreciation and amortization............................ 2,241 3,841 800(f) 6,882
---------- ---------- ----------- ---------
Total costs and expenses............................ 24,390 28,905 2,175 55,470
---------- ---------- ----------- ---------

Net income (loss)............................................. $ (833) $ (4,571) $(2,175) $(7,579)
---------- ---------- ----------- ---------
---------- ---------- ----------- ---------
</TABLE>

The Unaudited Condensed Pro Forma Consolidated Income Statement
should be read in conjunction with the accompanying notes.

F-58

<PAGE>

<PAGE>
GREENVILLE CASINO PARTNERS, L.P.
NOTES TO UNAUDITED CONDENSED PRO FORMA
CONSOLIDATED FINANCIALS

BALANCE SHEET ADJUSTMENTS

The Unaudited Condensed Pro Forma Consolidated Balance Sheet gives effect
to the adjustments set forth below to reflect Buyer's proposed acquisition of
certain net assets (the Bayou Caddy's Jubilee Casino) of Alpha Gulf Coast, Inc.
('Gulf Coast') pursuant to the Asset Purchase Agreement, dated December 17,
1997. For purposes of this pro forma, it has been assumed that the purchase
price will approximate $37,750 that includes approximately $750 of transaction
related costs. Additionally, the pro forma reflects the applicable debt
issuances to consummate the proposed acquisition and to effect certain
refinancings of existing indebtedness of Buyer. (Dollar amounts in thousands.)

(a) Reflects the provisional allocation of the Gulf Coast purchase
price using the purchase method of accounting:

<TABLE>
<C> <S> <C>
(i) Property and equipment.............................................. $ 6,582
(ii) Net assets acquired from Gulf Coast................................. 31,168
-------
$37,750
-------
-------
</TABLE>

No intangible assets were identified that required separate valuation.
Additionally, the Buyer believes that the Gulf Coast assets acquired will
generate sufficient future cash flows to recoup the values assigned to those
assets.

(b) Reflects the payment of $27,250 in cash for the net assets of Gulf
Coast and related transaction costs, the assumption by Buyer at closing of
up to $2,000 in general corporate liabilities related to Gulf Coast's
casino operations and the issuance of limited partner interests
representing 25% of Buyer's equity of $8,500 the value of which was
determined by the interested parties. The value of the 25% equity interest
in Buyer is a result of arm's-length negotiations between the parties upon
their agreement to the issuance of such equity interest in lieu of Buyer's
incurring $8.5 million of indebtedness to Gulf Coast for acquisition of its
operating assets, as initially contemplated. The parties agreed upon this
valuation in reliance upon various appraisals and market studies undertaken
by or on behalf of the parties in the conduct of their respective business
operations.

(c) Reflects the issuance of a certain first mortgage debt facility,
other indebtedness secured by gaming equipment and subordinated debt to
third parties, net of related discount:

<TABLE>
<C> <S> <C>
(i) First mortgage indebtedness......................................... $33,000
(ii) Equipment facility.................................................. 11,000
(iii) Subordinated debt................................................... 8,500
(iv) Discount on indebtedness............................................ (8,500)
-------
$44,000
Less current portion........................................................ (5,316)
-------
$38,684
-------
-------
</TABLE>

(d) Reflects the payment of $1,448 in loan closing costs.

(e) Reflects the retirement of certain existing indebtedness of Buyer
and related accrued interest:

<TABLE>
<C> <S> <C>
(i) Senior secured notes................................................ $10,600
(ii) Hotel construction loan............................................. 563
-------
11,163
(iii) Accrued interest.................................................... 318
-------
$11,481
-------
-------
</TABLE>

F-59

<PAGE>

<PAGE>
GREENVILLE CASINO PARTNERS, L.P.
NOTES TO UNAUDITED CONDENSED PRO FORMA
CONSOLIDATED FINANCIALS -- (CONTINUED)

INCOME STATEMENT ADJUSTMENTS

The Unaudited Condensed Pro Forma Consolidated Income statement for the
year ended December 31, 1996 gives effect to the following pro forma adjustments
necessary to reflect the proposed Sale and related financing activities:

(f) Reflects depreciation and amortization expense on the acquired
property and equipment, as adjusted for the previously described purchase
accounting adjustment, based on the estimated useful lives established by
Buyer. Useful lives are 5 to 7 years for furniture and equipment; 10 years
for riverboats and related improvements; 15 years for land improvements and
31.5 years for buildings.

(g) Reflects interest expense, including the related amortization of
debt discount and the amortization of deferred financing costs, on the
first mortgage indebtedness, gaming equipment lending facility and
subordinated debt arrangement. The first mortgage indebtedness bears an
interest rate, determined monthly, based on the 30-day London Interbank
Offered Rate ('LIBOR') plus 615 basis points. The gaming equipment lending
facility and the subordinated debt arrangement bear a fixed interest rate
of 11.0%. For purposes of this pro forma, the first mortgage indebtedness
assumes a 30-day LIBOR rate of 6.0%. A change in the monthly 30-day LIBOR
rate of 1/8 of 1% would result in a change in pro forma interest expense
payments of $40 for the year ended December 31, 1996. The components of pro
forma interest expense are as follows:

<TABLE>
<S> <C>
First mortgage indebtedness................................................ $3,842
Gaming equipment facility.................................................. 1,074
Subordinated debt.......................................................... 984
Amortization of related debt discount and financing costs.................. 2,675
------
8,575
Less historical interest of Alpha Gulf and interest costs on retired debt
of Buyer................................................................. (6,460)
------
$2,115
------
------
</TABLE>

(h) Reflects depreciation and amortization expense on the acquired
property and equipment, as adjusted for the previously described purchase
accounting adjustment, based on the estimated useful lives established by
Buyer. Useful lives are 5 to 7 years for furniture and equipment; 10 years
for riverboats and related improvements; 15 years for land improvements and
31.5 years for buildings.

(i) Reflects interest expense, including the related amortization of
debt discount and the amortization of deferred financing costs, on the
first mortgage indebtedness, gaming equipment lending facility and
subordinated debt arrangement. The first mortgage indebtedness bears an
interest rate, determined monthly, based on the 30-day ('LIBOR') plus 615
basis points. The gaming equipment lending facility and the subordinated
debt arrangement bear a fixed interest rate of 11.0%. For purposes of this
pro forma, the first mortgage indebtedness assumes a 30-day LIBOR rate of
6.0%. A change in the monthly 30-day LIBOR rate of 1/8 of 1% would result
in a change in

F-60

<PAGE>

<PAGE>
GREENVILLE CASINO PARTNERS, L.P.
NOTES TO UNAUDITED CONDENSED PRO FORMA
CONSOLIDATED FINANCIALS -- (CONTINUED)

pro forma interest expense payments of $30 for the nine months ended
September 30, 1997. The components of pro forma interest expense are as
follows:

<TABLE>
<S> <C>
First mortgage indebtedness................................................ $2,882
Gaming equipment facility.................................................. 630
Subordinated debt.......................................................... 812
Amortization of related debt discount and financing costs.................. 1,734
------
6,058
Less historical interest of Alpha Gulf and interest costs on retired debt
of Buyer................................................................. (4,683)
------
$1,375
------
------
</TABLE>

F-61

<PAGE>

ASSET PURCHASE AGREEMENT

between

ALPHA GULF COAST, INC., A DELAWARE CORPORATION

and

ALPHA GREENVILLE HOTEL, INC., A DELAWARE CORPORATION

and

GREENVILLE CASINO PARTNERS, L.P.,

A MISSISSIPPI LIMITED PARTNERSHIP
DATED DECEMBER 17, 1997

TABLE OF CONTENTS

<TABLE>
<S> <C> <C>
1. Casino Assets . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Casino Barge and Related Equipment . . . . . . . . . 3
1.2 Fixtures, Gaming Equipment and Other Assets. . . . . 3
1.3 Moorage, Lease and Related Agreements. . . . . . . . 4
1.4 Excluded Assets. . . . . . . . . . . . . . . . . . . 5
1.5 List of Casino Assets . . . . . . . . . . . . . . . 6
2. Hotel Assets. . . . . . . . . . . . . . . . . . . . . . . 6
2.1 Casino Hotel . . . . . . . . . . . . . . . . . . . . 6
2.2 Lease, Permits and Commitments . . . . . . . . . . . 7
3. Employees . . . . . . . . . . . . . . . . . . . . . . . . 8
4. Consideration and Closing . . . . . . . . . . . . . . . . 9
4.1 Cash Portion . . . . . . . . . . . . . . . . . . . . 9
4.2 Designated Liabilities . . . . . . . . . . . . . . . 11
4.3 Limited Partnership Interest . . . . . . . . . . . . 13
4.4 Consideration for Hotel Assets . . . . . . . . . . . 13
4.5 Closing of the Purchase of the Casino Assets . . . . 15
4.6 Closing of Purchase of Hotel Assets . . . . . . . . 16
5. Deliveries at Closing . . . . . . . . . . . . . . . . . . 20
5.1 Unencumbered Assets. . . . . . . . . . . . . . . . . 20
5.2 Current Obligations. . . . . . . . . . . . . . . . . 22
5.3 Assumption of Liabilities. . . . . . . . . . . . . . 23
5.4 Excluded Liabilities . . . . . . . . . . . . . . . . 23
6. Conduct Prior to the Closing Date . . . . . . . . . . . . 24
7. Additional Conduct Prior to the Hotel Closing Date. . . . 29

</TABLE>

<TABLE>

<S> <C> <C>
8. Conditions to Closing . . . . . . . . . . . . . . . . . . 31

8.1 Conditions to Seller's Obligations to Close
Purchase of Casino Assets . . . . . . . . . . . . . 31

8.2 Conditions to Purchaser's Obligation to Close
Purchase of the Casino Assets . . . . . . . . . . . 34

8.3 Conditions to Purchaser's Obligations to Close
the Purchase of the Hotel Assets . . . . . . . . . . 43

9. Post-Closing Agreements . . . . . . . . . . . . . . . . . 46

9.1 Disclosure and Use of Confidential Information . . . 46

9.2 Use of Trademarks. . . . . . . . . . . . . . . . . . 47

9.3 Hiring Away Employees. . . . . . . . . . . . . . . . 47

9.4 Back-Up . . . . . . . . . . . . . . . . . . . . . . 48

9.5 Further Assurances . . . . . . . . . . . . . . . . . 48

9.6 Injunctive Relief. . . . . . . . . . . . . . . . . . 49

9.7 Indemnification and Settlement of Claims . . . . . . 50

(a) Indemnification of Purchaser . . . . . . . . . 50

(b) Survival Periods as to Seller . . . . . . . . . 52

(d) Survival Periods as to Purchaser . . . . . . . 54

(e) Procedure for Claimed Relief . . . . . . . . . 55

(i) Notice of Claims . . . . . . . . . . . . . 55

(ii) Dispute with Respect to Notice of
Claim . . . . . . . . . . . . . . . . . . 57

(iii) Third Party Claims . . . . . . . . . . . . 58

(f) Right to Offset . . . . . . . . . . . . . . . . 60

10. Seller's Representations and Warranties . . . . . . . . . 61

10.1 Permits, Registrations, Licenses, Leasehold,
Moorage and Dockage Interest . . . . . . . . . . . . 62

</TABLE>

<TABLE>

<S> <C> <C>
10.2 Listing of Assets and Title . . . . . . . . . . . . 64
10.3 Payment of Debts . . . . . . . . . . . . . . . . . . 65
10.4 Designated Liabilities . . . . . . . . . . . . . . . 66
10.5 No Other Contracts . . . . . . . . . . . . . . . . . 66
10.6 Hart-Scott-Rodino Act . . . . . . . . . . . . . . . 67
10.7 Coast Guard Standards. . . . . . . . . . . . . . . . 67
10.8 No Conflict. . . . . . . . . . . . . . . . . . . . . 67
10.9 Condition and Non-Removal of Equipment . . . . . . . 68
10.10 Compliance with Laws . . . . . . . . . . . . . . . 68
10.11 Hotel Marketing. . . . . . . . . . . . . . . . . . . 69
10.12 Litigation . . . . . . . . . . . . . . . . . . . . . 69
10.13 Hazardous Substances . . . . . . . . . . . . . . . . 70
10.14 Brokers and Real Estate Commissions. . . . . . . . . 71
10.15 Contracts and Agreements . . . . . . . . . . . . . . 72
10.16 Compliance with Mississippi Gaming Regulations . . . 73
10.17 Good Standing. . . . . . . . . . . . . . . . . . . . 73
10.18 Corporate Authorization. . . . . . . . . . . . . . . 74
10.19 Valid Obligation . . . . . . . . . . . . . . . . . . 74
10.20 Profit and Loss Statements . . . . . . . . . . . . . 74
10.21 Knowledge . . . . . . . . . . . . . . . . . . . . . 75
10.22 Application of Sale Proceeds . . . . . . . . . . . . 76
10.23 Pledge of Partnership Interest . . . . . . . . . . . 78
11. Purchaser's Representations and Warranties. . . . . . . . 79
11.1 Good Standing. . . . . . . . . . . . . . . . . . . . 79
11.2 Corporate Authorization. . . . . . . . . . . . . . . 79
11.3 No Violation of Other Documents. . . . . . . . . . . 80

</TABLE>

iii

<TABLE>

<S> <C> <C>
11.4 Brokers and Real Estate Commissions. . . . . . . . . 80
11.5 Hart-Scott-Rodino Act . . . . . . . . . . . . . . 80
11.6 Delivery of Partnership Agreement . . . . . . . . . 81
11.7 Delivery of Proforma Balance Sheet . . . . . . . . . 81
12. Right to Terminate and Remedies . . . . . . . . . . . . . 82
12.1 Right To Terminate . . . . . . . . . . . . . . . . . 82
12.2 Remedies . . . . . . . . . . . . . . . . . . . . . . 83
(a) Purchaser's Remedies . . . . . . . . . . . . . 83
(b) Seller's Remedies . . . . . . . . . . . . . . . 85
(c) Subordination of Termination Payments . . . . . 85
13. Legal Compliance. . . . . . . . . . . . . . . . . . . . . 88
14. Risk of Loss. . . . . . . . . . . . . . . . . . . . . . . 88
15. Time of Essence . . . . . . . . . . . . . . . . . . . . . 90
16. Governing Law . . . . . . . . . . . . . . . . . . . . . . 90
17. Guaranty . . . . . . . . . . . . . . . . . . . . . . . . 90
18. Notices . . . . . . . . . . . . . . . . . . . . . . . . . 91
19. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 92
19.1 Entire Agreement; Enforceability . . . . . . . . . . 92
19.2 Amendments . . . . . . . . . . . . . . . . . . . . . 93
19.3 Binding Effect; Assignment; No
Third Party Beneficiaries . . . . . . . . . . . . . 93
19.4 Waivers; Consents . . . . . . . . . . . . . . . . . 94
19.5 Severability . . . . . . . . . . . . . . . . . . . . 95
19.6 Captions . . . . . . . . . . . . . . . . . . . . . . 95
19.7 Interpretation of "including" and "day". . . . . . . 95
19.8 Counterparts . . . . . . . . . . . . . . . . . . . . 96

</TABLE>

<TABLE>

<S> <C> <C>
20. No Offer. . . . . . . . . . . . . . . . . . . . . . . . . 96

</TABLE>

SCHEDULES

<TABLE>
<S> <C>
Schedule 1.3(a) Casino Agreements

Schedule 1.3(b) Option to Acquire Option and
Contract Rights

Schedule 1.4 Excluded Assets

Schedule 1.5 Casino Assets

Schedule 4.6 Pledge of Limited Partnership Interest

Schedule 5.1 Form of Conveyances

Schedule 5.1(e)(v) Additional Permitted Exceptions to Title to Real Estate

Schedule 6(d)(i) Key Employee Positions Requiring Notification

Schedule 6(e) Casino Insurance

Schedule 7(c) Builder's Risk Insurance Policy

Schedule 8.1(c) Form of Opinion Letter of Purchaser's Counsel

Schedule 8.2(c)(2)(a) Form of Written Consent of the City of Greenville

Schedule 8.2(c)(2)(b) Form of Consent of City of Greenville to Collateral Assignment

Schedule 8.2(c)(3)(a) Form of Written Consent of the Greenville Yacht
Club

Schedule 8.2(c)(3)(b) Form of Consent of the Greenville Yacht Club to
Collateral Assignment

Schedule 8.2(c)(4)(a) Form of Written Consent of Board of Mississippi
Levee Commissioners

Schedule 8.2(c)(4)(b) Form of Consent of the Board of Mississippi Levee
Commissioners to Collateral Assignment

</TABLE>

<TABLE>
<S> <C>
Schedule 8.2(c)(5)(a) Form of Written Consent for Assignment to Purchaser of Permit to
Construct and Maintain Facilities

Schedule 8.2(c)(5)(b) Form of Consent of Board of Mississippi Levee Commissioners
to Collateral Assignment

Schedule 8.2(c)(9)(a) Form of Acknowledgment of the Greenville Port Commission

Schedule 8.2(c)(9)(b) Consent to Collateral Assignment by Greenville Port Commission

Schedule 8.2(c)(10)(a) Form of Acknowledgment of the Board of Mississippi Levee Commissioners

Schedule 8.2(c)(10)(b) Consent to Collateral Assignment by Board of Mississippi Levee
Commissioners

Schedule 8.2(e) Form of Opinion Letter of Seller's Counsel for Casino Closing

Schedule 8.2(f) Environmental Matters

Schedule 8.2(i) Engineering Matters

Schedule 8.2(j) Site Inspection Matters

Schedule 8.2(m) Regulatory Matters

Schedule 8.2(n) Utility Matters

Schedule 8.3(e) Form of Opinion of Seller's Counsel for Hotel Closing

Schedule 8.3(k) Supervisory Management Agreement

Schedule 8.3(l) Consent of The Mississippi Department of Archives and History to Assignment and
Collateral Assignment

Schedule 10.9 Slot Machines to Be Removed from Casino

Schedule 10.12 Pending Litigation

Schedule 10.20 Non-Recurring Items

</TABLE>

<TABLE>
<S> <C>
Schedule 11.6 Partnership Agreement

Schedule 11.7 Purchaser's Proforma Balance Sheet

Schedule 17 Guaranty from Alpha Hospitality Corporation

</TABLE>

iii

ASSET PURCHASE AGREEMENT

This Agreement is entered into by ALPHA GULF COAST, INC., a Delaware
corporation (hereinafter referred to as "SELLER"), ALPHA GREENVILLE HOTEL, INC.,
a Delaware corporation (hereinafter referred to as "ALPHA HOTEL"), and
GREENVILLE CASINO PARTNERS, L.P., a Mississippi limited partnership (hereinafter
referred to as "PURCHASER") as of the 17th day of December, 1997 (hereinafter
referred to as the "EXECUTION DATE").

R E C I T A L S:

A. Seller is the owner and operator of the Bayou Caddy's Jubilee Casino
(hereinafter referred to as the "CASINO") consisting of the Casino Barge
(Official Number 519419) (hereinafter referred to as the "CASINO
BARGE"), certain permits, mooring, dockage, lease rights and other
assets, including real property and tangible and intangible personal
property more particularly described herein.

B. Seller wishes to sell to Purchaser the Casino including Casino Barge,
and all related fixtures, equipment, contractual rights, and all other
real and personal property associated therewith, and the Casino Hotel,
together with its furniture

and fixtures, and to assign each of the agreements described below to
Purchaser, and Purchaser wishes to buy and assume the same, all under
the terms and conditions set forth in this Agreement.

C. Seller's affiliate, Alpha Hotel, is currently constructing an all-suite
hotel on the site of the former headquarters of the Mississippi Board of
Levee Commissioners as described in Section 2 below (hereinafter
referred to as the "CASINO HOTEL"). Alpha Hotel is a wholly owned
subsidiary of Alpha Hospitality Corporation. Seller hereby undertakes to
cause Alpha Hotel to transfer the Hotel Assets in accordance with the
terms of this Agreement and Alpha Hotel by execution hereof agrees to
transfer the Hotel Assets to Purchaser and to be bound by the terms of
this Agreement as they relate to the sale of the Hotel Assets and makes
any and all representations and undertaking with respect to the Hotel
Assets as set forth herein. When used herein with respect to any and all
obligations, undertakings, agreements, representations or warranties
with respect to the Hotel Assets and the sale of the Hotel Assets, the
term Seller shall be deemed to include Alpha Gulf Coast, Inc. and Alpha
Greenville Hotel, Inc.

AGREEMENT
---------

Seller and Purchaser agree as follows:

1. CASINO ASSETS: (excluding the Casino Hotel)

Seller agrees to sell Seller's interest in, and Purchaser agrees to buy
Seller's interest in the following, all under the terms and conditions
set forth in this Agreement:

1.1 CASINO BARGE AND RELATED EQUIPMENT

The Casino Barge presently docked at the Greenville, Mississippi
Waterfront, together with the Boarding Barge (Official Number
514272) (hereinafter referred to as the "BOARDING BARGE"),
together with any and all engines, boilers, machinery,
components, masts, boats, anchors, cables, chains, rigging,
tackle, apparel, furniture, capstans, outfit tools, pumps, gear,
furnishings, appliances, fittings, spare and replacement parts,
and any and all other appurtenances appertaining or belonging
thereto, and whether on board or not on board, and, additionally,
all log books, manuals, trip records, maintenance reports,
inspection records, seaworthiness certificates, and other
historical records or information relating to the Casino Barge
and the Boarding Barge in the possession of Seller, and ramps,
generators and related equipment (including, but not limited to,
existing walkway coverings) located at the site described

in the Mooring Agreement and the Dockage Agreement described in
Schedule 1.3(a).

1.2 FIXTURES, GAMING EQUIPMENT AND OTHER ASSETS

Except as otherwise provided in Section 1.4, all fixtures,
improvements, equipment, equipment supplies, furniture,
advertising and promotional materials, trade names, logos,
customer lists and other tangible and intangible assets,
including, without limitation, all books and records with respect
to assets described in Sections 1.1, 1.2, and 1.3(a) (except for
those certain books and records expressly excluded in Section
1.4(c)), in, on, or about the Casino Barge, or at any other
location at Greenville, Mississippi, and owned, leased and/or
used by Seller in connection with the Casino, and all interests
in real property owned, leased, or under option to Seller in
Washington County, Mississippi, and all improvements thereto.

1.3 MOORAGE, LEASE AND RELATED AGREEMENTS

(a) All of Seller's rights and obligations under the permits,
moorage, dockage, license, lease agreements and contracts
as listed on Schedule 1.3(a) (hereinafter referred to as
the "CASINO AGREEMENTS").

(The assets described in Sections 1.1, 1.2, and 1.3(a)
except those expressly excluded in Section 1.4 are
hereinafter referred to as the "CASINO ASSETS".)

(b) Provided that with respect to the real property described
in the Real Estate Option Agreement dated October 26,
1995, recorded in Book 1893, at page 62, of the land
records of Washington County, Mississippi, and the Lease
and Option Agreement dated October 26, 1995, the
Memorandum of which is recorded in Deed Book 1893, at page
70, of said land records, each between Deer Creek and
Black Bayou Steam Navigation and Transportation Company
and Cotton Club, Inc., and assigned to Seller, Seller
shall not convey such assets to Purchaser upon Closing
but, in lieu of conveyance, shall execute and deliver to
Purchaser at closing the Option to Exercise Option Rights
in the form attached as Schedule 1.3(b).

1.4 EXCLUDED ASSETS

The provisions of Sections 1.1, 1.2 and 1.3(a) notwithstanding,
Casino Assets shall not include:

a. cash, accounts receivable, notes receivable and any

other amounts due from any third party arising from the
operation of the Casino prior to the closing on the
closing date;

b. the gaming equipment and other equipment and assets listed
on Schedule 1.4;

c. Seller's stock records, books, tax returns, minute books
and financial, tax, and accounting records;

d. All of Seller's rights under this Agreement;

e. All tax refunds;

f. The Lease Agreement with Mosow Real Estate, Inc. dated
November 14, 1995;

g. The Lease Agreement with Mosow Real Estate, Inc. dated
February 1, 1997; and

h. The Real Estate Option Agreement dated October 26, 1995,
and the Lease and Option Agreement dated October 26, 1995,
each between Deer Creek Navigation and Transportation
Company and Cotton Club, Inc., and assigned to Seller.

1.5 LIST OF CASINO ASSETS

The Casino Assets to be purchased, except the Casino Agreements
which are listed on Schedule 1.3(a), are listed on Schedule 1.5;
provided, however, as soon as practical, and in no event later
than five (5) days after the execution of this Agreement, Seller
shall provide Purchaser with any amendments to Schedule 1.5 and,

subject to Purchaser's agreement, the amendments shall be made to
Schedule 1.5.

2. HOTEL ASSETS:

2.1 CASINO HOTEL

Alpha Hotel agrees to sell and Purchaser agrees to buy the Casino
Hotel upon the substantial completion of its construction by
Alpha Hotel in accordance with the Standard Form Agreement
between Alpha Greenville Hotel, Inc., as Owner, and W. G. Yates
and Sons Construction Company, Inc., dated July 7, 1997 and the
plans and specifications for construction as referenced therein,
and the specifications for furnishing of the hotel prepared by
Seller and delivered to Purchaser on December 6, 1997
(hereinafter referred to collectively the "HOTEL PLANS") together
with all furniture, fixtures, and equipment, including telephone
equipment, located therein or owned or acquired for use in
connection therewith.

2.2 LEASE, PERMITS AND COMMITMENTS

In connection with the purchase of the Casino Hotel, Seller
agrees to assign and Purchaser agrees to assume the following
agreements with third parties:

a. A Lease Agreement with The Board of Mississippi

Levee Commissioners for construction and maintenance of a
hotel in Greenville, Mississippi dated February 19, 1997,
and amended April 18, 1997;

b. A permit for construction and maintenance of facilities on
The Board of Mississippi Levee Commissioners' right-of-way
dated September 11, 1997;

c. A Mississippi Landmark permit issued by the Mississippi
Department of Archives and History dated March 28, 1997;

d. A Consent by The Board of Mississippi Levee Commissioners
to the aforementioned Mississippi Landmark permit dated
July 9, 1997.

(Hereinafter the agreements identified in Section 2.2 are
hereinafter collectively referred to as the "HOTEL AGREEMENTS").

(The Casino Hotel and the Hotel Agreements are hereinafter
referred to as the "HOTEL ASSETS". The Casino Assets and Hotel
Assets are hereinafter referred to collectively as the "ASSETS").

3. EMPLOYEES:

Purchaser will assume no employment agreements or other obligations to
Seller's employees (except for accrued vacation and health insurance due
upon the Closing Date and assumed by

Purchaser as described in Section 4.2). Notwithstanding the foregoing,
Purchaser intends to rehire some employees of the Seller and certifies
that it shall rehire so many of Seller's employees as is necessary to
prevent the application of the Worker Adjustment and Retraining
Notification Act, 29 USC 'SS'.2101, et seq. (the "WARN ACT"). Purchaser
shall indemnify and hold harmless the Seller from any violations of the
WARN Act caused by any act or omission of Purchaser including a breach
of the certification in the prior sentence. If requested by Purchaser,
Seller shall deliver to Purchaser before the Closing Date, or Hotel
Closing Date respectively, the following information as to each of its
employees: name; salary or wage rate; date of hire; vacation
entitlement; and the amount and monetary value of accrued vacation as of
the Closing Date and Hotel Closing Date. Purchaser shall be entitled
prior to the Closing Date, and Hotel Closing Date respectively, to
review Seller's employee records and to interview Seller's employees, on
a schedule mutually agreed to by the parties and under conditions
mutually agreed to by the parties, and, at Purchaser's sole discretion,
subject to the certifications made in this Section 3, to make offers, if
any, for post Closing Date and post Hotel Closing Date employment to
Seller's employees. Provided, nothing herein shall constitute a right to
employment in any employee.

4. CONSIDERATION AND CLOSING:

The total consideration for the Casino Assets shall be the sum of the
considerations set forth in Sections 4.1, 4.2 and 4.3:

4.1 CASH PORTION

The cash portion of the purchase price shall be $26,500,000,
which shall be payable as follows:

(a) Credit to the Purchaser for the assumption by Purchaser of
the principal balance owing as of the Closing Date of the
senior secured Promissory Note from Seller to Credit
Suisse First Boston Mortgage Capital, L.L.C. or any
affiliate, successor, assignee or designee thereof
(hereinafter referred to as the "LENDER") in the original
principal amount of $19,000,000 executed in the financing
transaction described in Section 8.1(e) and Section 8.2(t)
(hereinafter referred to as the "PRINCIPAL LOAN"). The
amount of such credit shall be equal to the original
principal amount of the Principal Loan less the sum of the
following:

(i) an amount equal to the sum of any principal payments
made by the Seller on account of the Principal Loan,
and

(ii) an amount equal to the sum of loan points, and
brokerage commissions, totaling in the aggregate 4.5%
of the Principal Loan amount (totalling no more than

$855,000.00), and filing fees and title insurance
expenses incurred by Seller in connection with the
closing of the Principal Loan and the Subordinated
Debt (as hereinafter defined). It is expressly
understood and agreed that all of the Lender's legal
fees owing to Lender's counsel shall be charged to
Purchaser.

(b) Payment in cash or other immediately available funds upon
the Closing Date of the balance of the aforesaid cash
portion of the purchase price.

4.2 DESIGNATED LIABILITIES AND ASSUMED DEBT

The assumption by Purchaser of the following specified
liabilities of Seller which shall not exceed $2,000,000.00
as of closing:

a. Accrued vacation pay and health insurance claims due to
employees of Seller upon the Closing Date;

b. Chip liability as of the Closing Date;

c. Seller's Greenville Casino operations accounts incurred
in the ordinary course of business which are not older
than forty-five (45) days past their respective due dates
on the Closing Date. Provided, however, any wages earned
by Seller's Casino employees but not paid as of the
Closing Date shall not be included in the Designated
Liabilities and

shall be paid by Purchaser when due, provided that such
amount shall not exceed $1,000,000.00 as of the Closing
Date, and shall be accounted for by Seller on closing as a
reduction to the cash payment in Section 4.1;

d. Non-delinquent city, county, levee, drainage, and school
district ad valorem property taxes and special assessments
for calendar year 1998, prorated to Closing Date on the
basis of calendar year 1997's property taxes and special
assessments;

e. The gross amount of slot machine and table games
progressive meter liability;

f. The gross amount of poker "bad beat" liability; and

g. The slot club points and unredeemed promotional coupons
liability.

The liabilities to be assumed by Purchaser under Section 4.2, subparts
(a) through (g) inclusive are hereinafter referred to collectively as
the "DESIGNATED LIABILITIES". The precise amount of the Designated
Liabilities set forth in Section 4.2(a)-(g) shall be calculated by
Seller as of the Closing Date and verified as accurate by Purchaser.
Provided that the value of slot club points and unredeemed promotional
coupons shall be calculated upon Closing Date at sixty percent (60%) of
the face amount thereof; provided, further, that the actual dollar value
of the slot club points and promotional coupon

liability as of Closing Date shall be verified by a subsequent
accounting performed by Seller and Purchaser on the six (6) month
anniversary of the Closing Date and any variation in the actual dollar
value of these items which when added to the Designated Liabilities
causes the Designated Liabilities to exceed $2,000,000.00 shall result
in a payment by Seller to Purchaser in the amount of the excess of such
Designated Liabilities above $2,000,000.00 upon twenty (20) days advance
written notice of the excess.

Also, Purchaser shall assume the outstanding balance as of the Closing
Date on the subordinated secured note from the Seller to the Lender in
the original principal amount of $4,879,000.00 executed in the financing
transaction described in Section 8.1(e) and Section 8.2(t) (hereinafter
the "SUBORDINATED DEBT").

4.3 LIMITED PARTNERSHIP INTEREST

A limited partnership interest equal to twenty-five percent (25%)
of all the outstanding partnership interests in Purchaser as of
the Closing Date. Seller's limited partnership interest shall be
subject to all terms and conditions of the Revised Third Amended
and Restated Partnership Agreement of Purchaser dated as of
December 1, 1997. The parties agree solely for purposes

of this Agreement that the value of the 25% limited partnership
interest is $8,500,000.00.

4.4 CONSIDERATION FOR HOTEL ASSETS

The total purchase price for the Hotel Assets shall be equal to
Seller's cost of construction and furnishing in compliance with
the Hotel Plans, subject to a maximum purchase price of
$3,200,000.00 plus the additional sum of $112,500.00 as
consideration for Seller's advance lease payments in a like
amount made to the Board of Mississippi Levee Commissioners
pursuant to the Lease described in Section 2.2(a) for the
27-month period beginning December 1, 1997, through February 29,
2000, subject to a $4,166.67 per month reduction in the amount of
$112,500.00 for each month or part thereof after December 1,
1997, during which the purchase of the Hotel Assets does not
close (the "HOTEL PURCHASE PRICE"), plus interest at an annual
rate of 11% for construction financing on an amount equal to the
Hotel Purchase Price from the date of Purchaser's receipt of
written notice from Seller of substantial completion of the
construction and furnishing of the Casino Hotel (which notice
shall include a copy of the architect's certificate of
substantial completion and which will also certify that such
construction conformed to the plans submitted to and

approved by the Mississippi Department of Archives and History
addressed to Seller and Purchaser and a certificate of the
building inspector of the City of Greenville or his designated
agent evidencing inspection and approval for occupancy)
(hereinafter referred to as "DATE OF SUBSTANTIAL COMPLETION")
until closing of the purchase of the Hotel Assets, less the
amount of any items of work necessary to complete construction
and furnishing of the Casino Hotel after issuance of the
certificate of the building inspector of the City of Greenville
or his designated agent evidencing inspection and approval for
occupancy and architect's certificate of substantial completion.
The purchase price for the Hotel Assets shall be payable upon the
Hotel Closing Date (hereinafter defined).

4.5 CLOSING OF THE PURCHASE OF THE CASINO ASSETS

The closing of the purchase of the Casino Assets shall be
consummated at 590 Madison Avenue, New York, New York, (or at
such other place, as may hereinafter be agreed upon by Seller and
Purchaser) on the earlier of (a) the fifth (5th) business day
after all conditions precedent stated in Article 8 are fulfilled
or (b) January 31, 1998, provided, however, the foregoing
notwithstanding, if the Securities and Exchange Commission
(hereinafter

referred to as the "SEC") has not approved the form of the proxy
statement for the meeting of Seller's parent's shareholders to
consider approval of this transaction on or before January 6,
1998, the date of January 31, 1998, shall be extended to the
earlier of (x) the twenty-fifth (25th) day after SEC approval of
such proxy statement or (y) February 25, 1998, or on such other
date, as may hereafter be agreed upon by Seller and Purchaser
(hereinafter referred to as the "CLOSING DATE"). The physical
transfer of Casino Assets and transfer of the operation of the
Casino shall occur on Closing Date. The schedule and procedure
for transfer of Casino Assets and transfer of operation of the
Casino shall comply with rules, regulations, orders and
directives of the Mississippi Gaming Commission. At the time of
transfer of Casino Assets, and subject to approval of the
Mississippi Gaming Commission and the Mississippi State Tax
Commission, Purchaser and Seller will count down the floor bank,
hopper and cage cash and Purchaser will purchase from Seller the
cash therein (the total sum of which shall equal the minimum
amount required by the Mississippi Gaming Commission for the
current operation of the Casino not, however, to exceed
$1,500,000.00) upon payment therefor at par in cash or other
immediately available funds.

4.6 CLOSING OF PURCHASE OF HOTEL ASSETS

The closing of the purchase of Hotel Assets shall be consummated
at 590 Madison Avenue, New York, New York, as soon as practically
possible after written notice by Seller of the Date of
Substantial Completion and the conditions precedent to the Hotel
Closing have been fulfilled (hereinafter referred to as the
"HOTEL CLOSING DATE"). The Date of Substantial Completion of the
Hotel shall occur no later than February 6, 1998, or on such
later date as provided in this Section 4.6, and Seller represents
that February 26, 1998, is the latest date on which Seller must
complete the Casino Hotel in order to satisfy infrastructure
investment requirement applicable to the Casino under current
orders issued by the Mississippi Gaming Commission. In the event
that the Date of Substantial Completion for the Hotel is after
February 6, 1998, then for each day after February 6, 1998, until
Hotel Closing Date:

a. Seller shall pay to Purchaser liquidated damages of One
Thousand Dollars ($1,000.00) per day, payable weekly until
the Date of Substantial Completion of the Casino Hotel,
the payment of which shall be secured by a security
interest in Seller's limited partnership interest in
Purchaser, as more particularly described in the pledge of
partnership in-

strument attached as Schedule 4.6 (hereinafter referred to
as the "PLEDGE OF PARTNERSHIP INTEREST"); and

b. In the event any failure to complete the Casino Hotel
(including, but not limited to, a failure caused by a
casualty loss) results in any suspension of Purchaser's
gaming license at the Casino by the Mississippi Gaming
Commission, Seller shall pay to Purchaser an additional
amount of liquidated damages in the sum of One Hundred
Thousand Dollars ($100,000.00) per day, payable daily, for
each day during which such suspension is in effect, which
liability shall be secured by a security interest in
Seller's limited partnership interest in Purchaser, as
more particularly described in the Pledge of Partnership
Insterest attached as Schedule 4.6. In the event any
amount of liquidated damages is in excess of the value of
the limited partnership interest when applied against it,
the excess shall be due and payable from Seller. Provided,
however, Purchaser shall give Seller written notice of its
intent to collect such liability under Section 4.6(a) or
Section 4.6(b) by exercise of Purchaser's rights under the
Pledge of Partnership Interest and Seller shall have
thirty

(30) days to pay the amount to be otherwise collected
under the Pledge of Partnership Interest in cash or other
immediately available funds. In the event of any such cash
payment by Seller, Purchaser's right to collect the amount
owing by exercise of Purchaser's rights under the Pledge
of Partnership Interest shall be reduced by the amount
thus paid. The Purchaser agrees to take such reasonable
action and work with the Mississippi Gaming Commission and
Seller to prevent the suspension of the Purchaser's gaming
license. Provided, further, it is expressly understood
that the notice and procedure provisions set forth in
Paragraph 9.7 shall have no application to the payments
required in this Paragraph 4.6(a) and (b).

c. Subject to fulfillment of the conditions precedent to the
Hotel Closing, should Purchaser, due to no fault of Seller
or its agents, representatives or contractors, fail to
close the purchase of the Hotel Assets within fifteen (15)
days after receipt of Seller's notice of the Date of
Substantial Completion of the Hotel, Purchaser shall pay
to Seller, in addition to the interest specified in
Section 4.4, an additional sum of One Thousand Dollars
($1,000.00) per day, payable weekly, for each day
thereafter during which Purchaser does not

close the purchase of the Hotel Assets. If after the
expiration of the sixty (60) day period following the
receipt of the notice of the Date of Substantial
Completion, Purchaser has failed to close the purchase of
Hotel Assets under conditions stated above in this Section
4.6(c), in addition to the monetary penalties provided
above and any other remedy available to Seller, Seller
shall be entitled to seek specific performance of
Purchaser's obligation to close the purchase of the Hotel
Assets.

5. DELIVERIES AT CLOSING:

5.1 UNENCUMBERED ASSETS

At the Closing Date and Hotel Closing Date respectively, the
Seller shall deliver to Purchaser all documents (including all
Required Approvals (as such term is defined in Section 8.2(c)
hereof) from third parties) necessary to convey title to or
assign Seller's interests in the Casino Assets and the Hotel
Assets, respectively. All documents to be delivered shall be in
the forms specified in Schedule 5.1 (provided that fee simple
estates in real property shall be conveyed by deeds of the same
type by which such real property was conveyed to

Seller's predecessor-in-title, Jubilation Lakeshore, Inc.,
formerly known as Cotton Club of Greenville, Inc., (hereinafter
referred to as the "JUBILATION LAKESHORE")) and shall convey the
Assets free and clear of all mortgages, liens, security
interests, reservations, judgments, pledges, charges, claims,
escrows or other encumbrances (hereinafter referred to
collectively as "ENCUMBRANCES") except the following expressly
enumerated Encumbrances and other exceptions (hereinafter
referred to as the "PERMITTED EXCEPTIONS"):

a. The liens in favor of the Lender securing the Principal
Loan and the Subordinated Debt;

b. Liens in respect to Seller's share of the ad valorem taxes
for the year 1998 not yet due and payable, including city,
county, levee, drainage and school district ad valorem
taxes and special assignments (all ad valorem and special
assessments for the year 1997 shall have been paid by
Seller on or before closing);

c. Except as otherwise provided in this Agreement, interests
in real estate including estates in fee simple,
leaseholds, licenses, and options, shall only be warranted
to be free and clear of Encumbrances created by Seller or
by Seller's predecessor-in-title, Jubilation Lakeshore, or
arising

after the earlier of the acquisition of the subject real
estate asset by Jubilation Lakeshore or by Seller, as the
case may be; and

d. Except as otherwise provided in this Agreement, with
respect to any interest in real estate included in the
Assets, including estates in fee simple, leaseholds,
licenses, and options, the following exceptions shall also
apply:

(i) Any restrictions, terms or provisions of any zoning
ordinances of the City of Greenville or Washington
County, Mississippi;

(ii) Oil, gas and other minerals lying in, on or under
any property conveyed by Seller's
predecessors-in-title;

(iii) Rights of parties in possession not shown of public
record, deficiencies in quantity of land, boundary
line disputes, road ways, unrecorded servitudes or
easements, or uses of the subject property not
visible from the surface, and any other similar
matters not of record not created by or known to
Seller;

(iv) With respect to parties in the chain of title before
Seller and/or Jubilation Lakeshore, lack of legal
capacity or lack of authority of any grantor, fraud
of forgery of any instruments, false recitals of
marital status or

marital rights, and undisclosed heirs not revealed
in the chain of title for any such properties; and

(v) The additional exceptions to title as described on
Schedule 5.1(e)(v) with respect to each of the real
estate parcels owned or leased.

5.2 CURRENT OBLIGATIONS

Seller shall be current, as of the Closing Date and Hotel Closing
Date, respectively, in its obligations on all permits, leases,
moorage, dockage, licenses, and other existing contracts which
are part of the Assets purchased. Seller shall use its
commercially reasonable efforts to obtain estoppel certificates
from the other party to each such agreement, but shall not be
responsible to Purchaser for failure to obtain such estoppel
certificates.

5.3 ASSUMPTION OF LIABILITIES

Subject to the terms and conditions set forth in this Agreement,
Purchaser shall assume and agree to pay, perform and discharge
the following, and only the following, liabilities and
obligations of Seller as the same exist on midnight of the day
preceding the Closing

Date (the "ASSUMED LIABILITIES"):

(a) Seller's indebtedness to the Lender under the Principal
Loan and the Subordinated Debt;

(b) Designated Liabilities as described in Section 4.2;

(c) Seller's liability for lease payments and contractual
obligations which first become due and owing after the
Closing Date under the Casino Agreements and Hotel
Agreements listed on Schedule 1.3(a) and in Section 2.2,
respectively.

5.4 EXCLUDED LIABILITIES

Except for the Assumed Liabilities, no obligation or liability of
Seller or relating to the business of Seller or to the Assets, of
any nature whatsoever (whether express or implied, fixed or
contingent, liquidated or unliquidated, known or unknown,
accrued, due or to become due), is to be assumed by Purchaser,
nor shall Purchaser be liable to pay, perform or discharge any
such obligation or liability.

6. CONDUCT PRIOR TO THE CLOSING DATE:

Between the Execution Date and closing and physical transfer of Casino
Assets on the Closing Date:

a. Seller shall give to Purchaser and Purchaser's officers,
employees, agents, attorneys, consul-

tants, accountants and lenders (designated by Purchaser as
"PURCHASER'S AUTHORIZED REPRESENTATIVES") all of whom
shall have agreed in writing to be bound by the
confidentiality agreement between Seller and Purchaser
dated September 30, 1997, reasonable access, during normal
business hours upon reasonable notice, to all of the
properties (both real and personal) included in the Assets
and to the books, contracts, documents and records of the
Casino and shall furnish to Purchaser and Purchaser's
Authorized Representatives such information as Purchaser
or such persons may at any time and from time to time
reasonably request.

b. Seller shall use its commercially reasonable efforts to
obtain the Required Approvals required under Section
8.2(c). At Purchaser's request, Seller shall provide all
reasonable assistance needed to transfer to Purchaser, or
to any person designated by Purchaser, any other
transferable licenses and permits not included in the
Required Approvals, provided that failure to obtain
approvals for transfer of licenses and permits not
included in the Required Approvals is not a condition
precedent for closing for which Seller shall be held
responsible.

c. Seller shall cause the Casino to carry on its business in
the usual and ordinary course, consistent with past
practices, and shall use its commercially reasonable
efforts to preserve the Casino's business and the goodwill
of its customers, suppliers and others having business
relations with the Casino and to retain the business
organization of the Casino intact, including using
reasonable efforts to keep available the services of its
present employees (other than those dismissed for cause or
who voluntarily discontinue their employment), and to
maintain all of its properties in good operating condition
and repair, ordinary wear and tear excepted. Without
limiting the generality of the foregoing and subject to
the provisions of Section 4.2 hereof, Seller shall pay,
when due, all wages and benefits (including medical
benefit claims) of Seller's employees currently when due
in accordance with their terms, all indebtednesses to
trade creditors and other obligations incurred in the
ordinary course of the Casino's business. Seller shall
make no material change in marketing expenditures without
the prior written consent of Purchaser, provided, however,
Seller shall be entitled to allocate such expenditures as
Seller deems appropriate.

d. Without the prior written consent of Purchaser, which
shall not be unreasonably withheld, and without limiting
the generality of any other provision of this Agreement,
except in the ordinary course of business, Seller shall
not:

(i) hire any employee for a position listed on Schedule
6(d)(i) without prior notification to Purchaser's
representative, John R. O'Donnell, or such other
representative as may be designated by Purchaser;

(ii) sell, transfer or otherwise dispose of any asset or
property, except for monies applied in payment of
the Casino's liabilities in the usual and ordinary
course of business;

(iii) incur or commit to incur any capital expenditures
(including, without limitation, purchases,
commitments or offers to purchase real estate) in
excess of $50,000 or which materially changes the
character of the Casino's operations without the
written approval of John R. O'Donnell or such other
representative as may be designated by Purchaser;

(iv) incur, assume or guarantee any indebtedness secured
by the Assets (except for the Principal Loan and the
Subordinated Debt); or

(v) directly or indirectly, enter into or assume

any contract, agreement, obligation, lease, license
or commitment other than in the usual and ordinary
course of business in accordance with past practices
and which would extend beyond the Closing Date.

e. Seller shall cause the Casino to maintain the insurance
policies listed on Schedule 6(e) in full force and effect.
If any of the said policies shall expire, the Casino shall
use reasonable efforts to renew or replace the same prior
to the expiration of the expiring policies with policies
from a reputable insurance carrier with a "Best's Rating"
equal to or better than that of the existing carrier,
containing insurance coverage in the same or greater
amount than the existing policies in substantially the
same form and substance as the existing policies.

f. The Seller shall cooperate to provide documents relating
to the Assets and relating to the revenues and expenses of
the Casino and other documents and information reasonably
requested by Purchaser in connection with the closing of
Purchaser's financing, provided that Purchaser shall
reimburse Seller for any reasonable expenses incurred by
Seller in connection with providing such documents or
information and Seller shall have no obligation with

respect to any requirements or approvals required for such
financing except as expressly provided for herein.

g. Seller shall provide Purchaser notice within 24 hours
after receipt of any notice of resignation received by
Seller from any of its employees whose position is listed
on Schedule 6(d)(i).

h. Seller shall use commercially reasonable efforts to close
the Principal Loan and the Subordinated Debt prior to
midnight December 31, 1997. After closing of said
financing, Seller shall remain current in its obligations
to Lender on the Principal Loan and the Subordinated Debt
and shall not allow an Event of Default (as defined in the
Principal Loan or the Subordinate Debt as the case may be)
to occur under the loan agreement and other loan documents
executed in connection with the Principal Loan and the
Subordinated Debt.

i. Purchaser shall use commercially reasonable efforts to
close the financing with Lender that will be evidenced by
a Senior Secured Note in the amount of $17,200,000.00 and
by a Subordinated Note in the amount of $3,621,000.00
prior to midnight December 31, 1997. After closing of said
financing, Purchaser shall remain current in its
obligations to

Lender on the Senior Secured Note and the Subordinated
Note and shall not allow an Event of Default (as defined
in the loan agreement made in connection with the Senior
Secured Note and the Subordinated Note, as the case may
be) to occur under the loan agreement and other loan
documents in connection with the Senior Secured Note and
the Subordinated Note.

7. ADDITIONAL CONDUCT PRIOR TO THE HOTEL CLOSING DATE:

Between the Execution Date and the Hotel Closing Date:

a. Seller shall give the Purchaser and Purchaser's Authorized
Representatives reasonable access during normal business
hours to all of the Hotel Assets (both real and personal),
books, contracts, documents, records and shall furnish to
Purchaser and Purchaser's Authorized Representatives such
information as Purchaser or Purchaser's Authorized
Representatives may at any time and from time to time
reasonably request.

b. Seller shall use commercially reasonable efforts to
complete the construction of the Hotel in accordance with
the Hotel Plans. Any change orders in the Hotel Plans
totalling in the aggregate more than $20,000.00 (whether
as an increase or reduction) shall be subject to
Purchaser's approval,

which shall not be unreasonably withheld.

c. Seller shall maintain the builder's risk insurance policy
listed on Schedule 7(c) which covers the Casino Hotel in
full force and effect. If the Casino Hotel policy shall
expire, the Seller shall use reasonable efforts to renew
or replace the same prior to the expiration of the
expiring policy with the policy from a reputable insurance
carrier with the "Best Rating" equal to or better than
that of the existing carrier containing insurance coverage
in the same or greater amount than the existing policies
in substantially the same form and substance as the
existing policy.

8. CONDITIONS TO CLOSING:

8.1 CONDITIONS TO SELLER'S OBLIGATIONS TO CLOSE PURCHASE OF CASINO
ASSETS

The obligation of Seller to close the transactions contemplated
hereby is subject to the fulfillment of all of the following
conditions as of the Closing Date (except where a different date
is expressly provided for herein), upon the non-fulfillment of
any of which, this Agreement may, at Seller's option, be
terminated and/or remedies sought pursuant to and with the effect
set forth

in Section 12:

a. Each and every representation and warranty made by
Purchaser as of Execution Date shall have been true and
correct when made and shall be true and correct as of the
Closing Date.

b. All obligations of Purchaser to be performed hereunder
through, and including on, the Closing Date (including,
without limitation, all obligations which Purchaser would
be required to perform at the closing if the transaction
contemplated hereby was consummated) shall have been
performed.

c. Purchaser shall have delivered to Seller the written
opinions of Lake Tindall, LLP, and/or Altheimer & Gray,
and/or gaming counsel for Purchaser, dated as of the
Closing Date concerning Purchaser's partnership
organization and the Purchaser's general partner's good
standing and authority to consummate the transactions
contemplated hereby, in substantially the form of Schedule
8.1(c) attached hereto.

d. Approval by final Order of the Mississippi Gaming
Commission of the transactions contemplated herein and
post-closing operation of the Casino by Purchaser.

e. All conditions precedent to the closing of the Principal
Loan and the Subordinated Debt shall have

been satisfied and the closing thereof shall have occurred
and all conditions precedent to the closing of that
certain financing from Lender to Purchaser represented by
a senior secured note in the principal amount of
$17,200,000.00 and a subordinated secured note in the
amount of $3,621,000.00 shall have been satisfied and the
closing thereof shall have occurred and all such financing
shall have been fully funded by the Lender by midnight
December 31, 1997. If both of the aforementioned loan
financings have not been closed and fully funded by
midnight December 31, 1997, this Agreement shall be null
and void. Provided further, that all conditions precedent
to the closing of the assumption of the Principal Loan and
the Subordinated Debt as of Closing Date, pursuant to an
amended and restated loan agreement between Lender and
Purchaser renewing and rearranging indebtedness in the in
the principal amount of $36,200,000 of senior secured
indebtedness and $8,500,000.00 of subordinated secured
indebtedness on terms agreeable to Lender and to Purchaser
shall have been satisfied, the closing of such assumption
and refinancing shall have occurred, and all loans to be
made pursuant thereto shall have been fully funded to
Purchaser before Seller shall have any

obligation to sell the Casino Assets hereunder.

f. There shall have been no voluntary or involuntary
bankruptcy filing of Purchaser or its General Partner.

g. No suit, proceeding or litigation (including but not
limited to any proceeding by any government agency under
Hart-Scott-Rodino Act, as hereinafter defined) shall have
been commenced and an order obtained (which has not been
stayed) restraining or enjoining the consummation of the
transaction contemplated hereby.

8.2 CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE PURCHASE OF THE
CASINO ASSETS

The obligation of Purchaser to close the transactions
contemplated hereby is subject to the fulfillment of all of the
following conditions as of the Closing Date (except where
different date is expressly provided for herein), upon the
non-fulfillment of any of which, this Agreement may, at
Purchaser's option, be terminated and/or remedies sought pursuant
to and with the effect and subject to the limitations set forth
in Section 12.

a. Each and every representation and warranty made by Seller
as of Execution Date shall have been true and correct when
made and shall be true and correct as of the Closing Date.

b. All obligations of Seller to be performed hereunder
through, and including on, the Closing Date (including,
without limitation, all obligations which Seller would be
required to perform at the closing if the transaction
contemplated hereby was consummated) shall have been
performed.

c. All of the consents and approvals as listed below in this
Section 8.2(c) ("REQUIRED APPROVALS") shall have been
obtained:

(1) Approval by proper corporate and shareholder actions
of the transactions contemplated herein by the
Sellers' Boards of Directors and shareholders, and
by the Board of Directors and shareholders of Alpha
Hospitality Corporation.

(2) Written consent of the City of Greenville to the
assignment to the Purchaser of the City Moorage
Agreement and the City Lease Agreement, and to the
collateral assignment thereof to the Lender in the
forms attached as Schedule 8.2(c)(2)(a) and (b).

(3) Written consent of the Greenville Yacht Club

(a) to the assignment to the Purchaser of the Yacht
Club Dockage Agreement and Yacht Club License
Agreement and (b) to the collateral assignment
thereof to the Lender in the forms attached as
Schedule 8.2(c)(3)(a) and (b).

(4) Written consent of The Board of Mississippi Levee
Commissioners (a) to assignment to the Purchaser of
the Hotel Lease (effective as of the Hotel Closing
Date) and (b) to the collateral assignment thereof
to the Lender in the forms attached as Schedule
8.2(c)(4)(a) and (b).

(5) Written consent for assignment to Purchaser of the
permit for construction and maintenance of
facilities on The Board of Mississippi Levee
Commissioners' right-of-way dated September 11,
1997, in the form attached as Schedule 8.2(c)(5)(a)
and (b).

(6) Assignment to the Purchaser of permits from the U.S.
Army Corps of Engineers or issuance of permits to
Purchaser permitting the moorage of the Casino Barge
and the Boarding Barge in their present location.

(7) Written verification from the Mississippi Gaming
Commission that Seller is not in violation of any
infrastructure requirements

which have been imposed in connection with the
granting of Gaming Licenses to Seller effective as
of the Closing Date.

(8) The consents, approvals and estoppels, if any,
obtained by Seller in connection with the closing of
the Principal Loan shall not have been withdrawn or
revoked by the issuing party.

(9) Written acknowledgment of the Greenville Port
Commission that it has no objection to the
assignment to the Purchaser of the City Moorage
Agreement and City Lease Agreement and to the
collateral assignment thereof to the Lender in the
forms attached as Schedule 8.2(c)(9)(a) and (b).

(10) Written acknowledgment of The Board of Mississippi
Levee Commissioners that it has no objection to the
assignment to the Purchaser of the City Moorage
Agreement and the City Lease Agreement and to the
collateral assignment thereof to the Lender in the
forms attached as Schedules 8.2(c)(10)(a) and (b).

d. No suit, proceeding or litigation (including, but not
limited to, any proceeding by any government agency under
the Hart-Scott-Rodino Antitrust Im-

provements Act of 1976, Pub. L. 94-435 (the
"HART-SCOTT-RODINO ACT"), shall have been commenced and an
order obtained (which has not been stayed) restraining or
enjoining the consummation of the transaction contemplated
hereby.

e. Seller shall have delivered to Purchaser the written
opinions of Watkins, Ludlam & Stennis, P.A., Parker,
Duryee, Rosoff & Haft, P.C. and such other law firm(s)
reasonably acceptable to Purchaser, dated as of the
Closing Date, addressed to Purchaser and which shall state
that the Lender will be entitled to rely thereon, which
contains opinions in substantially the form of Schedule
8.2(e) attached hereto.

f. All of the matters shown on the attached Schedule 8.2(f)
shall have been cured to the satisfaction of Purchaser and
the Lender, and there shall have been no material adverse
change in the types of matters shown in the environmental
reports dated November 20, 1997, provided to the Lender
since the date of such environmental reports that has not
been cured to the satisfaction of Purchaser and the
Lender.

g. Seller's parent, Alpha Hospitality Corporation, shall have
executed and delivered to Purchaser on

Execution Date the guaranty, the form of which is attached
as Schedule 17.

h. Seller shall have delivered to Purchaser a copy of a
"Fairness Opinion" acceptable to the Securities and
Exchange Commission as part of Seller's disclosure to its
Shareholders and which shall state that the Lender may
rely thereon, relating to the transactions under this
Agreement.

i. All of the matters shown on the attached Schedule 8.2(i)
shall have been cured to the satisfaction of Purchaser and
the Lender, and there shall have been no material adverse
change in the types of matters shown in the Engineering
Reports provided to the Lender since the date of such
Engineering Reports which has not been cured to the
satisfaction of Purchaser and the Lender.

j. All of the matters shown on the attached Schedule 8.2(j)
shall have been cured to the satisfaction of Purchaser and
the Lender, and there shall have been no material adverse
change in the real property and facilities since the date
of the site inspections dated November 21, 1997, provided
to the Lender that has not been cured to the satisfaction
of Purchaser and the Lender.

k. There shall have been no material adverse change

in the matters addressed in the Appraisals provided to the
Lender since the date of such Appraisals that has not been
cured to the satisfaction of Purchaser and the Lender.

l. All material necessary licenses, permits, approvals,
waivers, authorization, consents, waiting period
expirations and clearances for the acquisition of the
Casino Assets, use and operation (and proposed operation)
of Casino Assets and the conduct of Purchaser's business
as conducted or as proposed to be conducted (including the
operation of both the Las Vegas Casino and Bayou Caddy's
Jubilee Casino) have been issued and/or obtained from the
appropriate governmental authority (excluding the
Alcoholic Beverage Control Division of the State Tax
Commission ("ABC")) and are in full force and effect.
Provided that except for the Required Approvals which are
expressly addressed in Schedule 8.2(c), Seller shall be
obligated only to use its commercially reasonable efforts
to obtain the assignment of the aforementioned items and
Seller's failure to obtain one or more of such items after
using its reasonable efforts to obtain the same shall not
result in any liability from Seller to Purchaser. All the
Casino Agreements shown on Schedule 1.3(a) (Items 1-7)
shall have

been assigned by Seller to Purchaser. All approvals to be
obtained from the Mississippi Gaming Authorities in
connection with the issuance of additional equity by
Purchaser to Seller shall have been obtained. All
licensing, registrations and all other approvals and
findings of suitability for Seller to become an equity
holder in Purchaser shall have been obtained.

m. All of the matters shown on the attached Schedule 8.2(m)
shall have been cured to the satisfaction of Purchaser and
the Lender and there shall have been no material adverse
change since September 30, 1997, in the compliance of the
improvements and facilities or the use thereof with all
applicable zoning, subdivision, environmental protection,
toxic waste, asbestos, and all other applicable federal,
state and local laws and ordinances, and all rules,
regulations and requirements of any and all governmental
or quasi-governmental authorities having jurisdiction over
any of the Casino Assets with respect to the foregoing.

n. All of the matters shown on the attached Schedule 8.2(n)
shall have been cured to the satisfaction of Purchaser and
the Lender, and there shall have been no material adverse
change in utility-related

matters since November 21, 1997.

o. A certificate in a form satisfactory to Purchaser and the
Lender representing that no pending or threatened action,
suit, or proceeding, judicial, administrative or
otherwise, is pending against Seller or its parent, Alpha
Hospitality Corporation, which would have a material
adverse effect on their ability to perform their
respective obligations under this Asset Purchase
Agreement.

p. Seller shall have delivered evidence of acceptance by the
City of utility, water, and sewer lines to be installed in
partial payment of rent pursuant to Section 6 of the Alpha
Moorage Agreement.

q. Seller shall deliver to Purchaser the pledge (in the form
attached as Schedule 4.6) of its partnership interest in
Purchaser as described in Section 4.3 as collateral to
secure Purchaser's obligations under Sections 4.6 and
9.7(f).

r. Approval by Final Order of the Mississippi Gaming
Commission of the transactions contemplated herein and
post closing operation of the Casino by Purchaser.

s. There shall have been no voluntary or involuntary
bankruptcy filing of Seller, Seller's Parent, Alpha
Hospitality Corporation, or any other subsidiary of Alpha
Hospitality Corporation.

t. All conditions precedent to the closing of the Principal
Loan and the Subordinated Debt shall have been satisfied
and the closing thereof shall have occurred and all
conditions precedent to the closing of that certain
financing from Lender to Purchaser represented by a senior
secured note in the principal amount of $17,200,000.00 and
a subordinated secured note in the amount of $3,621,000.00
shall have been satisfied and the closing thereof shall
have occurred and all such financing shall have been fully
funded by midnight December 31, 1997. If both of the
aforementioned loan financings have not been closed and
fully funded by midnight December 31, 1997, this Agreement
shall be null and void. Provided further, that all
conditions precedent to the closing of assumption of the
Principal Loan and the Subordinated Debt as of Closing
Date, pursuant to an amended and restated loan agreement
between Lender to Purchaser renewing and rearranging
indebtedness in the aggregate amount of $36,200,000.00 of
senior secured indebtedness and $8,500,000.00 of
subordinated secured indebtedness on terms agreeable to
Lender and to Purchaser shall have been satisfied, the
closing of such assumption and refinancing shall have

occurred and all loans to be made pursuant thereto shall
have been fully funded to Purchaser before Purchaser shall
have any obligation to purchase the Casino Assets
hereunder.

8.3 CONDITIONS TO PURCHASER'S OBLIGATIONS TO CLOSE THE PURCHASE OF
THE HOTEL ASSETS

The conditions to Purchaser's obligations to close the purchase
of the Hotel Assets are as follows:

a. The closing of the Casino Assets shall have closed or be
closed simultaneously herewith.

b. Each and every representation and warranty made by Seller
with respect to the Hotel Assets as of Execution Date
shall have been true and correct in all material respects
when made and shall be true and correct in all material
respects as of the Hotel Closing Date.

c. All obligations of Seller with respect to the Hotel Assets
to be performed hereunder through, and including on, the
Hotel Closing Date (including, without limitation, all
obligations which Seller would be required to perform at
the closing if the transaction contemplated hereby was
consummated) shall have been performed.

d. No suit, proceeding or investigation (including,

but not limited to, any proceeding or request for
information from any government agency under the
Hart-Scott-Rodino Act) shall have been commenced or
threatened by any governmental authority or private person
on any grounds to restrain, enjoin or hinder, or to seek
material damages on account of, the consummation of the
transaction contemplated hereby.

e. Seller's delivery to Purchaser of the written opinion of
Watkins, Ludlam & Stennis, P.A. and Parker, Duryee, Rosoff
& Haft, P.C. and such other law firm(s) reasonably
acceptable to Purchaser, dated as of the Hotel Closing
Date, which shall state that the Lender is entitled to
rely thereon and which contains opinions in substantially
the form of Schedule 8.3(e) attached.

f. All of the matters shown on the attached schedule 8.2(f)
which relate to the Casino Hotel shall have been cured to
the satisfaction of Purchaser and the Lender and there
shall have been no material adverse change in the types of
matters which relate to the Casino Hotel shown in the
Environmental Reports provided to the Lender since the
date of such Environmental Reports that has not been cured
to the satisfaction of Purchaser and the Lender.

g. Seller shall have provided Purchaser with a certificate of
approval from the building inspector of the City of
Greenville or his designated agent evidencing inspection
and approval for occupancy, and an architect's certificate
evidencing the substantial completion of the Casino Hotel
in compliance with the Hotel Plans (which will also
certify that such construction conformed to the plans
submitted to and approved by the Mississippi Department of
Archives and History), subject to punch list items which
do not exceed in the aggregate $10,000.00.

h. Seller shall have provided Buyer with copies of all
documents, invoices and agreements related to the
construction and furnishing of the Casino Hotel and the
cost of same.

i. The Hotel shall be ready in all material respects to
receive guests in the ordinary course of the Hotel's
business.

j. All of the Hotel Agreements listed in Section 2.2 shall
have been assigned by Seller to Purchaser.

k. Greenville Hotel II, LLC, a wholly owned subsidiary of
Purchaser, and Alpha Hospitality Corporation shall have
entered into that certain Supervisory Management Agreement
in the form attached as Schedule 8.3(k) and Seller shall
have

no obligation to close the sale of the Hotel until
such agreement is executed and delivered.

l. The Mississippi Department of Archives and History (the
"MDAH") shall have consented to the granting of a
leasehold deed of trust by Alpha Greenville Hotel, Inc.,
its successors and assigns, in the form attached as
Schedule 8.3(l) to Lender and the assignment of the MDAH
permit to Greenville Hotel II, and Purchaser and
Greenville Hotel II, LLC, shall have received an
architect's certificate confirming that there has been no
violation of the MDAH permit.

9. POST-CLOSING AGREEMENTS:
The parties agree that after the Closing:

9.1 DISCLOSURE AND USE OF CONFIDENTIAL INFORMATION

The Confidentiality Agreement dated September 30, 1997,
(hereinafter "CONFIDENTIALITY AGREEMENT") between the parties
shall remain in effect until December 31, 2002, provided that the
restrictions in the Confidentiality Agreement shall be waived to
the extent notices must be given or filings must be made by
either the Seller or Purchaser to any partners, shareholders,
regulatory officials, or other third parties, provided that any

notices, filings or announcements concerning the transaction made
by Seller or Purchaser which contain Confidential Information
covered by the Confidentiality Agreement will be subject to
advance review and approval by the opposite party, which approval
shall not be unreasonably delayed or withheld.

9.2 USE OF TRADEMARKS

Seller shall not use and shall not license or permit any third
party to use, any names, slogan, logo or trademark which is
similar or deceptively similar to any of the names or trademarks
presently used or which may be used prior to Closing Date in
connection with the Casino's business.

9.3 HIRING AWAY EMPLOYEES

For a period commencing on the Execution Date and ending 180 days
after the Closing Date, Seller and its affiliates shall not
employ or take any actions which are calculated to persuade any
salaried, technical or special employees, representatives or
agents of Purchaser who are rehired by Purchaser at Closing to
terminate their association with Purchaser and thereafter shall
only take such actions upon 30 days prior written notice provided
to Purchaser. This

section shall not apply to any employee who Purchaser chooses not
to employ as of the Closing Date.

9.4 BACK-UP

Seller shall, at Purchaser's request and expense, furnish to
Purchaser such documents and information with respect to Seller,
the Casino, or the Casino Hotel, which are in Seller's possession
and which are requested in connection with any investigation by
the Mississippi Gaming Commission or any tax authorities.

9.5 FURTHER ASSURANCES

The parties shall execute such further documents, and perform
such further acts, as may be reasonably necessary to transfer and
convey the Assets to Purchaser on the terms herein contained and
to otherwise comply with the terms of this Agreement.

9.6 INJUNCTIVE RELIEF

Seller specifically recognizes that any breach of Sections 9.1,
9.2 and 9.3 by Seller will cause irreparable injury to Purchaser,
and Purchaser specifically recognizes that any breach of Section
9.1 by Purchaser will cause irreparable injury to Seller and that
both parties recognize that in any such event

actual damages may be difficult to ascertain, and in any event,
may be inadequate. Accordingly (and without limiting the
availability of legal or equitable, including injunctive,
remedies under any other provisions of this Agreement), Seller
and Purchaser agree that in the event of any such breach, in
addition to such other legal and equitable remedies, injunctive
relief may be available. Seller and Purchaser recognize that the
absence of time limitations in Sections 9.1 and 9.2 is reasonable
and properly required for the protection of Seller and Purchaser,
and in the event that the absence of such limitation is deemed to
be unreasonable by a court of competent jurisdiction, the parties
agree and submit to the imposition of such a limitation as said
court shall deem reasonable.

9.7 INDEMNIFICATION AND SETTLEMENT OF CLAIMS

a. INDEMNIFICATION OF PURCHASER Subject to the terms,
conditions and limitations contained in this Agreement,
the Seller agrees to indemnify, defend and hold Purchaser,
its partners and subsidiaries, and their respective
officers and directors (as hereinafter defined)
(collectively, for purposes of this Section 9.7(a),
referred to

as "PURCHASER") harmless from and against any claims,
losses, liability, obligations, lawsuits, deficiencies,
damages or expense, including reasonable attorneys' fees
and all reasonable amounts paid in defense or settlement
of the foregoing (but net of any tax benefit derived by
any of the foregoing and net of any off-setting recoveries
or related proceeds received from insurance or similar
arrangements from third parties) (hereinafter referred to
as "LOSSES"), suffered or incurred as a result of (i) the
occurrence of any litigation identified in Schedule 10.12;
(ii) breach of any obligation, representation, warranty,
covenant or agreement made in this Agreement; (iii) any of
the Excluded Liabilities and/or (iv) the operation, use or
occupancy of the Assets by Seller or Seller's
predecessors-in-interest on or before the Closing Date
which obligation is not part of the Designated
Liabilities. All statements contained in this Agreement or
any schedule or exhibit hereto or certificate delivered by
or on behalf of Seller pursuant hereto shall be deemed
representations and warranties of Seller. Notwithstanding
the foregoing, Seller shall be liable to Purchaser

hereunder only if and to the extent the amount of Losses
exceeds in aggregate $10,000 with respect to Casino Assets
or exceeds in the aggregate $10,000 with respect to Hotel
Assets; provided that Seller's aggregate liability under
this provision with respect to the Casino Assets shall not
exceed the amount of the total debt assumed by Purchaser
from Seller under Section 4.1 and Section 4.2 and the cash
paid pursuant to Section 4.1 or with respect to the Hotel
Assets shall not exceed $3,200,000; provided, further, in
the event of any breach of any of the representations and
warranties in Section 10.1(i) during the first five (5)
years after the Closing Date, Purchaser shall receive as
its sole remedy damages equal to the lesser of (a) the
aggregate of the sum of present value (using a discount
rate of 11%) of increased payments required to cure the
disturbance of the moorage and/or occupancy of the Casino
at its present location and to continue such moorage and
occupancy and all reasonable expenses incurred by
Purchaser in connection with such breach, or (b) the
following amounts: $600,000.00 if the breach occurs in the
first year following the Closing Date; $480,000.00 if the
breach occurs in the second year following the

Closing Date; $360,000.00 if the breach occurs in the
third year following the Closing Date; $240,000.00 if the
breach occurs in the fourth year following the Closing
Date; and $120,000.00 if the breach occurs in the fifth
year following the Closing Date. Nothing herein shall be
construed to require indemnification by Seller for any
federal or state income taxes, or any interest or
penalties incurred thereon, payable by the Purchaser as a
result of any federal, state or local taxing authority
challenging the valuation of assets or the treatment for
tax purposes of any payment of fees or expenses.

b. SURVIVAL PERIODS AS TO SELLER Except as otherwise provided
in this Agreement, the representations, warranties,
covenants, and agreements made by the Seller in this
Agreement or any exhibit or schedule hereto or certificate
delivered pursuant hereto shall not merge into the
documents delivered at closing and shall survive the
Closing Dates and the transfer of Assets for a period to
expire on the later of (a) expiration of eighteen (18)
months after Closing Date or (b) July 31, 1999; provided,
however,that the representations and warranties set forth
in Section 10.1(i) and 10.13 shall be enforceable for a
period to expire

on the later of (a) expiration of five (5) years after
Closing Date or (b) January 31, 2003.

c. INDEMNIFICATION OF SELLER AND ITS PARENT (i) Subject to
the provisions of this Agreement, Purchaser agrees to
indemnify, defend and hold Seller, its parent corporation,
Alpha Hospitality Corporation, and their respective
officers and directors (collectively, for purposes of this
Section 9.7(c), referred to as the "SELLER") harmless from
and against any losses, liability, obligations, lawsuits,
damages, or expenses including (without limitation)
reasonable legal cost and attorney's fees (but net of any
offsetting recoveries for related proceeds received from
insurance or similar arrangements with third parties)
(hereinafter referred to as "LOSSES") suffered or incurred
by Seller as a result of the occurrence of any breach of
any obligation, representation, warranty, covenant or
agreement of Purchaser contained in this Agreement or the
operation, use or occupancy of the Assets by Purchaser or
Purchaser's successors-in-interest to the Assets from and
after the Closing Date (and not arising from acts or
omissions by Seller or its predecessors prior to closing).
All

statements contained in this Agreement or any schedule
or exhibit hereto or certificate delivered by or on behalf
of Purchaser pursuant hereto shall be deemed
representations and warranties of Purchaser.

d. SURVIVAL PERIODS AS TO PURCHASER Except as otherwise
provided in this Agreement, the representations,
warranties, covenants, and agreements made by the
Purchaser in this Agreement or any exhibit or schedule
hereto or certificate delivered pursuant hereto shall
survive the Closing Dates and the transfer of Assets and
shall not merge into the documents delivered at Closing.
The covenant to indemnify Seller for losses suffered or
incurred by Seller as a result of the operation, use, or
occupancy of assets by Purchaser or Purchaser's
successors-in-interest to the Assets (and not arising from
acts or omissions by Seller or its predecessors on or
prior to closing) from and after the Closing Date shall be
enforceable until expiration of five (5) years after
Closing Date, or such longer period for any agreements
which were assigned and assumed by Purchaser and for which
the Seller or any of its affiliates remain liable. All
other representations, warranties, covenants, and
agreements made by Purchaser shall

be enforceable for a period to expire on the later of (a)
expiration of eighteen (18) months after Closing Date or
(b) July 31, 1999.

(e) PROCEDURE FOR CLAIMED RELIEF

(i) NOTICE OF CLAIMS If at any time, or from time to time,
the party to be indemnified under Sections 9.7(a) or
9.7(c) (hereinafter referred to as the "INDEMNIFIED
PARTY") shall receive notice of or become aware of any
claim or liability which results or could result in a
Loss, such Indemnified Party shall give written notice
(hereinafter referred to as a "NOTICE OF CLAIM") to the
appropriate party to provide the indemnification under
this Section 9.7(a) or 9.7(c), as appropriate (hereinafter
referred to as the "INDEMNIFYING PARTY"), (a) within
thirty (30) days of the discovery of such potential or
actual Loss in the event the Indemnified Party has
received formal written notice of a third party claim, or
(b) otherwise within forty-five (45) days of the discovery
of such potential or actual Loss. Provided, the failure of
the Indemnified Party to give the 45-day notice of any
claim shall not release, waive, or otherwise affect the
Indemnifying Party's obligations with respect thereto

except to the extent that the Indemnifying Party can
demonstrate actual loss and prejudice as a result of such
failure; provided, the Indemnifying Party shall be
relieved of any indemnification obligation whatsoever
under Section 9.7(a) and Section 9.7(c) respecting claims
for which the Indemnified Party has failed to provide
notice prior to the expiration of the applicable survival
period as set forth in Section 9.7(b) or Section 9.7(d),
as the case may be. A Notice of Claim shall set forth (a)
a brief description of the nature of the potential or
actual Loss, (b) a copy of all information and documents
relating thereto, (c) an estimate of the total amount of
Loss anticipated (including any costs or expenses which
have been or may be reasonably incurred in connection
therewith). With regard to third party claims as described
in Section 9.7(e)(iii), the Indemnified Party shall submit
a copy of the pleading asserting any such claim as its
Notice of Claim or, if no pleadings have been filed, the
form of notice shall contain the information as set forth
above. The providing of a Notice of Claim within the
applicable survival period as set forth in Section 9.7(b)
and Section 9.7(d), as the case may be, tolls the survival
period as to the

claim described in the Notice of Claim, subject to the
requirements set forth in Section 9.7(e)(ii).

(ii) DISPUTE WITH RESPECT TO NOTICE OF CLAIM If the
Indemnifying Party rejects any Loss as to which a Notice
of Claim is received from an Indemnified Party, the
Indemnifying Party shall give written notice of such
rejection to such Indemnified Party within thirty (30)
days after the date of the Notice of Claim. Such written
notice shall set forth the grounds upon which the
Indemnifying Party bases its rejection of Loss. If no such
rejection of a Notice of Claim shall be sent within such
30 day period, the Indemnifying Party shall be deemed to
acknowledge the correctness of such claim for up to the
full amount thereof. In the event that the Indemnifying
Party shall have made timely rejection of any such claim
of an Indemnified Party, and the Indemnifying Party and
such Indemnified Party shall have failed to resolve or
compromise such claim within 60 days from the date the
Indemnified Party shall have received notice of such
rejection, then the Indemnified Party must, within 90 days
after such 60 day period, commence legal proceedings
against the Indemnifying Party, provided that, in any
event,

suit must be brought within 6 months of the assertion of
the claim. Within sixty (60) days after the Indemnifying
Party's liability to an Indemnified Party for a Loss is
finally determined (a "final determination") in such legal
proceedings by a final nonappealable judgment or by
written agreement of the Indemnifying Party and
Indemnified Party, the Indemnifying Party shall satisfy
the Loss or its portion thereof as applicable by paying
cash or other immediately available funds to such
Indemnified Party.

(iii) THIRD PARTY CLAIMS With respect to any claims or
demands by third parties, whenever the Indemnified Party
shall have notice that a third party claim or demand has
been asserted or threatened which, if true, would
constitute a basis for indemnification hereunder, the
Indemnified Party shall notify the appropriate
Indemnifying Party of such claim or demand and of the
facts within the knowledge of the Indemnified Party which
relate thereto by a Notice of Claim in accordance with
Section 9.7(e)(i) above, and such Notice of Claim shall
specifically state that the claim is a third party claim.
The Indemnifying Party shall then have the right to
contest, negotiate or settle any such claim or demand
through counsel of the Indem-

nifying Party's selection, reasonably satisfactory to the
Indemnified Party, and solely at the Indemnifying Party's
own cost, risk and expense; provided, however, that the
Indemnifying Party shall not, without the prior written
consent of the Indemnified Party (such consent not to be
unreasonably withheld or delayed) settle, compromise or
offer to settle or compromise any such claim or demand on
a basis which would result in the imposition of a consent
order, injunction or decree which would restrict the
future activity or conduct of Purchaser's business by the
Indemnified Party. In the event that the Indemnifying
Party should fail to give written notice to the
Indemnified Party of the Indemnifying Party's intention to
contest or settle any such claim or demand within twenty
(20) days after the Indemnified Party has notified the
Indemnifying Party that any such claim or demand has been
asserted or threatened, the Indemnified Party shall have
the right to satisfy and discharge the same by payment,
compromise or otherwise, and the Indemnifying Party shall
be entirely liable therefor to the Indemnified Party under
this indemnity. Notwithstanding the foregoing, however, in
the event the Indemnifying

Party disputes the Notice of Claim sent pursuant to
Section 9.7(e)(i) or (iii), then the Indemnified Party
shall not, without such Indemnifying Party's written
consent settle or compromise such claim or consent to the
entry of a judgment in respect thereto. The Indemnified
Party may also, if it so elects and entirely within its
own discretion, defend any such claim or demand in the
event the Indemnifying Party fails to give notice of its
intention to contest or settle any such claim or demand or
to contest the Notice of Claim as provided in Section
9.7(e)(ii), in which event the Indemnifying Party shall be
required to indemnify the Indemnified Party for any and
all Losses which it may sustain, suffer, incur or become
subject to as a result of its decision to defend any such
claim or demand.

f. RIGHT TO OFFSET In the event that the Seller fails to pay
any Loss adjudicated to be due against the Seller pursuant
to the procedure set forth in Section 9.7(e) within thirty
(30) days after the final determination, subject to the
terms of this subsection (f), Purchaser shall have the
right, at its option, to enforce any such claim for
recovery by exercising its rights under the Pledge of
Partnership Interest pursuant to

which Seller's Partnership Interest in Purchaser described
in Section 4.3 shall serve as collateral for any Loss
adjudicated to be due the Purchaser as aforesaid. Any
amount of Loss in excess of the value of the limited
partnership interest when applied against it shall be due
and payable in cash or immediately available funds from
Seller. Provided, however, Purchaser shall give Seller
written notice of its intent to enforce such liability
against the Pledge of Partnership Interest and Seller
shall have thirty (30) days to pay the amount to be
collected by the exercise of Purchaser's rights under the
Pledge of Partnership Interest, in which case Purchaser's
right to collect the amount by exercise of its rights
under the Pledge of Partnership Interest shall be reduced
by the amount thus paid.

10. SELLER'S REPRESENTATIONS AND WARRANTIES:

To induce Purchaser to enter into this Agreement, Seller makes the
following representations and warranties effective as of the closing and
transfer on Closing Date (except where any other effective date is
expressly indicated):

10.1 PERMITS, REGISTRATIONS, LICENSES, LEASEHOLD, MOORAGE AND DOCKAGE
INTEREST

a. Seller is a party to each of the Casino Agreements
identified in Schedule 1.3(a) and the Hotel Agreements
identified in Section 2.2 (hereinafter collectively
"AGREEMENTS");

b. A true and complete copy of each of the Agreements
(including all amendments, modifications and supplements
to the Agreements) has been delivered to Purchaser as of
the Execution Date;

c. The Agreements are in full force and effect;

d. The Agreements have not been amended, modified or
supplemented, orally, by course of conduct or in writing,
except as identified in Schedule 1.3(a) and Section 2.2 or
except as may be agreed to by Purchaser after the
Execution Date and before Closing Date or Hotel Closing
Date as appropriate;

e. All rentals and fees due through the respective Closing
Dates under the Agreements shall have been paid in full as
of such closing dates and all such rentals and fees for
current periods not then due have been prorated in
accordance with a closing statement mutually agreed to
between Seller and Purchaser as of the respective closing
dates;

f. Seller is not in material default under the terms

of any of the Agreements and Seller has received no notice
of any alleged default by Seller under the terms of any of
the Agreements. To the best of Seller's knowledge, no
other party to any of the Agreements is in material
default under the terms of any of the Agreements;

g. No event has occurred which, upon the passage of time or
the giving of notice or both, would constitute a material
default by any party to any of the Agreements;

h. All Required Approvals for assignment of the Agreements to
Purchaser will have been obtained as of the Closing Date
or the Hotel Closing Date, as applicable;

i. So long as Purchaser performs its obligations under the
Casino Agreements from and after Closing Date, Purchaser's
moorage and occupancy of the Casino moored at its present
location at the Greenville, Mississippi, Waterfront cannot
be disturbed or terminated by any third party and a breach
hereof may be asserted despite the fact that the facts
relating to such breach also may constitute a breach of
any other representation or warranty; and

j. So long as Purchaser performs its obligations under the
Hotel Agreements from and after Hotel

Closing Date, Purchaser's occupancy of the Casino Hotel
cannot be disturbed or terminated by any third party.

10.2 LISTING OF ASSETS AND TITLE

a. The Casino Assets identified on Schedules 1.3(a) and 1.5
are complete lists of the assets owned, leased, or used by
the Seller in connection with the operation or ownership
of the Casino, excepting only those assets listed on
Schedule 1.4.

b. Seller has good and valid title, right, or leasehold
interests in the Assets free and clear of all Encumbrances
(except Permitted Exceptions) except that with respect to
title to interests in real estate (including estates in
fee simple, leaseholds, licenses, and options), Seller
warrants only that such Assets are free of Encumbrances
created by Seller or Seller's predecessor-in-title,
Jubilation Lakeshore, but are subject to the Permitted
Exceptions, and that as to title to the trade name "Bayou
Caddy's Jubilee Casino," Seller warrants only that Seller
has the right to use such name as it is presently used and
that such name is free of Encumbrances created by Seller;

c. Seller has the right to sell or assign the Assets under
the terms of this Agreement subject to obtaining the
approvals specifically described in Section 8.2; and

d. Seller will defend the title to all Assets against all
claims and demands made by any party claiming rights
against Seller and its successors-in-interest as a result
of acts of Seller.

10.3 PAYMENT OF DEBTS

Excepting Permitted Exceptions, including, but not limited to,
Designated Liabilities, the Principal Loan and the Subordinated
Debt, Seller has paid, or will promptly pay and discharge as of
the Closing Date (or Hotel Closing Date as related to debts and
liabilities for construction and furnishing for the Casino Hotel)
all debts, liabilities and obligations, including, without
limitation, sales taxes, employee salaries and benefits, and
obligations to trade creditors, customers, public authorities, or
other third parties, which constitute a lien on any of the Assets
as of the Closing Date or which if not paid would result in the
imposition of a lien on the Assets or a judgment, consent order,
injunction or decree which would require payment by the Purchaser
or which would restrict the future activity or conduct of the
Casino or Casino

Hotel by Purchaser. Provided further, Seller shall be current on
all obligations to the Lender in connection with the Principal
Loan and the Subordinated Debt and Seller shall not be in default
under any of the terms of the Principal Loan or the Subordinated
Debt.

10.4 DESIGNATED LIABILITIES

The Designated Liabilities including any increases thereto in
connection with Section 4.2 hereof shall not exceed $2,000,000.00
in the aggregate.

10.5 NO OTHER CONTRACTS

As of the Execution Date and as of the Closing Date (except for
the Principal Loan and the Subordinated Debt), the Seller has not
entered into any other contract to assign, sell, mortgage, or
encumber all or part of the Casino Assets. As of the Hotel
Closing Date, the Seller has not entered into any other contract
to assign, sell, mortgage, or encumber all or part of the Hotel
Assets. Except for the Hotel Agreements, Seller will not enter
into any executory contracts as to the Hotel Assets requiring
performance beyond the time of the Hotel Closing Date.

10.6 HART-SCOTT-RODINO ACT

Seller's parent, Alpha Hospitality Corporation, is its own
"ultimate parent" for purposes of the Hart-Scott-Rodino Act, and
rules and regulations issued thereunder and Seller and its
"ultimate parent" do not have assets or annual revenues of
$100,000,000.00 per their most recent regularly prepared
financial statements.

10.7 COAST GUARD STANDARDS

To the best of Seller's knowledge, the Casino meets U. S. Coast
Guard standards applicable to floating casino vessels and is in a
seaworthy condition. Seller has received no written notices to
the contrary.

10.8 NO CONFLICT

By entering into this Agreement, as of the Execution Date, and
subject to obtaining the consents referred to in Section 8.2, by
assigning the Agreements and selling the Assets to Purchaser, as
of the Closing Date and Hotel Closing Date as applicable, Seller
will not breach any other material contract or agreement to which
Seller is a party, violate any judgment, order, or decree of any
court or arbiter that is binding on Seller, or create any lien,
charge, or encumbrance upon the Assets purchased and conveyed or
assigned

hereunder.

10.9 CONDITION AND NON-REMOVAL OF EQUIPMENT

The Casino Assets will be at Closing Date, and the Hotel Assets
will be on the Hotel Closing Date, in good operating condition,
except for normal wear and tear. Except for the slot machines and
other assets listed in Schedule 1.4, none of the Casino Assets or
Hotel Assets present on the Execution Date will be removed, sold,
or disposed of before the respective closing dates, except in
ordinary course of business. Specifically, and without limitation
of the generality of the foregoing, there shall be no removal of
gaming equipment or reconfiguration of the gaming equipment in
the Casino from Execution Date through Closing Date, provided
that prior to Closing Date, Seller shall remove from the Casino
those certain sixteen (16) slot machines listed by name and
serial number in Schedule 10.9 and replace them with
substantially comparable sixteen (16) slot machines now in
Seller's inventory of slot machines stored off the Casino Barge.

10.10 COMPLIANCE WITH LAWS

Except as otherwise provided herein, as of the Execution Date and
as of the Closing Date with respect to

the Casino Assets, and as of the Hotel Closing Date with respect
to the Hotel Assets, Seller is not in default or in violation of
any law or regulation, except for such defaults or violations
which will not have a material adverse effect on the Assets or
the operation of the Casino or Hotel operations. The business
operated by Seller at the Casino will be conducted up to the time
of Closing Date substantially in accordance with all applicable
federal, state, and local laws, rules, regulations, and orders,
including those pursuant to the Mississippi Gaming Control Act
and all rules, regulations, and orders of the Mississippi Gaming
Commission. Any non-compliance which results in a fine or
monetary claim (which Seller has not paid as of Closing Date), or
an action by a public official or regulatory agent to close or
restrict Casino operations is deemed to be a material
non-compliance for purposes of this Section.

10.11 HOTEL MARKETING

Seller will market the opening of the Casino Hotel prior to the
Hotel Closing Date pursuant to its Hotel marketing plan and
budget which has been provided to Purchaser prior to Execution
Date.

10.12 LITIGATION

Except as identified on Schedule 10.12, as of the Execution Date,
and as of the Closing Date with respect to the Casino Assets, and
as of the Hotel Closing Date with respect to the Hotel Assets, no
action, litigation, government investigation, condemnation
proceeding, claim, eminent domain proceeding, or any other
proceeding is pending or, to the best of Seller's knowledge,
contemplated as to Seller or all or part of the Assets which is
not covered by insurance or which if adversely determined would
impose a lien on any of the Assets or would result in a consent
order, injunction or decree which would require that a payment be
made or would restrict the future conduct of the Casino business
by Purchaser at the Casino Barge in its present location in
Greenville, Mississippi.

10.13 HAZARDOUS SUBSTANCES

To the best of Seller's knowledge, neither Seller nor any of its
predecessors-in-interest has allowed any Hazardous Substances to
discharge or accumulate in violation of any applicable
environmental law, rule, or regulation on the Casino Barge or the
Boarding Barge, at the Greenville, Mississippi, waterfront or at
other real estate sites owned, licensed or leased by Seller

in Greenville, Mississippi, or at the site of the Hotel (except
as previously disclosed in writing to Purchaser and remediated by
Seller at the site of the Hotel in accordance with applicable
environmental laws, rules, and regulations). To the best of
Seller's knowledge, no material violations of environmental laws
and regulations exist with respect to the Assets and no notices
of such alleged violations have been received by Seller.
"Hazardous Substances" shall mean any dangerous, toxic or
hazardous substance defined as hazardous or as a pollutant or
contaminant in, or the release or disposal of which is regulated
by, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980; the Super Fund Amendments and
Reauthorization Act of 1986; the Federal Resource Conservation
and Recovery Act of 1986; the Clean Water Act; the Clean Air Act;
or the Toxic Substances Control Act; or any other applicable
federal or state law. The representations and warranties in this
Section 10.13 do not cover the three properties to which Seller
holds options under that certain Real Estate Option dated October
26, 1995, from Deer Creek & Black Bayou Steam Navigation and
Transportation Company, Inc., and that certain Lease and Option
to Purchase Agreement dated October 26, 1995, from Deer Creek &
Black Bayou Steam Navigation and Transportation Company, Inc.

10.14 BROKERS AND REAL ESTATE COMMISSIONS

Neither Seller nor any of its officers, directors,
representatives, or employees have had any dealings with any
broker or finder or incurred any liability for any brokerage
fees, brokerage commissions, or finder's fees as to this
Agreement or the sale of the Casino Assets or Hotel Assets.

10.15 CONTRACTS AND AGREEMENTS

Schedule 1.3(a) and Section 2.2 contain a true and complete list
of all material contracts and agreements to which Seller is a
party and which relate to the Casino or the Casino Hotel. Except
for non-written employment agreements with employees of the
Casino which are terminable at will by Seller, Seller is not a
party to any non-written contract or agreement pertaining to the
Casino or the Casino Hotel. True and correct copies of all
contracts and agreements listed on Schedule 1.3(a) and in Section
2.2, including any amendments, modifications, or supplements
thereto, have been provided to Purchaser prior to Execution Date.
All such contracts and agreements are in full force and effect.
Seller has materially performed its obligations thereunder, and,
to the best of Seller's knowledge, neither Seller nor any other
party thereto

is in material default thereunder; and, to the best of Seller's
knowledge, no condition exists with which notice or lapse of time
or both would constitute a material default thereunder. Seller
will comply with all its material obligations under each of the
above described contracts and agreements up to the time of the
Closing Date and Hotel Closing Date as applicable. Specifically,
and without limitation of the generality of the foregoing, Seller
will comply with its obligations under its rental agreement with
Mosow Real Estate, Inc., related to the property at 240 S.
Theobald Street for such period of time as Seller is obligated to
The Board of Mississippi Levee Commissioners to provide it office
space under the Temporary Facilities Agreement between Seller and
The Board of Mississippi Levee Commissioners dated as of April
18, 1997.

10.16 COMPLIANCE WITH MISSISSIPPI GAMING REGULATIONS

The Casino is and will remain through the Closing Date in
compliance with the Mississippi Gaming Control Act and
regulations, rules, and orders of the Mississippi Gaming
Commission, provided, however, that non-material and
non-substantial breaches of said regulations, rules, and orders
which have had or will have no economic or operational
consequence are excluded from

this representation and warranty.

10.17 GOOD STANDING

Seller is a corporation that is duly incorporated, validly
existing, and in good standing under the laws of the State of
Delaware, and Seller has all requisite corporate power and
authority to own its properties and to conduct its businesses as
they are now being conducted.

10.18 CORPORATE AUTHORIZATION

The execution, delivery, and performance of this Agreement by
Seller, Alpha Hospitality Corporation and Alpha Hotel have been
duly and validly authorized by all requisite corporate action
subject to obtaining their respective Shareholders' approval of
the execution, delivery and performance of this Agreement prior
to Closing.

10.19 VALID OBLIGATION

This Agreement is a valid and binding obligation of Seller and is
enforceable according to its terms, except as the same may be
restricted, limited or delayed by applicable bankruptcy or other
similar laws affecting creditors' rights generally and general

equitable principles.

10.20 PROFIT AND LOSS STATEMENTS

Seller has provided to Purchaser prior to the Execution Date (a)
audited financial statements for the Casino for the fiscal year
ended December 31, 1996, and (b) unaudited profit and loss
statements for the Casino from January 1, 1997 through September
29, 1997, which, except for non-recurring items shown on Schedule
10.20, have been produced in the ordinary course of business
consistent with Seller's past practice in connection with the
operation of the Casino. The above-referenced audited financial
statements fairly present in all material respects the financial
condition of the Seller and the results of its operations for the
fiscal year ended December 31, 1996, and the above-referenced
unaudited profit and loss statements fairly present in all
material respects the results of Seller's operations (except for
non-recurring items as listed on Schedule 10.20 hereto) for the
periods ended at the respective dates thereof.

10.21 KNOWLEDGE

Any representation, warranty or covenant of Seller qualified by
the phrase "to best of Seller's knowledge"

or "to Seller's knowledge", "known" or other similar phrase
implying a limitation on the basis of knowledge is intended to
indicate that none of the present directors of Seller or its
parent, Seller's or Seller's parent's President, Vice President,
Chief Financial Officer or Vice President-Casino Operations or
any of them has information which would give him or her actual
knowledge contrary to the existence or nonexistence of such facts
and appropriate inquiry has been made of the relevant operational
personnel of the Casino.

10.22 APPLICATION OF SALE PROCEEDS

At closing on the Closing Date, the closing agent, First American
Title Insurance Company, as agent for Seller, will apply the net
cash portion of the purchase price described in Section 4.1 as is
necessary to satisfy any and all then-outstanding Encumbrances
against the Assets and indebtednesses of Seller (not included in
the Designated Liabilities), except for the Permitted Exceptions,
including, but not limited to, liens, mortgages and encumbrances
in favor of the Lender and granted in connection with the
Principal Loan and the Subordinated Debt, provided the closing
agent shall distribute the funds in accordance with a closing
statement agreed to by the Purchaser and Seller. The Purchaser
and Seller agree that the

closing statement shall provide that the claims of Seller's
non-affiliated third party creditors (including, but not limited
to, all trade creditors with invoices over 45 days old on the
Closing Date), except the Lender, shall be satisfied in full
prior to any payment from the sale proceeds to Seller's
affiliated creditors (including specifically and without
limitation Bryanston Group, Inc. and BP Group, Ltd.), each of
which shall, nonetheless, release any then-outstanding liens,
mortgages, and encumbrances against the Assets and shall consent
in writing to this distribution of sales proceeds and waive any
claims against Purchaser or the Lender arising therefrom.
Provided further, that Seller represents and warrants that all
litigation matters shown on Schedule 10.12, except the matters
numbered 1, 13, 18, 27, 28 and 29, shall, consistent with the
representations made on the Schedule, either be fully insured
without a reservation of rights or be paid in full or otherwise
fully satisfied on the Closing Date. As to the following
litigation matters: Hendrick Outdoor, Inc. v. Alpha Gulf Coast,
Inc., Cause No. 96-0426 (No. 13 on Schedule 10.12); Tidelands
Lease with the State of Mississippi (No. 27 on Schedule 10.12);
and Pitney Bowes Credit Corp. v. Alpha Gulf Coast, Inc., Cause
No. 097-0406 (No. 29 on Schedule 10.12), Seller shall, prior to
any payment to

affiliated creditors, deposit with First American Title Insurance
Company at closing the sums of $63,000.00, $393,000.00 and
$43,000.00, respectively, to be held by said title insurance
company as agent for Seller to satisfy any of the contingent
liabilities arising out of or in connection with the aforelisted
itemized litigation matters, upon the satisfaction of each of
which Seller shall be entitled to disbursement of remaining
funds, if any, held by the Closing Agent on account of that
litigation matter. As to the matters numbered 1, 18, and 28 on
Schedule 10.12 (Akers v. Bayou Caddy's Jubilee Casino, Cause
#C196,0232; Lewis v. Alpha Gulf Coast Inc., Cause #C197-0128; and
Wilson v. Alpha Gulf Coast Inc., Cause #C197-0041), Seller
represents and warrants that such claims are fully insured
without reservation of rights except to the extent that the
allegations made of intentional conduct and/or give rise to
punitive damages and further represents and warrants that no
damages arising out of claims for intentional conduct and/or
punitive damages will be awarded in any such action.

10.23 PLEDGE OF PARTNERSHIP INTEREST

Upon its delivery to Purchaser on Closing Date, the pledge of
partnership interest, if any, described in Sections 4.6 and
9.7(f) will be duly and validly authorized by Seller's
shareholders and organizational

documents and shall constitute valid and binding obligation of
Seller and shall be enforceable against Seller according to its
terms, except as the same may be restricted, limited or delayed
by applicable bankruptcy or similar laws affecting creditors'
rights and general equitable principles.

11. PURCHASER'S REPRESENTATIONS AND WARRANTIES:

To induce Seller to enter into this Agreement, Purchaser makes the
following representations and warranties effective as of the closing on
Closing Date (except where any other effective date is expressly
indicated):

11.1 GOOD STANDING

Purchaser is a limited partnership that is duly organized,
validly existing, and in good standing under the laws of the
State of Mississippi. Purchaser's general partner, Greenville CP,
Inc., is a corporation that is duly incorporated, validly
existing, in good standing under the laws of the State of
Delaware and qualified to do business in the State of
Mississippi. Purchaser has all requisite partnership power and
authority to own its properties and to carry on its businesses as
they are now being conducted.

11.2 PARTNERSHIP AUTHORIZATION

The execution, delivery, and performance of this Agreement by
Purchaser has been duly and validly authorized in a manner
required by its organizational documents. This Agreement is a
valid and binding obligation of Purchaser and is enforceable
against Purchaser according to its terms, except as the same may
be restricted, limited or delayed by applicable bankruptcy or
other similar laws affecting creditors' rights generally and
general equitable principles.

11.3 NO VIOLATION OF OTHER DOCUMENTS

By closing the transactions contemplated under this Agreement on
the Closing Date and Hotel Closing Date, as applicable, Purchaser
will not breach any other contract to which Purchaser is a party
or violate any judgment, order, or decree of any court or arbiter
that is binding on Purchaser.

11.4 BROKERS AND REAL ESTATE COMMISSIONS

Neither Purchaser nor any of its officers, directors,
representatives, or employees have had any dealings with any
broker or finder or incurred any liability for any brokerage
fees, brokerage commissions, or finder's fees as to this
Agreement or the purchase of the

Assets, except that Purchaser has employed the services of
Executive Business Services, Inc., in connection with financing
from Lender. Brokerage fees, if any, to Executive Business
Services, Inc., shall be paid by Purchaser.

11.5 HART-SCOTT-RODINO ACT

Purchaser is its own "ultimate parent" for purposes of the
Hart-Scott-Rodino Act, and rules and regulations issued
thereunder, and Purchaser does not have assets or annual revenues
of $100,000,000.00 per its most recent regularly prepared
financial statement.

11.6 DELIVERY OF PARTNERSHIP AGREEMENT

Purchaser has delivered to Seller prior to the Execution Date a
true and complete copy of its current Partnership Agreement and
all prior amendments thereto and the Securities Purchase
Agreement between Purchaser and certain Noteholders, dated as of
December 14, 1993, and all prior amendments thereto to Seller on
or before Closing Date. Attached hereto as Schedule 11.6 is a
true and complete copy of the Revised Third Amended and Restated
Partnership Agreement, which will be in full force and effect in
lieu of the Second Amended Partnership Agreement from and after
the Closing Date.

Purchaser and its General Partner will use their best efforts as
described in the Letter attached to Schedule 11.6 to obtain
approval of the amendments to the Partnership Agreement contained
in said Letter.

11.7 DELIVERY OF BALANCE SHEET AND PROFORMA BALANCE SHEET

Purchaser has delivered to Seller on or before Execution Date
Purchaser's balance sheet as of the end of its fiscal quarter
most recently closed prior to the Execution Date, and attached as
Schedule 11.7 is Purchaser's proforma balance sheet as of Closing
Date, which will take into account the transactions contemplated
hereby. Purchaser represents that the balance sheet delivered on
or before Execution Date fairly presents the assets, liabilities,
and partnership investments as of the date thereof.

12. RIGHT TO TERMINATE AND REMEDIES:

12.1 RIGHT TO TERMINATE

Anything to the contrary herein notwithstanding, this Agreement
and the transactions contemplated hereby may be terminated at any
time prior to the Closing Date and Hotel Closing Date,
respectively, by prompt notice given in accordance with Section
18:

a. by the mutual written consent of Purchaser and

Seller; or

b. by either of such parties by written notice given in
accordance with Section 18 if the closing of the purchase
of the Casino Assets shall not have occurred on the
earlier of (a) five (5) business days after all conditions
precedent stated in Sections 8.1 and 8.2 are fulfilled or
(b) January 31, 1998, provided, however, the foregoing
notwithstanding, if the "SEC" has not approved the form of
the proxy statement for the meeting of Seller's parent's
shareholders to consider approval of this transaction on
or before January 6, 1998, the date of January 31, 1998,
shall be extended to the earlier of (a) the twenty-fifth
(25th) day after SEC approval of such proxy statement or
(b) February 25, 1998 (or on such later date on which
Seller and Purchaser may hereafter mutually agree in
writing to be the Closing Date, neither party being
obligated to agree to such an extension); provided
however, that the right to terminate this Agreement under
this Section 12.1(b) shall not be available to any party
whose failure to fulfill any material obligation for which
such party has responsibility under this Agreement has
been the cause of or resulted in the failure of the
closing to occur on

or prior to the aforesaid dates.

12.2 REMEDIES

a. PURCHASER'S REMEDIES The provisions of Section 12.1(b)
notwithstanding, in the event of a material breach of this
Agreement by Seller, and/or if all conditions precedent to
Seller's obligation to close the purchase of Casino Assets
as set forth in Section 8.1 are satisfied on the Closing
Date, or if all conditions precedent to Seller's
obligation to close the purchase of the Hotel Assets are
satisfied on the Hotel Closing Date, and Seller fails to
close in accordance with this Agreement, the Purchaser
shall not be limited to the remedy of termination of this
Agreement, but shall be entitled to pursue monetary
damages up to the amount of the Subordinated Debt and/or
specific performance of this Agreement. Provided, however,
the Purchaser shall not execute on any monetary judgment
obtained by it against the Seller (except one obtained in
connection with Seller's obligations under Section 4.6(a)
and/or (b)) pursuant to the foregoing until Seller has
paid the Principal Loan and Subordinated Note in full or
it has otherwise been satisfied or assigned.

Notwithstanding the foregoing, in the event that the
closing does not occur due to (i) the failure of Seller
and/or Seller's parent, Alpha Hospitality Corporation, to
obtain on or before the Closing Date, the approval of the
transaction contemplated herein by their respective
shareholders provided in Section 8.2(e); (ii) Seller, its
parent or any other subsidiary of its parent are the
subject of bankruptcy proceedings; or (iii) the Seller
fails to deliver the Casino Assets as provided in Section
5.1 of the Agreement then, in such event, Purchaser shall
be immediately entitled to damages in the amount of One
Million Dollars ($1,000,000.00) in addition to all other
damages and remedies provided for in this Section. In
addition to the foregoing, the Purchaser shall be entitled
to recover all of its reasonable costs and expenses
incurred in pursuing either of these remedies (including,
without limitation, reasonable attorneys' fees).

b. SELLER'S REMEDIES The provisions of Section 12.1(b)
notwithstanding, in the event of a material breach of this
Agreement by Purchaser, and/or if all conditions precedent
to Purchaser's obligation to close the purchase of Casino
Assets as set forth in Section 8.2 are satisfied on the

Closing Date, or if all conditions precedent to
Purchaser's obligation to close the purchase of the Hotel
Assets are satisfied on the Hotel Closing Date, and
Purchaser fails to close in accordance with this
Agreement, the Seller shall not be limited to the remedy
of termination of this Agreement, but shall be entitled to
pursue monetary damages up to the amount of the
Subordinated Debt and/or specific performance of this
Agreement and shall be entitled to recover all of its
reasonable costs and expenses incurred in pursuing either
of these remedies (including, without limitation,
reasonable attorneys' fees). Provided, however, the Seller
shall not execute on any monetary judgment obtained by it
pursuant to the foregoing until the Purchaser has paid the
indebtedness from the Lender evidenced by (i) the senior
secured note to the Lender in the amount of $17,200,000.00
and the subordinated secured note in the amount of
$3,621,000.00 executed in the financing transaction
described in Section 8.1(e) and Section 8.2(t), or (ii)
the senior secured note to the Lender in the amount of
$36,200,000.00 and the subordinated secured note to the
Lender in the amount of $8,500,000.00 in the event the
amended and restated loan agreement described in

Section 8.2(t) is consummated. Notwithstanding the
foregoing, in the event that the closing of the sale and
purchase of the Casino Assets occurs, and all of the
conditions precedent to Purchaser's obligation to close
the purchase of the Hotel Assets are satisfied on the
Hotel Closing Date and Purchaser fails to close such
Purchase in accordance with this Agreement, the Seller
shall be entitled to pursue specific performance of this
Agreement and shall be entitled to recover all of its
reasonable costs and expenses incurred in pursuing this
remedy (including, without limitation, reasonable
attorneys' fees).

c. Subordination of Termination Payments. All amounts, if
any, payable by (i) Seller to Purchaser pursuant to
Section 12.2 (a) hereof, except those described in Section
4.6(a) and (b) and except for the one million dollar
payment described in Section 12.2(a), shall be evidenced
by a non-interest bearing promissory note issued by Seller
to Purchaser (the "SELLER TERMINATION NOTE") which shall
be fully subordinated to all obligations owing to Lender
from Seller, if any, or (ii) Purchaser to Seller pursuant
to Section 12.2(b) hereof shall be evidenced by a
non-interest bearing promissory note issued by

Purchaser to Seller (the "PURCHASER TERMINATION NOTE")
which shall be fully subordinated to all obligations owing
to Lender from Purchaser. As long as Seller owes any
obligations to Lender, the holder of the Seller
Termination Note shall be prohibited from receiving
payments, declaring an event of default or otherwise
accelerating the amounts payable thereunder and as long as
Purchaser owes any obligations to Lender, the holder of
the Purchaser Termination Note shall be prohibited from
receiving payments, declaring an event of default or
otherwise accelerating the amounts payable thereunder.

13. LEGAL COMPLIANCE:

Seller and Purchaser agree that Article 6 of the Uniform Commercial
Code--Bulk Transfer has been repealed in Mississippi and, accordingly,
no action to comply with Bulk Sales laws will be taken.

14. RISK OF LOSS:

Seller shall fully assume the risk of any loss by fire or other casualty
that affects any of the Casino Assets or Hotel Assets up to the time of
Closing Date (as to Casino Assets) and the Hotel Closing Date (as to the
Hotel Assets). Seller shall, at its expense, keep the Casino Asset
insured until the time of the Closing Date and the Hotel Assets insured

until Hotel Closing Date against any loss from fire or other casualty in
an amount equal to the replacement value of such Assets. If before the
transfer of Assets on the Closing Date and Hotel Closing Date, as
applicable, any loss by fire or other casualty affects some or all of
the Assets, Purchaser may choose either of the following alternatives:

a. If the casualty damages or destroys the Casino Assets to
the extent of Five Million Dollars ($5,000,000.00) or more
of their replacement cost and/or so damages the Casino
Barge as to render it not commercially usable for a period
of twenty (20) days or more, Purchaser may terminate this
Agreement. In that event, Purchaser shall have no further
obligations under this Agreement. If the casualty damages
or destroys the Hotel Assets to the extent of Seven
Hundred Thousand Dollars ($700,000.00) or more of their
replacement cost and/or so damages the Hotel as to delay
its substantial completion or opening for a period not to
exceed the shorter of thirty (30) days from February 6,
1998, or such period as the Mississippi Gaming Commission
allows Seller to complete the Casino Hotel in satisfaction
of "infrastructure" requirements under orders and
requirements issued by the Mississippi Gaming Commission
to proceed

with closing, Purchaser may terminate this
Agreement with respect to the Hotel Assets.

b. If a casualty loss occurs in an amount or duration less
than the applicable amount or duration set forth in
Section 14.1(a) or, if notwithstanding the provisions of
Section 14.1(a), in the event of casualty loss covered by
Section 14.1(a), Purchaser chooses to go forward with the
purchase of the Casino Assets or the Hotel Assets, as
applicable, all insurance proceeds paid as a result of the
loss affecting the Assets (except for business
interruption insurance) shall be used to pay the expenses
of repairing, replacing, and restoring the Casino Assets
or Hotel Assets as applicable affected by the loss, and
any such expenses not covered by the insurance proceeds
shall be borne by Seller, with the Closing Date or Hotel
Closing Date extended until such repairs are completed. If
the repair, replacement, and restoration of the Casino
Assets or Hotel Assets has not been completed by the time
scheduled for the Closing Date or Hotel Closing Date, as
applicable, and nonetheless the parties mutually agree to
proceed with closing, further repair work shall be
completed by Purchaser at Seller's expense and any
insurance proceeds paid as a

result of the loss shall be held in trust for that
purpose.

15. TIME OF ESSENCE:

The parties agree that as to performance under this Agreement, time
shall be of the essence.

16. GOVERNING LAW:

The Agreement shall be governed by the substantive laws of the State of
Mississippi, without regard to conflicts of law rules.

17. GUARANTY OF ALPHA HOSPITALITY CORPORATION:

By its signature below, Alpha Hospitality Corporation, parent of Seller,
guarantees Seller's performance of all of Seller's obligations and
liabilities to Purchaser arising out of or in relation to this Agreement
and any documents executed pursuant to this Agreement in accordance with
the terms and provisions set forth in the form of guaranty attached as
Schedule 17, the original of which shall be executed and delivered to
Purchaser by Alpha Hospitality Corporation on the Execution Date.

18. NOTICES:

All notices given under this Agreement shall be in writing and shall be
sent postage prepaid by either (a) United States certified mail, return
receipt requested, or (b) for delivery on the next business day with a
nationally-recognized express courier. All such notices shall be sent to
the following addresses, until such addresses are changed by 30 days'
notice:

To Seller: Alpha Gulf Coast, Inc.
12 East 49th Street
New York, New York 10017

ATTN: President

With a copy to: Gina Jacobs, Esq.
Watkins, Ludlam & Stennis, P.A.

P. O. Box 427
Jackson, MS 39205

To Purchaser: Greenville Casino Partners, L.P.

c/o Greenville CP, Inc.,
its general partner
242 South Walnut Street
Greenville, MS 38701

ATTN: John R. O'Donnell,
President

With a copy to: Jerome C. Hafter, Esq.
Jenny M. Virden, Esq.
Lake Tindall, LLP
P. O. Box 918
Greenville, MS 38702-0918

Notices shall be deemed delivered on the fifth day after postmark, if
sent by certified mail, or on date of delivery

to addressee as shown by express courier's receipt, if sent by express
courier. If the last day for giving any notice or taking any action
required or permitted under this Agreement would otherwise fall on a
Saturday, Sunday, or legal holiday, that last day shall be postponed
until the next legal business day.

19. MISCELLANEOUS:

19.1 ENTIRE AGREEMENT; ENFORCEABILITY

This Agreement, including any Recitals and any attached
Schedules, all of which are made a part of this Agreement,
contains the entire agreement of the parties concerning this
subject matter. No other terms or oral promises which are not in
this Agreement may be legally enforced, and no promises,
projections, inducements or representations made on or before the
Execution Date will change the terms of this Agreement or be
binding on any party. No promises or other terms shall be implied
in this Agreement.

19.2 AMENDMENTS

No amendment of this Agreement shall be binding unless it is in
writing, states that it constitutes an Amendment to this
Agreement, and is signed by the party

against whom enforcement is sought.

19.3 BINDING EFFECT; ASSIGNMENT; NO THIRD PARTY BENEFICIARIES

This Agreement shall both bind and benefit the parties to
this Agreement and their successors and permitted assigns.
Purchaser may assign its rights and privileges and
delegate its obligations under this Agreement, in whole or
in part, (a) to another entity which is wholly-owned by
Purchaser; (b) to another entity which is at the time of
assignment a current holder of a gaming license issued by
the Mississippi Gaming Commission; or (c) to any other
assignee only with the advance written approval of the
Seller, which approval will not be unreasonably denied or
delayed; provided, however, that no such assignment or
delegation shall relieve Purchaser of any obligations to
Seller expressly set forth in this Agreement. Purchase may
assign, as collateral, this Agreement and each of
Purchaser's rights and privileges hereunder to the Lender.
The parties do not intend that there be any third party or
other beneficiaries of this Agreement or guaranty except
that the Lender or any other party who becomes Purchaser's
successor-in-interest as to

any or all of the Assets, after or as a result of an event
of default under the Casino Loan, shall become Purchaser's
successor as to all rights and privileges under this
Agreement and the guaranties delivered pursuant hereto,
including without limitation the right to rely upon and
enforce Seller's representations and warranties set forth
in Article 10, as if the Lender or such other party were a
party to this Agreement.

19.4 WAIVERS; CONSENTS

A party shall not be deemed to have made a waiver, consent or
approval under this Agreement unless it does so in writing. The
mere failure of a party to act to enforce any provision of this
Agreement shall not be considered a waiver, consent or approval
and shall not prevent that party from enforcing any provision of
this Agreement in the future.

19.5 SEVERABILITY

The invalidity or unenforceability of one provision of this
Agreement will not affect the validity or enforceability of the
other provisions.

19.6 CAPTIONS

The section numbers and captions are inserted only as a matter of
convenience, and do not in any way define, limit, or describe the
scope or intent of this Agreement. Any references in this
Agreement to a Section or subsection shall refer to such Section
or subsection of this Agreement, unless expressly provided
otherwise.

19.7 INTERPRETATION OF "INCLUDING" AND "DAY"

Wherever the word "including" is used in this Agreement, or in
any recital or exhibit to this Agreement, it shall mean
"including without limitation." Wherever the word "day(s)" is
used in this Agreement, or in any recital or exhibit to this
Agreement, and the word "business" does not appear immediately
before such word, such word shall mean "calendar day(s)."

19.8 COUNTERPARTS

This Agreement may be executed in several counterparts, each of
which shall be deemed an original, and all of which together
shall constitute one and the same instrument.

20. NO OFFER:

The submission of this Agreement for examination and negotiation does
not constitute an offer to enter into an agreement, and this Agreement
shall not be binding on any party until it is executed and delivered by
each party to this Agreement.

Seller, Purchaser, and Guarantor only for purposes of the guaranty executed
herein, have executed this Agreement as of the Execution Date.

SELLER:

ALPHA GULF COAST, INC., a
Delaware Corporation

/s/ Sanford Freedman
By:_____________________________

Secretary
Its:____________________________

ALPHA GREENVILLE HOTEL, INC.,
a Delaware Corporation

/s/ Sanford Freedman
By:____________________________

Assistant Secretary
Its:_________________________

GUARANTOR:

ALPHA HOSPITALITY CORPORATION,
a Delaware Corporation, only
for the purpose of agreeing to
the Guaranty

/s/ Sanford Freedman
By:_____________________________

Vice President
Its:____________________________

PURCHASER:

GREENVILLE CASINO PARTNERS,
L.P., a Mississippi Limited
Partnership

By: GREENVILLE CP, INC., a
Delaware Corporation, Its
General Partner

/s/ Michael J. Jacobson
By:_____________________________

Chairman
Its:____________________________

100

<PAGE>

411 HACKENSACK AVENUE TELEPHONE 201 487 5900
HACKENSACK, NJ 07601 FAX 201 487 5533

APPRAISAL ECONOMICS INC. [Logo]

December 30, 1997

Board of Directors
Alpha Hospitality Corporation
12 East 49th Street
New York, NY 10017

Ladies and Gentlemen:

Appraisal Economics, Inc. was retained by Alpha Hospitality Corporation, a
Delaware corporation ("AHC"), to express its opinion as to the fairness to
shareholders of AHC's anticipated transaction by which AHC's wholly-owned
subsidiary, Alpha Gulf Coast, Inc., a Delaware corporation ("AGCI" or "Seller")
has agreed to sell certain of AGCI's assets which constitute substantially all
of the operating assets of a gaming casino located in Greenville, Mississippi,
known as Bayou Caddy's Jubilee Casino (hereinafter the "Casino Assets"), to
Greenville Casino Partners, L.P., a Mississippi limited partnership ("GCP" or
"Purchaser"), pursuant to an executed Asset Purchase Agreement between AGCI and
GCP (the "Asset Purchase Agreement"), dated December 17, 1997 (the
"Transaction").

The closing of the purchase of the Casino Assets shall be on the earlier of (a)
the fifth (5th) business day after all conditions precedent are fulfilled or (b)
January 31, 1998, provided, however, the foregoing notwithstanding, if the
Securities and Exchange Commission (hereinafter referred to as the "SEC") has
not approved the form of the proxy statement for the meeting of Seller's
parent's shareholders to consider approval of this transaction on or before
January 6, 1998, the date of January 31, 1998, shall be extended to the earlier
of (x) the twenty-fifth (25th) day after SEC approval of such proxy statement or
(y) February 25 1998, or on such other date, as may hereafter be agreed upon by
Seller and Purchaser (hereinafter referred to as the "Closing Date").

The Casino Assets consist of the casino barge presently anchored in Lake
Ferguson adjacent to the municipality of Greenville, Mississippi (Official
Number 519419) (hereinafter "Casino Barge"), along with certain permits,
mooring, dockage, lease rights and other assets, including all related fixtures,
equipment, contractual rights, and all other real and personal property
associated therewith. A detailed description of the Casino Assets is attached as
Exhibit I.

- --------------------------------------------------------------------------------
HACKENSACK, NEW JERSEY GOLD RIVER, CALIFORNIA BARRINGTON, ILLINOIS

Board of Directors
Alpha Hospitality Corporation
December 30, 1997
Page 2 [Logo]

We also understand that Seller has agreed to undertake to cause Seller's
affiliate Alpha Greenville Hotel, Inc., a Delaware corporation ("Alpha Hotel"),
a wholly owned subsidiary of AHC, to transfer to Purchaser for separate
consideration, substantially all of its interest in a 41 keyed room hotel (the
"Casino Hotel") on the site of the former headquarters of the Mississippi Board
of Levee Commissioners upon the substantial completion of its construction,
together with all furniture, fixtures, and equipment, including telephone
equipment, and will assign to Purchaser certain agreements, including a lease
agreement with the Mississippi Levee Commissioners for construction and
maintenance of a hotel in Greenville, Mississippi dated February 19, 1997, and
amended April 18, 1997, a permit for construction and maintenance of facilities
on the Mississippi Levee Commissioners' right-of-way dated September 11, 1997, a
Mississippi Landmark permit issued by the Mississippi Department of Archives and
History dated March 28, 1997, a consent by the Mississippi Levee Commissioners
to the aforementioned Mississippi Landmark permit dated July 9, 1997, (the
agreements so identified are collectively referred to as the "Hotel Agreements,"
and the Casino Hotel and the Hotel Agreements are referred to as the "Hotel
Assets").

We understand that in order to accommodate the wishes of Credit Suisse First
Boston Mortgage Capital, L.L.C. or any affiliate, successor, assignee or
designee thereof (hereinafter referred to as the "Lender"), the Seller has
entered into certain financing arrangements in advance of the closing of the
Transaction, which have resulted in the restructuring of certain of the Seller's
long-term debt obligations in anticipation of the Transaction. In this regard,
we understand that the Seller executed a senior secured Promissory Note, dated
December 30, 1997 from Seller to Lender in the original principal amount of
$19,000,000.00 (the "Principal Loan"), and that simultaneously the Seller
executed a subordinated, unsecured and unfunded Subordinated Note (the
"Subordinated Debt"), also dated December 30, 1997 from Seller to Lender in the
original principal amount of $4,879,000.00. We understand that the Subordinated
Note was issued to the Lender as an inducement to the Lender to make the
Principal Loan in anticipation of the Transaction, and that it was understood by
Seller, Purchaser and Lender that the financing transactions involving the
Principal Note and Subordinated Debt were undertaken for the sole purpose of
facilitating the closing of certain debt financing with the Lender prior to
December 31, 1997 (the "Financing Transactions").

We understand that the Seller has received from the Lender net proceeds from the
Financing Transactions equal to approximately $19,000,000, less approximately
$855,000 in loan points, brokerage commissions, and filing fees incurred by
Seller in connection with the closing of the Principal Loan and the Subordinated
Debt, and less approximately $250,000 in certain legal and professional fees
associated therewith. We

Board of Directors
Alpha Hospitality Corporation
December 30, 1997
Page 3 [Logo]

further understand that Seller has applied such proceeds as it has received from
Lender in consideration of the issuance of the Principal Loan and Subordinated
Debt in order to pay off certain prior liens encumbering the Assets as well as
certain other obligations of the Seller.

This fairness opinion is only to be used by AHC's board members and AHC's
shareholders in determining the fairness of exchanging the Casino Assets for
total consideration of $26,500,000 in cash or other immediately available funds,
in the form described below, the assumption of approximately $2,000,000 in
certain designated liabilities, and the issuance of limited partnership
interests equal to 25% of the outstanding partnership interests of GCP (the
"Casino Purchase Price"). This fairness opinion is contingent upon the Closing
of the Transaction and may be relied upon by AHC's shareholders with respect to
the fairness of the Financing Transactions only to the limited extent that the
Financing Transactions constitute an integral part of the Transaction and are
taken by Seller as an intermediate step required by Lender and Purchaser solely
to facilitate the Transaction.

We have not examined the effect on the Seller, AHC, or AHC's shareholders of the
issuance of the Principal Loan and Subordinated Debt prior to the Closing of the
Transaction, and accordingly do not express an opinion as to the fairness of the
Financing Transactions to the shareholders of AHC, except to the limited extent
described above. We do not express an opinion as to the fairness of the
Financing Transactions to the Lender or the Lender's shareholders. Further, we
express no opinion as to the solvency of the Seller, either before or after
giving effect to the Financing Transactions. Nor do we express an opinion as to
the solvency of the Purchaser, either before or after giving effect to the
Transaction and other associated financing transactions.

The date of analysis related to this opinion is December 30, 1997. This letter
cannot be relied upon by any party other than AHC's board members, except to the
limited extent that the Lender may rely on this opinion, but only as it applies
to the fairness of the Transaction from the perspective of AHC's shareholders.
We express no opinion as to the fairness of the Transaction from the perspective
of the Lender or the Lender's shareholders.

We understand that the Casino Purchase Price shall be payable as follows:

1) $26,500,000.00 in cash, payable as follows:

a) Credit to the Purchaser for the assumption by Purchaser of the
principal balance owing as of the Closing Date of the Principal Loan
in the original principal amount of $19,000,000.00.

Board of Directors
Alpha Hospitality Corporation
December 30, 1997
Page 4 [Logo]

b) The amount of such credit shall be equal to the original principal
amount of the Principal Loan less the sum of the following:

i) an amount equal to the sum of any principal payments made by the
Seller on account of the Principal Loan, and

ii) an amount equal to the sum of loan points, and brokerage
commissions, totaling in the aggregate 4.5% of the Principal Loan
amount (totaling no more than $855,000.00), and filing fees
incurred by Seller in connection with the closing of the
Principal Loan and the Subordinated Debt (as hereinafter
defined). It is expressly understood and agreed that all of the
Lender's legal fees owing to Lender's counsel shall be charged to
Purchaser.

c) Payment in cash or other immediately available funds upon the Closing
Date of the balance of the aforesaid cash portion of the purchase
price, which payment will be at least $7,500,000.00 plus the
adjustments described in paragraph b)ii) above.

We understand that, in conjunction with the assumption of the Principal
Loan, the Subordinated Debt in the original principal amount of $4,879,000
will also be assumed by the Purchaser. However, such assumption of the
Subordinated Debt, to the extent that it was unfunded at the time of
issuance, will not be regarded as additional consideration apart from the
assumption of the Principal Loan, and accordingly the assumption of the
Subordinated Debt by the Purchaser will not result in any additional
credit, or any other adjustment, toward the cash payment to Seller required
by the Asset Purchase Agreement.

2) The assumption by the Purchaser of certain liabilities of the Seller
(hereinafter the "Designated Liabilities"). We understand that the
Designated Liabilities shall not exceed $2,000,000.00 as of the Closing and
will include such items as accrued vacation and health insurance claims due
to employees of Seller, chip liability, and Seller's Greenville Casino
operations accounts incurred in the ordinary course of business which are
not older than forty-five (45) days past their respective due dates.
Provided, however, any wages earned but not paid as of the Closing Date
shall not be included in the Designated Liabilities and shall be paid by
Purchaser when due, provided that such amount shall not exceed
$1,000,000.00 as of the Closing Date, and shall be accounted for by Seller
on closing as a reduction to the cash payment noted above. Also included
among the Designated Liabilities are non-delinquent city, county, levee,
drainage, and school district property ad

Board of Directors
Alpha Hospitality Corporation
December 30, 1997
Page 5 [Logo]

valorem property taxes and special assessments for calendar year 1998,
prorated to Closing Date on the basis of calendar year 1997's property
taxes and special assessments, the gross amount of slot machine and table
games progressive meter liability, the gross amount of poker "bad beat"
liability, and the slot club points and unredeemed promotional coupons
liability.

The precise amount of the Designated Liabilities shall be calculated as of
the Closing Date and verified as accurate by Purchaser. Provided that the
value of slot club points and unredeemed promotional coupons shall be
calculated upon Closing Date at sixty percent (60%) of the face amount
thereof; provided, further, that the actual dollar value of the slot club
points and promotional coupon liability as of the Closing Date shall be
verified by a subsequent accounting performed by Seller and Purchaser on
the six (6) month anniversary of the Closing Date and any variation in the
actual dollar value of these items which when added to the Designated
Liabilities causes the Designated Liabilities to exceed $2,000,000.00 shall
result in a payment by Seller to Purchaser in the amount of the excess of
such Designated Liabilities above $2,000,000.00 upon twenty (20) days
advance written notice of the excess.

3) A limited partnership interest equal to twenty-five percent (25%) of all
outstanding partnership interests in GCP as of the Closing Date (the
"Limited Partnership Interest"). Seller's Limited Partnership Interest
shall be subject to all terms and conditions of the Revised Third Amended
and Restated Partnership Agreement of Purchaser dated as of December 1,
1997. We understand that the Seller and Purchaser have agreed solely for
purposes of the Asset Purchase Agreement that the value of the 25% limited
partnership interest is $8,500,000.00. We note, however, that, as of the
Closing, the Limited Partnership Interest represents a highly speculative
and illiquid asset, the sale of which being severely restricted and as
such, may not have readily marketable value.

The physical transfer of Casino Assets and transfer of the operation of the
Casino shall occur on the Closing Date. The schedule and procedure for transfer
of Casino Assets and transfer of operation of the Casino shall comply with
rules, regulations, orders and directives of the Mississippi Gaming Commission.
At the time of transfer of Casino Assets, and subject to approval of the
Mississippi Gaming Commission and the Mississippi State Tax Commission,
Purchaser and Seller will count down the floor bank, hopper and cage cash and
Purchaser will purchase from Seller the cash therein (the total sum of which
shall equal the minimum amount required by the Mississippi Gaming Commission for
the current operation of the Casino, not to exceed $1,500,000.00) upon payment
therefor at par in cash or other immediately available funds.

Board of Directors
Alpha Hospitality Corporation
December 30, 1997
Page 6 [Logo]

We understand that the total consideration for the Hotel Assets shall be equal
to Alpha Hotel's cost of construction and furnishing in compliance with the
Hotel Plans, subject to a maximum purchase price of $3,200,000, plus the
additional sum of $112,500.00 as consideration for Alpha Hotel's advance lease
payments in a like amount made to the Board of Mississippi Levee Commissioners
for the 27-month period beginning December 1, 1997, through February 29, 2000,
subject to a $4,166.67 per month reduction in the amount of $112,500.00 for each
month or part thereof after December 1, 1997, during which the purchase of the
Hotel Assets does not close (the "Hotel Purchase Price"). In addition, total
consideration for the Hotel Assets will include interest at an annual rate of
11% for construction financing on an amount equal to the Hotel Purchase Price
from the date of the Purchaser's receipt of written notice from Seller of
substantial completion of the construction and furnishing of the Casino Hotel
(which notice shall include a copy of the architect's certificate of substantial
completion and which will also certify that such construction conformed to the
plans submitted to and approved by the Mississippi Department of Archives and
History addressed to Seller and Purchaser and a certificate of the building
inspector of the City of Greenville or his designated agent evidencing final
inspection and approval for occupancy) (hereinafter referred to as the "Date of
Substantial Completion") until closing of the purchase of the Hotel Assets.
Total consideration for the Hotel Assets will be reduced for the amount of any
items of work necessary to complete construction and furnishing of the Casino
Hotel after issuance of the certificate of the building inspector of the City of
Greenville or his designated agent evidencing inspection and approval for
occupancy and architect's certificate of substantial completion. The purchase
price for the Hotel Assets shall be payable upon the Hotel Closing Date (as
defined below).

The closing of the purchase of the Hotel Assets shall be consummated as soon as
practically possible after written notice by Seller of the Date of Substantial
Completion and the conditions precedent to the Hotel Closing have been fulfilled
(hereinafter the "Hotel Closing Date"). The Date of Substantial Completion of
the Hotel shall occur no later than February 6, 1998, and Seller represents that
February 26, 1998, is the latest date on which Seller must complete the Casino
Hotel in order to satisfy the infrastructure investment requirement applicable
to the Casino under current orders issued by the Mississippi Gaming Commission.
In the event that the Date of Substantial Completion for the Hotel is after
February 6, 1998, then for each date after February 6, 1998, until Hotel Closing
Date:

a. Seller shall pay to Purchaser liquidated damages of One Thousand
Dollars ($1,000.00) per day, payable weekly until the Date of
Substantial Completion of the Casino Hotel, the payment of which shall
be secured by a security interest in Seller's limited partnership
interest in Purchaser, as particularly

Board of Directors
Alpha Hospitality Corporation
December 30, 1997
Page 7 [Logo]

described in the pledge of partnership instrument attached as Schedule
4.6 of the Asset Purchase Agreement (hereinafter the "Pledge of
Partnership Interest"); and

b. In the event any failure to complete the Casino Hotel (including, but
not limited to, a failure caused by a casualty loss) results in any
suspension of Purchaser's gaming license at the Casino by the
Mississippi Gaming Commission, Seller shall pay to Purchaser an
additional amount of liquidated damages in the sum of One Hundred
Thousand Dollars ($100,000.00) per day, payable daily, for each day
during which such suspension is in effect. Such liability shall be
secured by a security interest in Seller's limited partnership
interest in the Purchaser, as more particularly described in the
Pledge of Partnership Interest. In the event any amount of liquidated
damages is in excess of the value of the limited partnership interest
when applied against it, the excess shall be due and payable from
Seller, provided, however, Purchaser shall give Seller written notice
of its intent to collect such liability under Section 4.6(a) or
Section 4.6(b) of the Asset Purchase Agreement by exercise of
Purchaser's rights under the Pledge of Partnership Interest and Seller
shall have thirty (30) days to pay the amount to be otherwise
collected under the Pledge of Partnership Interest in cash or other
immediately available funds. In the event of any such cash payment by
Seller, Purchaser's right to collect the amount owing by exercise of
Purchaser's rights under the Pledge of Partnership Interest shall be
reduced by the amount thus paid.

Further, in the event that the Seller fails to pay any Loss adjudicated to be
due against the Seller pursuant to the procedure set forth in Section 9.7(e) of
the Asset Purchase Agreement within thirty (30) days after the final
determination, subject to the terms of Section 9.7(f) ("Right to Offset"),
Purchaser shall have the right, at its option subject to certain time
limitations, to enforce any such claim for recovery by exercising its rights
under the Pledge of Partnership Interest pursuant to which Seller's Partnership
Interest in Purchaser described in Section 4.3 of the Asset Purchase Agreement
shall serve as collateral for any Loss adjudicated to be due the Purchaser as
aforesaid. Provided, however, Purchaser shall give Seller written notice of its
intent to enforce such liability against the Pledge of Partnership Interest and
Seller shall have thirty (30) days to pay the amount to be collected by the
exercise of Purchaser's rights under the Pledge of Partnership Interest, in
which case Purchaser's right to collect the amount by exercise of its rights
under the Pledge of Partnership Interest shall be reduced by the amount thus
paid.

Board of Directors
Alpha Hospitality Corporation
December 30, 1997
Page 8 [Logo]

In determining our opinion, we have considered the nature and history of AHC,
AGCI, the Casino Assets and the Hotel Assets. We have reviewed the economic
outlook in general, the outlook for the industry in particular, the prospective
earnings and cash flows of the Casino Assets, book value of the Casino Assets,
the overall financial condition and dividend-paying capacity of the Casino. In
addition, we have reviewed any past transactions involving the Casino Assets,
and examined prices at which similar assets, as well as prices that the stock of
AHC and of certain guideline publicly traded companies, are selling. We also
considered the nature and history of the Purchaser and the prospective
combination of the Casino Assets and Hotel Assets with those of the Purchaser.
We inspected the Casino Assets and visited the Las Vegas Casino, located in
Greenville, which is owned by the Purchaser, in addition to several of the
gaming operations of competitors in the area. We also performed such valuation
tests and procedures as we considered appropriate as they related to the Casino
Assets.

Specific documents we have relied upon in arriving at our opinion included
audited financial statements of AHC from the date of inception of March 19, 1993
to the period ending December 31, 1996, AHC's unaudited financial statements for
the nine-months ended September 29, 1997, the audited financial statements of
AGCI for year ending December 31, 1996, the unaudited financial statements for
the nine-months ended September 30, 1997 for AGCI dba Bayou Caddy's Jubilee
Casino, the unaudited management reports for AGCI dba Bayou Caddy's Jubilee
Casino for the nine-month period ended September 29, 1997, certain unaudited
condensed pro forma consolidated financial statements of GCP showing the effect
of the acquisition of the Casino Assets as if it had been consummated on
September 30, 1997 for balance sheet presentation purposes and as of January 1,
1996 for the year ended December 31, 1996 and for the nine months ended
September 30, 1997 for income statement presentation purposes. In addition, we
have relied on certain information contained in an appraisal report provided to
the Lender, dated November 26, 1997, prepared by Michael M. Axler & Associates,
Inc., on which we understand the Lender is relying. We have also relied on
various other documents relating to AHC, AGIC, and GCP, including but not
limited to certain analyses prepared by and/or for AHC and AGIC.

We also analyzed financial statements and other material regarding comparative
public companies, acquisition data of companies in the same industry, required
rates of return on common stocks in general, material discussing the general
economic outlook and the specific industry outlook and other material as we
deemed appropriate.

Board of Directors
Alpha Hospitality Corporation
December 30, 1997
Page 9 [Logo]

As part of our analysis, we also reviewed AHC's publicly traded share price
history, the Securities and Exchange Commission ("SEC") Form 10-Q Quarterly
Report for the quarterly periods ended June 30, 1997 and September 30, 1997, SEC
Form 10-K Annual Report for the year ended December 31, 1996, other reports
filed by AHC with the SEC, and information about the industry and comparable
companies.

According to AHC's September 30, 1997 SEC Form 10-Q, AHC was in default for
nonpayment on (i) mortgage notes payable aggregating approximately $11,456,000,
and (ii) equipment notes aggregating approximately $3,433,000. In addition, AHC
was in default of certain loan covenants not relating to payments which
pertained to equipment notes amounting to $4,768,000. AHC received a waiver of
the defaults on the $7,800,000 mortgage note payable to Bryanston Group, Inc.
("Bryanston"), through December 31, 1997. Bryanston is 50 percent owned by Mrs.
Beatrice Tollman, the spouse of AHC Chairman and co-Chief Executive Officer, and
50 percent owned by a trust for the benefit of a child of Mr. Monty D. Hundley,
AHC's former President and co-Chief Executive Officer.

The inability to meet certain of its debt obligations was discussed in an
independent auditor's report of Rothstein, Kass & Company, P. C. ("Rothstein &
Kass") for fiscal years ended 1995 and 1996. Rothstein & Kass qualified its
opinion as to the ability of AHC to continue as a going concern. Their opinion
cited the significant losses from operations, a working capital deficit and an
accumulated deficit. It is our understanding that if the Transaction is
consummated prior to the issuance of financial statements for fiscal year ending
December 31, 1997, Rothstein & Kass will issue its opinion for the fiscal year
end 1997 without qualification as to the ability of AHC to continue as a going
concern.

Based on the foregoing, it is our opinion that the exchange of the Casino Assets
for consideration in the form of cash, assumed liabilities and securities as
described above, as of the Closing Date, is fair to the shareholders of AHC.
However, this analysis is as of December 30, 1997 and does not reflect any
changes in circumstances that may occur after that date.

This fairness opinion is subject to the attached Certification of Appraisal
Economics Inc. and the Statement of Assumptions and Limiting Conditions.

Respectfully submitted by,

Board of Directors
Alpha Hospitality Corporation
December 30, 1997
Page 10 [Logo]

CERTIFICATION OF APPRAISAL ECONOMICS INC.

We hereby certify the following statements regarding this opinion:

We have no present or contemplated future interest in the Casino Assets, the
Hotel Assets, AHC, AGCI, GCP, or the Lender.

We have no personal interest or bias with respect to the Casino Assets, the
Hotel Assets, AHC, AGCI, GCP, or the Lender.

Our compensation for this letter is in no way contingent upon the opinion
reported.

To the best of our knowledge and belief, the statements of facts contained in
this report, are true and correct.

No persons other than Appraisal Economics employees have prepared this analysis
or opinion stated in this letter.

Board of Directors
Alpha Hospitality Corporation
December 30, 1997
Page 11 [Logo]

STATEMENT OF ASSUMPTIONS AND LIMITING CONDITIONS

We have made no investigation of and assume no responsibility for the legal
description or matters including legal or title considerations. This is not an
opinion concerning the legal nature of the transfer or conveyance of the
property.

The information furnished by others is believed to be reliable. However, we give
no warranty or other form of assurance regarding its accuracy.

It is assumed that there is full compliance with all applicable federal, state,
and local regulations and laws.

It is assumed that all required licenses, certificates of occupancy, consents,
or legislative or administrative authority from any local, state, or national
government, private entity or organization have been or can be obtained or
renewed for any use on which the opinion in this letter is based.

It is assumed that there are no environmental problems which would negatively
affect value of the subject businesses.

Possession of this letter, or a copy thereof, does not carry with it the right
of publication. It may not be used for any purpose by any person other than the
party to whom it is addressed without our written consent and, in any event,
only with proper written qualifications and only in its entirety. No part of the
contents of this letter (especially any conclusions of value, the identity of
the analysts, or the firm with which the analysts are associated) shall be
disseminated to the public through advertising, public relations, news, sales,
or other media without our prior written consent and approval.

We, by reason of this letter, are not required to furnish a complete report, or
to give testimony, or to be in attendance in court with reference to the
companies in question unless arrangements have been previously made.

Board of Directors
Alpha Hospitality Corporation
December 30, 1997
Page 12 [Logo]

This fairness opinion is only to be used by AHC's board members and AHC's
shareholders in determining the fairness of exchanging the Casino Assets for
the consideration described in the body of our letter. The date of analysis
related to this opinion is December 30, 1997. This letter cannot be relied upon
by any party other than AHC board members and AHC's shareholders, except to the
limited extent that the Lender may rely on this opinion, but only as it applies
to the fairness of the Transaction from the perspective of the AHC shareholders.
We express no opinion as to the fairness of the Transaction from the perspective
of the Lender or the Lender's shareholders.

We have not examined the effect on the Seller, AHC, or AHC's shareholders of the
issuance of the Principal Loan and Subordinated Debt prior to the Closing of the
Transaction, and accordingly do not express an opinion as to the fairness of the
Financing Transactions to the shareholders of AHC. Likewise, we do not express
an opinion as to the fairness of the Financing Transactions to the Lender or the
Lender's shareholders. Further, we express no opinion as to the solvency of the
Seller, either before or after giving effect to the Financing Transactions. Nor
do we express an opinion as to the solvency of the Purchaser, either before or
after giving effect to the Transaction and other associated financing
transactions.

We consent to disclosure of this letter and our opinion set forth herein in
AHC's proxy statement to stockholders for the purposes of soliciting
stockholders' approval of the Asset Purchase Agreement and the transactions
provided for therein and to references to this letter and such opinion in such
proxy statement.
<PAGE>
<PAGE>

Board of Directors
Alpha Hospitality Corporation
December 30, 1997
Page 13 [Logo]

EXHIBIT I
DESCRIPTION OF CASINO ASSETS

BARGE AND RELATED EQUIPMENT

The Casino Barge presently docked at the Greenville, Mississippi Waterfront,
together with the boarding barge (Official Number 514272) (hereinafter the
"Boarding Barge"), together with any and all engines, boilers, machinery,
components, masts, boats, anchors, cables, chains, rigging, tackle, apparel,
furniture, capstans, outfit tools, pumps, gear, furnishings, appliances,
fittings, spare and replacement parts, and any and all other appurtenances
appertaining or belonging thereto, and whether on board or not on board, and,
additionally, all log books, manuals, trip records, maintenance reports,
inspection records, seaworthiness certificates, and other historical records or
information relating to the Casino Barge and the Boarding Barge in the
possession of Seller, and ramps, generators and related equipment (including,
but not limited to, existing walkway coverings) located at the site described in
the Mooring Agreement and the Dockage Agreement described in Schedule 1.3(a) of
the Asset Purchase Agreement.

FIXTURES, GAMING EQUIPMENT AND OTHER ASSETS

Except as otherwise provided in Section 1.4 of the Asset Purchase Agreement, all
fixtures, improvements, equipment, equipment supplies, furniture, advertising
and promotional materials, trade names, logos, customer lists and other tangible
and intangible assets, including, without limitation, all books and records with
respect to assets described in Sections 1.1, 1.2, and 1.3 of the Asset Purchase
Agreement (except for those certain books and records expressly excluded in
Section 1.4(c)), in, on, or about the Casino Barge, or at any other location at
Greenville, Mississippi, and owned, leased, or under option to Seller in
Washington County, Mississippi, and all improvements thereto.

MOORAGE, LEASE AND RELATED AGREEMENTS

All of Seller's rights and obligations under the following permits, moorage,
dockage, license, lease agreements and contracts as listed on Schedule 1.3(a) of
the Asset Purchase Agreement.

Seller shall assign such Casino Agreements to Purchaser pursuant to the terms
set forth in the applicable assignment and assumption agreement and deeds, the
form of which are attached as collective Schedule 1.3 of the Asset Purchase
Agreement.

Board of Directors
Alpha Hospitality Corporation
December 30, 1997
Page 14 [Logo]

Provided that with respect to the real property described in the Real Estate
Option Agreement dated October 26, 1995, recorded in Book 1893, at page 62, of
the land records of Washington County, Mississippi, and the Lease and Option
Agreement dated October 26, 1995, the Memorandum of which is recorded in Deed
Book 1893, at page 70, of said land records, each between Deer Creek and Black
Bayou Steam Navigation and Transportation Company and Cotton Club, Inc., and
assigned to Seller, Seller shall not convey such assets to Purchaser upon
Closing but, in lieu of conveyance, shall execute and deliver to Purchaser at
closing the Option to Exercise Option Rights in the form of Schedule 1.3(b) of
the Asset Purchase Agreement.

EXCLUDED ASSETS

The provisions listed above notwithstanding, Casino Assets shall not include:

a) Cash, accounts receivable, notes receivable and any other amounts due from
any third party arising from the operation of the Casino prior to the
closing on the closing date;
b) The gaming equipment and other equipment and assets listed on Schedule 1.4
of The Asset Purchase Agreement;
c) Seller's stock records, books, tax returns, minute books and financial, tax
and accounting records;
d) All of Seller's rights under the Asset Purchase Agreement;
e) All tax refunds;
f) The Lease Agreement with Mosow Real Estate, Inc. dated November 14, 1995;
g) The Lease Agreement with Mosow Real Estate, Inc. dated February 1, 1997;
h) The Real Estate Option Agreement dated October 26, 1995, and the Lease and
Option Agreement dated October 26, 1995, each between Deer Creek Navigation
and Transportation Company and Cotton Club, Inc., and assigned to Seller.

<PAGE>

<PAGE>
APPENDIX 1
PROXY CARD

ALPHA HOSPITALITY CORPORATION
12 EAST 49TH STREET
NEW YORK, NEW YORK 10017
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF ALPHA HOSPITALITY CORPORATION

The undersigned Stockholder of Alpha Hospitality Corporation, a Delaware
corporation, hereby acknowledges receipt of the Notice of Annual and Special
Meeting of Stockholders dated February 2, 1998 and Proxy Statement dated
February 12, 1998, and hereby appoints James Cutler and Robert Steenhuisen, and
each of them proxies and attorneys-in-fact with full power to each of them of
substitution, on behalf of and in the name of the undersigned, to represent the
undersigned at the Annual and Special Meeting of Stockholders of Alpha
Hospitality Corporation, to be held on February 23, 1998 at 11:00 a.m., local
time, at the Loews New York Hotel, Lexington Avenue at 51st Street, New York,
New York, and at any adjournment or adjournments thereof, and to vote all shares
of Common Stock and Preferred Stock which the undersigned would be entitled to
vote if then and there personally present, on matters set forth below:

<TABLE>
<S> <C>
1. Election of Directors:

[ ] FOR all nominees listed below (except as marked [ ] WITHHOLD AUTHORITY to vote for
to the contrary below) all
nominees listed below
</TABLE>

(INSTRUCTION: To withhold authority to vote for any individual nominee, strike
such nominee's name from the list below.)

Stanley S. Tollam, Brett G. Tollman, Sanford Freedman, James A. Cutler, Thomas
W. Aro, Matthew B. Walker

(to be signed on reverse side)

<PAGE>

<PAGE>
(continued from other side)

<TABLE>
<S> <C>
2. To ratify the selection of Rothstein Kass & Company, 3. Proposal to approve the Sale Proposal (as defined in
P.C. as Alpha Hospitality Corporation's independent the Proxy Statement):
auditors for the fiscal year ending December 31,
1998:
</TABLE>

<TABLE>
<S> <C> <C> <C> <C> <C>
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
[ ] [ ] [ ] [ ] [ ] [ ]
</TABLE>

and upon such other matter or matters that may promptly come before the meeting
or any adjournment or adjournments thereof.

THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED IN FAVOR OF EACH OF THE PROPOSALS SET FORTH ABOVE, AND
AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE
THE MEETING.

A majority of such attorneys or substitutes as shall be present and shall
act at said meeting or any adjournment or adjournments thereof (or if only one
shall be present and act, then that one) shall have and may exercise all of the
powers of said attorneys-in-fact hereunder.

<TABLE>
<S> <C>
Dated: February .................. , 1998
..........................................
SIGNATURE
..........................................
SIGNATURE
(THIS PROXY SHOULD BE MARKED, DATED AND
SIGNED BY THE STOCKHOLDER(S) EXACTLY AS
HIS/HER/ITS NAME APPEARS HEREON, AND
RETURNED PROMPTLY IN THE ENCLOSED ENVEL-
OPE. PERSONS SIGNING IN A FIDUCIARY
CAPACITY SHOULD SO INDICATE. IF SHARES ARE
HELD BY JOINT TENANTS OR AS COMMUNITY
PROPERTY, BOTH SHOULD SIGN.)
</TABLE>
STATEMENT OF DIFFERENCES

The section symbol shall be expressed as .................................'SS'