TABLE OF CONTENTS

PARTIES AND RECITALS			Page
Parties
Recitals
ARTICLE I DEFINITIONS AND INTERPRETATION
Section 1.01	Definitions		2
Section 1.02	Additional Provisions as to Interpretation		7
ARTICLE II TRANSFER AND PLEDGE OF PLEDGED DISTRIBUTIONS
Section 2.01	Transfer and Assignment by Nation of Pledged Distributions		7
Section 2.02	Pledge by the Nation		7
ARTICLE III COVENANTS OF SGC
Section 3.01	Initial Monthly Distributions		7
Section 3.02	Subsequent Monthly Distributions		7
Section 3.03	Distributions during Lock-Down Event of Default		7
Section 3.04	No Other Distributions		8
Section 3.05	Calculation of Income Available for Distribution		8
ARTICLE IV COVENANTS OF THE NATION
Section 4.01	Pledged Distributions		8
Section 4.02	Payment of Taxes		8
Section 4.03	Maintenance of Properties		8
Section 4.04	Maintenance of Insurance		8
Section 4.05	Compliance with Laws		9
Section 4.06	Gaming Licenses		9
Section 4.07	Notices of Violations		9
Section 4.08	Legal Existence		10
Section 4.09	Mergers, Etc		10
Section 4.10	Contractual Obligations		10
Section 4.11	Sovereign Immunity, Jurisdiction and Venue		10
Section 4.12	Financial Statements		10
Section 4.13	Further Assurances, Financing Statements, Maintenance of Lien		11
Section 4.14	Concerning the Pledged Distributions		11
Section 4.15	Continued Operation of the Class III Gaming		11
Section 4.16	Operation of Class II Gaming		11
Section 4.17	Ownership of SGC and Restricted Subsidiaries		11
Section 4.18	Gaming Compliance/Termination		11
Section 4.19	Operating Lease Payments		11
Section 4.20	Covenant to Provide Information		12

 

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Section 4.21	Governmental Actions; Taxes		12
Section 4.22	Capital Expenditures		13
Section 4.23	Affiliate Transactions		13
Section 4.24	Tax-Free Nature of Series 2007-A Bonds		13
Section 4.25	Existence of Authority		14
ARTICLE V COVENANTS OF THE AUTHORITY
Section 5.01	Pledged Distributions; Distributions		14
Section 5.02	Concerning the Pledged Distributions		14
ARTICLE VI EVENTS OF DEFAULT AND REMEDIES
Section 6.01	Events of Default		14
Section 6.02	Enforcement of Covenants and Conditions		16
Section 6.03	Limited Recourse		16
Section 6.04	No Recourse to SGC		16
ARTICLE VII GOVERNING LAW; ARBITRATION; SOVEREIGN IMMUNITY
Section 7.01	Governing Law		16
Section 7.02	Limited Waiver of Sovereign Immunity; Jurisdiction		16
Section 7.03	Dispute Resolution.		19
ARTICLE VIII MISCELLANEOUS
Section 8.01	Covenants to Bind Successors and Assigns		21
Section 8.02	Immunity of Officers		22
Section 8.03	No Benefits to Outside Parties		22
Section 8.04	Severability of Provisions		22
Section 8.05	Execution in Counterparts		22
Section 8.06	Headings Not Controlling		22
Section 8.07	Notices, etc. to Trustee, Nation, Authority and SGC		22
Section 8.08	Amendments		23

 

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DISTRIBUTION AGREEMENT

This DISTRIBUTION AGREEMENT, dated as of the 27th day of April, 2007, by and among the SENECA NATION OF INDIANS, a federally recognized and sovereign Indian Nation (the “Nation”), SENECA NATION OF INDIANS CAPITAL IMPROVEMENTS AUTHORITY, a governmental instrumentality of the Nation (the “Authority”), SENECA GAMING CORPORATION, a tribally chartered corporation wholly-owned by the Nation (“SGC”) and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association with trust powers (the “Trustee”);

WITNESSETH:

WHEREAS, the Authority has been established by the Nation for the purpose of acquiring, constructing, financing, operating and maintaining such capital improvements of the Nation as may from time to time be designated by the Nation’s Council; and

WHEREAS, as directed by the Nation’s Council, the Authority has determined to finance certain capital improvements of the Nation (the “Projects”); and

WHEREAS, the Authority has determined to finance all or a portion of the Projects through the issuance of bonds payable solely from and with recourse limited to, the Trust Estate (as defined herein); and

WHEREAS, in order to finance some or all of the costs of the Projects, the Authority has determined to enter into a Trust Indenture dated as of April 27, 2007 between the Authority and the Trustee (the “Indenture”) and has duly authorized and directed the issuance of two series of bonds in the aggregate principal amount of $159,495,000 to be designated “Special Obligation Bonds,” one series, designated Series 2007-A (tax-exempt), to be issued in the aggregate principal amount of $119,495,000 (consisting of $32,800,000 aggregate principal amount due 2016 (the “Series 2007-A Bonds due 2016”), and $86,695,000 aggregate principal amount due 2023 (the “Series 2007-A Bonds due 2023”)) and one series, designated Series 2007-B (taxable), to be issued in the aggregate principal amount of $40,000,000 (the Series 2007-A Bonds, the Series 2007-B Bonds and any Additional Bonds issued under the Indenture being collectively referred to herein as the “Bonds”), thereunder; and

WHEREAS, SGC is an instrumentality of the Nation which, together with its three wholly-owned subsidiaries (also instrumentalities of the Nation), conducts all aspects of the Nation’s Gaming Enterprise (as defined herein); and

WHEREAS, SGC makes Distributions (as defined herein) attributable to operations of the Gaming Enterprise; and

WHEREAS, the Nation has determined to transfer and assign a sufficient amount of the Distributions distributed to it by SGC to the Authority in order to provide for the Authority’s payment of the principal of, premium, if any, and interest on the Bonds; and

WHEREAS, as security for the Bonds, the Authority has determined to pledge all of its right, title and interest in the Pledged Distributions (as defined herein) to the Trustee; and

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WHEREAS, it is a condition for the issuance of the Bonds under the Indenture that the Nation, the Authority and SGC enter into this Agreement with the Trustee.

NOW, THEREFORE, THIS AGREEMENT WITNESSETH:

ARTICLE I

DEFINITIONS AND INTERPRETATION

Section 1.01       Definitions .  Unless the context otherwise requires, the terms defined in this Article I and in the recitals and succeeding Articles of this Agreement shall, for all purposes of this Agreement have the meanings herein specified, such definitions to be equally applicable to both the singular and plural forms of any of the terms defined:

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person.  For the purposes of this definition, “control” when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Affiliate Contract” has the meaning given in Section 4.23 .

“Affiliate Transaction” has the meaning assigned to it in the SGC Indenture.

“Arm’s Length Contract” has the meaning given in Section 4.23 .

“Authority” has the meaning assigned to it in the Recitals.

“Bond Fund” means the Bond Fund established under Section 5.01 of the Indenture.

“Bonds” has the meaning assigned to it in the Recitals.

“Buffalo Creek Territory” means approximately nine acres of land located on the Nation’s Buffalo Creek Territory in Buffalo, New York within the boundaries of Michigan Avenue, Perry Street, Marvin Street and South Park Avenue.

“Capital Expenditures” means all amounts that would, in accordance with GAAP, be included on the financial statements of a Person as additions to property, plant and equipment on a statement of cash flows for such Person in respect of (a) the acquisition, construction, improvement, replacement or betterment of land, buildings, machinery, equipment or of any other fixed assets or leaseholds, (b) to the extent related to and not included in clause (a), materials and contract labor (excluding expenditures properly chargeable to repairs or maintenance in accordance with GAAP), and (c) other capital expenditures and other uses recorded as capital expenditures or similar terms having substantially the same effect.

“Capital Stock” has the meaning assigned to it in the SGC Indenture.

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“Class II Gaming” has the meaning assigned to it in IGRA.

“Class III Gaming” has the meaning assigned to it in IGRA.

“Closing Date” means the date on which the initial series of Bonds are issued and delivered to the initial purchaser thereof.

“Code” means the Internal Revenue Code of 1986, as now or hereafter amended.

“Compact” means the Nation-State Gaming Compact between the Seneca Nation of Indians and the State of New York, dated as of August 18, 2002, deemed approved by the Secretary of the Interior as of December 9, 2002, as amended, and as it may be further amended, extended, renewed or replaced from time to time.

“Compact Exclusivity Fee Payments” means the payments that the Nation is required to make to the State of New York under Section 12 of the Compact.

“Constitution” means the Constitution of the Seneca Nation of Indians of 1848, as amended.

“Contractual Obligation” of any Person means any indenture, note, lease, loan agreement, security, deed of trust, mortgage, security agreement, guaranty, instrument, contract, agreement or other form of contractual obligation or undertaking to which such Person is a party or by which such Person or any of its property is bound.

“Council” means the Council of the Nation identified in Section 1 of the Constitution of the Nation, or its successor governing body of the Nation.

“Default” means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default.

“Distributions” means all money, cash, cash and non cash dividends and distributions, investments (whether by means of a loan, advance or guarantee), and other amounts received by the Nation or any Affiliate of the Nation, or by any third party for the benefit of the Nation or any Affiliate of the Nation (excluding Distributions received by or for the benefit of SGC, each  Restricted Subsidiary of SGC and the respective officers, directors and employees of each of the foregoing) after the date hereof and derived from the operation of the Gaming Enterprise; provided, that Distributions do not include Excluded Payments.

“Event of Default” has the meaning given in Section 6.01 .

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Excluded Payments” means all amounts received by the Nation or any Affiliate of the Nation (other than SGC or any Restricted Subsidiary of SGC) after the date hereof, derived from the operation of the Gaming Enterprise, and actually applied to the satisfaction of (a) Compact Exclusivity Fee Payments, (b) Operating Lease Payments, (c) payments pursuant to Permitted Affiliate Transactions or (d) reimbursement of Regulatory and Shared Services Expenses.

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“Existing Affiliate Contract” has the meaning given in Section 4.23 .

“Fair Market Value” has the meaning assigned to it in the SGC Indenture.

“Fiscal Year” means the fiscal year of SGC consisting of a 12-month fiscal period ending on each September 30, or such other period designated by SGC as its fiscal year.

“GAAP” means generally accepted accounting principles in effect in the United States as of the date hereof.

“Gaming Authority” means any agency, authority, board, bureau, commission, department, office or instrumentality of any nature whatsoever of the United States, the Nation, the State of New York or any political subdivision thereof, whether now or hereafter in existence, or any officer or official thereof, with authority to regulate the Gaming Enterprise.

“Gaming Enterprise” means the Class III Gaming and resort business and any activity or business incidental, related, complementary or similar thereto, or any business or activity that is a reasonable extension, development or expansion thereof or ancillary thereto, including without limitation any hotel, entertainment, transportation, recreation or other activity or business designed to promote, market, support, develop, construct or enhance the casino gaming and resort business operated by SGC and its Restricted Subsidiaries at the Venues.

“Gaming License” means each license, permit, franchise or other authorization from any Gaming Authority required on the Closing Date or at any time thereafter in order for SGC to conduct Class III Gaming at the Venues, including all licenses granted under the Nation Gaming Ordinance, and the regulations promulgated pursuant thereto, and other applicable federal, state, foreign or local laws.

“Gaming Regulations” means all federal, Nation and New York State laws, ordinances, rules, regulations and orders applicable to the Class III Gaming at the Venues, whether now or hereafter adopted or in effect.

“Governmental Authority” means any government body or regulatory authority exercising jurisdiction over the Gaming Enterprise.

“Holder,” “Bondholder” or “owner” whenever employed herein with respect to a Bond means the person in whose name such Bond shall be registered under the Indenture.

“IGRA” means the Indian Gaming Regulatory Act, Public Law 100-497, codified as 25 U.S.C. §§ 2701-2721, as amended from time to time.

“Income Available for Distribution” means, as to any period, the amount of Consolidated Net Income (as defined in the SGC Indenture as such instrument is in effect on the date hereof) for such period that, subject to any contractual restrictions applicable to SGC, could be the subject of a Distribution to the Nation in that period, regardless of whether such amount was actually so distributed and without regard to any amount of Consolidated Net Income from prior periods that could be the subject of a Distribution in the period in question, less all Excluded

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Payments (to the extent not already excluded in determining Consolidated Net Income) made or required to be made in such period.

“Indenture” has the meaning assigned to it in the Recitals.

“Independent Financial Advisor” means a nationally recognized accounting, appraisal or investment banking firm or consultant in the United States that is, in the judgment of the Trustee, qualified to perform the task for which it has been engaged (1) which does not, and whose directors, officers and employees or Affiliates do not, have a direct or indirect financial interest in SGC and (2) which, in the judgment of the Trustee, is otherwise independent and qualified to perform the task for which it is to be engaged.

“Laws” means, collectively, all federal, tribal and state treaties, laws, rules and regulations and administrative and judicial decisions.

“Lock-Down Event of Default” has the meaning assigned to it in the Indenture.

“Maintenance Capital Expenditures” means Capital Expenditures for the maintenance, repairs, restoration or refurbishment of tangible property (real and personal), but excluding any Capital Expenditure that expands property.

“Nation” has the meaning assigned to it in the Recitals.

“Nation Gaming Ordinance” means the Nation Gaming Ordinance of the Nation enacted by the Council on August 1, 2002, subsequently amended on November 16, 2002, and August 12, 2006, and approved by the Chairman of the National Indian Gaming Commission on November 26, 2002 and November 6, 2006.

“Nation Parties” means the Nation, the Authority and SGC.

“Nation Territory” means the Allegany, Cattaraugus, Oil Spring, Niagara Falls and Buffalo Creek Territories of the Nation.

“New Affiliate Contract” has the meaning given in Section 4.23 .

“Niagara Territory” means the approximately 50 acres of land in Niagara Falls, New York designated in the Compact for ownership by the Nation.

“NIGC” means the National Indian Gaming Commission established under IGRA.

“Operating Lease Payments” means all lease payments made to the Nation for the use of the land and buildings used in connection with the Gaming Enterprise.

“Outstanding,” whenever employed herein with respect to a Bond, shall have the meaning assigned to such term in the Indenture.

“Permitted  Affiliate Transactions” means Affiliate Transactions which are permitted under the SGC Indenture or, should the senior notes issued under the SGC Indenture cease to

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represent SGC’s principal indebtedness, affiliate transactions permitted under the indenture or credit agreement then governing SGC’s principal indebtedness.

“Person” means any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, unincorporated organization, government, Indian tribe or nation or any agency or political subdivision thereof.

“Pledged Distributions” means (a) all Distributions made by SGC pursuant, and subject to, Section 3.01 hereof and (b) to the extent not released to the Nation in accordance with Section 3.03 hereof, all Distributions made by SGC following the occurrence and during the continuation of a Lock-Down Event of Default (such Distributions to be made in accordance with, and subject to the terms of, Section 3.03 hereof).

“Purchase Agreement” has the meaning assigned to it in the Indenture.

“Projects” has the meaning assigned to it in the Recitals.

“Qualified Capital Stock” has the meaning assigned to it in the SGC Indenture.

“Regulatory and Shared Services Expenses” means (i) the SGA’s costs of regulating the Gaming Enterprise; (ii) the regulatory costs that the Nation is required to pay to the NIGC pursuant to the IGRA and its accompanying regulations; (iii) the regulatory costs that the Nation is required to pay to the State of New York under the Compact; and (iv) the reasonably allocated costs to the Gaming Enterprise of the Nation’s costs and expenses in providing certain governmental services for the operation and support of the Gaming Enterprise, including but not limited to the costs of fire protection services, law enforcement services, road improvements, water and waste treatment, and waste removal, (to avoid duplication, all to the extent to which such items are not otherwise reflected as operating expenses of the Gaming Enterprise).

“Restricted Subsidiary” means each of Seneca Erie Gaming Corporation, Seneca Niagara Falls Gaming Corporation and Seneca Territory Gaming Corporation and any of their respective permitted successors.

“SGA” means the Seneca Gaming Authority, the gaming regulatory instrumentality of the Nation, referred to in the Compact and created under the Nation Gaming Ordinance.

“SGC” means the Seneca Gaming Corporation, a tribally chartered corporation wholly-owned by the Nation, and any permitted successor to SGC.

“SGC Indenture” has the meaning given to such term in the Indenture.

“Trust Estate” has the meaning given to such term in the Indenture.

“Trustee” means Wells Fargo Bank, National Association, or its successor as trustee under the Indenture.

“Venues” means the multi-amenity Class III Gaming, food, lodging and entertainment complexes, located or to be located on the Nation Territory.

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Section 1.02        Additional Provisions as to Interpretation .  All references herein to “Articles,” “Sections” and other subdivisions are to the corresponding Articles, Sections or subdivisions of this Agreement; and the words “herein,” “hereof,” “hereunder” and other words of similar import refer to this Agreement as a whole and not any particular Article, Section or subdivision hereof.

ARTICLE II

TRANSFER AND PLEDGE OF PLEDGED DISTRIBUTIONS

Section 2.01        Transfer and Assignment by Nation of Pledged Distributions .  The Nation hereby transfers and assigns to the Authority all of its right, title and interest to and in the Pledged Distributions.

Section 2.02        Pledge by the Nation .  The Nation hereby grants to the Trustee a security interest in, all of the Nation’s contractual rights hereunder to enforce the obligation of SGC to make the Pledged Distributions (whether a general intangible or payment intangible), together with all proceeds of the foregoing.

ARTICLE III

COVENANTS OF SGC

SGC covenants and agrees that, so long as any Bonds are Outstanding under the Indenture, it shall and, to the extent applicable, shall cause its Restricted Subsidiaries to:

Section 3.01        Initial Monthly Distributions .  Subject to any contractual restrictions applicable to SGC, make a Distribution to the Nation on or before the 5 th  day of each month in an amount equal to the amount required to be deposited by the Authority with the Trustee in that month under Section 5.01 of the Indenture.  The Nation and the Authority, pursuant to duly adopted resolutions, have directed SGC to pay all Distributions made to the Nation under this section (and assigned by the Nation to the Authority pursuant to Section 2.01 hereof) directly to the Trustee (for the account of the Authority) for deposit to the Bond Fund.

Section 3.02        Subsequent Monthly Distributions .  Not make any Distribution in any month, other than pursuant to Sections 3.01 or 3.03 hereof, until the Trustee has received the Distribution required by Section 3.01 in that month.

Section 3.03        Distributions during Lock-Down Event of Default .  Upon receipt by the Authority and SGC of written notice from the Trustee that a Lock-Down Event of Default has occurred and is continuing, and until such time as the Authority and SGC receive written notice from the Trustee that such Lock-Down Event of Default is no longer continuing, at the direction of the Nation and the Authority (pursuant to duly adopted resolutions), not make any Distributions other than by paying the same to the Trustee for the account of the Authority.  If a Lock-Down Event of Default is cured or waived or otherwise ceases to continue, then all Distributions paid by SGC to the Trustee pursuant to this Section 3.03 and not theretofore applied by the Trustee consistent with the terms of the Indenture shall be released by the Trustee

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to the Nation and upon such release such Distributions shall no longer constitute Pledged Distributions.

Section 3.04        No Other Distributions .   Not make any Distributions other than Distributions made in accordance with Section 3.01 , 3.02 or 3.03 .

Section 3.05        Calculation of Income Available for Distribution .  Upon receipt of a written request from the Authority in connection with Section 2.10 of the Indenture, provide the Authority with a calculation showing the Income Available for Distribution for the period or periods requested by the Authority.

ARTICLE IV

COVENANTS OF THE NATION

The Nation covenants and agrees that, so long as any Bonds are Outstanding under the Indenture, it shall:

Section 4.01        Pledged Distributions .  (a)  Consistent with Section 2.01 hereof, take any further action necessary to ensure the continuing validity and effectiveness of its (i) transfer and assignment of all Pledged Distributions to the Authority and (ii) grant of a security interest pursuant to Section 2.02 hereof; (b) cause SGC, subject to any contractual restrictions, to make the Pledged Distributions required under Section 3.01 hereof and to pay all Pledged Distributions directly to the Trustee (for the account of the Authority) for deposit to the Bond Fund; and (c) in the event that it receives any Distribution from SGC in contravention of Section 3.01 , 3.02 , 3.03 or 3.04 hereof, hold such Distribution in trust for the benefit of the Trustee and promptly deliver such Distribution to the Trustee for deposit in the Bond Fund.

Section 4.02        Payment of Taxes .  Cause SGC to pay prior to delinquency all material taxes, assessments, and governmental levies imposed upon SGC or any of its Restricted Subsidiaries, except for any tax, assessment or governmental levy contested in good faith and by appropriate proceeding or where the failure to make such payment is not adverse in any material respect to the ability of SGC to meet is obligations under this Agreement.

Section 4.03        Maintenance of Properties .  Cause SGC to cause all material properties used or useful in the conduct of the Gaming Enterprise to be maintained and kept in good working condition, repair and working order at all times (reasonable wear and tear excepted) and supplied with all reasonably necessary equipment, and cause SGC to make all commercially reasonable repairs, renewals, replacements, betterments and improvements thereon.

Section 4.04        Maintenance of Insurance .  Cause SGC to maintain insurance with responsible carriers against such risks and in such amounts as is customarily carried by similar businesses with such deductibles, retentions, self insured amounts and coinsurance provisions as are customarily carried by similar businesses of similar size, including, without limitation, property and casualty.  Customary insurance will be deemed to include, without limitation, the following:

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(a)           workers’ compensation insurance to the extent required to comply with the Compact or the laws and regulations of any applicable jurisdiction;

(b)           comprehensive general liability insurance with minimum limits of $1,000,000 per occurrence;

(c)           umbrella or excess liability insurance providing excess liability coverages over and above the foregoing underlying insurance policies up to a minimum limit of $4,000,000 in the aggregate;

(d)           business interruption insurance with a minimum limit of at least $50,000,000; and

(e)           property insurance protecting the property against losses and damages as is customarily covered by an “all-risk” policy or property policy covering “special” causes of loss for a business of similar type and size, providing coverage of not less than 100% of actual replacement value (as determined at each policy renewal based  on the F. W. Dodge Building Index or some other recognized means) of any improvements customarily insured consistent with industry standards and with a deductible no greater than 2% of the insured value of the Venues or such greater amount as is available on commercially reasonable terms (other than earthquake or flood insurance, for which the deductible may be up to 10% of such replacement value).

All such insurance policies will be issued by carriers having an A.M. Best & Company, Inc. rating of A or higher and a financial size category of not less than VII, in each case on the date each such policy is issued to SGC, or if such carrier is not rated by A.M. Best & Company, having the financial stability and size deemed appropriate by an opinion from a reputable insurance broker.

Section 4.05        Compliance with Laws .  Cause SGC to comply with all statutes, laws, ordinances or government rules and regulations to which it is subject, non-compliance with which would materially adversely affect the business, prospects, earnings, properties, assets or financial condition of SGC and its Restricted Subsidiaries taken as a whole.

Section 4.06        Gaming Licenses .  Use its com