MID STATE RACEWAY INC
EXHIBIT 10.4
<DOCUMENT>
<TYPE>EX-10.4
<SEQUENCE>5
<FILENAME>l06942aexv10w4.txt
<DESCRIPTION>EXHIBIT 10.4
<TEXT>
<PAGE>
                                                                    Exhibit 10.4

                                    GUARANTY

                  GUARANTY, dated this 10th day of April, 2004 executed by
Leonard Mercer ("Guarantor")" in favor of Vestin Mortgage, Inc. ("Vestin").


                                   WITNESSETH

                  WHEREAS, is a stockholder of International Housing Development
Group, Corp. ("International") which is engaged in the development, ownership,
operation and sales of real property; and

                  WHEREAS, the remaining stockholders of International
("Affiliates") are the sole and exclusive members of, and own 100% of the equity
interests in, Raceway Ventures, LLC, a Florida limited liability company
("Purchaser"); and

                  WHEREAS, Guarantor desires to have the Affiliates to acquire
19,549 shares of the Common Stock (the "Common Stock") of Mid-State Raceway,
Inc. ("Raceway") and warrants (the "Warrants") to purchase 1,250,000 shares of
Common Stock from All Capital LLC ("All Capital") and 450,000 shares of Common
Stock from Victoria Scott respectively; and

                  WHEREAS, Raceway owns in excess of 600 acres of real property
in Vernon New York ("Development Property") suitable for real estate development
by International; and

                  WHEREAS, if the Affiliates acquire Raceway International and
the Guarantor will benefit from the development of the Development Property; and

                  WHEREAS, Raceway and Mid-State Development Corporation
("Development" and Raceway and Development collectively referred to herein as
Borrower") are indebted to Vestin in the amount of up to $26,000,000 ("Existing
Indebtedness") as evidenced by a Consolidated Secured Promissory Note (the
"Note"); and

                  WHEREAS, the Guarantor and the Affiliates desire to have
Vestin execute and deliver its consent to acquisition by the Affiliates of the
Common Stock and Warrants (the "Consent"); and

                  WHEREAS, as a condition to Vestin executing and delivering the
Consent, Vestin has requested that the Guarantor execute and deliver this
Guaranty.

                  NOW THEREFORE, in consideration of the premises, the mutual
agreements


<PAGE>




herein contained the parties hereto agree as follows:

          1.      Guaranty of Payment and Performance.

                  (a) Subject to and in accordance with the provisions of
subparagraphs 1 (b) and (c) hereof, the Guarantor does hereby absolutely,
unconditionally and irrevocably guaranty to Vestin the full and punctual payment
and performance of the Obligations (as defined). For purposes of this Guaranty
the term "Obligations" shall be and mean the Borrower's obligations under the
Note solely and exclusively for the payment of principal and interest thereon
computed at the rate of 11% per annum , whether now existing or hereafter
arising, when the same shall become due and payable, in accordance with the
terms of the Note; provided however that anything in this Guaranty to the
contrary notwithstanding, Guarantor's obligations hereunder and/or with respect
to the Obligations shall in no event or circumstance exceed the aggregate amount
of $10,000,000.00.

                  (b) If any of the Obligations shall not be paid in full as the
same shall become due and payable, either at stated maturity or otherwise, in
accordance with the terms of the Note, then and in that event:

                           (i)      Vestin shall take and perform such
                                    reasonable efforts (collectively "Collection
                                    Efforts") as shall be reasonably necessary
                                    to cause the Borrower to make payment of the
                                    Obligations then due and payable; and

                           (ii)     Vestin shall, following the completion of
                                    the Collection Efforts transmit to the
                                    Guarantor written notice ("Vestin Notice")
                                    setting forth: (A) the continued existence
                                    of the Borrower's default in payment of the
                                    Obligations, (B) the amount of the
                                    Obligations which are at such time the
                                    subject of Borrower's payment default prior
                                    to any acceleration and/or imposition of
                                    Default Interest ("Current Default"), (C)
                                    the amount of the costs incurred by Vestin
                                    in performing the Collection Efforts (the
                                    "Collection Costs"), (D) the total amount
                                    of the Obligations and (E) the sum of the
                                    Collection Costs and the Obligations (the
                                    "Buy Out Amount"); and

                           (iii)    Guarantor shall have the right during the
                                    seven day period following transmittal by
                                    Vestin of the Vestin Notice to either (A)
                                    cure the Borrower's payment default by
                                    making payment to Vestin of the full amount
                                    of the Current Default prior to the
                                    expiration of such seven day period, or (B)
                                    purchasing, for cash, 100% of the payees
                                    interest in and to the Note and the proceeds
                                    thereof and all collateral securing the same
                                    (the "Property") for the Buy-Out Amount, If
                                    the Guarantor elect to exercise the purchase
                                    right described above they shall (C) give
                                    Vestin written notice of such


<PAGE>




                                    election ("Purchase Notice") prior to the
                                    expiration of such seven day period; which
                                    Purchase Notice shall specify a closing date
                                    for such purchase within 14 days following
                                    the transmittal of the Purchase Notice to
                                    Vestin and (D) have the right to transfer,
                                    sell assign and convey their rights to
                                    acquire the Property and/or any agreements
                                    with respect to the acquisition of the
                                    Property to any third party.

                  (c) If the Guarantor shall fail or refuse to either pay the
full amount of the Current Default or transmit the Purchase Notice within the
seven day period following the transmittal of the Vestin Notice and/or having
transmitted the Purchase Notice failed and/or refused to fully and timely
perform their obligations thereunder, then and in any such event the Guarantor
shall, upon demand, immediately pay to Vestin any such Obligations without
presentment, diligence, protest or other notice of any kind, all of which are
hereby expressly waived. In addition to the foregoing, the Guarantor agrees to
pay any and all reasonable expenses (including without limitation, reasonable
attorney's fees and expenses) which may be paid or incurred by Vestin in
connection with the enforcement by Vestin of the obligations of the Guarantor
with respect to the Obligations. All payments under this Guaranty shall be made
in the place, currency and manner specified for the Obligations as provided in
the Note.

                  (d) Without limiting the generality of the provisions of
subparagraph 1(a) hereof but expressly subject to the provisions of
subparagraphs 1(b) and (c)hereof:

                           (i)      The liability of the Guarantor under this
Guaranty is primary, absolute, direct and immediate, and not conditional or
contingent upon pursuit by Vestin of any remedies it may have against the
Borrower or any other person or entity, whether pursuant to the terms hereof or
at law, in equity or by statute;

                           (ii)     The Guarantor hereby waives any right he
otherwise might have to require Vestin to make any demand upon and/or proceed
against the Borrower or any other person or entity before seeking enforcement of
this Guaranty, or to pursue any legal, equitable or statutory remedy otherwise
available to Vestin in any particular manner or order;

                           (iii) The Guarantor hereby expressly authorizes
Vestin, in its sole and absolute discretion, without notice to or further assent
of the Guarantor and without in any way discharging, terminating, releasing,
affecting or impairing the obligations and liabilities of the Guarantor
hereunder, from time to time or at any one or more times to: (A) amend, modify,
renew, extend, accelerate or otherwise change the time or manner of payment for
or performance of, or otherwise change, modify or amend any of the other terms
and conditions of the Obligations, (B) release, discharge or compromise or
settle with the Borrower, (C) waive compliance with or any default under,
forbear from, delay or only partially enforce, or grant any other indulgences
with respect to the Obligations, (D) assign, transfer, pledge, hypothecate,
grant a security interest in or otherwise transfer his interest in this
Guaranty, and (E) otherwise deal in all respects with the Borrower with respect
to the Note as if this Guaranty was not in effect;


<PAGE>




                           (iv) The Guarantor: (A) agrees that the validity and
enforceability of his obligations hereunder shall be unaffected by the
genuineness, validity, regularity or enforceability of the Note or by any other
circumstance which might otherwise constitute a legal or equitable discharge or
defense of a surety or guarantor, (B) expressly waives any defense arising by
reason of laches, the statute of limitations or any incapacity, lack of
authority, or other defense of the Borrower (including, without limitation, the
bankruptcy, reorganization, liquidation, dissolution, release or discharge of
the Borrower or any arrangement, compromise, settlement or other action with
respect to the Borrowers creditors or by reason of the cessation from any cause
whatsoever (other than payment or performance in full) of the liability of the
Borrower), and (C) hereby releases Vestin from any requirement of looking into
such matters.

                  2. Guarantor's Obligations Not Affected. This Guaranty is an
absolute, unconditional, irrevocable, present and continuing guarantee of
payment and performance and not merely of collection or collectibility, and,
except as expressly provided herein to the contrary, is in no way conditioned or
contingent upon any attempt to collect from the Borrower or any other person any
of the Obligations or upon any other condition or contingency. The obligations
of the Guarantor under this Guaranty shall remain in full force and effect
without regard to, and shall not be impaired or affected by:

                           (i) any change in the existence, structure or
ownership of the Borrower, or any insolvency, bankruptcy, reorganization,
arrangement, adjustment, composition, liquidation, receivership or similar
proceeding affecting the Borrower;

                           (ii) the existence of any claim or other rights
that the Guarantor or any of them may have at any time against the Borrower,
whether in connection herewith or in any unrelated transactions; provided
however that nothing herein shall prevent the assertion of any such claim by
separate suit or compulsory counterclaim;

                           (iii) any exercise or non-exercise by Vestin or
any other person of any right, power, privilege or remedy pursuant to or in
respect of this Guaranty, or any waiver of any such right, power, privilege or
remedy; or

                           (iv) any merger or consolidation of the Borrower
with or into any other person, or any sale, lease or transfer of any or all of
the assets of the Borrower to any other person or the dissolution, termination,
winding up or other discontinuation of the Borrower.

                  3. Waiver. Except as herein expressly provided to the
contrary, the Guarantor unconditionally waives (i) all notices which may be
required by statute, rule of law or otherwise, notice of acceptance of this
Guaranty as well as (a) presentment, demand for payment and/or performance and
protest of non-payment and/or non-performance, (b) notice of presentment, demand
and protest, (c) notice of any default hereunder and/or under the Note, and of
all indulgences, (d) demand for observance of performance of, or enforcement of,
any terms or provisions of this Guaranty, and (e) all other notices and demands
otherwise required by law or


<PAGE>




statute which Guarantor may lawfully waive, Further, to the extent permitted by
law, the Guarantor waives the rights to (f) trial by jury, (g) implead the
Borrower or assert a counterclaim against the Borrower, (h) to consolidate any
such action with any proceeding involving the Borrower, and (ii) any requirement
of diligence on the part of Vestin.

                  4. Termination. This Guaranty and the obligations of the
Guarantor hereunder shall terminate and be of no further force and effect on the
earlier to occur of (a) the date when the Obligations shall be have been
indefeasibly paid in full, or (b) the VLT Commencement Date (as defined); or (c)
the date upon which the Borrower's obligations for the payment of principal and
interest under the Note is reduced, by payment (other than as a result of the
foreclosure and/or sale of the real and/or personal property securing the Note),
to $16,000,000.00 or less. The "VLT Commencement Date" shall be and mean the
date upon which video lottery terminals ("VLT's") installed on the premises of
Vernon Downs Race Track, Vernon New York, are first activated and available for
utilization on a pilot, temporary or permanent basis.

                  5. No Waivers. No failure or delay by Vestin in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies provided herein shall be cumulative and not exclusive of any rights or
remedies provided by law.

                  6. Notices. Any and all notices, requests or instructions
desired or required to be given to Vestin or to Guarantor shall be in writing
and shall either be hand delivered or mailed to the recipient first class,
postage prepaid, certified, return receipt requested at the following respective
addresses:

To:       Guarantor

          Raceway Ventures, LLC
          5300 NW 12th Ave. Suite 1
          Ft. Lauderdale, Florida 33309

To:       Vestin
          2901 El Camino Avenue, Suite 206
          Las Vegas, NV 89102

or at such other address as any party hereto shall designate in a writing
complying with the provisions of this Paragraph.

                  7. Savings Clause. If any provision of this Guaranty is held
to be invalid or unenforceable by any court or tribunal of competent
jurisdiction, the remainder hereof shall not be affected thereby, and such
provisions shall be carried out as nearly as possible according to its original
terms and intent to eliminate such invalidity or unenforceability.


<PAGE>




                  8. General. This agreement sets forth the entire agreement
between the parties hereto with respect to the subject matter herein contained;
shall be governed and construed in accordance with the laws of the State of
Nevada; cannot be altered, amended, modified or terminated except by a writing
executed by both of the parties hereto or as herein expressly otherwise
provided; and shall inure to the benefit of and be binding upon the parties
hereto and their respective successors, transferees, heirs, assigns and
beneficiaries.

                  IN WITNESS WHEREOF, each of the undersigned has caused this
Guaranty to be executed and delivered as of the day and year first above
written.


                                          By: /s/ Leonard Mercer, individually
                                             ---------------------------------



</TEXT>
</DOCUMENT>
