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As of February 27, 2006, 22,349,909 shares of the Registrant’s Common Stock were outstanding. Based upon the last sale price of the Common Stock as reported on the NASDAQ National Market on July 1, 2005 (the last business day of the Registrant’s most recently completed second quarter), the aggregate market value of the Common Stock held by non-affiliates of the Registrant as of such date was $249.5 million. For purposes of these computations, affiliates of the Registrant are deemed only to be the Registrant’s executive officers and directors. All share and per share data for periods prior to May 3, 2004 have been retroactively restated to give effect to a two-for-one stock split (the “Stock Split”) in the form of a 100% stock dividend paid on May 3, 2004 to shareholders of record on April 26, 2004.

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Certain information included in this Annual Report on Form 10-K and other materials filed or to be filed by the Company with the United States Securities and Exchange Commission (“SEC”) as well as information included in oral statements or other written statements made or to be made by the Company contain statements that are forward-looking, such as plans for future expansion and other business development activities as well as other statements regarding capital spending, financing sources and the effects of regulation (including gaming and tax regulation) and competition.

These risks and uncertainties include, but are not limited to, the re-listing of Lakes’ common stock on The Nasdaq Stock Market; need for current financing to meet Lakes’ operational and development needs; those relating to the inability to complete or possible delays in completion of Lakes’ casino projects, including various regulatory approvals and numerous other conditions which must be satisfied before completion of these projects; possible termination or adverse modification of management contracts; Lakes operates in a highly competitive industry; possible changes in regulations; reliance on continued positive relationships with Indian tribes and repayment of amounts owed to Lakes by Indian tribes; possible need for future financing to meet Lakes’ expansion goals; risks of entry into new businesses; reliance on Lakes’ management; and the fact that the WPT Enterprises, Inc. (Nasdaq: WPTE) (“WPTE”) shares held by Lakes are currently not liquid assets, and there is no assurance that Lakes will be able to realize value from these holdings equal to the current or future market value of WPTE common stock. There are also risks and uncertainties relating to WPTE that may have a material effect on the Company’s consolidated results of operations or the market value of the WPTE shares held by the Company, including WPTE’s significant dependence on the Travel Channel as a source of revenue; the potential that WPTE’s television programming will fail to maintain a sufficient audience; difficulty of predicting the growth of WPTE’s online casino business, which is a relatively new industry with an increasing number of market entrants; the risk that WPTE may not be able to protect its entertainment concepts, current and future brands and other intellectual property rights; the risk that competitors with greater financial resources or marketplace presence might develop television programming that would directly compete with WPTE’s television programming; the risk that WPTE may not be able to protect its entertainment concepts, current and future brands and other intellectual property rights; risks associated with future expansion into new or complementary businesses; the termination or impairment of WPTE’s relationships with key licensing and strategic partners; and WPTE’s dependence on its senior management team. For more information, review the Company’s filings with the Securities and Exchange Commission. For further information regarding the risks and uncertainties, see the “Risk Factors” section in Item 1A of this Annual Report on Form 10-K.

Lakes Entertainment, Inc., a Minnesota corporation (“Lakes” or the “Company”), has development agreements for various Indian-owned casino properties and intends to manage such casinos when applicable regulatory approvals have been received and other contingencies have been satisfied. Lakes is also involved in other business activities, including development of a Company owned casino and the purchase/license or development of new table game concepts for licensing to other casinos. In addition, as of January 1, 2006, Lakes owned approximately 62% of WPTE, a separate publicly held media and entertainment company principally engaged in the creation of branded entertainment and consumer products driven by the development, production and marketing of gaming themed televised programming, the licensing and sale of branded products and the sale of corporate sponsorships. Lakes’ consolidated financial statements include the

Lakes’ primary business is to develop and manage Indian-owned casino properties that offer the opportunity for long-term development of related entertainment facilities, including hotels, golf courses, theaters, recreational vehicle parks and other complementary amenities. Lakes currently has development and management agreements with five separate tribes that include one new casino development project in Michigan, two new casino development projects in California, and three new casino development projects and two existing casino operations in Oklahoma. Lakes, through various subsidiaries, has entered into the following contracts for the development and management of new casino operations, all of which are subject to various regulatory approvals and in some cases resolution of legal proceedings:

The World Poker Tour, or the WPT, is a sports league of affiliated poker tournaments open to the public. There are currently 17 regular WPT tournaments or tour stops on the circuit which are all hosted by prestigious casinos and poker rooms. Each season of tour stops culminates in the WPT World Championship at the Bellagio Hotel and Casino in Las Vegas, Nevada, which includes the winner of each of that season’s previous WPT tournaments. The World Poker Tour tournament tour stops have attracted well-known and established professional and amateur poker players on the poker circuit. WPTE also makes tour stops accessible to the mainstream poker player by partnering with casinos and poker rooms which host “satellite” and “super satellite” poker tournaments in which the winner or winners may ultimately earn a paid entry into WPTE’s main events. At WPTE’s tour stops, WPTE films the final table of participants competing for some of the poker world’s largest tournament prize pools. WPTE then edits the footage from each tour stop into a two-hour episode, resulting in a series of two-hour episodes which are distributed for telecast to both domestic and international television audiences. In addition, WPTE films and produces special episodes based on a variety of non-traditional poker tournaments, which WPTE also distributes for telecast along with the episodes based on the WPT regular tour stops.

The World Poker Tour brand has gained recognition through the telecast of the World Poker Tour television series, which is exhibited on the Travel Channel and subsequently on multiple television networks around the world. Since its premiere during the spring and summer of 2003, WPTE’s television series has become the Travel Channel’s highest rated program, based on data compiled by Nielsen Media Research that measure the number of television households viewing the series’ episodes. The following table describes the timing of Seasons One through Four of the World Poker Tour series, including the delivery and exhibition of the episodes each season:

Lakes is a Minnesota corporation formed in 1998 under the name of GCI Lakes, Inc, which was changed to Lakes Gaming, Inc. in August 1998 and to Lakes Entertainment, Inc. during 2002. Lakes is the successor to the Indian gaming business of Grand Casinos, Inc. (“Grand Casinos”) and became a public company through a spin-off transaction in which shares of Lakes common stock were distributed to the shareholders of Grand Casinos. Before the spin-off, Grand Casinos had management contracts for Grand Casino Hinckley and Grand Casino Mille Lacs, both Indian-owned casinos in Minnesota. Those contracts ended before the spin-off. After the spin-off, Lakes managed two Indian-owned casinos in Louisiana previously managed by Grand Casinos. Lakes managed the largest casino resort in Louisiana, Grand Casino Coushatta, until the management contract expired in 2002. Lakes also had a management contract for Grand Casino Avoyelles, which was terminated through an early buyout of the contract effective in 2000.

In 2000, California voters approved an amendment to the State Constitution, which allows for Nevada-style gaming on Indian land and ratifies the agreement between the State and the Indian tribes (Tribal Compact). Lakes acquired its initial interest in the development agreement and management contract for the Shingle Springs Casino from Kean Argovitz Resorts in 1999 and formed a joint venture, in which the contracts were held, between Lakes and Kean Argovitz Resorts — Shingle Springs, LLC (“KAR — Shingle Springs”). On January 30, 2003, Lakes purchased the remaining KAR — Shingle Springs’ partnership interest in the joint venture. In connection with the purchase transaction, Lakes entered into separate

The agreement also provides for Lakes to arrange for financing or, in its discretion, loan to the Shingle Springs Tribe in the form of a facility loan for the costs of construction and initial costs of operation up to a maximum of $300 million. In addition, Lakes will assist in the design, development and construction of the facility as well as manage the pre-opening, opening and continued operations of the casino and related amenities for a period of seven years. As compensation for its management services, Lakes will receive a management fee between 21% and 30% of net income of the operations annually for the first five years, with a declining percentage in years six and seven, as defined by the management contract. Lakes’ management fee will be subordinated to senior indebtedness of the Shingle Springs Casino and the minimum guaranteed payment to the Shingle Springs Tribe. Generally, the order of priority of payments from the Shingle Springs Casino’s cash flows is as follows: a certain minimum monthly guaranteed payment to the Shingle Springs Tribe, repayment of various debt with interest accrued thereon, management fee to Lakes, and other obligations, with the remaining funds distributed to the Shingle Springs Tribe. The management contract includes provisions that allow the Shingle Springs Tribe to buyout the management contract after four years from the opening date. The buyout amount is based upon the previous twelve months of management fees earned multiplied by the remaining number of years under the contract, discounted back to the present value at the time the buyout occurs. If the Shingle Springs Tribe elects to buy out the contract, all outstanding amounts owed to Lakes become payable. The Shingle Springs Tribe may terminate the agreement after five years from the opening of the casino if any of certain required elements of the project have not been developed.

Development of the casino resort will begin as soon as the pending litigation, as discussed in Item 3 — “Legal Proceedings” and below is resolved and third party financing is obtained. The Shingle Springs Tribe received regulatory approval of new interchange construction for access to the tribal land of the Shingle Springs Tribe. El Dorado County (the county in which the reservation is located) and another local group commenced litigation in federal and state courts against the California regulatory agencies, attempting to block the approval of the interchange. The federal lawsuit filed by the County challenged the validity of the Environmental Assessment prepared under the National Environmental Protection Act by the NIGC, as required for the approval of the management contract and as required by the Bureau of Indian Affairs for construction of the road which would allow access to the Shingle Springs Rancheria and site of the proposed casino project. The federal lawsuit also challenged the validity of the Shingle Springs Tribe and the qualification of the Shingle Springs Rancheria as Indian lands which would allow gaming. In January 2005, the United States District Court for the Eastern District of California issued a favorable ruling on all federal issues with respect to the casino development planned by the Shingle Springs Tribe. El Dorado County and the local opposition group are appealing the federal favorable ruling related to the project. Lakes expects the courts’ rulings to be upheld based on consultation with third-party advisors and their interpretation of the law. A separate California State court case regarding the project is pending. See Item 3 — “Legal Proceedings.”

Development and Management of Pokagon Casino. The Pokagon Casino is planned to be developed on approximately 675 acres of land owned by the Pokagon Band in New Buffalo Township, Michigan, near the first Interstate 94 exit in southwestern Michigan and approximately 75 miles east of Chicago. The facility will feature approximately 3,000 slot machines and approximately 100 table games as well as multiple restaurants and bars, a parking garage and other facilities. In 1999, Lakes and the Pokagon Band executed a development agreement and management contract governing their relationship during the development, construction and management of the casino.

The development agreement provides for Lakes to advance up to approximately $73.0 million for the purchase of land and for the initial development phase of the project. The development agreement for the Pokagon project also provides that to the extent the Pokagon Band is unable to raise additional funding from third parties at an interest rate not to exceed 13%, Lakes will be required to provide additional financing of up to approximately $54.0 million. Based on extensive discussions with prospective lenders, it appears that third-party financing will be available for this project; however, there can be no assurance that third-party financing will be available at the time the project begins construction. Lakes is not required to fund these amounts. If, however, Lakes discontinues the funding prior to fulfilling the obligation, Lakes will forfeit its rights under the management contract.

As of January 1, 2006 the principal balance of the loan to the Pokagon Band is $46.4 million. The management contract is subject to the approval of the NIGC and is for a term of five years from the opening of the casino and may be for seven years under certain circumstances. Lakes will receive 24% of net income up to a certain threshold and 19% on net income over that threshold, as a management fee. Lakes’ management fee will be subordinated to senior indebtedness of the Pokagon Casino and is subject to a minimum guaranteed monthly payment to the Pokagon Band. Generally, the order of priority of payments from the Pokagon Casino’s cash flows is as follows: a certain minimum monthly guaranteed payment to the Pokagon Band, repayment of various debt with interest accrued thereon, management fee to Lakes, and other obligations, with the remaining funds distributed to the Pokagon Band. The Pokagon Band may buy out the management contract after two years from the opening date. The buyout amount is calculated based upon the previous twelve months of management fees earned multiplied by the remaining number of years under the management contract, discounted back to the present value at the time the buyout occurs. If the Pokagon Band elects to buy out the contract, all outstanding amounts owed to Lakes become payable.

During the 30-day waiting period, a lawsuit was filed in 2001 against the federal government in the District Court of Columbia by a Michigan-based group called “Taxpayers of Michigan Against Casinos” (“TOMAC”) to stop the U.S. Department of Interior from placing into trust the land for the casino site. In 2002, the judge eliminated several of TOMAC’s assertions, and in 2003, dismissed all remaining issues except for one. In March 2005, the federal judge dismissed the last remaining issue filed by TOMAC making it possible for the land to be taken into trust for the gaming project. During the required 60-day waiting period, TOMAC filed for an appeal, which was held on December 8, 2005. On January 6, 2006, the United States Court of Appeals for the District of Columbia Circuit ruled in favor of the Pokagon Band by affirming the Federal District Court’s grant of summary judgment in the lawsuit by TOMAC versus the U.S. Department of the Interior. On January 27, 2006, the Federal Government took official action to acquire the Pokagon Band’s 675-acre parcel of land in New Buffalo Township, Michigan, into trust for the Pokagon Band. This official action by the Department of the Interior paves the way for the Pokagon Band to move forward with their Four Winds Casino Resort project. Casino construction is not planned to start until the development agreement and management contract are approved by the Chairman of the NIGC and third party financing is obtained, which could occur as early as mid 2006.

Development and Management of Jamul Casino. Lakes has a contract to develop and manage a casino resort facility with the Jamul Tribe on land owned by the Jamul Tribe near San Diego, California. Lakes acquired its initial interest in the development agreement and management contract for the Jamul Casino from Kean Argovitz Resorts in 1999 and formed a joint venture in which the contracts were held between Lakes and Kean Argovitz Resorts — Jamul, LLC (“KAR — Jamul”). On January 30, 2003, Lakes purchased the remaining KAR — Jamul’s partnership interest in the joint venture. In connection with the purchase transaction, Lakes entered into separate agreements with the two individual owners of KAR — Jamul. See “Agreements With Owners of KAR Entities” below.

The development agreement provides for Lakes to make certain pre-construction advances to the Jamul Tribe up to $30 million. Lakes is not required to fund these amounts. If, however, Lakes discontinues the funding prior to fulfilling the obligation, Lakes would forfeit its rights under the management contract. The principal balance of the loan to the Jamul Tribe is $16.9 million as of January 1, 2006. Lakes will receive a management fee between 18% and 30% of the net income of the operations annually for seven years, subject to regulatory approval of the management contract. Generally, the order of priority of payments from the Jamul Casino’s cash flows is as follows: a certain minimum monthly guaranteed payment to the Jamul Tribe, repayment of various debt with interest accrued thereon, management fee to Lakes, and other obligations, with the remaining funds distributed to the Jamul Tribe. The Jamul Tribe may terminate the management contract after five years from the opening date of the casino if any of certain required elements of the project have not been developed.

In 2000, California voters approved an amendment to the State Constitution, which allows for Nevada-style gaming on Indian land and ratifies the Tribal Compact. Development of the casino resort to be located on State Highway 94, approximately 20 miles east of downtown San Diego, will begin once various regulatory approvals are received. Plans for the casino include approximately, 2,000 slot machines and approximately 85 table games along with various restaurants and related amenities. The Jamul Tribe has an approximate six-acre reservation on which the casino will be built. The reservation is located near San Diego, California. Lakes has also acquired 101 acres of land contiguous to the six-acres of Rancheria land of which 82 acres could be used for the casino support facilities if the land is taken into trust. The process of getting the land contiguous to the reservation placed into trust has been slow. Therefore, during August of 2005, the Jamul Tribe and Lakes formally announced plans to build the casino on the approximately six acres of reservation land held by the Jamul Tribe. Reservation land qualifies for gaming without going through a land in trust process. The approximate size of the casino and related guest amenities will not change in total, as the casino was always planned to be built on the reservation land. The approximate six-acre project will be built on various levels to accommodate essentially all of the same amenities that were planned for the project on the larger parcel of land. Therefore, the design of the project was changed significantly from a complex of lower-level buildings spread out over a larger area to a multi-level resort built on a smaller parcel of land. Total square footage, nature or cost of the project are not expected to change significantly as it will be primarily the same project being built on a smaller footprint.

Lakes has consulted with third-party advisors as to the architectural feasibility of the alternative plan and has been assured that the project can be successfully built on the reservation land. The Company has completed economic models for each alternative and concluded that either would result in a successful operation assuming that adequate financing can be obtained. Therefore, the Company believes this project will be successfully completed. The development agreement and management contract is subject to approval by the NIGC and is currently in the review process. A consulting agreement with the Jamul Tribe is also under consideration. Construction of the casino could begin in late 2006 with an estimated opening date of the casino 12 months thereafter.

Consulting Agreement and Management Contract with the Kickapoo Tribe. As of November 10, 2005, Lakes and the Kickapoo Tribe terminated their business relationship. The relationship between Lakes and the Kickapoo Tribe had begun to deteriorate during the third quarter of fiscal 2005 and ended with a decision to terminate the business relationship due to different ideas on how to proceed with the project. Lakes was assisting the Kickapoo Tribe with improving the performance of the Kickapoo Tribe’s gaming operations conducted at the Kickapoo Tribe’s existing Lucky Eagle Casino in Eagle Pass, Texas (located approximately 140 miles southwest of San Antonio) under the terms of a gaming operations consulting agreement. Lakes and the Kickapoo Tribe entered into the gaming operations consulting agreement and a separate management contract in December 2004, as amended and restated in March 2005, effective as of January 19, 2005. Lakes also committed to provide advances to the Kickapoo Tribe of up to $2.0 million for business improvement purposes. As of January 1, 2006, Lakes had advanced approximately $2.3 million to the Kickapoo Tribe. Additionally, unpaid invoices related to the project total approximately $3.9 million, some or all of which Lakes may be required to pay. As a result of the terminated business relationship with the Kickapoo Tribe, Lakes is working with the Kickapoo Tribe to resolve all of the financial terms of the contracts, including

Gaming Development Consulting Agreements and Management Contracts with three wholly-owned subsidiaries of the Pawnee Tribal Development Corporation (“Pawnee TDC)” referred to collectively as the “Pawnee Nation”. In January 2005, Lakes entered into three gaming development and consulting agreements (collectively “Pawnee Development and Consulting Agreements”) and three separate management contracts (collectively “Pawnee Management Contracts”) with wholly-owned subsidiaries of Pawnee TDC in connection with assisting the Pawnee Nation in developing, equipping and managing three separate casino destinations.

The Pawnee Nation also operates its “Trading Post” Casino, which currently includes approximately 66 gaming devices along with a retail convenience store and gas station in the town of Pawnee, Oklahoma. Lakes will assist in the management of this project and in its expansion if the Pawnee Nation decides to expand the casino. As compensation for its management services on this project, Lakes will receive a management fee of approximately 30% of net income, as defined in the agreement, based on the incremental net income produced at this location during the length of the management contract, expected to be from five to seven years, less any amounts earned by any Company affiliate for consulting services performed at the Trading Post, subject to regulatory approval and certain other conditions.

Prior to the approval of the Pawnee Management Contracts by the NIGC, Lakes will provide services under the Pawnee Development and Consulting Agreements to each of the three Pawnee casino projects. Under these agreements Lakes plans to provide advances to the Pawnee Nation, if needed, from time to time to each particular project for preliminary development costs as agreed to by Lakes and the Pawnee Nation. Any advances made will accrue interest at prime plus two percent and be repayable in 24 equal monthly installments beginning on the 25th day following the opening date for the project if the loan has not previously been repaid through the project permanent financing. The Pawnee Development Consulting Agreements are for 12 years from the effective date of the agreements or until the project development fees and the project preliminary development loans have been fully paid, whichever date is later, subject to early termination. In addition to interest earned on the project preliminary development loan, Lakes will receive a development fixed fee equal to three percent of project costs at each location and a monthly consulting flat fee for each of the three projects of $5,000 for the Trading Post location, $25,000 for the Travel Plaza location and $250,000 for the new casino per month for 10 years. The above development fixed fees shall be paid on the opening date of each of the projects. No monthly consulting fixed fee is earned or paid prior to the opening date of the project. After the opening date of the project the monthly consulting fixed fee shall be due and paid commencing on the 25th day of the following calendar month and each successive month.

Arrangement with Consultant. The Company has executed an agreement stipulating that Kevin Kean will be compensated for consulting services (relating to the Pawnee Nation) rendered to the Company. Under this arrangement, subject to Mr. Kean obtaining certain regulatory approvals, Mr. Kean will receive 20% of the Company’s fee compensation earned under the Pawnee Development and Consulting Agreements and Pawnee Management Contracts with the Pawnee Nation (i.e., six percent of the incremental total net income or 20% of the Company’s 30% share). This agreement provides that payments will be due to Mr. Kean when the Company is paid by the Pawnee Nation.

Consulting Agreements and Management Contracts with the Iowa Tribe of Oklahoma. On March 15, 2005, the Company, through its wholly-owned subsidiaries, entered into consulting agreements and management contracts with the Iowa Tribe of Oklahoma, a federally recognized Indian Tribe, and the Iowa Tribe of Oklahoma, a federally-chartered corporation (collectively, the “Iowa Tribe”). The agreements are effective as of January 27, 2005. The Company will provide consulting services to assist the Iowa Tribe with two separate casino destinations in Oklahoma including (i) assisting in developing a new first class casino and ancillary amenities and facilities to be located on Indian land approximately 25 miles northeast of Oklahoma City along Route 66 (the “Development Project”); and (ii) consulting on the refurbishment of and operational efforts at the Iowa Tribe’s existing Cimarron Casino, located in Perkins, Oklahoma (the “Cimarron Casino”). The Company will also provide management services for the Iowa Tribe’s casino operations at each location subject to regulatory approval.

The Iowa Management Contract for the Development Project is subject to the approval of the NIGC and certain other conditions. For its performance under the Iowa Management Contract, the Company will be entitled to receive management fees of approximately 30% of net income, as defined in the agreement, for each month during the term of the Iowa Management Contract, less any amounts earned by any Company affiliate for consulting on the Development Project. The Iowa Management Contract term is seven years from the first day that the Company is able to commence management of the Development Project’s gaming operations under all legal and regulatory requirements (the “Commencement Date”), provided that the Iowa Tribe has the right to buy out the remaining term of the Iowa Management Contract after the Development Project has been in continuous operation for five years, for an amount based on the then present value of estimated future management fees. If the Iowa Tribe elects to buy out the contract, all outstanding amounts owed to Lakes become payable if not already paid. Subject to certain conditions, the Company agrees to make advances for the Development Project’s working capital requirements, if needed, during the first six months after the Commencement Date. The advances are to be repaid through an operating note payable from revenues generated by future operations of the Development Project bearing interest at two percent over the prime rate. The Company also agrees to fund any shortfall in certain minimum monthly Development Project payments to the Iowa Tribe by means of non-interest bearing advances under the same operating note.

Cimarron Casino. The Company has entered into a separate gaming consulting agreement (“Cimarron Consulting Agreement”) and management contract (“Cimarron Management Contract”) with the Iowa Tribe with respect to the Cimarron Casino. Many of the material provisions of these two agreements are similar to those for the Development Project, except that: (i) the Cimarron Consulting Agreement is primarily for services related to the existing operations (with the possibility of further development); (ii) the Company was obligated to provide up to a $1 million business improvement loan rather than a preliminary development loan (this loan was repaid in December 2005 with proceeds from the permanent financing); (iii) the fee under the Cimarron Consulting Agreement will consist entirely of a limited flat monthly fee of $50,000; and (iv) the annual fee under the Cimarron Management Contract will be 30% of net income in excess of $4 million (reduced by any amounts earned by any Company affiliate for consulting services under the Cimarron Consulting Agreement).

Arrangement with Consultant. The Company has executed an agreement stipulating that Kevin Kean will be compensated for his consulting services (relating to the Iowa Tribe) rendered to the Company. Under this arrangement, subject to Mr. Kean obtaining certain regulatory approvals, Mr. Kean will receive 20% of the Company’s fee compensation that is received under the Iowa Consulting Agreement, Cimarron Consulting Agreement, Iowa Management Contract and Cimarron Management Contract with the Iowa Tribe (i.e., six percent of the incremental total net income or 20% of the Company’s 30% share). This agreement provides that payments will be due to Mr. Kean when the Company is paid by the Iowa Tribe.

Agreements With Owners of KAR Entities. The joint venture entities that hold the management contracts for the Jamul and Shingle Springs Casino resorts were previously jointly owned by KAR — California and KAR — Shingle Springs (together, the “KAR Entities”), respectively. Lakes advanced $0.97 million to each of the KAR Entities pursuant to promissory notes dated May 25, 1999 and July 29, 1999 (collectively, the “1999 Notes”). At the time, the KAR Entities held rights in development and management contracts for the Jamul and Shingle Springs Casino projects. The loans were part of overall transactions in which Lakes acquired interests in those casino projects by entering into joint ventures with the KAR Entities. Under the joint venture arrangements, Lakes and the KAR Entities jointly formed the companies to develop the casinos (“Project Companies”) and the KAR Entities assigned their rights in the development and management contracts to the Project Companies. As such, the business purpose for the loans by Lakes was to acquire interests in the subject casino projects, as the loans were a condition to entering into the joint ventures.

Under the agreement with Mr. Kean with respect to the KAR Entities, Mr. Kean may elect to serve as a consultant to Lakes during the term of each casino management contract if he is found suitable by relevant gaming regulatory authorities. In such event, Mr. Kean will be entitled to receive annual consulting fees equal to 20% of the management fees received by Lakes from the Jamul Casino operations and 15% of the management fees received by Lakes from the Shingle Springs Casino operations, less certain costs of these operations. If Mr. Kean is found suitable by relevant gaming regulatory authorities and elects to serve as a consultant, he will be obligated to repay 50% of the notes receivable from the KAR Entities. If Mr. Kean is not found suitable by relevant gaming regulatory authorities or otherwise elects not to serve as a consultant, he will be entitled to receive annual payments of $1 million from each of the Jamul and Shingle Springs Casino projects during the term of the respective casino management contracts (but not during any renewal term of such management contracts).

Additionally, Mr. Kean owes Lakes $1.8 million, which resulted from Lakes’ guaranty of a second mortgage on Mr. Kean’s personal residential property. This guaranty was originally an obligation of Grand Casinos (Lakes’ predecessor) that was assumed by Lakes in connection with its December 31, 1998 spin-off from Grand Casinos. In connection with the guaranty, Lakes took a subordinated security position in the residential property. Additionally, in October 1999, Lakes entered into an Agreement for Indemnification with Mr. Kean wherein Lakes acknowledged that it guaranteed the loan between Mr. Kean and the bank. Pursuant to the guarantee agreement, if Lakes performed under the guarantee, Lakes would be entitled to receive and retain all monies otherwise payable to Mr. Kean with respect to his interest in the KAR — Jamul and KAR — Shingle Springs projects until Lakes has been reimbursed for all monies it might pay to the bank in repayment of or to purchase the Kean loan. In 2001, Mr. Kean defaulted on his payment obligations under the mortgage, Lakes paid off the mortgage pursuant to its guaranty obligations, and Lakes succeeded to the bank’s second mortgage position and to the bank’s security interest in Kean’s shares of common stock in another company (the value associated with the shares of common stock is currently minimal). Lakes subsequently foreclosed on the property and effected a sheriff’s sale, which netted enough proceeds to pay the first mortgage on the house and apply some proceeds toward Mr. Kean’s obligation to Lakes under the second mortgage. As a result of these transactions, the resulting net balance due from Mr. Kean was approximately $1.8 million and Lakes recorded a note receivable in that amount in 2001. The note receivable is carried on the consolidated balance sheet and included in other long-term assets. Lakes has executed a Loan and Security Agreement with Mr. Kean and his obligation is secured by his interest in the Jamul and Shingle Springs Casino projects or any other source of income due Mr. Kean by a Lakes entity. Based on our evaluation that it is probable that each of these projects will be successfully completed and given our history and relationship with Mr. Kean and his involvement in those and other projects, we believe the note will be repaid.

In February 2005, Lakes announced that its request for gaming site approval with respect to its proposed casino location in Vicksburg, Mississippi had been granted by the Mississippi Gaming Commission. The site, on the Mississippi River, contains approximately 160 acres located on Magnolia Road in Vicksburg, Warren County, Mississippi. Lakes holds land purchase options for this site. During July 2005, Lakes received approval from the Mississippi Gaming Commission of its development plan for an approximately $225 million gaming project, to be built on this site. Lakes’ approved plan allows for an operation consisting of a 60,000 square foot casino floor which would include multiple bars, live entertainment, various restaurants, 1,200 to 1,500 slot machines, table games, poker room, valet parking and hotel rooms. This plan allows for expanded gaming, additional hotel rooms, a Kid’s Quest child care facility, a nightclub, cigar lounge, banquet rooms, and an event center. Lakes continues to work with all applicable parties to obtain the necessary permits and obtain the various land parcels on which to build the casino. Lakes does not expect to have access to the

The gaming industry is highly competitive. Gaming activities include traditional land-based casinos; river boat and dockside gaming; casino gaming on Indian land; state-sponsored video lottery and video poker in restaurants, bars and hotels; pari-mutuel betting on horse racing and dog racing; sports bookmaking; and card rooms. The casinos to be managed or owned by Lakes compete with all of these forms of gaming, and will compete with any new forms of gaming that may be legalized in additional jurisdictions, as well as with other types of entertainment. Lakes also competes with other gaming companies for opportunities to acquire legal gaming sites in emerging gaming jurisdictions and for the opportunity to manage casinos on Indian land. Some of the competitors of Lakes have more personnel and greater financial and other resources than Lakes. Further expansion of gaming could also significantly affect Lakes’ business.

According to the NIGC tribal data reports, from the end of 2003 through 2004, the number of Indian gaming operations has increased by 37, or 11.2%, to 367 operations nationwide. During this same period, tribal gaming revenues increased $6.6 billion, or 51%, to $19.4 billion in the United States. The NIGC reports gaming revenues on a regional basis and Region V, which contains Kansas, Oklahoma and Texas, showed the largest revenue increase of 185%. This was followed by Region II, which contains California and Northern Nevada, which increased 100% to $5.8 billion in 2004 and is now the highest grossing region. The Region II increases are due largely to the emergence of casinos in California.

In the market for televised poker tournaments, WPTE competes with producers of several poker-related programs, including the “World Series of Poker,” an annual event hosted by Harrah’s that airs on ESPN, “Celebrity Poker Showdown,” which airs on Bravo and showcases celebrities playing poker, and “Late Night Poker,” a U.K. based program that airs on Fox. Fox also telecasts “Poker Superstars,” a series of events featuring well-known professional poker players. Additional poker-related programs include the Full Tilt Poker.net Global Challenge on Fox, Poker Royale and High Stakes Poker on the Game Show Network and the National Heads-Up Poker Championship on NBC. In 2005, Harrah’s created the World Series of Poker national circuit, taking place at several casinos operated by Harrah’s Entertainment, Inc. throughout the U.S. All circuit championship events are currently taped for telecast on ESPN. These and other producers of poker-related programming may be well established and may have significantly greater resources than WPTE. The World Poker Tour series differentiates its programming schedule from competing shows by airing the

The ownership, management, and operation of gaming facilities are subject to extensive federal, state, provincial, tribal and/or local laws, regulations and ordinances, which are administered by the relevant regulatory agency or agencies in each jurisdiction (the “Regulatory Authorities”). These laws, regulations and ordinances vary from jurisdiction to jurisdiction, but generally pertain to the responsibility, financial stability and character of the owners and managers of gaming operations as well as persons financially interested or involved in gaming operations. Certain basic provisions that are currently applicable to Lakes in its management, development and financing activities are described below.

Neither Lakes nor any subsidiary may own, manage or operate a gaming facility unless proper licenses, permits and approvals are obtained. An application for a license, permit or approval may be denied for any cause that the Regulatory Authorities deem reasonable. Most Regulatory Authorities also have the right to license, investigate, and determine the suitability of any person who has a material relationship with Lakes or any of its subsidiaries, including officers, directors, employees, and security holders of Lakes or its subsidiaries. In the event a Regulatory Authority were to find a security holder to be unsuitable, Lakes may be sanctioned, and may lose its licenses and approvals if Lakes recognizes any rights in any entity with such unsuitable person in connection with such securities. Lakes may be required to repurchase its securities at fair market value from security holders that the Regulatory Authorities deem unsuitable. Lakes’ Articles of Incorporation authorize Lakes to redeem securities held by persons whose status as a security holder, in the opinion of the Lakes’ Board of Directors, jeopardizes gaming licenses or approvals of Lakes or its subsidiaries. Once obtained, licenses, permits, and approvals must be periodically renewed and generally are not transferable. The Regulatory Authorities may at any time revoke, suspend, condition, limit, or restrict a license for any cause they deem reasonable.

Fines for violations may be levied against the holder of a license, and in certain jurisdictions, gaming operation revenues can be forfeited to the state under certain circumstances. No assurance can be given that any licenses, permits, or approvals will be obtained by Lakes or its subsidiaries, or if obtained, will be renewed or not revoked in the future. In addition, the rejection or termination of a license, permit, or approval of Lakes or any of its employees or security holders in any jurisdiction may have adverse consequences in other jurisdictions. Certain jurisdictions require gaming operators licensed therein to seek approval from the state before conducting gaming in other jurisdictions. Lakes and its subsidiaries may be required to submit detailed financial and operating reports to Regulatory Authorities.

The IGRA currently requires NIGC to approve management contracts and certain collateral agreements for Indian-owned casinos. Prior to NIGC assuming its management contract approval responsibility, management contracts and other agreements were approved by the BIA. The NIGC may review any of Lakes’ management contracts and collateral agreements for compliance with the IGRA at any time in the future. The NIGC will not approve a management contract if a director or a 5% Shareholder of the management company (i) is an elected member of the Indian tribal government that owns the facility purchasing or leasing the games; (ii) has been or is convicted of a felony gaming offense; (iii) has knowingly and willfully provided materially false information to the NIGC or the tribe; (iv) has refused to respond to questions from the NIGC; or (v) is a person whose prior history, reputation and associations pose a threat to the public interest or to effective gaming regulation and control, or create or enhance the chance of unsuitable activities in gaming or the business and financial arrangements incidental thereto.

A management contract can be approved only after NIGC determines that the contract provides, among other things, for (i) adequate accounting procedures and verifiable financial reports, which must be furnished to the tribe; (ii) tribal access to the daily operations of the gaming enterprise, including the right to verify daily gross revenues and income; (iii) minimum guaranteed payments to the tribe, which must have priority over the retirement of development and construction costs; (iv) a ceiling on the repayment of such development and construction costs; and (v) a contract term not exceeding five years and a management fee not exceeding 30% of profits; provided that the NIGC may approve up to a seven-year term if NIGC is satisfied that the capital investment required, the risk exposure, and the income projections for the particular gaming activity justify the longer term.

The IGRA prohibits substantially all forms of Class III gaming unless the tribe has entered into a written agreement with the state in which the casino is located that specifically authorizes the types of commercial gaming the tribe may offer (a “tribal-state compact”). The IGRA requires states to negotiate in good faith with tribes that seek tribal-state compacts, and grants Indian tribes the right to seek a federal court order to compel such negotiations. Many states have refused to enter into such negotiations. Tribes in several states have sought federal court orders to compel such negotiations under the IGRA; however, the Supreme Court of the United States held in 1996 that the Eleventh Amendment to the United States Constitution immunizes states from suit by Indian tribes in federal court without the states’ consent.

Title 25, Section 81 of the United States Code states that “no agreement shall be made by any person with any tribe of Indians, or individual Indians not citizens of the United States, for the payment or delivery of any money or other thing of value in consideration of services for said Indians relative to their lands unless such contract or agreement be executed and approved” by the Secretary or his or her designee. An agreement or contract for services relative to Indian lands that fails to conform with the requirements of Section 81 will be void and unenforceable. Any money or other thing of value paid to any person by any Indian or tribe for or on his or their behalf, on account of such services, in excess of any amount approved by the Secretary or his or her authorized representative will be subject to forfeiture.

The Indian Trader Licensing Act, Title 25, Section 261-64 of the United States Code (“ITLA”) states that “any person other than an Indian of the full blood who shall attempt to reside in the Indian country, or on any Indian reservation, as a trader, or to introduce goods, or to trade therein, without such license, shall forfeit all merchandise offered for sale to the Indians or found in his possession, and shall moreover be liable to a penalty of $500...” No such licenses have been issued to Lakes to date. The applicability of the ITLA to Indian gaming management contracts is unclear. Lakes believes that the ITLA is not applicable to its management contracts, under which Lakes provides services rather than goods to Indian tribes. Lakes further believes that the ITLA has been superseded by the IGRA.

Indian tribes are sovereign nations with their own governmental systems which have primary regulatory authority over gaming on land within the tribe’s jurisdiction. Because of their sovereign status, Indian tribes possess immunity from lawsuits to which the tribes have not otherwise consented or otherwise waived their sovereign immunity defense. Therefore, no contractual obligations undertaken by tribes to Lakes would be enforceable by Lakes unless the tribe has expressly waived its sovereign immunity as to such obligations. Courts strictly construe such waivers. Lakes has obtained immunity waivers from each of the tribes to enforce the terms of its management agreements, however, the scope of those waivers has never been tested in court, and may be subject to dispute. Additionally, persons engaged in gaming activities, including Lakes, are subject to the provisions of tribal ordinances and regulations on gaming. These ordinances are subject to review by NIGC under certain standards established by the IGRA.

The Company and its subsidiaries are subject to certain federal, state, and local safety and health laws, regulations and ordinances that apply to non-gaming businesses generally, such as the Clean Air Act, Clean Water Act, Occupational Safety and Health Act, Resource Conservation Recovery Act and the Comprehensive Environmental Response, Compensation and Liability Act. The Company believes that it is currently in material compliance with such regulations. The coverage and attendant compliance costs associated with such laws, regulations and ordinances may result in future additional cost to the Company’s operations.

We received a Nasdaq Staff Determination letter on April 20, 2005, indicating that we were not compliant with Nasdaq listing standards because we did not timely file our Annual Report on Form 10-K for the year ended January 2, 2005 and our Quarterly Report on Form 10-Q for the fiscal quarter ended April 3, 2005 with the United States Securities and Exchange Commission, referred to as the SEC. As a result, our common stock was subject to delisting from the Nasdaq National Market. The delisting notification is standard procedure when a Nasdaq listed company fails to complete a required filing in a timely manner. On August 9, 2005, we received notice from the Nasdaq Stock Market Listing Qualifications Department that the Nasdaq Listing Qualifications Panel determined to delist our common stock from the Nasdaq National Market effective as of the opening of business on August 10, 2005.

Although we have experience developing and managing casinos owned by Indian tribes and located on Indian land, neither we nor any of these individuals has developed or managed a casino in the States of California, Michigan, or Oklahoma. The opening of each of our proposed facilities will be contingent upon, among other things, the completion of construction, hiring and training of sufficient personnel and receipt of all regulatory licenses, permits, allocations and authorizations. The scope of the approvals required to construct and open these facilities will be extensive, and the failure to obtain such approvals could prevent or delay the completion of construction or opening of all or part of such facilities or otherwise affect the design and features of the proposed casinos.

Since the expiration of our management contract for Grand Casino Coushatta (the last remaining Indian-owned casino managed by us) on January 16, 2002, we have generated minimal revenue from our casino management activities. We have had minimal current casino management-related operating revenue with which to offset the investment costs associated with our current or future casino development projects, delays in the completion of our current development projects, or the failure of such projects to be completed at all, may cause our operating results to fluctuate significantly and may adversely affect our profitability. In addition, once developed, no assurances can be given that we will be able to manage these casinos on a profitable basis or to attract a sufficient number of guests, gaming customers and other visitors to make the various operations profitable independently. With each project we are subject to the risk that our investment may be lost if the project cannot obtain adequate financing to complete development and open the casino successfully. In some cases, we may be forced to provide more financing than we originally planned in order to complete development, increasing the risk to us in the event of a default by the casino. In addition, because our future growth in revenues and our ability to generate profits will depend to a large extent on our ability to increase the number of our managed casinos or develop new business opportunities, the delays in the completion or the non-completion of our current development projects may adversely affect our ability to realize future growth in revenues and future profits.

The ownership, management and operation of gaming facilities are subject to extensive federal, state, provincial, tribal and/or local laws, regulations and ordinances, which are administered by the relevant regulatory agency or agencies in each jurisdiction. These laws, regulations and ordinances vary from jurisdiction to jurisdiction, but generally concern the responsibility, financial stability and character of the owners and managers of gaming operations as well as persons financially interested or involved in gaming operations, and often require such parties to obtain certain licenses, permits and approvals.

The rapidly-changing political and regulatory environment governing the gaming industry (including gaming operations which are conducted on Indian land) makes it impossible for us to accurately predict the effects that an adoption of or changes in the gaming laws, regulations and ordinances will have on us. However, the failure of us, or any of our key personnel, significant shareholders or joint venture partners, to obtain or retain required gaming regulatory licenses could prevent us from expanding into new markets, prohibit us from generating revenues in certain jurisdictions, and subject us to sanctions and fines.

The NIGC has the power to require modifications to Indian management contracts under certain circumstances or to void such contracts or ancillary agreements including loan agreements if the management company fails to obtain requisite approvals or to comply with applicable laws and regulations. The NIGC has the right to review each contract and has the authority to reduce the term of a management contract or the management fee or otherwise require modification of the contract, which could have an adverse effect on us. Currently, only the Shingle Springs management contract has been approved by the NIGC. The other management contracts have not received final approval by the NIGC and may require modification prior to receiving approval.

We have made, and may make, substantial loans to Indian tribes for the construction, development, equipment and operations of casinos to be managed by us. Our only recourse for collection of indebtedness from an Indian tribe or money damages for breach or wrongful termination of a management contract is from revenues, if any, from casino operations. We have subordinated, and may in the future subordinate, the repayment of loans made to an Indian tribe and other distributions due from an Indian tribe (including management fees) in favor of other obligations of the Indian tribe to other parties related to the casino operations. Accordingly, in the event of a default by an Indian tribe under such obligations, our loans and other claims against the Indian tribe will not be repaid until such default has been cured or the Indian tribe’s senior casino-related creditors have been repaid in full.

Good personal and professional relationships with Indian tribes and their officials are critical to our proposed and future Indian-related gaming operations and activities, including our ability to obtain, develop and effectuate management and other agreements. As sovereign nations, Indian tribes establish their own governmental systems under which tribal officials or bodies representing an Indian tribe may be replaced by appointment or election or become subject to policy changes. Replacements of Indian tribe officials or administrations, changes in policies to which an Indian tribe is subject, or other factors that may lead to the deterioration of our relationship with an Indian tribe may cause delays in the completion of a development project with that Indian tribe or prevent the project’s completion altogether, which may have an adverse effect on the results of our operations.

We will require additional capital through either public or private financings to meet operating expenses during 2006 and we are currently considering various financing alternatives. On February 15, 2006 we closed on a $50 million financing facility with an affiliate of Prentice Capital Management, LP. An initial draw of $25 million was made under the facility, another $10 million is immediately available under the facility and the remaining $15 million can be drawn in $5 million increments subject to the satisfaction of certain conditions. See Note 18 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

Even with this financing facility in place, as previously announced, we will continue to explore additional financing alternatives to fund our future operational and development needs, including financing to meet our obligations related to our casino projects as soon as regulatory approvals are received and construction can begin. Such financings may not be available when needed on terms acceptable to us or at all. Moreover, any additional equity or debt financings may be dilutive to our shareholders, and any debt financing may involve additional restrictive covenants. An inability to raise such funds when needed might require us to delay, scale back or eliminate some of our expansion and development goals, or might require us to cease our operations entirely. Our financial condition and resources are discussed in greater detail in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K.

the form of loans to the Indian tribes pursuant to our financing agreements with varying degrees of collection risk, and with repayment often dependent on the operating performance of each gaming property. These loans are included as notes receivable on the consolidated balance sheet, under the category “long-term assets related to Indian casino projects”. At January 1, 2006, we had $152.8 million in long-term assets related to Indian casino projects, of which $87.1 million was in the form of notes receivable, which are recorded at fair value on the consolidated balance sheet. The notes receivable represented approximately 38% of our total assets. See Note 4 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. The loans are made to Indian tribes for pre-construction financing related to gaming properties being developed by us. All of the loans are subject to varying degrees of collection risk and there is no established market. For the loans representing indebtedness of Indian tribes, the repayment terms are specific to each Indian tribe and are largely dependent upon the operating performance of each gaming property. Repayments of such loans are required to be made only if distributable profits are available from the operation of the related casinos. Repayments are also the subject of certain distribution priorities specified in the management contracts. In addition, repayment to us of the loans and the manager’s fees under our management contracts are subordinated to certain other financial obligations of the respective Indian tribes.

Included in long-term assets related to Indian casino projects are intangible assets related to the acquisition of the management contract, land held for development and other costs incurred in connection with opening the casino of $46.1 million, $16.2 million and $3.4 million, respectively, at January 1, 2006. It is possible that one or more of our Indian casino projects will fail to open, which will render the majority of the assets related to the failed Indian casino project impaired. See our accounting policy within Note 1 of the Consolidated Financial Statements included in Item 8 of the Annual Report on Form 10-K.

During September 2005, the Department of Justice proposed legislation that would amend the Gambling Devices Act of 1962 (commonly referred to as the Johnson Act). The proposal seeks to clarify the difference between Class II and Class III machines. It prohibits Indian tribes from operating games that resemble slot machines without a tribal-state compact. The legislation proposes to amend the Johnson Act in three significant ways. First, the definition of “gaming device” in Section 1171 of the Johnson Act would be amended to clarify how the element of chance can be provided in a gaming device. Second, Section 1172 of the Johnson Act would be amended to clarify that certain “qualifying” technologic aids could be transported and used in Indian country. Third, a new Section (d) would be added to Section 1175 of the Johnson Act to provide an express exception to allow technological devices to be used in Class II gaming.

This is only proposed legislation, but if passed it could affect our planned casino operations for the Shingle Springs Tribe and the Jamul Tribe and distributable management fees to us. Class II machines are currently planned to be used at the Shingle Springs and Jamul Casinos. If the legislation were passed there is no assurance that substitute allowable Class II machines would result in the same projected operating results as the Class II machines currently planned to be used and in use by the above-mentioned projects. If this were to occur it could have a material adverse effect on our results of operations and financial conditions.

We have announced that part of our strategy involves diversifying into other businesses such as developing and owning our own casino and the development and marketing of our own table games. Such businesses involve business risks separate from the risks involved in casino development and these investments may result in future losses to us. These risks include but are not limited to negative cash flow, initial high development costs of new products and/or services without corresponding sales pending receipt of corporate and regulatory approvals, market introduction and acceptance of new products and/or services, and obtaining regulatory approvals required to conduct the new businesses. There is no assurance that diversification activities will successfully add to our future revenues and income.

As of January 1, 2006, we, through our subsidiary Lakes Poker Tour, LLC, owned approximately 62% of the outstanding common stock of WPT Enterprises, Inc., referred to as WPTE. As a result, our consolidated results include WPTE operations. In fiscal 2004, our consolidated revenues of $17.6 million, were derived entirely from the WPTE business, mainly from license fees for United States telecast of World Poker Tour television episodes. In fiscal 2005 the majority of our consolidated revenues of $18.2 million were derived from WPTE. WPTE has an agreement for a third season with the TRV, for broadcast of the World Poker Tour series on cable television which began airing in the fourth quarter of 2004 and continued airing in 2005. TRV exercised its option for Season Four in March 2005 and has options for three additional seasons. WPTE’s revenues were $18.1 million for fiscal 2005 from the delivery of 13 Season Three episodes and five Season Four episodes, international television licensing of the World Poker Tour’s Season One and Two and product licensing fees. However, we can provide no assurance that WPTE will achieve its forecasted revenues, that WPTE will be able to expand its business, or that WPTE’s operations will positively impact our financial results because WPTE’s business is subject to many risks and uncertainties. The risks include, but are not limited to, WPTE’s short operating history, WPTE’s dependence on its agreements with TRV, continued public acceptance of the World Poker Tour programming and brand, protection of WPTE’s intellectual property rights, and WPTE’s ability to successfully expand into new and complementary business, including internet gaming.

Our Articles of Incorporation authorize our Board of Directors to issue up to 200 million shares of capital stock, the terms of which may be determined at the time of issuance by the Board of Directors, without further action by our shareholders. The Board of Directors may authorize additional classes or series of shares that may include voting rights, preferences as to dividends and liquidation, conversion and redemptive rights and sinking fund provisions that could adversely affect the rights of holders of our common stock and reduce the value of our common stock. In connection with closing on a $50 million financing facility in February 2006, our Board of Directors authorized the creation of class of Series A Convertible Preferred Stock with contingent conversion rights and limited voting rights, and we issued an aggregate of 4,451,751 shares of such preferred stock to an affiliate of the lender. The Series A Convertible Preferred Stock and any other class of preferred stock that may be authorized by our Board of Directors for issuance in the future could make it more difficult for a third party to acquire us, even if a majority of our holders of common stock approved of such acquisition.

As of January 1, 2006, we had options outstanding to acquire 5.3 million shares of our common stock, exercisable at prices ranging from $3.25 to $18.16 per share, with a weighted average exercise price of approximately $6.03 per share and warrants outstanding to acquire up to 2 million shares of common stock. The warrants were cancelled effective February 15, 2006. During the terms of these options, the holders will have the opportunity to profit from an increase in the market price of our common stock with resulting dilution to the holders of shares who purchased shares for a price higher than the respective exercise or conversion price. In addition, the increase in the outstanding shares of our common stock as a result of the exercise or conversion of these options could result in a significant decrease in the percentage ownership of our common stock by the purchasers of its common stock.

On February 15, 2006, we closed on a $50 million financing facility with an affiliate of Prentice Capital Management, LP. As consideration for the financing, we issued to an affiliate of Prentice Capital warrants to purchase 1.25 million shares of common stock that can be immediately exercised at $7.50 per share. The warrants are subject to customary anti-dilution protections. An additional 1.25 million warrants to purchase common stock are exercisable at $7.50 per share as additional draws under the facility are made. Up to an additional 1.96 million warrants to purchase common stock can be exercised at $7.50 per share upon the occurrence of certain events relating to loan collateral. All warrants expire in February 2013.

In 1994, William H. Poulos filed a class-action lawsuit in the United States District Court for the Middle District of Florida against various parties, including Lakes’ predecessor, Grand Casinos, and numerous other parties alleged to be casino operators or slot machine manufacturers. This lawsuit was followed by several additional lawsuits of the same nature against the same, as well as additional defendants, all of which were subsequently consolidated into a single class-action pending in the United States District Court for the District of Nevada. Following a court order dismissing all pending pleadings and allowing the plaintiffs to re-file a single complaint, a complaint has been filed containing substantially identical claims, alleging that the defendants fraudulently marketed and operated casino video poker machines and electronic slot machines, and asserting common law fraud and deceit, unjust enrichment and negligent misrepresentation and claims under the federal Racketeering-Influenced and Corrupt Organizations Act. Various motions were filed by the defendants seeking to have this new complaint dismissed or otherwise limited. In December 1997, the Court, in general, ruled on all motions in favor of the plaintiffs. The plaintiffs then filed a motion seeking class certification and the defendants opposed it. In June 2002, the District Court entered an order denying class certification. On August 10, 2004, the Ninth Circuit Court of Appeals affirmed the District Court’s denial of class certification. On September 14, 2005, the United States District Court for the District of Nevada granted the defendants’ motions for summary judgment, and judgment was entered against the plaintiffs on that same day. The defendants have moved to seek the payment of their costs and attorneys’ fees. The motion has been fully briefed and is pending before the Trial Court. The plaintiffs have appealed from the judgment to the United States Court of Appeals for the Ninth Circuit, and the briefing of the appeal is scheduled to be completed by the end of March 2006.

On January 3, 2003, El Dorado County filed an action in the Superior Court of the State of California, seeking to prevent the construction of a highway interchange that was approved by a California state agency. The action, which was consolidated with a similar action brought by Voices for Rural Living and others, does not seek relief directly against Lakes. However, the interchange is necessary to permit the construction of a casino to be developed and managed by Lakes through a joint venture. The casino will be owned by the Shingle Springs Tribe. The matter was tried to the court on August 22, 2003. On January 2, 2004, Judge Lloyd G. Connelly, Judge of the Superior Court of the State of California, issued his ruling on the matter denying the petition in all respects except one. As to the one exception, the court sought clarification as to whether the transportation conformity determination used to determine the significance of the air quality impact of the interchange operations considered the impact on attainment of the state ambient air quality standard for ozone. The California Department of Transportation (CalTrans) prepared and filed the

A ruling with respect to the addendum was issued June 21, 2004 by the Superior Court of the State of California, County of Sacramento. The ruling indicated that the addendum provided to the court by CalTrans did not provide a quantitative showing to satisfy the court’s earlier request for a clarification on meeting the state ambient ozone standard. The court recognized that the information provided by CalTrans does qualitatively show that the project may comply with the state standard, but concluded that a quantitative analysis is necessary even though the court recognized that the methodology for that analysis “is not readily apparent”. In addition, the ruling specifically stated, “Moreover, such methodology appears necessary for the CEQA analysis of transportation projects throughout the state, including transportation projects for which respondents (i.e., CalTrans) have approval authority.” CalTrans, the Shingle Springs Tribe and Lakes responded to the court with a revised submission in August 2004. Representatives of the California Air Resources Board and the Sacramento Area Council of Governments filed declarations supporting the revised submission to the court. Opposition to that revised submission was filed, a hearing on the revised submission took place on August 20, 2004 and the court again found the revised submission of CalTrans, the Shingle Springs Tribe and Lakes to be inadequate. That ruling was separately appealed to the California Court of Appeals (the “Court”) and an oral argument for these appeals and the appeals of El Dorado County and Voices of Rural Living was held before the Court on August 29, 2005.

The Court issued its decision on the appeals on November 8, 2005. The Court ruled in favor of CalTrans’ appeal, rejecting the El Dorado County’s argument that the transportation conformity analysis did not conform to state standards. The Court also rejected all but two of the legal claims asserted in the appeal by El Dorado County and Voices for Rural Living against the environmental impact report (“EIR”) prepared by CalTrans for the interchange that will connect Highway 50 to the Shingle Springs Rancheria. For the remaining two issues, the Court held that CalTrans must supplement its environmental analysis by adding some discussion to the air quality chapter to further explain the project’s contribution to overall vehicular emissions in the region, and that CalTrans also must evaluate whether a smaller casino and hotel would reduce environmental impacts. The Court acknowledged CalTrans lacks jurisdiction to require the Shingle Springs Tribe to develop a smaller casino, but nevertheless required some discussion of this alternative in the interchange EIR. On December 19, 2005, CalTrans filed a Petition for Review with the Supreme Court of the State of California, and on February 8, 2006 the Supreme Court denied the Petition for Review and ordered the Court of Appeals decision to be depublished. CalTrans is now preparing to comply with the Court of Appeals order.

In connection with the establishment of Lakes as a public corporation on December 31, 1998, via a distribution of its common stock to the shareholders of Grand Casinos, the Company and Grand Casinos entered into an agreement governing the sharing or allocation of tax benefits accruing to Grand Casinos and certain affiliated companies of Grand Casinos. Lakes asserted claims against Grand Casinos for amounts to which Lakes believed it was entitled under the tax sharing agreement. On December 1, 2004, Lakes entered into a settlement agreement with Grand Casinos and its parent company, Park Place Entertainment Corporation (now known as “Harrah’s Entertainment, Inc.”), pursuant to which Lakes received $11.3 million in December 2004 in satisfaction of its prior claim and its future rights to the tax benefits that were the subject of the dispute. Lakes will be required to provide reimbursement for its share of the disallowed benefits. This settlement income has been recorded as other income in the consolidated statement of earnings (loss) for the year ended January 2, 2005. Lakes has not recorded any tax related to the settlement payment of $11.3 million, as Lakes believes this settlement is not taxable to Lakes.

The Louisiana Department of Revenue maintains a position that Lakes owes additional Louisiana corporation income tax for the period ended January 3, 1999 and the tax years ended 1999 through 2001 and additional Louisiana corporation franchise tax for the tax years ended 2000 through 2002. This determination is the result of an audit of Louisiana tax returns filed by Lakes for the tax periods at issue and relates to the reporting of income earned by Lakes in connection with the managing of two Louisiana-based casinos. On December 20, 2004, the Secretary of the Department of Revenue of the State of Louisiana filed a petition to collect taxes in the amount of $8.6 million, excluding interest, against Lakes in the 19th Judicial District Court, East Baton Rouge Parish, Louisiana (Docket No. 527596, Section 23). In the petition to collect taxes the Department of Revenue of the state of Louisiana asserts that additional corporation income tax and corporation franchise tax are due by Lakes for the taxable periods set forth above. Lakes maintains that it has remitted the proper Louisiana corporation income tax and Louisiana corporation franchise tax for the taxable periods at issue. On February 14, 2005, Lakes filed an answer to the petition to collect taxes asserting all proper defenses and maintaining that no additional taxes are owed and that the petition to collect taxes should be dismissed. Management intends to vigorously contest this action by the Louisiana Department of Revenue. Lakes may be required to pay up to the $8.6 million assessment plus interest and legal fees of the State if Lakes is not successful in this matter. The Company has recorded a provision for its estimated settlement related to this examination including accrued interest, which is included as part of income taxes payable on the Company’s consolidated balance sheets.

In late 2005 and early 2006, WPTE was involved in a dispute with the Travel Channel in connection with licensing the Professional Poker Tour^tm, or the PPT^tm for telecast. Under the WPT agreements between WPTE and the Travel Channel, the Travel Channel is afforded the right to negotiate with WPTE with respect to certain types of programming developed by WPTE during a sixty (60) day period. Pursuant to the WPT agreements, WPTE had submitted the PPT to the Travel Channel and began negotiations but failed to reach an agreement with the Travel Channel within the allotted negotiation window. Consequently, WPTE began discussions with other networks. While WPTE later revived its attempts to reach a deal with the Travel Channel after its exclusive bargaining window had ended, WPTE ultimately received an offer from another network. WPTE submitted this offer to the Travel Channel pursuant to its contractual last right to match the deal as specified under the WPT agreements. Thereafter, the Travel Channel sent letters to WPTE and the other broadcaster asserting, among other things, that WPTE was not entitled to complete a deal for the PPT with a third party.

In response to the Travel Channel’s communications, WPTE filed suit in California Superior Court in September 2005, alleging that the Travel Channel had interfered with WPTE’s prospective contractual relationship with a third party as well as attempted to contravene WPTE’s express contractual right to produce non-World Poker Tour branded programs covering poker tournaments. After a series of motions and cross-motions between the parties, on January 25, 2006, WPTE settled the dispute and entered into a settlement agreement with the Travel Channel, as well as agreements with the Travel Channel with respect to certain amendments to the WPT agreements and the licensing of the PPT for telecast on the Travel Channel.

Lakes received a Nasdaq Staff Determination letter on April 20, 2005, indicating that the Company was not compliant with Nasdaq listing standards because Lakes did not timely file its Annual Report on Form 10-K for the year ended January 2, 2005 and its Quarterly Report on Form 10-Q for the fiscal quarter ended April 3, 2005 with the SEC. As a result, Lakes’ common stock was subject to delisting from the Nasdaq National Market. The delisting notification is standard procedure when a Nasdaq listed company fails to complete a required filing in a timely manner. On August 9, 2005, Lakes received notice from the Nasdaq Stock Market Listing Qualifications Department that the Nasdaq Listing Qualifications Panel determined to delist Lakes’ common stock from the Nasdaq National Market effective as of the opening of business on August 10, 2005.

As a result of the stock split, shareholders received one additional share of common stock for every share they held on the record date. Upon completion of the split, the number of common shares outstanding was approximately 22.2 million. In connection with the stock split, the Company introduced a direct registration program to provide for uncertified shares through Wells Fargo Shareowner Services, the Company’s transfer agent and registrar. As a result, the additional shares were issued in “book-entry” form without stock certificates and are registered on the books of the Company maintained by Wells Fargo Shareowner Services.

Lakes develops/finances Indian-owned casino properties and intends to manage such casinos when applicable regulatory approvals have been received and we have satisfied other contingencies. Lakes currently has development (which includes certain financing requirements) and management agreements with three separate tribes for one new casino development project in Michigan, two in California, and with two separate tribes in Oklahoma for five various casino projects. Lakes is also involved in other business activities including development of a non-Indian casino in Mississippi and the development of new table games for licensing to both Tribal and non-Tribal casinos. In addition, as of January 1, 2006, Lakes owned approximately 62% of WPTE, a separate publicly held media and entertainment company principally engaged in the development, production and marketing of gaming themed televised programming, the licensing and sale of branded products and the sale of corporate sponsorships. Lakes’ consolidated financial statements include the results of operations of WPTE, and in recent periods, all of Lakes’ revenues have been derived from WPTE’s business.

WPT Studios, WPTE’s multi-media entertainment division, generates revenue through the domestic and international licensing of broadcast and telecast rights and through casino host fees. Since WPTE’s inception, the WPT Studios division has been responsible for approximately 76% of total revenue. WPTE licenses the WPT series to The Travel Channel, L.L.C. (TRV or Travel Channel) for telecast in the U.S. under an exclusive license agreement. WPTE also has license agreements for the distribution of WPTE’s World Poker Tour episodes in over 140 territories, for which WPTE receives license fees, net of WPTE’s agent’s sales fee and agreed upon sales and marketing expenses. In addition, WPTE recently signed a license agreement with TRV to telecast WPTE’s new Professional Poker Tour^tm, or PPT^tm, series, which is expected to begin airing in the third quarter of 2006. WPTE also collects annual host fees from the member casinos that host World Poker Tour events (WPTE’s member casinos).

WPTE has entered into a series of agreements with TRV for the U.S. distribution of the World Poker Tour^® (WPT) television series (the “WPT Agreements”). Since WPTE’s inception, fees from TRV under the WPT Agreements have been responsible for approximately 61% of WPTE’s total revenue. For each season covered by the WPT Agreements and related options, TRV has exclusive rights to exhibit the episodes in that season an unlimited number of times on its television network (or any other television network owned by Discovery Communications) in the U.S. for four years (three years for the episodes in Season One). WPTE has produced three complete seasons of the World Poker Tour series under the WPT Agreements, and Season Four is currently in production. TRV also has options to license the following three seasons (Seasons Five through Seven).

Under the WPT Agreements, TRV pays fixed license fees for each episode WPTE produces, which are payable at various times during the pre-production, production and post-production process and are recognized upon TRV’s receipt and acceptance of the completed episode. Television production costs related to WPT episodes are generally capitalized and charged to the cost of revenues as revenues are recognized. Therefore, the timing and number of episodes involved in the various seasons of the series affect the timing of the revenues and expenses of the WPT Studios business. The following table describes the timing of Seasons One through Four of the World Poker Tour series, including the delivery and exhibition of the episodes each season:

WPTE has also entered into an agreement with TRV for the U.S. distribution of the PPT television series. Similar to the WPT agreements and related options, TRV has exclusive rights to exhibit the PPT episodes in that season an unlimited number of times on its television network (or any other television network owned by the Discovery Channel) in the U.S. for four years. WPTE is currently in production on Season One of the PPT, and TRV has options to license the following three seasons (Seasons Two through Four). In accordance with WPTE’s accounting policy of not capitalizing production costs until a firm commitment for distribution is in place, WPTE expensed approximately $4.3 million of production expenses related to the Professional Poker Tour through January 1, 2006. With the agreement to telecast the PPT now complete WPTE will capitalize additional expenses associated with the production of the show beginning in the first quarter of 2006 to be expensed as episodes are delivered to the Travel Channel.

WPT Consumer Products, WPTE’s branded consumer products division, generates revenues principally through royalties from the licensing of WPTE’s brand to companies seeking to use the World Poker Tour brand and logo in the retail sales of their consumer products. In addition, this business unit generates revenue from direct sales of company-produced branded merchandise. WPTE has generated significant revenues from existing licensees, including US Playing Card, mForma, Jakks Pacific, and MDI. WPTE also has a number of licensees that are developing new licensed products including slot machines from IGT, and interactive television games from Pixel Play.

WPT Corporate Alliances, WPTE sponsorship and event management division, generates revenue through corporate sponsorship and management of televised and live events. WPTE’s sponsorship program uses the professional sports model as a method to foster entitlement sponsorship opportunities and naming rights to major corporations. Anheuser-Busch has been the largest source of revenues through its sponsorship of Seasons Two and Three of the World Poker Tour series on TRV. During the third quarter of 2005, Anheuser-Busch announced that its sponsorship in Season Four will now feature its largest brand, Budweiser, as the official beer of the World Poker Tour on the Travel Channel.

Revenues. Total revenues were $18.2 million for the fiscal year ended January 1, 2006 (“2005”) compared to $17.6 million for the fiscal year ended January 2, 2005 (“2004”), an increase of $0.6 million. Revenues for both years were derived primarily from WPTE operations, primarily from television and product license fees. WPTE receives fixed license payments from TRV subject to satisfaction of production milestones and other conditions. Domestic television license fees decreased $5.1 million in 2005 compared to 2004. The decrease is attributable to the delivery of 13 episodes of Season Three and five episodes of Season Four in fiscal 2005 compared to 24 episodes of Season Two and eight episodes of Season Three in fiscal 2004. Product licensing revenues increased $2.5 million in 2005 compared to 2004. This increase is primarily due to a full year of licensing efforts in 2005. International television license fees increased $1.7 million due to increased distribution agreements in fiscal 2005. Online gaming, host fees, sponsorship and merchandise revenues also increased $1.4 million in 2005 compared to 2004, of which $0.9 million is due to the online gaming launch during fiscal 2005. In 2005, we recognized approximately $0.1 million of consulting and development fees related to our Indian casino business with none in the prior year.

Selling and administrative expenses. Selling, general and administrative expenses increased $12.1 million in 2005 compared to 2004. The increase was due to an increase of approximately $7.4 million related to WPTE and $4.7 million related to Lakes. The increase at WPTE was primarily due to an additional $2.5 million in sales and marketing costs as a result of the WPTonline.com launch incurred during 2005, $0.7 million in additional licensing commissions due to a full year of product licensing efforts and $3.4 million as a result of additional headcount, legal and audit fees incurred during the 2005 period associated with development, growth and regulatory compliance costs. The increase at Lakes is due primarily to an increase in professional fees of approximately $0.9 million, additional headcount related costs of $2.8 million, and approximately $0.8 million in additional rent expense related to a deficiency in the guaranteed residual value of the aircraft the Company leases.

Impairment losses. Net impairment losses were $0.9 million in 2005 compared to $6.2 million in 2004. In 2005, Lakes recognized a $0.8 million impairment charge related to an investment in certain table games. Additionally, in 2005, Lakes recognized a $0.1 million impairment charge and an unrealized loss on notes receivable of $6.2 million related to the termination of the agreement with the Kickapoo Tribe. As of January 1, 2006, Lakes owns approximately 18 acres of land near the Kickapoo site with a cost basis of approximately $0.7 million. The Company is negotiating with the Kickapoo Tribe to resolve all of the financial terms of the contracts including the sale of the land owned by Lakes to the Kickapoo Tribe, and to formally terminate the gaming operations consulting agreement, management contract, and related ancillary agreements relating to the project. In 2004, Lakes recognized a $5.8 million impairment charge related to long-term assets related to the casino project with the Nipmuc Nation of Massachusetts (“Nipmuc Nation”). Lakes also recorded an unrealized loss on notes receivable of $0.8 million related to the fair value of the note receivable from the Nipmuc Nation. Additionally in 2004, Lakes recognized a net impairment charge of $1.0 million related to the sale of property in Las Vegas, Nevada and a gain of $0.6 million related to the write-off of an accrued liability related to the casino project with the Cloverdale Rancheria of Pomo Indians (“the Cloverdale project”) which was only payable if the casino opened.

Net unrealized gain on notes receivable. Net unrealized gain on notes receivable was $5.2 million and $3.1 million for 2005 and 2004, respectively, related to the adjustment to estimated fair value of the Company’s notes receivable from Indian tribes. These fair value calculations are determined based on current assumptions related to the projects and management’s evaluation of critical milestones as discussed below under “Accounting for long-term assets related to Indian casino projects.” During 2005, the net unrealized gain of $5.2 million included unrealized gains of approximately $11.4 million, which were partially offset by unrealized losses of approximately $6.2 million primarily related to the termination of the agreement with the Kickapoo Tribe. The unrealized gains of approximately $11.4 million related primarily to increased probability of opening related to the casino development projects with the Pokagon Band in New Buffalo, Michigan and with the Jamul Tribe near San Diego, California.

Taxes. The Company recorded a tax benefit of $1.2 million in 2005 compared to a tax provision of $4.0 million in 2004. The loss before income taxes, equity in earnings (loss) of unconsolidated investees and minority interest was $14.9 million for the period ended January 1, 2006 compared to $0.9 million for the period ended January 2, 2005. In 2005, the Company recognized a benefit of approximately $2.4 million related to the write-off of its long-term assets related to the Kickapoo Tribe project of approximately $6.2 million. The Company has recorded a deferred tax asset related to other capital losses in the amount of approximately $4.5 million. The realization of these benefits is dependent on the generation of capital gains. The Company believes it will have sufficient capital gains in the future to utilize these benefits. The Company owns approximately 12.5 million shares of WPTE common stock with a minimal cost basis, which the capital gain from the sale of a portion of these shares could be used against the capital losses. Additionally, in accordance with Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes (SFAS No. 109), Lakes evaluated the ability to utilize deferred tax assets arising from net operating loss carry forwards, net deferred tax assets relating to Lakes’ accounting for advances made to Indian tribes and other ordinary items and determined that a valuation allowance was appropriate at January 1, 2006 and January 2, 2005. Lakes evaluated all evidence and determined the negative evidence relating to net losses generated over

the past four years outweighed the current positive evidence that the Company believes exists surrounding its ability to generate significant income from its long-term assets related to Indian casino projects. The Company recorded a 100% valuation allowance against these items at January 1, 2006 and January 2, 2005 based upon the above factors. Included in the loss before income taxes in 2004 is the settlement of $11.3 million related to the tax sharing agreement with Grand Casinos. Lakes has not recorded any tax related to the settlement payment of $11.3 million because Lakes believes this settlement is not taxable to Lakes.

Outlook. It is currently contemplated that there will be minimal operating revenues for 2006 from existing casino development projects. The majority of Lakes’ revenues are expected to come from WPTE in 2006. WPTE’s revenues in the first quarter of 2006 are forecasted to be in the range of $6.5 - -$7.0 million. WPTE expects to deliver six episodes of Season Four of the World Poker Tour in the first quarter of 2006, with the remainder of Season Four Episodes to be delivered in the second quarter of 2006. Additionally, WPTE expects to deliver the first four episodes of Season Five of the World Poker Tour by the end of 2006. WPTE expects to deliver all twenty-four episodes of Season One of the PPT during the first three quarters of 2006, and the first five episodes of Season Two of the PPT in the fourth quarter of 2006. Margins for the PPT will be higher in the first few quarters of 2006 as certain production costs have already been expensed. WPTE expects to continue to increase sales and marketing expenses related to WPTonline.com during 2006 in order to increase player traffic on the site. Beginning in the first quarter of 2006, operating and net income will be negatively impacted by the adoption of FAS 123R, requiring WPTE to expense employee stock options. WPTE has engaged Thomas Weisel Partners LLC as its financial advisor to assist it in exploring strategic alternatives, including, but not limited to, the sale or merger of the business with another entity offering strategic opportunities for growth. There can be no assurance that the exploration of strategic alternatives will result in a transaction.

Revenues. Total revenues were $17.6 million for the fiscal year ended January 2, 2005 (“2004”) compared to $4.3 million for the fiscal year ended December 28, 2003 (“2003”). Revenues for both years were derived from WPTE operations, primarily from television license fees related to the World Poker Tour television series. WPTE receives fixed license payments from TRV subject to satisfaction of production milestones and other conditions. The increase in revenue is primarily due to increased license fees relating to a greater number of Season Two and Three episodes delivered to TRV during 2004, compared to the license fees resulting from the Season One and Two episodes delivered to TRV during 2003. In April 2004, TRV exercised its option to broadcast Season Three and in March 2005, TRV exercised its option for Season Four. TRV has options for three additional seasons. WPTE began delivering Season Three episodes in the fourth quarter of 2004 with the remaining episodes delivered in the first and second quarter of fiscal 2005. Also contributing to the increase is revenue of approximately $1.8 million related to WPTE host fees, sponsorship and other revenue compared to $0.4 million in 2003 due to growth in these areas in 2004.

Selling, general and administrative expense. Selling, general and administrative expenses were $16.4 million in 2004 compared to $6.9 million in 2003. The increase of $9.5 million was primarily due to an increase of approximately $4.7 million related to WPTE’s increased headcount costs, professional service fees related to the public offering of WPTE in 2004 and product licensing commissions. The remaining increase of approximately $4.8 million in 2004 is due primarily to an increase in Lakes’ professional fees of approximately $2.9 million and approximately $0.6 million in additional rent expense related to an expected deficiency in the guaranteed residual value of the aircraft the Company leases. The increase in professional fees is due to a reversal of an unused litigation accrual of approximately $3.2 million in 2003 related to the Company’s prior agreement to indemnify Grand Casinos in connection with the Stratosphere litigation matters. The remaining approximately, $1.3 million increase primarily related to increased travel in 2004 to support Lakes’ business development initiatives.

Production costs. Production costs related primarily to the WPT and PPT television shows were $10.2 million in 2004 compared to $2.7 million in 2003. WPTE production costs increased $7.5 million as compared to 2003. WPTE production costs and related episode revenues are recognized in the period the relative episode is delivered to TRV. The increase is due to a greater number of episodes being delivered to TRV during 2004 as compared to 2003. The gross profit percentage increased in 2004 to 42% compared to 37% in 2003. The increased gross margin is primarily due to WPTE selling more international television licensing and product licensing as compared to 2003, which are at higher margins.

Impairment losses. Net impairment losses were $6.2 million in 2004 compared to $1.0 million in 2003. In 2004, Lakes recognized a $5.8 million impairment charge related to long-term assets related to the Nipmuc Nation project. Lakes also recorded an unrealized loss on notes receivable of $0.8 million related to the fair value of the note receivable from the Nipmuc Nation. In June 2004, the BIA issued its final determination denying the Nipmuc Nation’s application for federal recognition. Although the Nipmuc Nation is appealing the determination with the BIA, Lakes made a decision to discontinue funding the project in the second quarter of 2004. At that time, Lakes recorded the impairment charge as an unrealized loss on notes receivable. Should the Nipmuc Nation become federally recognized and successfully open a casino operation (with or without Lakes’ assistance) Lakes is contractually entitled to receive payment in full of its advances and deferred interest. Additionally in 2004, Lakes recognized a net impairment charge of $1.0 million related to the sale of property in Las Vegas, Nevada and a gain of $0.6 million related to the write-off of an accrued liability related to the Cloverdale project of $0.6 million which was only payable if the casino opened. The Company also recorded an unrealized loss on notes receivable of $0.3 million related to the estimated fair value of its note receivable from the Cloverdale Rancheria. In 2003, Lakes recognized an impairment charge of $1.0 million related to the sale of property in Las Vegas, Nevada.

Other income. Other income was $12.1 million in 2004 compared to $0.8 million in 2003. Other income in 2004 included an $11.3 million settlement received in December 2004 related to a tax sharing agreement entered into in 1998 with Grand Casinos, a subsidiary of Park Place Entertainment, which was renamed Harrah’s Entertainment, Inc. (“Harrah’s”). Under the terms of its tax sharing agreement with Grand Casinos, any further tax benefits subsequent to 1998 relating to capital losses resulting from the write-off of its investment in Stratosphere would be shared equally by Lakes and Grand Casinos, up to a benefit of approximately $12.0 million to Lakes. The investment in Stratosphere was prior to Lakes’ spin-off from Grand Casinos in December 1998. On December 1, 2004, Lakes entered into a settlement agreement with Grand Casinos. Lakes received a cash payment of $11.3 million in settlement of the dispute, which was recorded as other income in the consolidated statement of loss for the year ended January 2, 2005.

Taxes. The Company recorded a tax provision of $4.0 million as of January 2, 2005 compared to a tax benefit of $1.0 million as of December 28, 2003. The loss before income taxes, equity in earnings (loss) of unconsolidated investees and minority interest was $0.9 million for the period ended January 2, 2005 compared to a loss of $2.6 million for the period ended December 28, 2003. Included in the loss before income taxes in 2004 is the settlement of $11.3 million related to the tax sharing agreement with Grand Casinos. Lakes has not recorded any tax related to the settlement payment of $11.3 million, as Lakes believes this settlement is not taxable to Lakes. Additionally, in accordance with Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes (SFAS No. 109), Lakes evaluated the ability to utilize

deferred tax assets arising from net operating loss carry forwards, net deferred tax assets relating to Lakes’ accounting for advances made to Indian tribes and other ordinary items and determined that a valuation allowance was appropriate at January 2, 2005. Lakes evaluated all evidence and determined the negative evidence relating to net losses generated over the past three years outweighed the current positive evidence that the Company believes exists surrounding its ability to generate significant income from its long-term assets related to Indian casino projects. The Company recorded a 100% valuation allowance against these items at January 2, 2005 based upon the above factors. In addition, the Company recognized a deferred tax asset for capital losses related to asset impairment charges. The realization of these benefits is dependent on the generation of capital gains. The Company believes it will have sufficient capital gains in the future to utilize these benefits due to its ownership of approximately 12.5 million common shares of WPTE with minimal basis. As a result of the above discussion of the Company’s nature of deferred tax assets, Lakes increased its net valuation allowance by approximately $6.5 million in 2004.

In August and September 2004, WPTE raised a total of approximately $32.4 million in cash proceeds from its initial public offering, net of underwriting discounts and estimated offering expenses. WPTE’s cash resources are expected to be used only for WPTE’s business and will not be available for Lakes’ casino projects or other non-WPTE businesses. The initial public offering resulted in the termination of Lakes’ obligation to fund WPTE operations under a limited revolving note receivable. As of January 1, 2006, Lakes holds approximately 12.5 million shares or approximately 62% of WPTE’s common stock. Lakes’ could sell shares of WPTE common stock to generate working capital, subject to applicable securities laws.

On February 15, 2006 we closed on a $50 million financing facility with an affiliate of Prentice Capital Management, LP. An initial draw of $25 million was made under the facility, another $10 million is immediately available under the facility and the remaining $15 million can be drawn in $5 million increments subject to the satisfaction of certain conditions (see Note 18 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K). All amounts drawn against the facility will be repayable within three years. Approximately $10.2 million of the initial draw was used to repay in full our December 16, 2005, loan from the Partnership. As a result of repaying the Partnership loan prior to February 28, 2006, the 2 million common stock purchase warrants previously issued to the Partnership were terminated. Lakes plans to continue pursuing other financing alternatives to fund its operational and development needs, and the Company believes the assets of Lakes provide sufficient collateral to obtain the necessary financing.

Other sources of cash for our development of casino projects during fiscal 2005 and fiscal 2004 have been from the planned sale of assets and a tax sharing settlement. During fiscal 2004, the 2022 Ranch land, which was owned by Lakes and its joint venture partner Land Baron West, LLC, was sold. Lakes received cash in the amount of approximately $2.5 million related to the sale of the land as well as through the settlement of a title dispute. Lakes received proceeds of $5.9 million in fiscal 2004 in connection with the sale of the Polo Plaza and adjacent Travelodge property and received an additional $5.0 million during 2005, pursuant to an option

Our agreements with our tribal partners require that we provide certain financing for project development in the form of loans. These loans are interest bearing; however, the loans and related interest are not due until the casino is built and has established profitable operations. In the event that the casinos are not built, our only recourse is to attempt to liquidate assets of the development, if any, excluding any land in trust. Approximately $24.1 million of the loans due from the Pokagon Band were used by the Pokagon Band to purchase the project site. The Company’s first deed of trust against this property was relinquished when the BIA placed the land into trust in January 2006. The Company holds a deed of trust against related non-gaming land which has a cost basis of approximately $13.2 million.

We currently believe that our casino development projects currently in progress and included in the table below will be constructed and achieve profitable operations; however, no assurance can be made that this will occur. If this does not occur, it is likely that Lakes would incur substantial or complete losses on its notes receivable from Indian tribes and related intangible assets associated with the acquisition of the management contracts. In addition, if Lakes’ current casino development projects are not completed or, upon completion, fail to successfully compete in the highly competitive market for gaming activities, Lakes may lack the funds to compete for and develop future gaming or other business opportunities and Lakes’ business could be adversely affected to the extent that it may be forced to cease its operations entirely.

to an unrelated third party once the Pokagon Casino is open and Lakes is the manager of the casino. The amount is payable quarterly for five years and is only payable if Lakes is the manager of the casino. The payment is part of a settlement and release agreement associated with Lakes obtaining the management contract with the Pokagon Band. The maximum liability over the five-year period is approximately $11 million. The Company will also be obligated to pay approximately $3.3 million to an unrelated third party in accordance with the management contract with the Pokagon Band which is payable once the casino opens over 24 months.

During 2006, Lakes’ corporate costs, excluding WPTE which is not expected to require additional capital from Lakes, will approximate $19 million, which includes $4.0 million of interest related to the financing facility entered into on February 15, 2006. Development project-related costs are expected to approximate $40 million during 2006 and include approximately $25 million related to the Pokagon project as construction is estimated to begin in mid 2006. Lakes’ cash balance, excluding WPTE cash, was approximately $8.2 million as of January 1, 2006. Additionally, the Company may be required to pay taxes up to approximately $12 million plus interest and penalties in fiscal 2006 related to two tax matters. Lakes will require additional capital through public or private financings or the sale of some or all of the Company’s shares of WPTE to meet operating expenses and development project-related costs during fiscal 2006 and the Company is currently considering various financing alternatives. In December 2005, Lakes obtained a $20 million financing facility from the Lyle Berman Family Partnership and received a $10 million draw on this facility on December 16, 2005 (see Note 9 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K). On February 15, 2006 we closed on a $50 million financing facility with an affiliate of Prentice Capital Management, LP. An initial draw of $25 million was made under the facility, another $10 million is immediately available under the facility and the remaining $15 million can be drawn in $5 million increments subject to the satisfaction of certain conditions. See Note 18 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. Approximately $10.2 million of the initial draw was used to repay in full our loan from the Partnership.

Our major use of cash over the past three years has been pre-construction financing provided to our tribal partners. Lakes also anticipates that it may incur additional pre-construction costs which would require the Company to obtain additional sources of financing. These development costs do not include construction-related costs that would be incurred if any of the projects were to begin construction during the next twelve months. Management anticipates that it will be necessary to raise additional capital when any of the projects begin construction and believes such financing will be available based on preliminary discussions with prospective lenders. However, such financings may not be available when needed on terms acceptable to Lakes or at all. Moreover, any additional equity financings may be dilutive to Lakes’ shareholders, and any debt financing may involve additional restrictive covenants. An inability to raise such funds when needed might require Lakes to delay, scale back or eliminate some of its expansion and development goals.

In addition, the construction of the Company’s Indian casino projects may depend on the ability of the tribes to obtain financing for the projects. If such financing cannot be obtained on acceptable terms, it may not be possible to complete these projects, which could have a material adverse effect on Lakes’ results of operations and financial condition. In order to assist the tribes, Lakes may be required to guarantee the tribes’ debt financing or otherwise provide support for the tribes’ obligations. Guarantees by Lakes, if any, will increase Lakes’ potential exposure in the event of a default by any of these tribes.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the balance sheet date and reported amounts of revenue and expenses during the reporting period. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, long-term assets related to Indian casino projects, deferred television costs, investments, litigation costs and income taxes. We base our estimates and judgments on historical experience and on various other factors that are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

In accordance with the terms of the WPT and PPT agreements, WPTE recognizes domestic television license revenues upon the receipt and acceptance of completed episodes. However, due to restrictions and practical limitations applicable to WPTE’s operating relationships with foreign networks, WPTE currently does not consider collectibility of international television license revenues to be reasonably assured until the international distributor has received payment, and accordingly, WPTE does not recognize such revenue until that time. Additionally, WPTE presents international distribution license fee revenues net of the distributor’s fees, as the distributor is the primary obligor in the transaction with the ultimate customer pursuant to the Financial Accounting Standards Board (FASB) Emerging Issues Task Force (EITF) 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent.

Online gaming revenues are recognized monthly based on detailed statements received from WagerWorks, WPTE’s online gaming partner, for online poker and casino activity throughout the previous month. In accordance with EITF 99-19, WPTE presents online gaming revenues gross of WagerWorks costs, including WagerWorks management fee, royalties, credit card processing and chargebacks that are recorded as cost of revenues, since WPTE has the ability to adjust price and specifications of the online gaming site, WPTE bears the majority of the credit risk and WPTE is responsible for the sales and marketing of the gaming site. The company includes certain promotional expenses related to free bets and deposit bonuses along with customer charge backs as deductions of revenue. All other promotional expenses are generally recorded as sales and marketing expenses

Deferred television costs: WPTE accounts for deferred television costs in accordance to SOP No. 00-2. Deferred television costs include capitalizable direct costs, production overhead and development costs related to episodes of the WPT, and are stated at the lower of cost or net realizable value based on anticipated revenue. WPTE has not currently anticipated any revenues in excess of those subject to existing contractual relationships because WPTE has insufficient operating history to enable such anticipation. Accordingly, television costs related to the new PPT series were expensed as incurred since a licensing agreement had not been executed and WPTE did not have a firm distribution commitment for the series. However, in January 2006, WPTE signed an agreement for the PPT with Discovery Communications, Inc, the parent company of the Travel Channel, therefore, on-going PPT television costs will be capitalized beginning in the first quarter of 2006 and will be expensed as episodes are delivered to the Travel Channel. Marketing, distribution and general and administrative costs are expensed as incurred. Capitalized television production costs for each

Investment: Until October 2005, WPTE had an investment (consisting of a 15% equity interest carried at nominal cost basis) in and a loan receivable from PokerTek, a company formed in August 2003 to develop and market the PokerPro system, an electronic poker table designed to provide a fully automated poker room environment, to tribal casinos, commercial casinos and card clubs. As a result of PokerTek’s initial public offering in October 2005, WPTE’s ownership interest was diluted to 11.7% (See Note 6 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K). WPTE’s Executive Chairman of the Board, Lyle Berman, along with his son Bradley Berman, who also sits on the WPTE’s Board of Directors, have personal investments in PokerTek and, as of January 1, 2006, hold a combined ownership of approximately 9% in PokerTek. Lyle Berman also serves as Chairman of the Board of PokerTek and received options to purchase 200,000 shares of common stock in that company.

Lakes is involved as the exclusive developer and manager of Indian-owned casino projects. The Company has formal procedures governing its evaluation of opportunities for potential development projects that it follows before entering into agreements to provide financial support for the development of these properties. Lakes determines that there is probable future economic benefit prior to recording any asset related to the Indian casino project. No asset related to an Indian casino project is recognized unless it is considered probable that the project will be built and result in an economic benefit to Lakes sufficient to recover the asset. Lakes initially evaluates the following six factors involving critical milestones that affect the probability of developing and operating a casino:

The development phase of each relationship commences with the signing of the respective contracts and continues until the casinos open for business; thereafter, the management phase of the relationship, governed by the management contract, continues for a period of up to seven years. Lakes, as developer and manager, has the exclusive right and obligation to develop, manage, operate and maintain the casino and to train tribal members and others in the operation and maintenance of the casino during the term of the contract. The Company also makes advances to the tribes to fund certain portions of the projects, which bear interest generally at prime plus 1% or 2%. Repayment of the advances and accrued interest is only required if the casino is successfully opened and distributable profits are available from the casino operations. Under the management contract Lakes typically earns a management fee calculated as a percentage of the net income of the operations. In addition, repayment of the loans and the manager’s fees under the management contracts are subordinated to certain other financial obligations of the respective operations. Generally, the order of priority of payments from the casinos’ cash flows is as follows: a certain minimum monthly priority payment to the tribe, repayment of various senior debt associated with construction and equipping of the casino with interest accrued thereon, repayment of various debt with interest accrued thereon due to Lakes, management fee to Lakes, and other obligations, with the remaining funds distributed to the tribe.

The Company accounts for its advances to the tribes and its management contracts as separate elements. The advances made to the tribes are accounted for as structured notes in accordance with the guidance contained in Emerging Issues Task Force Consensus No. 96-12 Recognition of Interest Income and Balance Sheet Classification of Structured Notes (EITF No. 96-12). Because repayment of the notes is required only if a casino is successfully opened, Lakes’ advances may be at risk for reasons other than failure of the borrower to pay the contractual amounts due because if the casinos are not built the amounts due will not become contractually due. Accordingly, pursuant to the guidance in EITF No. 96-12, Lakes records its advances to tribes at estimated fair value. Because the stated rate of the notes receivable alone is not commensurate with the risk inherent in these projects, the estimated fair value of the notes receivable is generally less than the amount advanced. At the date of each advance, the difference between the estimated fair value of the note receivable and the actual amount advanced is recorded as an intangible asset related to the acquisition of the management contract. Subsequent to the initial recording, the two assets are accounted for separately.

Upon opening of the casino Lakes may conclude that it is no longer reasonably possible that the advances to Indian tribes would be at risk to not be repaid for reasons other than failure of the borrower to pay the contractual amounts due. In such situations, the notes receivable will be accounted for under the effective interest method upon opening of the casino and will no longer be adjusted to fair value at each balance sheet date. Any difference between the then fair value of the advances and the amount contractually due under the notes will be amortized into income using the effective interest method over the remaining term of the note. Such notes would then be evaluated for impairment pursuant to Statement of Financial Accounting Standards No. 114 “Accounting by Creditors for Impairment of a Loan.”

Intangible assets related to the acquisition of the management contracts are accounted for using the guidance in Statement of Financial Accounting Standards No. 142 Goodwill and Other Intangible Assets (FASB No. 142). Pursuant to that guidance, the assets are periodically evaluated for impairment based on the estimated cash flows from the management contract on an undiscounted basis. In the event the carrying value of the intangible assets, in combination with the carrying value of land held for development and other assets associated with the Indian casino projects described below, were to exceed the undiscounted cash flow, an impairment would be recorded. Such an impairment would be measured based on the difference between the fair value and carrying value of the assets. Lakes, in accordance with FASB No. 142, will amortize the intangible assets related to the acquisition of the management contracts under the straight-line method over the lives of the contracts which will commence when the related casinos open. In addition to the intangible asset associated with the cash advances to tribes described above, these assets include actual costs incurred to acquire Lakes’ interest in the projects from third parties.

The key assumptions and criteria used in the determination of the estimated fair value of the notes receivable are estimated casino opening date, projected interest rates, discount rates and probability of projects opening. The estimated casino opening date used in the valuation reflects the weighted average of three scenarios: a base case (which is based on the Company’s forecasted casino opening date) and one and two years out from the base case. The projected interest rates are based upon the one year U.S Treasury Bill spot yield curve per Bloomberg and the specific assumptions on contract term, stated interest rate and casino opening date. The discount rate for the projects is based on the yields available on certain financial instruments at the valuation date, the risk level of equity investments in general, and the specific operating risks associated with open and operating gaming enterprises similar to each of the projects. In estimating this discount rate, market data of other public gaming related companies is considered. The probability applied to each project is based upon a weighting of four different scenarios with the fourth scenario assuming the casino never opens. The first three scenarios assume the casino opens but applies different opening dates as discussed above. The probability weighting applied to each scenario captures the element of risk in these projects and is based upon the status of each project, review of the critical milestones and likelihood of achieving the milestones.


		consulting, and Lakes, in order to obtain the development agreement and management contract, agrees to advance a monthly amount used by the tribe for a variety of tribal expenses.

(b)		Lakes purchased land to be used and transferred to the tribe in connection with the casino project. At Pokagon, a portion of the land will be used by the tribe separate from the casino project land.

(c)		Represents amounts advanced under the agreements with the Iowa Tribe and Pawnee Tribe.

The financial models prepared by management for each project are based upon the scope of each of the projects, which are supported by a feasibility study as well as a market analysis where the casino will be built. Lakes’ (as its predecessor Grand Casinos Inc.) began developing Indian casino projects in 1990 and demonstrated success from the day the first Indian casino opened in 1991 through the expiration of its Coushatta management contract in 2002. This success legitimizes many of the key assumptions supporting the financial models. Projections for each applicable casino development were developed based on analysis of published information pertaining to the particular markets in which the Company’s Indian casinos will be located. In addition, Lakes has many years of casino operations experience within the Company, which provides a basis for its revenue expectations. The projections were prepared by Lakes not for purposes of the valuation at hand but rather for purposes of Lakes’ and the tribes’ business planning.

With regard to the Pokagon Casino project in southwest Michigan, the competitive market consists primarily of five Northern Indiana riverboats. The state of Indiana publicly reports certain results from these riverboat casinos which supports the underlying assumptions in our projections. Specifically, the Northern Indiana trailing twelve months market average for slot machine revenue has consistently been above $300 win per unit per day or greater than $105,000 per machine per year which exceeds the $275 win per unit per day that we used in our Pokagon Casino projections. Of the five casinos in the market, two locations produced a win per unit less than our projections with three casinos producing win per unit revenue amounts greater than our forecast. The closest casino to our location consistently produces approximately $330 win per unit per day.

During the third quarter of fiscal 2005 the Company’s relationship with the Kickapoo Tribe deteriorated and in November 2005, Lakes and the Kickapoo Tribe terminated their business relationship. Lakes committed to provide advances to the Kickapoo Tribe of up to $2.0 million for business improvement purposes. As of January 1, 2006, Lakes had advanced approximately $2.3 million to the Kickapoo Tribe. Additionally, unpaid invoices related to the project total approximately $3.9 million, some or all of which Lakes may be required to pay. As a result of the terminated business relationship with the Kickapoo Tribe, Lakes is negotiating with the Kickapoo Tribe to resolve all of the financial terms of the contracts including repayment of the advances and payment of the unpaid invoices, the sale of the land owned by Lakes to the Kickapoo Tribe, and to formally terminate the gaming operations consulting agreement, management contract, and related ancillary agreements relating to the project. During the second quarter of 2004, the BIA issued its final determination denying the Nipmuc Nation’s application for federal recognition. At that time, Lakes recorded an impairment charge of $5.8 million related to long-term assets related to the Nipmuc Nation project.

The development agreement provides for Lakes to advance up to approximately $73.0 million for purchase of land and for the initial development phase of the project. The development agreement for the Pokagon project also provides that to the extent the Pokagon Band is unable to raise additional funding from third parties at an interest rate not to exceed 13%, Lakes will be required to provide additional financing of up to approximately $54.0 million. Based on extensive discussions with prospective lenders, it appears that third party financing will be available for this project; however, there can be no assurance that third party financing will be available at the time construction for the project begins. Lakes is not required to fund these amounts; however, if Lakes discontinued the funding prior to fulfilling the obligation, Lakes would forfeit the rights under the management contract.

Lakes will receive approximately 24% of net income up to a certain level and 19% of the net income over that level, as a management fee. The term of the management contract is currently planned for five years beginning when the casino opens to the public and may extend for a total of seven years under certain circumstances. Payment of Lakes’ management fee will be subordinated to senior indebtedness of the Pokagon casino. The Pokagon Band may terminate the management contract after five years from the opening of the casino if any of certain required elements of the project have not been developed or certain financial commitments to the Pokagon Band have not been met. The Pokagon Band may also buy out the management contract provisions after two years from the opening date. The buyout amount is calculated based upon the previous 12 months of management fees earned multiplied by the remaining number of years under the management contract, discounted back to the present value at the time the buyout occurs. The management fee and length of contract are subject to regulatory approval. The casino could open as early as late 2007.

The estimated probability rate was increased from 75% to 90% in fiscal 2005, due to an evaluation of all critical milestones and due to the favorable federal judge ruling issued in March 2005 that will allow the land to be taken into trust by the Federal Government. Subsequently the Taxpayers of Michigan Against Casinos (“TOMAC”) filed for an appeal. The appeal hearing date was held on December 8, 2005. On January 6, 2006 the United States Court of Appeals for the District of Columbia Circuit ruled in favor of the Pokagon Band by affirming the Federal District Court’s grant of summary judgment in the lawsuit by the Taxpayers of Michigan Against Casinos (TOMAC) versus the U.S. Department of the Interior. On January 27, 2006, the Federal Government took official action to acquire the Pokagon Band’s 675-acre parcel of land in New Buffalo Township, Michigan, into trust for the Pokagon Band. This official action by the Department of the Interior paves the way for the Pokagon Band to move forward with their Four Winds Casino Resort project. TOMAC has 90 days from the date of the decision to petition the U.S. Supreme Court to review the decision.

In January 2001, the U.S. Department of Interior issued a finding of no significant impact and recommended that land be taken into trust on behalf of the Pokagon Band. During the required 30-day waiting period a lawsuit was filed by the TOMAC against the federal government to stop the land in trust process. Lakes and the Pokagon Band continued to provide support for this case and believed it would be resolved in favor of the Band. The first hearing before the federal judge took place on December 2001. In March 2002, the judge eliminated several of TOMAC’s assertions and continued to review the remaining issues. In January 2003, the Judge dismissed all remaining issues except for one and requested additional information from the federal government (“BIA”) to support their conclusions on that one issue. Due to the fact that all issues except for one had been dismissed, Lakes continued to believe that it was probable that the land would be taken into trust and that the casino would open. The BIA submitted the additional information in August 2004; and in March 2005, the federal judge dismissed the last remaining issue filed by TOMAC making it possible for the land to be taken into trust for the gaming project. During the required 60-day waiting period, TOMAC filed for an appeal. The appeal hearing was held on December 8, 2005. On January 6, 2006 the United States Court of Appeals for the District of Columbia Circuit ruled in favor of the Pokagon Band by affirming the Federal District Court’s grant of summary judgment in the lawsuit by TOMAC versus the

U.S. Department of the Interior. On January 27, 2006, the Federal Government took official action to acquire the Pokagon Band’s 675-acre parcel of land in New Buffalo Township, Michigan, into trust for the Pokagon Band. This official action by the Department of the Interior paves the way for the Pokagon Band to move forward with their Four Winds Casino Resort project. We expect approval of the management contract by the NIGC as early as April 2006 because the land was taken into trust by the BIA in January 2006. Once the NIGC approves the management contract and permanent financing is obtained Lakes will help the Pokagon Band build and manage their casino development. Construction of the project could begin as early as mid 2006 with an expected opening date twelve months following the start of construction.

Lakes acquired its initial interest in the development and management contracts for the Shingle Springs Casino from Kean Argovitz Resorts- Shingle Springs, LLC (“KAR — Shingle Springs”) in 1999 and formed a joint venture, in which the contracts were held, between Lakes and KAR — Shingle Springs. On January 30, 2003, Lakes purchased the remaining KAR — Shingle Springs’ partnership interest in the joint venture. In connection with the purchase transaction, Lakes entered into separate agreements with the two individual owners of KAR — Shingle Springs (Kevin M. Kean and Jerry A. Argovitz). Under the agreement with Mr. Kean, Mr. Kean may elect to serve as a consultant to Lakes during the term of the casino management contract if he is found suitable by relevant gaming regulatory authorities. In such event, Mr. Kean will be entitled to receive annual consulting fees equal to 15% of the management fees received by Lakes from the Shingle Springs Casino operations, less certain costs of these operations. If Mr. Kean is not found suitable by relevant gaming regulatory authorities or otherwise elects not to serve as a consultant, he will be entitled to receive annual payments of $1 million from the Shingle Springs Casino project during the term of the respective casino management contract (but not during any renewal term of such management contract).

Under the agreement with Mr. Argovitz, if he is found suitable by relevant gaming regulatory authorities he may elect to re-purchase his respective original equity interest in the Lakes’ subsidiary and then be entitled to obtain a 15% equity interest in the Lakes’ entity that holds the rights to the management contract with the Shingle Springs Casino. If he is not found suitable or does not elect to purchase equity interests in the Lakes’ subsidiary, Mr. Argovitz would receive annual payments of $1 million from the Shingle Springs Casino project from the date of election through the term of the respective casino management contract (but not during any renewal term of such management contract).

The agreement provides for Lakes to arrange for financing or, in its discretion, loan funds to the Shingle Springs Tribe in the form of a facility loan, for the costs of construction and initial costs of operation up to a maximum currently of $300 million. In addition, Lakes will assist in the design, development and construction of the facility as well as manage the pre-opening, opening and continued operations of the casino and related amenities for a period of seven years. As compensation for its management services, Lakes will receive a management fee between 21% and 30% of net income of the operations annually for the first five years, with a declining percentage in years six and seven, as that term is defined by the management contract. Payment of Lakes’ management fee will be subordinated to senior indebtedness of the Shingle Springs Casino and minimum priority payment to the Shingle Springs Tribe. The Shingle Springs Tribe may terminate the agreement after five years from the opening of the casino if any of certain required elements of the project

The most significant milestone yet to be achieved for this project is commercial access to the reservation on which the casino will be built. The Shingle Springs Tribe received state regulatory approval of a necessary interchange to access the tribal land during 2002. Neighboring El Dorado County and another local group commenced litigation in federal and state courts against the California regulatory agencies attempting to block the approval of the interchange. During January of 2004, the California Superior Court ruled in favor of the California Department of Transportation (“CalTrans”) on all of El Dorado County’s claims challenging CalTrans’ environmental review of the proposed casino project except that the court asked for clarification on one issue. The one remaining issue in the state case questions the state standards for ozone requirements of all of CalTrans projects throughout California. El Dorado County, Voices for Rural Living, CalTrans and the Shingle Springs Tribe filed an appeal and oral arguments on these appeals was heard in August 2005. In November 2005, the California Court of Appeal (“Court”) issued its decision on these appeals. The Court ruled in favor of CalTrans’ appeal, rejecting the El Dorado County’s argument that the transportation conformity analysis did not conform to state standards. The Court also rejected all but two of the legal claims asserted in the appeal by El Dorado County and Voices for Rural Living against the environmental impact report (“EIR”) prepared by CalTrans for the interchange that will connect Highway 50 to the Shingle Springs Rancheria. For the remaining two issues, the Court held that CalTrans must supplement its environmental analysis by adding some discussion to the air quality chapter to further explain the project’s contribution to overall vehicular emissions in the region, and that CalTrans also must evaluate whether a smaller casino and hotel would reduce environmental impacts. On December 19, 2005, CalTrans filed a Petition for Review with the Supreme Court of the State of California, and on February 8, 2006 the Supreme Court denied the Petition for Review and ordered the Court of Appeals decision to be depublished. CalTrans is preparing the necessary additional information as requested by the Court for the two issues described above. The Court acknowledged CalTrans lacks jurisdiction to require the Shingle Springs Tribe to develop a smaller casino, but nevertheless required some discussion of this alternative in the interchange EIR. Construction of the interchange and casino could begin as early as the end of 2006 with an estimated opening date approximately 14 months after the start of the construction.

Under the form of tribal-state compact first signed by the State of California with both the Jamul and Shingle Springs tribes in 1999, each tribe is allowed to operate up to 350 Class III slot machines without licenses from the state. This form of compact allows tribes to operate up to an additional 1,650 Class II slot machines by obtaining licenses for the devices from the state. Under these tribal-state compacts, there is a state-wide limitation on the aggregate number of Class III slot machine licenses that are available. Tribes who have entered into new tribal-state compacts or amendments to the 1999 form of tribal-state compact in general are allowed to operate an unlimited number of Class II slot machines without the need for obtaining additional licenses, subject to the payment of additional fees to the state, including, in recent cases, fees based on a percentage of slot “net win.” Currently, neither the Jamul Tribe nor the Shingle Springs Tribe have amended their tribal-state compacts. If the compacts are not renegotiated and amended, the tribes could operate under their existing compacts which allows for up to 350 Class III gaming devices and an unlimited number of Class II gaming devices. Management believes that this number of gaming devices is adequate to equip the planned developments. Therefore, Lakes believes the availability of additional slot licenses is not an issue that could prevent the projects from progressing. The Shingle Springs project is currently planned to open with 349 Class III slot machines and approximate 1,650 Class II devices.

Lakes acquired its initial interest in the development agreement and management contracts for the Jamul casino from Kean Argovitz Resorts-Jamul, LLC (“KAR — Jamul”) in 1999 and formed a joint venture in which the contracts were held between Lakes and KAR — Jamul. On January 30, 2003, Lakes purchased the remaining KAR — Jamul’s partnership interest in the joint venture. In connection with the purchase transaction, Lakes entered into separate agreements with the two individual owners of KAR — Jamul (Mr. Kean and Mr. Argovitz). The term of the contract is expected to be five or seven years. Under the agreement with Mr. Kean, Mr. Kean may elect to serve as a consultant to Lakes during the term of the casino management contract if he is found suitable by relevant gaming regulatory authorities. In such event, Mr. Kean will be entitled to receive annual consulting fees equal to 20% of the management fees received by Lakes from the Jamul Casino operations, less certain costs of these operations. If Mr. Kean is not found suitable by relevant gaming regulatory authorities or otherwise elects not to serve as a consultant, he will be entitled to receive annual payments of $1 million from the Jamul Casino project during the term of the respective casino management contract (but not during any renewal term of such management contract).

Under the agreement with Mr. Argovitz, if he is found suitable by relevant gaming regulatory authorities he may elect to re-purchase his respective original equity interest in the Lakes’ subsidiary and then be entitled to obtain a 20% equity interest in the Lakes’ entity that holds the rights to the management contract with the Jamul Tribe. If he is not found suitable or does not elect to purchase equity interests in the Lakes’ subsidiary, Mr. Argovitz may elect to receive annual payments of $1 million from the Jamul Casino project from the date of election through the term of the respective casino management contract (but not during any renewal term of such management contract).

The Jamul Tribe is a federally recognized tribe with a compact with the State of California and has an approximate six acre reservation on which the casino is planned to be built. The primary effort in this project has been to place approximately 82 acres of land contiguous to the reservation into trust for gaming. Lakes acquired 101 acres of land contiguous to the six acres of reservation land of which 19 acres relate to land with certain easements, which will not be accepted into trust. The trust application, including an Environmental Impact Statement (“EIS”), has been prepared, submitted to, reviewed and recommended for approval by the regional office of the BIA. The Washington, D.C. office of the BIA is currently reviewing the submission to determine if the land should be taken into trust. There has been some local opposition regarding the project. An EIS is more rigorous to complete than a more typical EA (Environmental Assessment). The EIS was more intense and took longer to prepare but is considered a better method to address all potential environmental concerns surrounding this project and to mitigate potential future opposition that may delay the project. The Jamul Tribe is in process of preparing another EA which is being prepared under guidelines of the State compact.

The process of getting the land contiguous to the reservation placed into trust has been slow. Therefore, during August of 2005, the Jamul Tribe and Lakes formally announced plans to build the casino on the approximately six acres of reservation land held by the Jamul Tribe. Reservation land qualifies for gaming without going through a land in trust process. The approximate size of the casino and related guest amenities will not change in total, as the casino was always planned to be built on the reservation land. The approximate six-acre project would be built on various levels to accommodate essentially all of the same amenities that were planned for the project on the larger parcel of land. Therefore, the design of the project would change

Under the form of tribal-state compact first signed by the State of California with both the Jamul and Shingle Springs tribes in 1999, each tribe is allowed to operate up to 350 Class III slot machines without licenses from the state. This form of compact allows tribes to operate up to an additional 1,650 Class II slot machines by obtaining licenses for the devices from the state. Under these tribal-state compacts, there is a state-wide limitation on the aggregate number of Class III slot machine licenses that are available to tribes. Certain tribes have entered into new tribal-state compacts or amendments to the 1999 form of tribal-state compact that allow them to operate an unlimited number of Class II slot machines without the need for obtaining additional licenses, subject to the payment of additional fees to the state, including in recent cases, fees based on a percentage of slot “net win.” Currently, neither the Jamul tribe nor the Shingle Springs tribe have amended their tribal-state compacts. If the compacts are not renegotiated and amended the tribes could operate under their existing compacts which allow for up to 350 Class III gaming devices and an unlimited number of Class II gaming devices. This number of gaming devices is adequate to equip the planned developments. Therefore, Lakes believes the availability of additional slot licenses is not an issue that could prevent the projects from progressing. The Jamul project is currently planned to open with 349 Class III slot machines and approximate 1,650 Class II devices.

The Pawnee Nation also operates its “Trading Post” Casino, which currently includes approximately 65 gaming devices along with a retail convenience store and gas station in the town of Pawnee, Oklahoma. Lakes will assist in the management of this project and in its expansion if the Pawnee Nation decides to expand the casino. As compensation for its management services on this project, Lakes will receive a management fee of approximately 30% of net income, as defined in the agreement, based on the incremental net income produced at this location during the length of the management contract, expected to be from five to seven years, depending on the scope of the facilities, less any amounts earned by any Company affiliate for consulting on the two projects subject to regulatory approval and certain other conditions.

Prior to the approval of the Pawnee Management Contracts by the NIGC, Lakes will provide services under the Pawnee Development and Consulting Agreements to each of the three Pawnee casino projects. Under these agreements Lakes will provide advances to the Pawnee Nation, if needed, from time to time to each particular project for preliminary development costs as agreed to by Lakes and the Pawnee Nation. Any advances made will accrue interest at prime plus two percent and be repayable in 24 equal monthly installments beginning on the 25th day following the opening date for the project if the loan has not previously been repaid through the project permanent financing. The Pawnee Development and Consulting Agreements are for 12 years from the effective date of the agreements or until the project development fees and the project preliminary development loans have been fully paid, whichever date is later, subject to early termination. In addition to interest earned on the project preliminary development loan, Lakes will receive a development fixed fee equal to three percent of project costs at each location and a monthly consulting flat fee for each of the three projects of $5,000 for the Trading Post location, $25,000 for the Travel Plaza location and $250,000 for the new casino, per month for 120 months. The above development fixed fees shall be paid on the opening date of each of the projects. No monthly consulting fixed fee is earned or paid prior to the opening date of the project. After the opening date of the project the monthly consulting fixed fee shall be due and paid commencing on the 25th day of the following calendar month and each successive month.

Arrangement with Consultant. The Company has executed an agreement stipulating that Kevin Kean will be compensated for his consulting services (relating to the Pawnee Nation) rendered to the Company. Under this arrangement, subject to Mr. Kean obtaining certain regulatory approvals, Mr. Kean will receive 20 percent of the Company’s fee compensation earned under the Pawnee Development and Consulting Agreements and Pawnee Management Contracts with the Pawnee Nation (i.e., six percent of the incremental total net income or 20 percent of the Company’s 30 percent share). This agreement provides that payments will be due to Mr. Kean when the Company is paid by the Pawnee Nation.

Long-term assets have been recorded as it is considered probable that the three Pawnee Nation Projects will result in economic benefit to Lakes sufficient to recover Lakes investment. Based upon the above status of all primary milestones and the projected fees to be earned under the consulting agreements and management contracts, no impairment has been recorded. The Pawnee Trading Post is currently open and operating and the refurbishments were completed in the fourth quarter of fiscal 2005. The Pawnee Travel Plaza is currently open and expansion could be completed to include gaming as early as mid 2006. The Pawnee new casino project could open as early as mid 2007.

On March 15, 2005, the Company, through its wholly-owned subsidiaries, entered into consulting agreements and management contracts with the Iowa Tribe of Oklahoma, a federally recognized Indian Tribe, and The Iowa Tribe of Oklahoma, a federally-chartered corporation (collectively, the “Iowa Tribe”). The agreements are effective as of January 27, 2005. The Company will provide consulting services to assist the Iowa Tribe with two separate casino destinations in Oklahoma including (i) assisting in developing a new first class casino and ancillary amenities and facilities to be located on Indian land approximately 25 miles northeast of Oklahoma City along Route 66 (the “Development Project”); and (ii) assisting with operational efforts at the Iowa Tribe’s existing Cimarron Casino, located in Perkins Oklahoma (the “Cimarron Casino”). The Company will also provide management services for the Tribe’s casino operations at each location subject to regulatory approval.

operations under all legal and regulatory requirements (the “Commencement Date”), provided that the Iowa Tribe has the right to buy out the remaining term of the Iowa Management Contract after the Development Project has been in continuous operation for 60 months, for an amount based on the then present value of estimated future management fees. If the Iowa Tribe elects to buy-out the contract, all outstanding amounts owed to Lakes become payable if not already paid. Subject to certain conditions, the Company agrees to make advances for the Development Project’s working capital requirements, if needed, during the first six months after the Commencement Date. The advances are to be repaid through an operating note payable from revenues generated by future operations of the Development Project bearing interest at two percent over the prime rate. The Company also agrees to fund any shortfall in certain minimum monthly Development Project payments to the Iowa Tribe by means of non-interest bearing advances under the same operating note.

Cimarron Casino. The Company has entered into a separate gaming consulting agreement (“Cimarron Consulting Agreement”) and management contract (“Cimarron Management Contract”) with the Iowa Tribe with respect to the Cimarron Casino. Many of the material provisions of these two agreements are similar to those for the Development Project, except that: (i) the Cimarron Consulting Agreement is primarily for services related to the existing operations (with the possibility of further development); (ii) the Company will provide up to a $1 million business improvement loan rather than a preliminary development loan; (iii) the fee under the Cimarron Consulting Agreement will consist entirely of a limited flat monthly fee of $50,000; and (iv) the annual fee under the Cimarron Management Contract will be 30% of net income in excess of $4 million (reduced by any amounts earned by any Company affiliate for consulting services under the Cimarron Consulting Agreement).

Arrangement with Consultant. The Company has executed an agreement stipulating that Kevin Kean will be compensated for his consulting services (relating to the Iowa Tribe) rendered to the Company. Under this arrangement, subject to Mr. Kean obtaining certain regulatory approvals, Mr. Kean will receive 20 percent of the Company’s fee compensation that is received under the Iowa Consulting Agreement, Cimarron Consulting Agreement, Iowa Management Contract and Cimarron Management Contract with the Iowa Tribe (i.e., six percent of the incremental total net income or 20 percent of the Company’s 30 percent share). This agreement provides that payments will be due to Mr. Kean when the Company is paid by the Iowa Tribe.

Lakes entered into consulting agreements and management contracts with the Kickapoo Tribe effective January 2005 to improve the performance of the gaming operations conducted at the Kickapoo Tribe’s existing Lucky Eagle Casino in Eagle Pass, Texas, located approximately 140 miles southwest of San Antonio. During the third quarter of fiscal 2005 the Company’s relationship with the Kickapoo Tribe deteriorated and in November 2005, Lakes and the Kickapoo Tribe terminated their business relationship. Lakes recognized an impairment charge of $0.1 million related to the intangible asset related to the acquisition of the management contract during the third quarter of fiscal 2005. In addition during fiscal 2005, the Company recorded an unrealized loss on notes receivable of $6.2 million related to the Kickapoo project. Included in the $6.2 million are unrealized losses of approximately $3.9 million related to project costs incurred that Lakes may be required to pay as a result of the terminated relationship, and approximately $2.3 million related to advances made by Lakes on the note receivable from the Kickapoo Tribe. As of January 1, 2006, Lakes owns approximately 18 acres of land near the Kickapoo site with a cost basis of approximately $0.7 million.

The Nipmuc Nation is a state-recognized tribe. In January 2001, the Nipmuc Nation received a draft, preliminary factual finding from the Assistant Secretary — Indian Affairs (“AS — IA”) indicating that the Nipmuc Nation was entitled to federal recognition. Based on these facts, as well as the Company’s evaluation of the project’s geographic location and the feasibility of the project’s success given such location, the structure and stability of the tribal government, the scope of the proposed project, including the physical scope of the contemplated facility and the expected financial scope of the related development, and the nature of the business opportunity, Lakes entered into a development and management contract with the Nipmuc Nation in July 2001.

The Nipmuc Nation is a state recognized tribe. In January 2001, the Nipmuc Nation received a draft, preliminary factual finding from the AS — IA indicating that the Nipmuc Nation was entitled to federal recognition. This finding, however, did not have the approval of the Office of the Solicitor of the Department of Indian Affairs, as required, and in fact, the Office of the Solicitor had approved the recommendation of the BIA, which recommended a proposed negative finding. In September 2001, the Nipmuc Nation received the official proposed negative finding, as evidenced by its publication in the October 1, 2001 Federal Register. As required under law, the Nipmuc Nation was permitted to challenge the proposed negative finding, which the Nipmuc Nation chose to do. The Nipmuc Nation engaged consultants and advisors, including the former Senior Historian for the BIA Branch of Acknowledgement and Research to assist them in submitting a formal response in September 2002. The response was organized in a manner to address the four remaining deficiencies outlined in the BIA’s published proposed negative finding. Indications to Lakes from the Nipmuc Nation and its consultants and advisors throughout the process of preparing the response were very positive about obtaining a reversal of the proposed negative finding. During 2003, Lakes continued to believe it was probable the Nipmuc Nation would become a federally recognized tribe because Lakes received advice from independent third-party consultants and advisors that supported a favorable ruling. As a result of this analysis, Lakes believed that, notwithstanding the proposed negative finding, it was probable that the Nipmuc Nation would likely be granted federal recognition based on additional genealogical data and other information submitted by the Nipmuc Nation to the BIA for reconsideration. During the second quarter of 2004, however, the BIA issued its final determination denying the Nipmuc Nation’s application for federal recognition.

After further evaluation of the site, Lakes proposed to the Cloverdale Rancheria that the agreements be changed to include a management contract to assist the Cloverdale Rancheria with a bigger and better project. The Cloverdale Rancheria offered a counter proposal. Lakes and the Cloverdale Rancheria could not reach agreement on a new management contract. The Cloverdale Rancheria then notified the venture between Lakes and MRD during 2002 that the Cloverdale Rancheria wished to terminate the relationship between the two parties. The partnership advised the Cloverdale Rancheria that the partnership believed the contract to be enforceable. In a written response, the Cloverdale Rancheria acknowledged that although the partnership loaned the Cloverdale Rancheria money and that it would endeavor to repay the money in a timely manner, it believed there was no valid, enforceable contract. Subsequently, the Cloverdale Rancheria refused to respond to a formal confirmation request of the money owed to Lakes and the Cloverdale Rancheria’s sovereign status makes enforcement of Lakes’ asserted contractual rights difficult and uncertain.

was payable upon the opening of the casino. During the fourth quarter of 2004 Lakes determined successful completion of the casino development was not likely given increased local opposition to the planned casino project. Specifically the County Board of Supervisors voted in February 2005 to oppose any casino project in their County. Therefore, in 2004 the Company recorded an unrealized loss on notes receivable of $0.3 million related to the fair value of its note receivable from the Cloverdale Rancheria. Lakes also wrote-off of an accrued liability related to the project of $0.6 million, which was only payable if the casino opened.

Income Taxes: In accordance with Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes (SFAS No. 109), Lakes evaluated the ability to utilize deferred tax assets arising from net operating loss carry forwards, net deferred tax assets relating to Lakes’ accounting for advances made to Indian tribes and other ordinary items and determined that a valuation allowance was appropriate at January 1, 2006 and January 2, 2005. Lakes evaluated all evidence and determined the negative evidence relating to net losses generated over the past four years outweighed the current positive evidence that the Company believes exists surrounding its ability to generate significant income from its long-term assets related to Indian casino projects. The Company recorded a 100% valuation allowance against these items at January 1, 2006 and January 2, 2005 based upon the above factors. The Company has established deferred tax assets related to unrealized investment losses and related carryovers as of January 1, 2006 and January 2, 2005. The Company believes it will have sufficient capital gains in the foreseeable future to utilize these benefits due to significant appreciation in its investment in WPTE. The Company owns approximately 12.5 million shares of WPTE common stock valued at approximately $83.5 million as of February 27, 2006 based upon the closing stock price as reported by Nasdaq on February 27, 2006 of $6.69. Lakes’ basis in the WPTE common stock is minimal.

Stock-based compensation: To date, we have accounted for equity-based employee compensation under the recognition and measurement principles of Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees and related Interpretations. However, Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (SFAS No. 123R) was issued in December 2004 and requires that compensation cost related to share-based employee compensation transactions be recognized in the financial statements. Share-based employee compensation transactions within the scope of SFAS No. 123R include stock options, restricted stock plans, performance-based awards, stock appreciation rights and employee share purchase plans. We have not completed our evaluation or determined the future impact of adopting SFAS No. 123R, which may be material to our results of operations when adopted, effective for fiscal year 2006, beginning on January 2, 2006.

Other Recent Accounting Pronouncements: In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and SFAS No. 3. SFAS No. 154 replaces APB Opinion No. 20, Accounting Changes and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements and changes the requirement for the accounting for and reporting of a change in accounting principles whenever the newly adopted standard does not include specific transition provisions. The provisions of SFAS No. 154 will be effective for accounting changes made in the fiscal year beginning after December 15, 2005. We do not presently expect to enter into any accounting changes in the foreseeable future that would be affected by adopting SFAS No. 154 when it becomes effective.

Lakes’ notes receivable from Indian tribes related to properties under development bear interest generally at prime plus one percent or two percent, however, the interest is only payable if the casino is successfully opened and distributable profits are available from casino operations. Lakes records its notes receivable at fair value and subsequent changes in fair value are recorded as income or expense in the Company’s consolidated statement of operations. As of January 1, 2006, Lakes had $87.1 million of notes receivable, at fair value with a floating interest rate (principal amount of $105.7 million, excluding advances to the Kickapoo Tribe). Based on the applicable current reference rates and assuming all other factors remain constant, interest income for a twelve month period would be approximately $9.3 million. A reference rate increase of 100 basis points would result in an increase in interest income of $1.1 million. A 100 basis point decrease in the reference rate would result in a decrease of $1.1 million in interest income over the same twelve-month period.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 audit provides a reasonable basis for our opinion.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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.

Lakes has development agreements for various Indian-owned casino properties and intends to manage such casinos when applicable regulatory approvals have been received and other contingencies have been satisfied. Lakes is also involved in other business activities, including development of a Company-owned casino and the purchase/license or development of new table game concepts for licensing to other casinos. In addition, as of January 1, 2006, Lakes owned approximately 62% of WPT Enterprises, Inc. (“WPTE”), a separate publicly-held media and entertainment company principally engaged in the development, production and marketing televised programming based on gaming themes, the licensing and sale of branded products, the sale of corporate sponsorships and a recently-launched online gaming venture. Lakes’ audited consolidated financial statements include the results of operations of WPTE, and in recent periods, all of Lakes’ revenues have been derived from WPTE’s business.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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, Significant estimates that are particularly susceptible to change materially within the next 12 months relate to revenue and related cost recognition relative to television

Licensing advances and guaranteed payments collected, but not yet earned by WPTE, as well as host fee and sponsorship receipts, collected prior to the airing of episodes, are classified as deferred revenue in the accompanying balance sheets. Deferred revenue is derived from three primary sources: Domestic Television, Product Licensing and Host Fees. Deferred revenue represents advanced payments received from TRV and product licensees, and deposits paid by casinos in order to secure a poker tournament date with the World Poker Tour as a host site. Deferred revenue was approximately $5.2 million and $3.3 million at January 1, 2006 and January 2, 2005, respectively.

The Company follows the provisions of Statement on Financial Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and Equity Securities and has classified all of its investments as available for sale, whereby investments are reported at fair value, with unrealized gains and losses reported as a component of accumulated other comprehensive earnings (loss), net of income taxes, in the accompanying statements of comprehensive earnings (loss). Market value is determined by the most recently traded price of the security at the balance sheet date. Net realized gains or losses are determined on the specific identification cost method.

WPTE accounts for its television costs pursuant to SOP No. 00-2. Television costs include capitalizable direct costs, production overhead and development costs and are stated at the lower of cost or net realizable value based on anticipated revenue. Production overhead costs include costs that are directly related to production and are incremental costs. These costs primarily include office facilities and insurance related to production. Production overhead office facilities costs are determined based on percentage of space used and are allocated to television costs based on number of episodes. Production overhead insurance costs are allocated to television costs based on number of episodes. WPTE has not currently anticipated any revenues in excess of those subject to existing contractual relationships. Capitalized television production costs for each episode are expensed as revenues are recognized upon delivery and acceptance of the completed episode.

In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (SFAS No. 123(R)), which amends FASB Statement No. 123 and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. SFAS No. 123(R) requires all companies to measure compensation expense for all share-based payments (including employee stock options) at fair value and recognize the expense over the related service period. Additionally, excess tax benefits, as defined in SFAS No. 123(R), will be recognized as an addition to paid-in capital and will be reclassified from operating cash flows to financing cash flows in the consolidated statements of cash flows. SFAS No. 123(R) will be effective for fiscal year 2006 beginning on January 2, 2006. Depending on the transitional option selected by management, there could be a retroactive effect on the Company’s financial statements of adopting the new standard. However, we are continuing to evaluate the effect that SFAS No. 123(R) will have on our financial position and results of operations.

The Company accounts for income taxes under the provisions of Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes (SFAS No. 109). Under this method, the Company determines deferred tax assets and liabilities based upon the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. The tax consequences of events recognized in the current year’s consolidated financial statements are included in determining income taxes currently payable. However, because tax laws and financial accounting standards differ in their recognition and measurement of assets, liabilities, equity, revenue, expenses, gains and losses, differences arise between the amount of taxable income and pretax financial income for a year and between the tax bases of assets or liabilities and their reported amounts in the consolidated financial statements.

Because it is assumed that the reported amounts of assets and liabilities will be recovered and settled, respectively, a difference between the tax basis of an asset or a liability and its reported amount in the balance sheet will result in a taxable or a deductible amount in some future years when the related liabilities are settled or the reported amounts of the assets are recovered, hence giving rise to deferred tax assets and liabilities. The Company must then assess the likelihood that deferred tax assets will be recovered from future taxable income and, to the extent management believes that recovery is not likely, they must establish a valuation allowance. The Company recorded a 100 percent valuation allowance against all deferred income tax assets as of January 1, 2006 and January 2, 2005 except for deferred tax assets related to unrealized investment losses and carryovers (see Note 10).

For all periods, basic loss per share (EPS) is calculated by dividing net loss by the weighted average common shares outstanding. Diluted EPS reflects the effect of all potentially dilutive common shares outstanding by dividing net loss by the weighted average of all common and potentially dilutive shares outstanding. Stock options that could potentially dilute earnings (loss) per share in the future of 5,307,626, 5,193,676 and 4,326,602 shares in 2005, 2004 and 2003, respectively, were not included in the computation of diluted loss per share because the effects would have been anti-dilutive for the periods presented.

The financial instruments that subject the Company to concentrations of credit risk consist principally of long-term assets related to Indian casino projects in the form of notes receivable due from Indian tribes (See Note 4). The notes receivable are primarily with the Pokagon Band, the Shingle Springs Tribe and the Jamul Tribe. Lakes manages this risk by evaluating the feasibility of the projects, including likelihood the project will open and be financially successful, before making advances to the Indian tribes. In the event these obligations become uncollectible, the maximum losses to be sustained would be the carrying value of the notes plus the net carrying value of the unamortized intangible assets. (See also Note 14 regarding commitments for future advances.)

During 2006, Lakes’ corporate costs, excluding WPTE which is not expected to require additional capital from Lakes, will approximate $19 million, which includes approximately $4.0 million of interest related to the financing facility entered into on February 15, 2006. Development project-related costs are expected to approximate $40 million during 2006 and include approximately $25 million related to the Pokagon project as construction is estimated to begin in mid 2006. Lakes’ cash balance, excluding WPTE cash, was approximately $8.2 million as of January 1, 2006. Additionally, the Company may be required to pay taxes up to approximately $12 million plus interest and penalties in fiscal 2006 related to two tax matters.

Lakes will require additional capital through either public or private financings to meet operating expenses and development project-related costs during fiscal 2006 and the Company is currently considering various financing alternatives. The Company believes the assets of Lakes provide sufficient collateral to obtain the necessary financing. The assets of Lakes include, in addition to the long-term assets related to Indian casino projects, common shares of WPTE that have an estimated fair value of over $83.5 million as of February 27, 2006. This estimated value is based on the public trading price, which may not be indicative of what Lakes could realize in a sale of its shares. The Company believes the shares of WPTE could be the source or part of the collateral for additional financing.

In 2004, the Securities and Exchange Commission declared effective a registration statement of WPTE that registered the offer and sale of up to 4,000,000 shares of WPTE common stock, at $8.00 per share, in WPTE’s initial public offering and an additional 600,000 shares of WPTE common stock that were sold by the underwriters involved in the offering exercise related to their over-allotment option. Proceeds from the sale of the 4,600,000 shares were $32.4 million, net of estimated offering expenses and underwriting discounts. These proceeds were used to expand WPTE’s entertainment production business and for its working capital. There were no selling shareholders participating in the offering. Net proceeds in excess of the amount allocated to minority interest have been reflected as additional paid-in-capital in the Company’s financial statements. Lakes did not recognize a gain on this transaction.

The majority of the assets related to Indian casino projects are in the form of notes receivable due from the Indian tribes pursuant to the Company’s development and management agreements. The repayment terms of the loans are specific to each Indian tribe and are dependent upon the operating performance of each gaming facility. Repayments of the loans are required to be made only if distributable profits are available from the operation of the related casinos. In addition, repayment of the loans and the manager’s fees under the management contracts are subordinated to certain other financial obligations of the respective operations. Generally, the order of priority of payments from the casinos’ cash flows is as follows: a certain minimum monthly priority payment to the Indian tribe, repayment of senior debt associated with construction and equipping of the casino with interest accrued thereon, repayment of various debt with interest accrued thereon due to Lakes, management fee to Lakes, and other obligations, with the remaining funds distributed to the Indian tribe.

The key assumptions and criteria used in the determination of the estimated fair value of the notes receivable are estimated casino opening date, projected interest rates, discount rates and probability of projects opening. The estimated casino opening date used in the valuation reflects the weighted average of three scenarios: a base case (which is based on the Company’s forecasted casino opening date) and one and two years out from the base case. The projected interest rates are based upon the one year U.S. Treasury Bill spot yield curve per Bloomberg and the specific assumptions on contract term, stated interest rate and casino opening date. The discount rate for the projects is based on the yields available on certain financial instruments at the valuation date, the risk level of equity investments in general, and the specific operating risks associated with open and operating gaming enterprises similar to each of the projects. In estimating this discount rate, market data of other public gaming related companies is considered. The probability applied to each project is based upon a weighting of four different scenarios with the fourth scenario assuming the casino never opens. The first three scenarios assume the casino opens but applies different opening dates as discussed above. The probability weighting applied to each scenario captures the element of risk in these projects and is based upon the status of each project, review of the critical milestones and likelihood of achieving the milestones.

The estimated probability rate was increased from 75% to 90% in fiscal 2005, due to an evaluation of all critical milestones and due to the favorable federal judge ruling issued in March 2005 that will allow the land to be taken into trust by the Federal Government. Subsequently the Taxpayers of Michigan Against Casinos (“TOMAC”) filed for an appeal. The appeal hearing date was held on December 8, 2005. On January 6, 2006, the United States Court of Appeals for the District of Columbia Circuit ruled in favor of the Pokagon Band by affirming the Federal District Court’s grant of summary judgment in the lawsuit by the Taxpayers of Michigan Against Casinos (TOMAC) versus the U.S. Department of the Interior. On January 27, 2006, the Federal Government took official action to acquire the Pokagon Band’s 675-acre parcel of land in New Buffalo Township, Michigan, into trust for the Pokagon Band. This official action by the Department of the Interior paves the way for the Pokagon Band to move forward with their Four Winds Casino Resort project. TOMAC has 90 days from the date of the decision to Petition the U.S. Supreme Court to review the decision.

In November 2005, the California Court of Appeal (“Court”) issued its decision on these appeals. The Court ruled in favor of CalTrans’ appeal, rejecting the El Dorado County’s argument that the transportation conformity analysis did not conform to state standards. The Court also rejected all but two of the legal claims asserted in the appeal by El Dorado County and Voices for Rural Living against the environmental impact report (“EIR”) prepared by CalTrans for the interchange that will connect Highway 50 to the Shingle Springs Rancheria. For the remaining two issues, the Court held that CalTrans must supplement its environmental analysis by adding some discussion to the air quality chapter to further explain the project’s contribution to overall vehicular emissions in the region, and that CalTrans also must evaluate whether a smaller casino and hotel would reduce environmental impacts. The Court acknowledged CalTrans lacks jurisdiction to require the Tribe to develop a smaller casino, but nevertheless required some discussion of this alternative in the interchange EIR. On December 19, 2005, CalTrans filed a Petition for Review with the Supreme Court of the

During the second quarter of 2004, the BIA issued its final determination denying the Nipmuc Nation’s application for federal recognition. Although the Nipmuc Nation is appealing the determination with the BIA, Lakes made a decision to discontinue funding the project. Lakes recorded an unrealized loss on notes receivable of $0.8 million during the second quarter of 2004 related to the fair value of the note receivable from the Nipmuc Nation. Lakes also recorded an impairment charge of $5.8 million during the second quarter of 2004 related to other long-term assets related to the Nipmuc Nation Indian casino project. As further background, the Nipmuc Nation is a state-recognized tribe. In January 2001, the Nipmuc Nation received a draft, preliminary factual finding from the Assistant Secretary — Indian Affairs (“AS-IA”) that the Nipmuc Nation was entitled to federal recognition. Based on these facts, as well as the Company’s evaluation of the project’s geographic location and the feasibility of the project’s success given such location, the structure and stability of the tribal government, the scope of the proposed project, including the physical scope of the contemplated facility and the expected financial scope of the related development, and the nature of the business opportunity, Lakes entered into a development and management contract with the Nipmuc Nation in July 2001. The January 2001 draft, preliminary factual finding from the AS — IA indicated that the Nipmuc Nation was entitled to federal recognition, however, it did not have the approval of the Office of the Solicitor of the Department of Indian Affairs, as required, and the Office of the Solicitor had approved the recommendation of the BIA, which recommended a proposed negative finding. In September 2001, the Nipmuc Nation received the official proposed negative finding, as evidenced by its publication in the October 1, 2001 Federal Register. As required under law, the Nipmuc Nation was permitted to challenge the proposed negative finding, which the Nipmuc Nation chose to do. The Nipmuc Nation engaged consultants and advisors, including the former Senior Historian for the BIA Branch of Acknowledgement and Research to assist them in submitting a formal response in September 2002. The response was organized in a manner to address the four remaining deficiencies outlined in the BIA’s published proposed negative finding. Indications to Lakes from the Nipmuc Nation and its consultants and advisors throughout the process of preparing the response were positive about obtaining a reversal of the proposed negative finding. Based on this analysis, the Company believed that, notwithstanding the proposed negative finding, the Nipmuc Nation would likely be granted federal recognition based on additional genealogical data and other information submitted by the tribe to the BIA for reconsideration. During the second quarter of 2004, however, the BIA issued its final determination denying the Nipmuc Nation’s application for federal recognition. Should the Nipmuc Nation

Included in other notes receivable from Indian tribes are amounts advanced under agreements with the Iowa Tribe and Pawnee Tribe. Additionally, included in other in the above table for fiscal 2005 are amounts related to consulting agreements and management contracts entered into by Lakes with the Kickapoo Tribe effective January 2005 to improve the performance of the gaming operations conducted at the Kickapoo Tribe’s existing Lucky Eagle Casino in Eagle Pass, Texas, located approximately 140 miles southwest of San Antonio. During the third quarter of fiscal 2005 the Company’s relationship with the Kickapoo Tribe deteriorated and in November 2005, Lakes and the Kickapoo Tribe terminated their business relationship. Lakes recognized an impairment charge of $0.1 million related to the intangible asset related to the acquisition of the management contract during the third quarter of fiscal 2005. In addition during fiscal 2005, the Company recorded an unrealized loss on notes receivable of $6.2 million related to the Kickapoo project. Included in the $6.2 million are unrealized losses of approximately $3.9 million related to project costs incurred that Lakes may be required to pay as a result of the terminated relationship, and approximately $2.3 million related to advances made by Lakes on the note receivable from the Kickapoo Tribe. As of January 1, 2006, Lakes owns approximately 18 acres of land near the Kickapoo site with a cost basis of approximately $0.7 million.

Until October 14, 2005, WPTE had an investment, (consisting of a 15% equity interest carried at its nominal cost basis) in and a loan receivable from PokerTek, a company that offers an electronic poker table called the PokerPro system that provides a fully automated poker room environment to tribal and commercial casinos and card clubs. On October 14, 2005, PokerTek announced its public offering of 2,000,000 shares of common stock at a price of $11 per share. Concurrently with the public offering, WPTE’s ownership interest was diluted to 11.7% (1,080,000 shares), and PokerTek repaid WPTE the outstanding loan amount at its maturity value of $186,000. WPTE’s shares in PokerTek are restricted, thus prohibiting any sale of such shares in the market for six months. Nevertheless, in accordance with Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and Equity Securities, WPTE adjusted its investment to fair market value and classified it as “available for sale”. The net unrealized gains and losses from this investment are accounted for in a separate component of shareholder’s equity.

At January 1, 2006, construction in progress relates to pre-construction costs, primarily architecture and engineering costs associated with a Company-owned planned casino project in Vicksburg, Mississippi. In February 2005, Lakes received gaming site approval by the Mississippi Gaming Commission with respect to its proposed casino location. Lakes plans to develop the project on an approximately 160-acre site on the Mississippi River, located on Magnolia Road in Vicksburg, Warren County, Mississippi, for which Lakes holds land purchase options. In connection with the planned development of the casino, Lakes has recorded $0.5 million related to land options, which are carried on the consolidated balance sheet in other long-term assets. During July 2005, Lakes received approval from the Mississippi Gaming Commission of its development plan for an approximately $225 million gaming project to be built on this site.

On December 16, 2005, Lakes closed on a $20 million financing facility with the Partnership (see Note 1). An initial draw of $10 million was made under the facility on December 16, 2005, and the remaining $10 million could be drawn in $5 million increments over time as needed. Any funds drawn under the facility bear interest at the rate of 12% per annum and are due and payable on the third anniversary of the first advance drawn. In consideration for the financing facility, Lakes issued to the Partnership warrants for the purchase of up to 2 million shares of its common stock at a purchase price of $7.88 per share that expire in December 2012. The warrants will not become exercisable if Lakes’ borrowings under the facility do not exceed $10 million in the aggregate and all amounts owed under the facility are repaid in full on or before February 28, 2006. On February 16, 2006 the facility was repaid in full with part of the proceeds of the new financing, which terminated all agreements relating to the Partnership financing facility, including cancellation of the 2 million warrants (see Note 18).

Lakes evaluated the ability to utilize deferred tax assets arising from net operating loss carry forwards, deferred tax assets and other ordinary items and determined that a valuation allowance was appropriate at January 1, 2006 and January 2, 2005. Lakes evaluated all evidence and determined net losses generated over the past three years outweighed the current positive evidence that the Company believes exists surrounding its ability to generate significant income from its long-term assets related to Indian casino projects. Therefore, the Company recorded a 100% valuation allowance against these items at January 1, 2006, and January 2, 2005. However, the Company has recognized a deferred tax asset related to capital losses during 2001 to 2005. The realization of these benefits is dependant on the generation of capital gains. The Company believes it will have sufficient capital gains in the foreseeable future to utilize these benefits due to significant appreciation in its investment in WPTE, which has a minimal cost basis and could be sold at a substantial gain. The Company owns approximately 12.5 million shares of WPTE common stock valued at approximately $74.1 million as of January 1, 2006 based upon the closing stock price as reported by Nasdaq on December 30, 2005 of $5.94.

of incentive and non-qualified stock options to officers, directors, and employees. Under the stock options granted under the 1998 option plans, the options vest in equal installments over four-year and five-year periods, beginning on the first anniversary of the date of each grant and continue on each subsequent anniversary date until the option is fully vested. The employee must be employed by Lakes on the anniversary date in order to vest in any shares that year. To the extent options are vested, the option shall be exercisable for ten years from the date of grant. If the employee is terminated (voluntarily or involuntarily) prior to vesting of any stock option, any options remaining to vest as of the date of termination will be forfeited.

World Poker Tour, LLC, a majority-owned subsidiary of Lakes and predecessor entity of WPTE, adopted the 2002 Option Plan (the 2002 Plan) which was approved to issue up to an aggregate of 1,120,000 shares in connection with option grants to employees and consultants. The options become exercisable in quarterly installments on each of the first four anniversaries of the date of the grant and expire six years after being exercisable. The employee must be employed by WPTE on the anniversary date in order to vest in any shares that year. If the employee is terminated (voluntarily or involuntarily) prior to vesting of any unit option, any options remaining to vest as of the date of termination will be forfeited.

In connection with the conversion to a corporation, WPTE adopted the 2004 Stock Incentive Plan that is authorized to grant stock awards to purchase up to 3,120,000 shares of common stock, including the options to purchase up to 1,120,000 shares of common stock issued to employees and consultants that were previously outstanding under the 2002 Plan at the time of conversion. Under the stock options granted in 2004 under the 2004 option plan, the options vest in equal installments over three-year and five-year periods, beginning on the first anniversary of the date of each grant and will continue on each subsequent anniversary date until the option is fully vested. The employee must be employed by WPTE on the anniversary date in order to vest in any shares that year. If the employee is terminated (voluntarily or involuntarily) prior to vesting of any stock option, any options remaining to vest as of the date of termination will be forfeited. To the extent options are vested, the option shall be exercisable for ten years from the date of grant.

For options issued to consultants, compensation expense is measured at the option’s fair value. Fair value is measured when the options vest in annual installments on each of the first four anniversaries of the date of the grant. Compensation expense is estimated in periods prior to vesting based on the then current fair value. Changes in the estimated fair value of unvested options are recorded in the periods the change occurs. Compensation expense for options issued to consultants was $0.8 million in 2005, $1.4 million in 2004, respectively. All of these expenses are capitalized television costs and are included as costs of revenue upon delivery and acceptance of completed episodes.

The Company leases an airplane, under a non-cancelable operating lease. Rent expense, under this lease, exclusive of real estate taxes, insurance, and maintenance expense was $1.5 million, $1.1 million and $0.6 million for 2005, 2004 and 2003, respectively. The airplane lease was amended on May 1, 2005, which allows for a base term of one year and two one-year renewal terms. Approximate future minimum lease payments due under this lease are $1.6 million, of which $0.7 million, $0.7 million and $0.2 million are payable in 2006, 2007 and 2008, respectively. Under the lease agreement, the Company has the option of renewing the lease, purchasing the airplane at amounts which range from approximately $5.2 million to $5.8 million or facilitating the sale of the aircraft at the end of each term included in the up to three-year lease term; however at the conclusion of the lease, the Company is required to either purchase the airplane or facilitate the sale of the airplane. The Company’s airplane lease contains a residual value guarantee of $5.2 million at the end of the three-year lease term.

The Company is under audit by the Internal Revenue Service (“IRS”) for the fiscal years ended 2001 and 2000. The IRS is challenging the treatment of income categorized as a capital gain. If the Company is unsuccessful in sustaining its position the Company may be required to pay up to approximately $3.2 million plus accrued interest and penalties related to tax on ordinary income. The Company originally carried back capital losses to offset the capital gain. If the Company were to be unsuccessful in sustaining its capital gain position it could use the capital losses in the future to offset future capital gains, if any, prior to their expiration. Management believes that the final outcome of this matter is not likely to have a material adverse effect upon the Company’s future consolidated financial position or results of operations. However, it may have a significant effect on cash flows in the period of settlement.

For the Pokagon Casino project, the Company has agreed to provide additional financing from its own funds if financing to the Pokagon Band at an interest rate not to exceed 13% is not available from third parties. If this occurs and Lakes is required to provide all financing, this would be an additional commitment of up to approximately $54 million. Based on discussions with prospective lenders the Company presently believes that third-party financing will be available for this project. However, there can be no assurance that third-party financing will be available at the time the project begins construction. Lakes is not required to fund these amounts. If, however, Lakes discontinued the funding prior to fulfilling the obligation, Lakes will forfeit the rights under the management contract.

The Company will be obligated to pay an amount to an unrelated third party once the Pokagon Casino is open and Lakes is the manager of the casino. The amount is payable quarterly for five years and is only payable if Lakes is the manager of the casino. The payment is part of a settlement and release agreement associated with Lakes obtaining the management contract with the Pokagon Band. The maximum liability over the five-year period is approximately $11 million. The Company will also be obligated to pay approximately $3.3 million in accordance with the management contract with the Pokagon Band which is payable once the casino opens over 24 months.

Lakes has entered into employment agreements with certain key employees of the Company. The agreements provide for certain benefits to the employee as well as severance if the employee is terminated without cause or due to a “constructive termination” as defined in the agreements. The severance amounts depend upon the term of the agreement and can be up to three years of base salary and three years of bonus calculated as the average bonus earned in the previous two years. If such termination occurs within two years of a change of control as defined in the agreements by the Company without cause or due to a constructive termination, the employee will receive a lump sum payment equal to two times the annual base salary and bonus/incentive compensation along with insurance costs, 401k matching contributions and certain other benefits. In the event the employee’s employment terminates for any reason, including death, disability, expiration of an initial term, non-renewal by the Company with or without cause, by the employee with notice, due to constructive termination, all unvested stock options vest at the date of termination and remain

WPTE has an employment agreement with Steven Lipscomb, Founder, President and Chief Executive Officer of WPTE, under which it has agreed to pay an annualized base salary of $500,000 commencing as of December 29, 2003, and expiring on December 29, 2006, and Mr. Lipscomb will be eligible to participate in an annual bonus pool of up to 10% of WPTE’s net profits and an additional bonus equal to 5% of WPTE’s annual net profits above $3.0 million in such fiscal year. WPTE also granted Mr. Lipscomb options to purchase 600,000 shares of WPTE’s common stock at $8.00 per share on August 9, 2004, which options will vest in equal installments over three years.

In connection with the establishment of Lakes as a public corporation on December 31, 1998, via a distribution of its common stock to the shareholders of Grand Casinos, the Company and Grand Casinos entered into an agreement governing the sharing or allocation of tax benefits accruing to Grand Casinos and certain affiliated companies of Grand Casinos. Lakes asserted claims against Grand Casinos for amounts to which Lakes believed it was entitled under the tax sharing agreement. On December 1, 2004, Lakes entered into a settlement agreement with Grand Casinos and its parent company, Park Place Entertainment Corporation (now known as “Harrah’s Entertainment, Inc.” or “Harrah’s”), pursuant to which Lakes received $11.3 million in December 2004 in satisfaction of its prior claim and its future rights to the tax benefits that were the subject of the dispute. Lakes will be required to provide reimbursement for its share of the disallowed benefits. This settlement income has been recorded as other income in the consolidated statement of earnings (loss) for the year ended January 2, 2005. Lakes has not recorded any tax related to the settlement payment of $11.3 million, as Lakes believes this settlement is not taxable to Lakes.

The Louisiana Department of Revenue maintains a position that Lakes owes additional Louisiana corporation income tax for the period ended January 3, 1999 and the tax years ended 1999 through 2001 and additional Louisiana corporation franchise tax for the tax years ended 2000 through 2002. This determination is the result of an audit of Louisiana tax returns filed by Lakes for the tax periods at issue and relates to the reporting of income earned by Lakes in connection with the managing of two Louisiana-based casinos. On December 20, 2004, the Secretary of the Department of Revenue of the State of Louisiana filed a petition to collect taxes in the amount of $8.6 million, excluding interest, against Lakes in the 19th Judicial District Court, East Baton Rouge Parish, Louisiana (Docket No. 527596, Section 23). In the petition to collect taxes the Department of Revenue of the state of Louisiana asserts that additional corporation income tax and corporation franchise tax are due by Lakes for the taxable periods set forth above. Lakes maintains that it has remitted the proper Louisiana corporation income tax and Louisiana corporation franchise tax for the taxable periods at issue. On February 14, 2005, Lakes filed an answer to the petition to collect taxes asserting all proper defenses and maintaining that no additional taxes are owed and that the petition to collect taxes should be dismissed. Management intends to vigorously contest this action by the Louisiana Department of Revenue. Lakes may be required to pay up to the $8.6 million assessment plus interest if Lakes is not successful in this matter. The Company has recorded a provision for its estimated settlement related to this examination including accrued interest, which is included as part of income taxes payable on the Company’s consolidated balance sheets.

types of programming developed by WPTE during a 60 day period. Pursuant to the WPT Agreements, WPTE submitted the PPT to TRV and began negotiations but failed to reach an agreement with TRV within the allotted negotiation window. Consequently, WPTE began discussions with other networks. While WPTE later revived its attempts to reach a deal with TRV after TRV’s exclusive bargaining window had ended, WPTE ultimately received an offer from ESPN. WPTE submitted this offer to TRV pursuant to TRV’s contractual last right to match the deal as specified under the WPT Agreements. Thereafter, TRV sent letters to WPTE and ESPN asserting, among other things, that WPTE was not entitled to complete a deal for the PPT with a third party. Following TRV’s letters, WPTE filed suit on September 19, 2005, alleging that TRV breached the WPT Agreements and interfered with WPTE’s prospective contractual relationship with ESPN, and seeking a judicial declaration of WPTE’s rights under the WPT Agreements to produce non-World Poker Tour branded programs covering poker tournaments. Subsequent to WPTE filing, ESPN withdrew its offer to WPTE to acquire the broadcast rights to the PPT. On September 22, 2005, TRV and Discovery Communications, Inc. filed an answer and cross-complaint and subsequently filed a motion for judgment on the pleadings and an “anti-SLAPP” motion, both of which were denied on November 10, 2005. On January 25, 2006, the parties settled the lawsuit and TRV entered into an agreement with WPTE to air the PPT television series.

Lakes, through its subsidiaries Lakes Jamul, Inc. and Lakes Shingle Springs, Inc. respectively, advanced $0.97 million to each of KAR-California and KAR-Shingle Springs (the “KAR Entities”) pursuant to promissory notes dated in 1999 (collectively, the “1999 Notes”). At the time, the KAR Entities held rights in development and management contracts for the Jamul and Shingle Springs casino projects. The loans were part of overall transactions in which Lakes acquired interests in those casino projects by entering into joint ventures with the KAR Entities. Under the joint venture arrangements, Lakes and the KAR Entities jointly formed the companies to develop the casinos (“Project Companies”) and the KAR Entities assigned their rights in the development and management contracts to the Project Companies. As such, the business purpose for the loans by Lakes was to acquire interests in the subject casinos projects, as the loans were a condition to entering into the joint ventures.

In 2003, Lakes purchased the respective joint venture interests of the KAR Entities. At the time of the purchase, the KAR Entities owed Lakes $1.9 million under the 1999 Notes. As consideration for the purchase of the KAR Entities’ partnership interest in Jamul and Shingle Springs, Lakes forgave the amounts owed under the 1999 Notes of $1.9 million. Lakes recorded the $1.9 million as part of its long-term assets related to the Jamul and Shingle Springs Indian casino projects described in Note 1. In connection with the purchase transactions, Lakes entered into separate agreements with Kevin M. Kean and Jerry A. Argovitz, the two individual owners of the KAR Entities. Under these agreements, Lakes forgave the notes receivable from the KAR Entities subject to the agreements of Messrs. Kean and/or Argovitz to assume the obligations under the notes in certain circumstances.

the Shingle Springs casino operations, less certain costs of these operations. If Mr. Kean is found suitable by relevant gaming regulatory authorities and elects to serve as a consultant, he will be obligated to repay 50% of the notes receivable from the KAR Entities. If Mr. Kean is not found suitable by relevant gaming regulatory authorities or otherwise elects not to serve as a consultant, he will be entitled to receive annual payments of $1 million from each of the Jamul and Shingle Springs casino projects during the term of the respective casino management contracts (but not during any renewal term of such management contracts).

Under the agreement with Mr. Argovitz, if Mr. Argovitz is found suitable by relevant gaming regulatory authorities, he may elect to re-purchase his respective original equity interest in the Lakes’ Subsidiaries and he will be entitled to obtain a 20% equity interest in the Lakes’ entity that holds the rights to the management contract with the Jamul casino and a 15% equity interest in Lakes’ management contract with the Shingle Springs casino. Upon obtaining this interest, Mr. Argovitz will become obligated to repay 50% of the 1999 Notes. If he is not found suitable or does not elect to purchase equity interests in the Lakes Subsidiaries, Mr. Argovitz may elect to receive annual payments of $1 million from each of the Jamul and Shingle Springs casino projects from the date of election through the term of the respective casino management contracts (but not during any renewal term of such management contracts).

Lakes guaranteed a loan of $2 million to Kevin Kean and received collateral, which included a subordinated interest in Mr. Kean’s personal residence and shares of common stock. This guaranty was originally an obligation of Grand Casinos (Lakes’ predecessor) that was assumed by Lakes in connection with its December 31, 1998 spin-off from Grand Casinos. In addition, Lakes received collateral from Kevin Kean consisting of Mr. Kean’s economic interest in the Shingle Springs and Jamul projects of 15% and 20%, respectively. In January 2001, Mr. Kean defaulted under the loan. On March 26, 2001 Lakes paid $2.2 million in full repayment of Mr. Kean’s loan. In September 2001, Lakes foreclosed on Mr. Kean’s personal residence and effected a sheriff’s sale. As a result of these transactions, the resulting net balance due from Mr. Kean was approximately $1.8 million.

Lakes continues to monitor the collectibility of this note on a quarterly basis and as of January 1, 2006 and January 2, 2005 concluded that repayment was probable based upon Mr. Kean’s remaining economic interests in the Jamul and Shingle Springs projects. Lakes also advanced Mr. Kean $0.8 million and $0.2 million in 2005 and 2004 respectively as consideration for assisting Lakes in obtaining and entering into development and management contracts for new casino projects. These amounts are included as part of other long-term assets on the consolidated balance sheets. The advances are evidenced by a loan that is secured by the future operations of certain casino projects in which Mr. Kean is directly involved in. The outstanding amount of this loan was $1.0 million and $0.2 million at January 1, 2006, and January 2, 2005, respectively. Mr. Kean has agreed that 50% of the consulting fees or other payments payable to him under the agreements

Lakes has entered into a license agreement with Sklansky Games, LLC (“Sklansky”) pursuant to which Lakes is developing a World Poker Tour No Limit Texas Hold’Em casino table game that uses certain of Sklansky’s intellectual property rights. Lakes had also entered into a license agreement with WPTE pursuant to which Lakes has obtained a license to utilize the World Poker Tour name and logo in connection with a casino table game. Under the terms of this agreement, if Lakes elects to proceed with its development of the casino table game, Lakes will be required to pay WPTE a specified minimum annual royalty payment of 10% of gross revenues, and Sklansky a specified minimum annual royalty payment of 30% of the gross revenue Lakes receives from its sale or lease of the game. Also, Lakes, through one of its wholly-owned subsidiaries, holds an indirect majority ownership in WPTE. Lyle Berman and his son, Bradley Berman, own 28% and 44% equity interests in Sklansky, respectively. Lyle Berman also serves as Chairman of WPTE, and Bradley Berman is a member of WPTE’s Board of Directors.

Effective as of February 24, 2004, WPTE entered into a non-exclusive license agreement with G-III Apparel Group. Ltd. (“G-III”). Morris Goldfarb, a Lakes director, is also a director, Chairman of the Board and Chief Executive Officer of G-III. Under the agreement, G-III licenses the World Poker Tour name, logo and trademark from WPTE in connection with G-III’s production of certain types of apparel for distribution in authorized channels within the United States, its territories and possessions and in certain circumstances, Canada. As consideration for this non-exclusive license, G-III pays royalties and certain other fees to WPTE. As of January 1, 2006, G-III paid WPTE approximately $0.3 million.

Lakes’ principal business is the development and management of gaming-related properties. Additionally, the Company is the majority owner of WPTE (see Note 1). Substantially all of Lakes’ and WPTE’s operations are conducted in the United States. Episodes of the World Poker series are distributed internationally by a third party distributor. Lakes’ segments reported below (in millions) are the segments of the Company for which separate financial information is available and for which operating results are evaluated by the chief operating decision-maker in deciding how to allocate resources and in assessing performance. The amounts in Corporate and Eliminations below have not been allocated to the other segments because these costs are not easily allocable and to do so would not be practical.

On February 15, 2006, Lakes closed on a $50 million financing facility with an affiliate of Prentice Capital Management, LP. An initial draw of $25 million was made under the facility, another $10 million is immediately available under the facility and the remaining $15 million can be drawn in $5 million increments subject to certain conditions. Any funds drawn on the facility bear interest at the rate of 12% per annum, interest payable in arrears monthly, subject to adjustment based on the value of the collateral, and are due and payable in full on the third anniversary of the closing date. Lakes may prepay the facility in whole or in part without penalty at any time. Lakes received net proceeds of approximately $12.1 million after repaying the Partnership facility with accrued interest and after costs and fees associated with the Prentice financing facility. Approximately $10.2 million of the initial draw was used to repay in full Lakes’ December 16, 2005 loan from the Partnership (Note 9).

The $50 million financing facility is secured by most of the assets of Lakes and certain of its subsidiaries (other than WPTE), including all of Lakes’ shares of WPTE. Lakes is permitted to sell up to 3 million of the approximate 12.5 million WPTE shares it owns without application to reduction of the amounts owing under the financing facility, subject to certain conditions. As consideration for the financing, Lakes issued to an affiliate of Prentice Capital warrants to purchase 1.25 million shares of common stock that can be immediately exercised at $7.50 per share. The warrants are subject to customary anti-dilution protections. An additional 1.25 million warrants to purchase common stock are exercisable at $7.50 per share as additional draws under the facility are made. Up to an additional 1.96 million warrants to purchase common stock can be exercised at $7.50 per share upon the occurrence of certain events relating to loan collateral. All warrants expire in February, 2013. The lender has demand registration rights with respect to the Lakes common stock underlying the warrants and, upon certain events, the WPTE shares pledged by Lakes to the lender. Lakes has agreed to pay substantially all of the costs incurred in the preparation and filing of these registration statements. Lakes is in the process of valuing the warrants which will be recorded as a debt discount with the value recorded as additional paid in capital.

WPTE entered into an agreement with Discovery Communications, Inc. (the parent company to the TRV) in January 2006, pursuant to which TRV agreed to license the U.S. rights to telecast Season One of the Professional Poker Tour^tm (PPT) events. The agreement provides the TRV with successive one-year options to acquire the exclusive license to telecast the episodes produced in connection with Seasons Two through Four of the PPT. Additionally, upon termination of the agreement, TRV’s revenue share percentage declines over the following four years. There is no revenue share percentage beginning in the fifth year following the termination of the agreement.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-5(f) under the Exchange Act). Our management assessed the effectiveness of our internal control over financial reporting as of January 1, 2006. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. Our management has concluded that, as of January 1, 2006, our internal control over financial reporting is effective based on these criteria. Piercy Bowler Taylor & Kern, the independent registered public accounting firm that audited the consolidated financial statements included in this Annual Report on Form 10-K has issued an attestation report on management’s assessment of our internal control over financial reporting, which is included in this Annual Report on Form 10-K.

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our internal control over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Lakes have been detected. Lakes’ internal control over financial reporting, however, are designed to provide reasonable assurance that the objectives of internal control over financial reporting are met.

As a result of discussions with the staff of the Securities and Exchange Commission on the Company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2003, during the fourth quarter of 2005 the Company re-evaluated and changed its accounting methodology surrounding its contractual relationships with Indian tribes, including the implementation of internal control procedures supporting the new accounting methodology. These changes were made prior to filing the Company’s Annual Report on Form 10-K for fiscal 2004 and the Quarterly Reports on Form 10-Q for the first three quarters of fiscal 2005, all of which were filed in December 2005. There have been no other changes to our internal control over financial reporting since the implementation of the new accounting methodology.

We have audited management’s assessment, included in the accompanying Management Report on Internal Control Over Financial Reporting, that Lakes Entertainment, Inc. and Subsidiaries (the Company) maintained effective internal control over financial reporting as of January 1, 2006, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

In our opinion, management’s assessment that Lakes Entertainment, Inc. and Subsidiaries maintained effective internal control over financial reporting as of January 1, 2006, is fairly stated, in all material respects, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 1, 2006, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In connection with our establishment as a public corporation, which occurred pursuant to a distribution of our common stock to the then shareholders of Grand Casinos (the “Distribution”), we issued options to purchase our common stock to the holders of then-outstanding options to purchase common stock of Grand Casinos. These Distribution-related options were treated as awards granted outside of the 1998 Employee Plan and the 1998 Director Plan, and we did not seek shareholder approval for the Distribution-related option grants apart from the approval obtained from the shareholders of Grand Casinos for the overall public distribution of our common stock.

134 EX-10.168 2 c02716exv10w168.txt LEASE INTENDED AS SECURITY Exhibit 10.168 LESSEE'S COPY LEASE INTENDED AS SECURITY LEASE INTENDED AS SECURITY ("Lease") dated as of December 3, 1999, between BANC OF AMERICA LEASING & CAPITAL, LLC, a Delaware limited liability company with its principal office at 2059 Northlake Parkway, Tucker, Georgia 30084 ("Lessor") and LAKES GAMING, INC., a Minnesota corporation, with its principal office at 130 Cheshire Boulevard, Minnetonka, Minnesota 55305 ("Lessee"). Lessor agrees to acquire and lease and sell to Lessee and Lessee agrees to hire and purchase from Lessor certain personal property (the "Aircraft") described in the Appendix (the "Appendix") attached hereto and made a part hereof, on the terms and conditions set forth herein and in the Appendix. Section 1. Procurement Delivery and Acceptance. 1.1 On a date to be agreed upon by Lessor and Lessee (the "Delivery Date"), Lessor will purchase from and lease back to Lessee for an amount equal to the agreed upon value of the Aircraft, and Lessee will sell to and lease back from Lessor the Aircraft. 1.2 The obligation of Lessor to make payments for the Aircraft is subject to the following conditions: (a) Lessee shall have delivered to Lessor not earlier than the tenth (10th) and not later than the first (1st) Business Day (as defined in Paragraph F of the Appendix) prior to the proposed Delivery Date, an irrevocable notice (a "Delivery Date Notice") substantially in the form of Exhibit A, specifying (i) the proposed Delivery Date, (ii) a description of the Aircraft to be purchased on such Delivery Date and the location thereof, (iii) the aggregate Purchase Price of the Aircraft, and (iv) wire transfer instructions for the disbursement of funds; (b) Prior to the Completion Date, Lessor shall have received an Appraisal to its satisfaction opining: (i) as to the appraised value of the Aircraft on the Delivery Date, on the Completion Date and at the end of the applicable Base Term and all applicable Renewal Terms; and (ii) that the average remaining economic useful life of the Aircraft is not less than 6.75 years. (c) Lessee shall have accepted the Aircraft on its Delivery Date and executed and delivered to Lessor for the Aircraft accepted by Lessee, a Lease Schedule and Acceptance Certificate in the form of Exhibit B (a "Schedule") confirming the Delivery Date of the Aircraft and the acceptance of the Aircraft as of its Delivery Date. The Schedule to be executed and delivered by Lessee on the Delivery Date shall set forth: (i) in Annex I thereto, a description of and the initial Purchase Price for the Aircraft; and (ii) in Annex II thereto, the Applicable Percentage Amounts, a schedule of the installments of Fixed Rent, the Payment Dates therefor payable during the Base Term and during each Renewal Term, the Schedule Balance of such Schedule as of the Delivery Date (such Applicable Percentage, schedule of payments of Fixed Rents and Schedule Balance to be adjusted by the Lessor on the Completion Date based upon the then Purchase Price using the same assumptions and methods of calculation as used in producing the original Applicable Percentage, schedule of payments of Fixed Rents and Schedule Balance, except for the changes in Purchase Price and any changes to appraised values and the remaining economic useful life of the Aircraft as determined by the Appraisal) therefor and as of each Payment Date in the Base Term and each Renewal Term, assuming in each case that all installments of Fixed Rent due and payable thereunder to and including such Payment date have been paid; Annex I and II to the Schedule shall be prepared by Lessor, and the items set forth by Lessor in such Schedule (including any adjustment thereto under clause (ii) above) shall be conclusive and binding upon Lessee for all purposes hereunder; (d) On or prior to the Delivery Date, Lessor shall have received from Lessee duly executed UCC financing statements, and such financing statements shall have been filed in all places deemed necessary or desirable by Lessor in order to perfect the security interest granted pursuant to the Lease with respect to the Aircraft and any related collateral being delivered on or after such Delivery Date; (e) There shall exist no Event of Default nor any event which, with notice or lapse of time or both, would become an Event of Default (a "Default"); (f) On or before its Delivery Date, Lessor shall have received in form and substance satisfactory to it (i) a Bill of Sale on FAA Form AC 8050-2 (or other form approved by or acceptable to the FAA) covering the Aircraft, dated the Delivery Date, executed by Lessee and naming Lessor as buyer, (ii) a warranty Bill of Sale in the form of Exhibit C-1 with respect to the Aircraft, and an Assignment of Warranties in the form of Exhibit C-2, each dated the Delivery Date, and (iii) an application for Aircraft Registration on AC Form 8050-1, or such other form as may be approved by the FAA on the Delivery Date. (g) Lessor shall receive evidence, satisfactory to Lessor, that the Aircraft is free and clear of all claims, liens, security interests and encumbrances; (h) On or prior to the Delivery Date and any Advance, Lessee shall have paid to Lessor any Transaction Costs not previously paid; (i) Each of the representations and warranties made by Lessee hereunder shall be true on and as of the Delivery Date and the date of any Advance; (j) No material adverse change in Lessee's financial condition shall have occurred since the date hereof; (k) Resolution of any environmental issues; If any of the foregoing conditions is not met, Lessor shall have no obligation to either Lessee or any third party to make any payments for the Aircraft. Any attempted or purported sale of an Aircraft by Lessee to Lessor after its Delivery Date shall not be effective whether or not accepted by Lessor, and Lessor shall not incur any obligations with respect to the Aircraft, including the obligation to pay for the Aircraft. 2 1.3 Lessee represents, warrants and covenants with respect to the Aircraft that (a) the Seller has the right to sell the Aircraft (b) both the Aircraft and Lessee's rights, title and interest in the Aircraft are, or will be as of its Delivery Date, free from all claims, liens, security interests and encumbrances, (c) Lessee will defend the sale against claims and demands of all persons and (d) the Purchase Price of the Aircraft is equal to its fair market value at the time of the sale. 1.4 As soon as possible, but no later than the Delivery Date, Lessee shall deliver or cause to be delivered to Lessor the following documents, in form and substance satisfactory to Lessor: (a) evidence of Lessee's authority to enter into and perform its obligations under this Lease; (b) a certificate as to the incumbency of the person or persons authorized to execute and deliver this Lease and any other agreements or documents required hereunder or thereunder, including specimen signatures of such persons; (c) certificates of insurance, including loss payable and other endorsements complying with, or other evidence acceptable to Lessor that Lessee has complied with, Section 7; (d) opinion of counsel to Lessee, substantially in the form of Exhibit D and the opinion of special aviation counsel to Lessor satisfactory to Lessor; and (e) any other documents specified in the Appendix and such other documents as Lessor may reasonably request. Section 2. Term. Rent and Payment. 2.1 The term of this Lease as to the Aircraft shall commence on its Delivery Date and continue as specified in the Appendix. 2.2 Lessee shall pay to Lessor rent for the Aircraft in the amounts and at the times set forth in the Appendix. 2.3 Rent and all other sums due Lessor hereunder shall be paid at the principal office of Lessor set forth above. 2.4 This Lease is a net lease and Lessee shall not be entitled to any abatement or reduction of rent or any setoff against rent, whether arising by reason of any past, present or future claim of any nature by Lessee against Lessor or otherwise. Except as otherwise expressly provided herein, this Lease shall not terminate, nor shall the obligations of Lessor or Lessee be otherwise affected by reason of (a) any defect in, damage to, loss of possession or use or destruction of the Aircraft, however caused, (b) the attachment of any lien, encumbrance, security interest or other right or claim of any third party to the Aircraft, (c) any prohibition or restriction of or interference with Lessee's use of the Aircraft by any person or entity, (d) the insolvency of or the commencement by or against Lessee of any bankruptcy, reorganization or similar proceeding, or (e) any other cause, whether similar or dissimilar to the foregoing, any present or future law to the contrary notwithstanding. It is the intention of the parties that all rent and other amounts payable by Lessee hereunder shall be payable in all events in the manner and at the times herein provided unless Lessee's obligations in respect thereof have been terminated pursuant to the express provisions of this Lease. 3 2.5 Payments shall be applied in the following order: (a) expenses, including allocated time charges of internal counsel for Lessor and any other attorneys' fees; (b) interest on late payments; and (c) rent and all other sums due hereunder. Payments shall be evidenced by entries in records maintained by Lessor which shall be presumptively correct. Section 3. Disclaimer of Warranties. LESSEE ACKNOWLEDGES AND AGREES THAT (1) THE AIRCRAFT, INCLUDING EACH ENGINE IS OF A SIZE, DESIGN, CAPACITY AND MANUFACTURE SELECTED BY AND ACCEPTABLE TO LESSEE AND SUITABLE FOR ITS PURPOSES, (2) LESSOR IS NOT A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND, (3) THE AIRCRAFT, INCLUDING EACH ENGINE IS LEASED HEREUNDER SUBJECT TO ALL APPLICABLE LAWS AND GOVERNMENT REGULATIONS NOW IN EFFECT OR HEREAFTER ADOPTED AND IN THE STATE AND CONDITION OF EVERY PART THEREOF WHEN THE SAME FIRST BECAME SUBJECT TO THIS LEASE, WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND BY LESSOR, AND (4) LESSOR LEASES THE AIRCRAFT INCLUDING, EACH ENGINE AS-IS WITHOUT WARRANTY OR REPRESENTATION EITHER EXPRESS OR IMPLIED, AND LESSOR EXPRESSLY DISCLAIMS ANY WARRANTY, EXPRESS OR IMPLIED, AS TO (i) TITLE, AIRWORTHINESS, CONDITION, FITNESS FOR USE FOR A PARTICULAR PURPOSE, DESIGN, VALUE, OPERATION OR MERCHANTABILITY THEREOF, (ii) QUALITY OF MATERIAL OR WORKMANSHIP, ABSENCE OF LATENT OR OTHER DEFECTS WHETHER OR NOT DISCERNIBLE, (iii) ABSENCE OF AN INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, (iv) ABSENCE OF ANY OBLIGATION BASED ON STRICT LIABILITY IN TORT, (v) LESSOR'S TITLE THERETO OR (vi) ANY OTHER MATTER WHATSOEVER, IT BEING AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY LESSEE. The provisions of this Section 3 have been negotiated by Lessor and Lessee and are intended to be a complete exclusion and negation of any representations or warranties of Lessor, express or implied, with respect to the Airframe and each Engine that may arise pursuant to any law now or hereafter in effect, or otherwise. Section 4. Possession. Use and Maintenance. 4.1 Lessee agrees not to maintain, repair, overhaul, use or operate the Airframe, any Engine or any Part in violation of any law, treaty or statute or any rule, regulation or order of any government or Government Body having jurisdiction (domestic or foreign) over Lessee or the Aircraft, or in violation of any airworthiness certificate, license or registration relating to the Airframe, any Engine or any Part issued by any such authority. If such laws, treaties, statutes, rules, regulations or orders require alteration of the Airframe, any Engine or any Part, Lessee will conform thereto or obtain conformance therewith at no expense to Lessor and will maintain the same in proper operating condition under such laws, treaties, statutes, rules, regulations and orders. Lessee also agrees not to fly the Aircraft, or suffer the Aircraft to be flown or the Airframe or any Engine to be located (i) in any area excluded from coverage by any insurance required by Section 7, (ii) in any country with which the United States does not maintain diplomatic relations, or (iii) in any area of actual or threatened armed hostilities unless fully covered to Lessor's reasonable satisfaction by war risk insurance or unless the Aircraft is operated or used under contract with the Government of the United States under which contract that Government assumes liability and provides indemnity in an amount not less than the amount of insurance and providing coverage, supported by the full faith and credit of the United States, as full and complete as otherwise required by Section 7 for any damage, loss, destruction or failure to return possession thereof at the end of the term of such contract and for injury to Persons and damage to Property of others. The Aircraft shall at all times be and remain registered in accordance with the laws of the United States. 4 Lessee shall not sublease, or otherwise in any manner deliver, relinquish or transfer possession of the Airframe or any Engine or any part thereof or any part of Lessee's rights hereunder to any Person without the prior written consent of Lessor except, if no Default or Event of Default exists, Lessee may, without the prior written consent of Lessor, deliver possession of the Airframe or any Engine to the manufacturer thereof for testing or other similar purposes or to any organization for service, repair, maintenance or overhaul work or for alterations or modifications in or additions to such Airframe or Engines, to the extent required or permitted by this Lease. 4.2 During the Lease Term, and until purchase or sale of the Aircraft in compliance with this Lease, Lessee, at its own cost and expense, shall: (i) service, repair, maintain, test and overhaul each Item of Equipment so as to keep such Item of Equipment in good operating condition and, ordinary wear and tear excepted, in the same condition as when delivered to Lessee hereunder, and so as to comply with each of the following standards: (A) to establish and keep the Aircraft in compliance with (1) Lessee's FAA-approved maintenance program, which shall include a corrosion control program (the "Maintenance Program"'), that is, with respect to the Airframe, either a phased maintenance program (a "Phased Maintenance Program") or a periodic medium and heavy block-hour interval overhaul program (a "Block-Time Maintenance Program") and that provides for all FAA required inspection, servicing, overhaul and replacement of all Aircraft components; (2) all applicable airworthiness directives issued by the FAA; and (3) all manufacturer's mandatory service bulletins; (B) to keep the Aircraft in such condition as may be necessary to enable the airworthiness certification of such Aircraft to be maintained in good standing at all times under the Federal Aviation Act; and (C) to keep the Aircraft maintained, serviced, repaired, tested or overhauled in at least the same manner and with the same care as used by Lessee with similar aircraft owned, leased by Lessee and maintained under the same approved maintenance program; (ii) not install replacement components with excessive wear or exchange components on or of the Aircraft for other aircraft components in Lessee's possession for use on aircraft that will remain in Lessee's possession after such return in order to reduce or avoid future maintenance requirements; and (iii) maintain in the English language all records, logs and other materials required by the FAA, and any other Government Body having jurisdiction over any Item of Equipment or Lessee, to be maintained in respect of each Item of Equipment so as to enable operation of the Aircraft under the laws of the United States, which records logs and materials will conform to good commercial practice for records regarding all maintenance carried out with respect to the Aircraft. Lessor agrees that, so long as no Default or Event of Default exists, Lessee shall have the benefit of and shall be entitled to enforce, either in its own name or in the name of Lessor, acting as agent or assignee of Lessor, for the use and benefit of Lessee, any and all vendor's, manufacturer's or subcontractor's warranties or servicing obligations, including any rights to instructions and data, in respect of the Aircraft and Lessor shall execute and deliver such further instruments as may be necessary to enable Lessee to obtain customary warranty service furnished for the Aircraft by such vendor, manufacturer or subcontractor. Lessor shall have no other obligation or duty with respect to any of such matters. 5 4.3 Lessee, at its own expense, will make (or cause to be made) such alterations and modifications in and additions to the Aircraft as may be required from time to time to meet the applicable standards of the FAA. In addition, Lessee, at its own expense, may from time to time make such alterations and modifications in and additions to the Airframe or any Engine as Lessee may deem desirable in the proper conduct of its business if such alterations, modifications or additions do not diminish the value, residual values, utility or useful life, of the Aircraft, or impair the condition or airworthiness thereof, below the value, residual values, utility, condition, airworthiness or useful life, thereof immediately before such alteration, modification or addition assuming the Airframe or such Engine was then of the value, residual values, utility, condition and airworthiness required to be maintained by the terms hereof. Title to all parts incorporated or installed in or attached or added to the Aircraft as the result of such alteration, modification or addition shall, without further act, vest in Lessor and such parts shall become Parts and shall become subject to this Lease. 4.4 Lessee will not directly or indirectly create, incur, assume or suffer to exist any Lien on or with respect to the Airframe or any Engine or Part or Records or title thereto or any interest therein except Permitted Encumbrances. Lessee shall promptly, at its own expense, take such action as may be necessary to duly discharge any such Lien not excepted above arising at any time with respect to the Airframe or any Engine or Part. 4.5 If Lessor supplies Lessee with labels, plates or other markings stating that the Aircraft is leased from Lessor, Lessee shall affix and keep the same on a prominent place on the Aircraft during the term of this Lease. 4.6 Upon prior notice to Lessee, Lessor shall have the right at all reasonable times to inspect the Aircraft, observe its use and inspect records related thereto. Section 5. General Tax Indemnity. 5.1 Lessee shall pay or reimburse Lessor for, and indemnify and hold Lessor harmless from, all fees (including, but not limited to, license, documentation, recording or registration fees), and all sales, use, gross receipts, property, occupational, value-added or other taxes, levies, imposts, duties, assessments, charges or withholdings of any nature whatsoever, together with any penalties, fines or additions to tax, or interest thereon (all of the foregoing being hereafter referred to as "Impositions"), arising at any time before or during the term of this Lease, or upon any termination of this Lease or return of the Aircraft to Lessor, and levied or imposed on Lessor, directly or otherwise, by any federal, state or local government or taxing authority in the United States or by any foreign country or foreign or international taxing authority on or with respect to (a) the Aircraft, (b) the exportation, importation, registration, purchase, ownership, delivery, leasing, possession, use, operation, storage, maintenance, repair, transportation, return, sale, transfer of title or other disposition thereof, (c) the rents, receipts, or earnings arising from the Aircraft or (d) this Lease or any payment made hereunder, excluding, however, taxes measured by Lessor's net income imposed or levied by the United States or any state thereof but not excluding any such net income taxes that by the terms of the statute imposing such tax expressly relieve Lessee or Lessor from the payment of any Impositions Lessee would otherwise have been obligated to pay, reimburse or indemnify. 5.2 Lessee shall pay on or before the time or times prescribed by law any Impositions (except any Impositions excluded by Section 5.1), but Lessee shall have no obligation to pay any such Imposition while Lessee is contesting such Imposition in good faith and by appropriate legal proceedings and the nonpayment thereof does not, in the opinion of Lessor, adversely affect the title, property, use, disposition or other rights of Lessor with respect to the Aircraft. If any Impositions (except any Imposition excluded 6 by Section 5.1) is charged or levied against Lessor directly and paid by Lessor, Lessee shall reimburse Lessor on presentation of an invoice therefor. 5.3 If Lessor is not entitled to a corresponding and equal deduction with respect to any Imposition Lessee is required to pay or reimburse under Section 5.1 or 5.2 and the payment or reimbursement constitutes income to Lessor, then Lessee shall also pay to Lessor the amount of any Imposition Lessor is obligated to pay in respect of (a) such payment or reimbursement by Lessee and (b) any payment by Lessee made pursuant to this Section 5.3. 5.4 Lessee shall prepare and file, in a manner satisfactory to Lessor, any reports or returns required with respect to the Aircraft. Lessee shall furnish on Lessor's request reports or returns so filed. Section 6. Risk of Loss, Casualty, Waiver and Indemnity. 6.1 During the Lease Term, and until purchase or sale of the Aircraft in compliance with this Lease, Lessee shall bear the risk of damage, loss, theft or destruction, partial or complete, of the Aircraft including the Airframe, Engine and any Part from whatsoever source arising (whether or not any insurance proceeds are payable in respect of, or are sufficient to cover, such damage, loss, theft or destruction) and any and all replacements, repairs or substitutions thereof shall be at the cost and expense of Lessee and shall constitute accessions thereto and title thereto shall vest and remain in Lessor. Except as otherwise provided in Section 6.2, Lessee, at its own cost and expense, shall during the Lease Term promptly replace all Parts that may from time to time become worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use for any reason whatsoever. In addition, in the ordinary course of maintenance, service, repair, overhaul or testing, Lessee may remove any Parts from the Aircraft, whether or not worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use. However, Lessee shall replace such Parts as promptly as practicable with replacement Parts. Any replacement Part shall be free and clear of ail Liens except Permitted Encumbrances and shall be in as good a condition as, and have a value and utility at least equal to, the Part it replaces, assuming such replaced Part was in the condition and repair required to be maintained by the terms hereof. All Parts at any time removed from the Airframe or any Engine shall remain subject to this Lease, no matter where located, until such Parts are replaced by Parts incorporated or installed in or attached to the Airframe or such Engine and that meet the requirements for replacement Parts specified above. Immediately upon any replacement Part becoming incorporated or installed in or attached to the Airframe or any Engine or Propeller as above provided, without further act, (A) title to the replaced Part shall thereupon vest in Lessee, free and clear of all rights of Lessor and shall no longer be deemed a Part hereunder; (B) title to such replacement Part shall thereupon vest in Lessor; and (C) such replacement Part shall become subject to this Lease and be deemed part of the Airframe or such Engine, as the case may be, for all purposes hereof to the same extent as the Parts originally incorporated or installed in or attached to the Airframe or such Engine. 6.2 If the Aircraft is worn out, lost, stolen, destroyed or irreparably damaged, from any cause whatsoever, or taken or requisitioned by condemnation or otherwise (any such occurrence being hereinafter called a "Casualty Occurrence") before or during the term of this Lease as to the Aircraft, Lessee shall give Lessor prompt notice thereof. On the first rent payment date after such Casualty Occurrence or, if there is no such rent payment date, 30 days after the Casualty Occurrence, Lessee shall pay to Lessor, in addition to any amounts then due and owing, an amount equal to the Lease Balance (as hereinafter defined) for the Aircraft plus any termination charges and interest on late payments required under the Appendix ("Other Charges"). 7 "Lease Balance" shall mean, as of any determination date, the aggregate Purchase Price of the Aircraft, minus all amounts of Fixed Rent (as defined in Paragraph F of the Appendix) actually paid to the date of determination. Upon the making of such payment by Lessee in respect of the Aircraft, the rent for the Aircraft shall cease to accrue, the term of this Lease as to the Aircraft shall terminate and Lessee shall be entitled to possession of the Aircraft. If Lessor receives the Lease Balance and Other Charges for the Aircraft, Lessee shall be entitled to the proceeds of any recovery in respect of the Aircraft, from insurance or otherwise, and Lessor, subject to the rights of any insurer insuring the Aircraft as provided herein, shall execute and deliver, to Lessee, or to its assignee or nominee, a bill of sale (without representations or warranties except that the Aircraft is free and clear of all claims, liens, security interests and other encumbrances by or in favor of any person claiming by, through or under Lessor) for the Aircraft, and such other documents as may be required to release the Aircraft from this Lease and to transfer title thereto to Lessee or such assignee or nominee, in such form as may reasonably be requested by Lessee, all at Lessee's expense. Except as provided in this Section 6.2, Lessee shall not be released from its obligations hereunder in the event of, and shall bear the risk of, any Casualty Occurrence to the Aircraft before or during the term of this Lease with respect to the Aircraft. 6.3 Upon a Casualty Occurrence with respect to an Engine, whether or not then installed on the Airframe, provided such occurrence does not or is not deemed to constitute or happen in connection with a Casualty Occurrence with respect to the Aircraft described in Section 6.2, Lessee shall give Lessor prompt written notice thereof and shall promptly (but in no event later than 30 days after such Casualty Occurrence), duly convey to Lessor, as replacement for the Engine with respect to which such Casualty Occurrence occurred, good and marketable title to another engine of the same manufacturer and of the same or an improved model and suitable for installation and use on the Airframe, as the case may be, and either then owned by Lessee or acquired by Lessee for such replacement, free and clear of all Liens except Permitted Encumbrances, and having a value and utility at least equal to, and being in as good a condition as, the Engine with respect to which such Casualty Occurrence occurred (assuming such Engine was of the value and utility and in the condition and repair as required by the terms hereof immediately before such Casualty Occurrence), and in such case, Lessee at its own expense, will promptly (i) furnish Lessor, with a full warranty bill of sale, in form and substance satisfactory to Lessor, with respect to such Replacement Engine and assigning to Lessor the benefit of such standard manufacturer's and vendor's warranties as are then available and assignable to Lessor with respect to such Replacement Engine, (ii) cause a supplement hereto, in form and substance satisfactory to Lessor subjecting such Replacement Engine to the terms of this Lease, to be duly executed by Lessee and recorded as may be necessary or as Lessor may request pursuant to the Federal Aviation Act, (iii) furnish Lessor with such evidence of Lessee's good and marketable title to such Replacement Engine and of compliance with the insurance provisions of Section 7 with respect to such Replacement Engine as may be necessary or as Lessor may reasonably request, (iv) furnish Lessor with an opinion of Lessee's counsel to the effect that the instruments transferring title to the Replacement Engine have been duly authorized and delivered, the Replacement Engine is free and clear of all Liens other than Permitted Encumbrances and has been validly subjected to the Lease, the instruments subjecting such Replacement Engine to the Lease have been duly filed for recordation pursuant to the Federal Aviation Act, and no further action filing or recording is necessary or advisable in order to establish the interest of Lessor in such Replacement Engine, and (v) take such other action and provide such further assurances as may be necessary or as Lessor may reasonably request with respect to such Replacement Engine in order that such Replacement Engine is duly and properly subjected to the Lease. Upon full compliance by Lessee with this Section 6.3, Lessor will transfer to Lessee all Lessor's right, title and interest, as-is, where-is, without recourse or warranty, express or implied, in and to the Engine with respect to which such Casualty Occurrence occurred. 8 6.4 Lessee waives and releases any claim now or hereafter existing against Lessor, any company controlled by, controlling, or under common control with Lessor and all of their directors, officers, employees, agents, attorneys, successors and assigns (each, an "Indemnified Person") on account of, and shall indemnify, reimburse and hold each Indemnified Person harmless from, any and all claims (including, but not limited to, claims based on or relating to copyright, trademark or patent infringement, environmental liability, negligence, strict liability in tort, statutory liability or violation of laws), losses, damages, obligations, penalties, liabilities, demands, suits, judgments or causes of action, and all legal proceedings, and any reasonable costs or expenses in connection therewith, including reasonable attorneys' fees, including reasonable allocated time charges of internal counsel, in each case imposed on, incurred by or asserted against the Indemnified Person in any way relating to or arising in any manner out of (a) the registration, purchase, taking or foreclosure of a security interest in, or the ownership, delivery, condition, lease, assignment, storage, transportation, possession, use, operation, return, repossession, sale or other disposition of, the Aircraft, before or during the term of this Lease as to the Aircraft, (b) any alleged or actual defect in the Aircraft (whether arising from the material or any article used therein, the design, testing, use, maintenance, service, repair or overhaul thereof or otherwise) regardless of when such defect is discovered or alleged, whether or not the Aircraft is in Lessee's possession and no matter where it is located or (c) this Lease or any other related document, the enforcement hereof or thereof or the consummation of the transactions contemplated hereby or thereby. Section 7. Insurance. Lessee, at its own cost and expense, shall keep the Aircraft insured against all risks, in no event for less than the Lease Balance (as such term is defined in Section 6.2) with respect to the Aircraft, and shall maintain public liability insurance against such risks and for such amounts as Lessor may require. All such insurance shall be in such form and with such companies as Lessor shall approve, shall specify Lessor as additional insured and Lessee as insured and shall provide that such insurance may not be canceled as to Lessor or altered in any way that would affect the interest of Lessor without at least 30 days prior written notice to Lessor (10 days in the case of nonpayment of premium). All insurance shall be primary, without right of contribution from any other insurance carried by Lessor and shall not be invalidated by the action or inaction of Lessee or any other person. All insurance shall contain a "breach of warranty" provision satisfactory to Lessor, and shall provide that all amounts payable by reason of loss or damage to the Aircraft shall be payable solely to Lessor. Section 8. Default. 8.1 The following shall constitute events of default ("Events of Default") hereunder: (a) Lessee fails to make any payments to Lessor when due hereunder; (b) Any representation or warranty of Lessee contained herein or in any document furnished to Lessor in connection herewith is incorrect or misleading in any material respect when made; (c) Lessee fails to observe or perform any other covenant, agreement or warranty made by Lessee hereunder and such failure continues for 10 days after written notice thereof to Lessee; (d) Any default occurs under any other agreement for borrowing money or receiving credit in excess of $1,000,000 under which Lessee may be obligated as borrower, if such default consists of the failure to pay any indebtedness when due or if such 9 default gives the holder of the indebtedness the right to accelerate the indebtedness; (e) Lessee makes an assignment for the benefit of creditors or files any petition or action under any bankruptcy, reorganization, insolvency or moratorium law, or any other law or laws for the relief of, or relating to, debtors; (f) Any involuntary petition is filed under any bankruptcy statute against Lessee or any receiver, trustee, custodian or similar official is appointed to take possession of the properties of Lessee, unless such petition or appointment is set aside or withdrawn or ceases to be in effect within 60 days from the date of the filing or appointment; (g) Lessee liquidates, dissolves, or enters into any partnership, joint venture, (other than in its ordinary course of business) consolidation, merger, or other combination, or sells, leases or dispose of a substantial portion of its business or assets; or 8.2 If any Event of Default occurs, Lessor, at its option, may: (a) proceed by appropriate court action or actions either at law or in equity, to enforce performance by Lessee of the applicable covenants of this Lease or to recover damages for the breach thereof; or (b) by notice in writing to Lessee terminate this Lease, whereupon Lessee shall remain liable as hereinafter provided, and Lessor may, at its option, do any one or more of the following: (i) declare the Lease Balance and all Other Charges immediately due and payable and recover any damages and expenses in addition thereto Lessor sustains by reason of the breach of any covenant, representation or warranty contained in this Lease other than for the payment of rent; (ii) enforce the security interest given hereunder pursuant to the Uniform Commercial Code or any other law; (iii) enter upon the premises where any of the Aircraft may be and take possession of all or any of the Aircraft; and (iv) require Lessee to return the Aircraft as provided in Section 9. 8.3 Lessor shall have any and all rights given to a secured party by law, and may, but is not required to, sell the Aircraft in one or more sales. Lessor may purchase at such sale. Lessee acknowledges that sales for cash or on credit to a wholesaler, retailer or user of the Aircraft, or at public or private auction, are all commercially reasonable. The proceeds of such sale shall be applied in the following order: First, to the reasonable expenses of retaking, holding, preparing for sale and selling, including the allocated time charges, costs and expenses of internal counsel of or for Lessor and any other attorneys' fees and expenses incurred by Lessor; Second, to the amounts, except those specified below, which under the terms of this Lease are due or have accrued; Third, to Other Charges; and Fourth, to the Lease Balance. Any surplus shall be paid to the person or persons entitled thereto. If there is a deficiency, Lessee will promptly pay the same to Lessor. 8.4 Lessee agrees to pay all allocated time charges, costs and expenses of internal counsel for Lessor and any other attorneys' fees, expenses or out-of-pocket costs incurred by Lessor in enforcing this Lease. 10 8.5 The remedies hereunder provided in favor of Lessor shall not be deemed exclusive, but shall be cumulative, and shall be in addition to all other remedies in its favor existing at law or in equity. 8.6 If Lessee fails to perform any of its agreements contained herein, Lessor may perform such agreement, and Lessee shall pay the expenses incurred by Lessor in connection with such performance, upon demand. Section 9. Return of Aircraft. If Lessor rightfully demands possession of the Aircraft pursuant to this Lease or otherwise, Lessee, at its expense, shall forthwith deliver possession of the Aircraft to Lessor, at the option of Lessor (a) by delivering the Aircraft, appropriately protected and in the condition required by Section 4, to Lessor at such place as may be specified by Lessor. Upon return of the Aircraft to Lessor or any purchaser a) The Airframe will have completed the next scheduled heaviest maintenance inspection within 25 hours of return; b) All airworthiness directives will be terminated where possible, and all service bulletins complied with, in each case applicable to the Airframe, any Engine any Part or the related records; c) All aspects of the applicable corrosion control program will be complete to date; d) All landing gear will have been overhauled within three months prior to return; e) All hard time components will have been overhauled or refurbished within 25 hours of return; and f) The Engines shall not have been used more than 25 hours or cycles since a complete overhaul or refurbishment. Section 10. Assignment. Lessor may at any time assign or transfer all or any of the right, title or interest of Lessor in and to this Lease, and the rights, benefits and advantages of Lessor hereunder, including the rights to receive payment of rent or any other payment hereunder, Lessor's title to the Aircraft and any and all obligations of Lessor in connection herewith. Lessor may disclose to any potential or actual assignee or transferee any information in the possession of Lessor or any Affiliate relating to Lessee or this Lease. Any such assignment or transfer shall be subject and subordinate to this Lease and the rights and interests of Lessee hereunder. No assignment of this Lease or any right or obligation hereunder may be made by Lessee or any assignee of Lessee without the prior written consent of Lessor. Section 11. Ownership, Security Interest and Further Assurances. Unless assigned by Lessor, or applicable law otherwise provides, title to and ownership of the Aircraft shall remain in Lessor as security for the obligations of Lessee hereunder until Lessee has fulfilled all of its obligations hereunder. Lessee hereby grants to Lessor a continuing security interest in the Aircraft to secure the payment of all sums due hereunder. Lessee confirms there is no pending litigation, tax claim, proceeding or dispute that may adversely affect its financial condition or impair its 11 ability to perform its obligations hereunder. Lessee will, at its expense, maintain its legal existence in good standing and do any further act and execute, acknowledge, deliver, file, register and record any further documents Lessor may reasonably request in order to protect Lessor's title to and security interest in the Aircraft and Lessor's rights and benefits under this Lease. Section 12. Late Payments. Lessee shall pay to Lessor, on demand, interest at the rate set forth in the Appendix on the amount of any payment not made when due hereunder from the date due until payment is made. Section 13. Effect of Waiver. No delay or omission to exercise any right, power or remedy accruing to Lessor upon any breach or default of Lessee hereunder shall impair any such right, power or remedy nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein or of or in any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of Lessor of any breach or default under this Lease must be in writing specifically set forth. Section 14. Survival of Covenants. All obligations of Lessee under Sections 1, 2, 4, 5, 6, 7, 8, 9, 12 and the Appendix shall survive the expiration or termination of this Lease to the extent required for their full observance and performance. Section 15. Applicable Law. This Lease shall be governed by and construed under the laws of Georgia, to the jurisdiction of which, and of federal courts in Georgia, the parties hereto submit. Section 16. Financial Information. Lessee shall (a) keep its books and records in accordance with generally accepted accounting principles and practices consistently applied and shall deliver to Lessor its annual audited financial statements, including without limitation Lessee's SEC form 10-K. within 30 days of filing, and such other financial statements and information as Lessor may reasonably request; (b) as soon as available but not later than 60 days after the end of each of the first 3 fiscal quarters of the Lessee the unaudited consolidated balance sheet of Lessee and its subsidiaries as at the end of such fiscal quarter, and the unaudited consolidated statement of income and retained earnings and of changes in cash flow of Lessee and its subsidiaries for such fiscal quarter and that portion of the fiscal year ending with such quarter, certified by a responsible officer of Lessee as being prepared in accordance with generally accepted accounting principles and complete and correct and fairly presenting the financial condition and results of operations of Lessee and its subsidiaries; 12 (c) as soon as available but no later than 120 days after the end of each of its fiscal years, a complete copy of an audit report of Lessee and its subsidiaries which shall include at least the consolidated balance sheet of Lessee and its subsidiaries as of the close of such year, and the consolidated statement of income and retained earnings and of changes in cash flows of Lessee for such year, prepared in accordance with generally accepted accounting principles and fairly presenting the Lessee's financial position and results of operations, certified by Deloitte-Touche, or other independent public accounting firm of recognized national standing selected by Lessee and satisfactory to Lessor. Such certificate shall not be qualified or limited because of restricted or limited examination by such accountant of any material portion of Lessee's records. Credit information relating to Lessee may be disseminated among Lessor and any of its affiliates and any of their respective successors and assigns. Section 17. Notices. All demands, notices and other communications hereunder shall be in writing and shall be deemed to have been duly given when personally delivered, when received by facsimile or when deposited in the mail, first class postage prepaid, or delivered to a telegraph office, charges prepaid, addressed to each party at the address set forth below the signature of such party on the signature page, or at such other address as may hereafter be furnished in writing by either party to the other. Section 18. Counterparts. Two counterparts of this Lease have been executed by the parties hereto. One counterpart has been prominently marked "Lessor's Copy". One counterpart has been prominently marked "Lessee's Copy". Only the counterpart marked "Lessor's Copy" shall evidence a monetary obligation of Lessee. Section 19. Transaction Costs. Lessee agrees to reimburse any legal expenses of Lessor (including allocated time charges of internal counsel for Lessor and other attorneys fees) and any out-of-pocket costs incurred in connection with the preparation and negotiation of lease documents (whether or not a lease is ever executed by Lessee) and any documents required in connection therewith. Section 20. Effect and Modification of Lease. This Lease exclusively and completely states the rights of Lessor and Lessee with respect to the leasing of the Aircraft and supersedes all prior agreements, oral or written, with respect thereto. No variation or modification of this Lease shall be valid unless in writing. Section 21, Truth in Leasing. THE AIRCRAFT, AS EQUIPMENT BECAME SUBJECT TO THE MAINTENANCE REQUIREMENTS OF PART 91 OF THE FEDERAL AVIATION REGULATIONS ("FARS") UPON THE REGISTRATION OF THE AIRCRAFT WITH THE FEDERAL AVIATION ADMINISTRATION. LESSEE CERTIFIES THAT THE AIRCRAFT WILL BE MAINTAINED AND INSPECTED UNDER PART 91 OF THE FARS FOR OPERATIONS TO BE CONDUCTED UNDER THIS AGREEMENT. UPON EXECUTION OF THIS AGREEMENT, AND DURING THE TERM HEREOF, LESSEE CERTIFIES THAT LESSEE SHALL BE REPSONSIBLE FOR THE OPERATIONAL CONTROL OF 13 THE AIRCRAFT UNDER THIS AGREEMENT. LESSEE FURTHER CERTIFIES THAT IT UNDERSTANDS ITS RESPONSIBILITIES FOR COMPLIANCE WITH APPLICABLE FARS. THE PARTIES HERETO ACKNOWLEDGE THAT AN EXPLANATION OF FACTORS BEARING ON OPERATIONAL CONTROL AND PERTINENT FARS MAY BE OBTAINED FROM THE NEAREST FEDERAL AVIATION ADMINISTRATION FLIGHT STANDARD DISTRICT OFFICE, GENERAL AVIATION DISTRICT OFFICE OR AIR CARRIER DISTRICT OFFICE. 14 The parties hereto have executed this Lease as of the day and year first above written. BANC OF AMERICA LEASING & CAPITAL, LLC LAKES GAMING, INC. By /s/ JERRY D. HOLMES By /s/ TIMOTHY COPE ----------------------------------- ------------------------------------ Title Vice President Title CFO --------------------------------- By JERRY D. HOLMES By TIMOTHY COPE ----------------------------------- ------------------------------------ Title VICE PRESIDENT Title CFO -------------------------------- --------------------------------- Address: 555 California Street 4th Floor San Francisco, CA 94104 Attn: Contract Administration #15811 Fax: (415)765-7373 FEB 18 2000 ================================================================================ FIRST AMENDMENT TO LEASE INTENDED AS SECURITY dated February 11, 2000 between BANG AMERICA LEASING & CAPITAL, LLC, as Lessor and LAKES GAMING, INC., as Lessee ================================================================================ FIRST AMENDMENT TO LEASE INTENDED AS SECURITY THIS FIRST AMENDMENT TO LEASE INTENDED AS SECURITY, dated February 11, 2000 (this "Amendment") between BANC OF AMERICA LEASING & CAPITAL, LLC, a Delaware limited liability company ("Lessor"), and LAKES GAMING, INC., a Minnesota corporation ("Lessee"), amends that certain Lease Intended as Security dated as of December 3, 1999 (the "Lease") as supplemented by Lease Schedule and Acceptance Certificate dated as of December 3, 1999 ("Lease Schedule"; the Lease, as supplemented by Lease Schedule, being referred to herein as the "Lease"), in each case between the Lessor and the Lessee. WITNESSETH: WHEREAS, except as otherwise defined in this Amendment, capitalized terms used herein and not otherwise defined herein shall have the meanings attributed thereto in the Lease as amended hereby; WHEREAS, pursuant to the Lease, Lessee has leased from Lessor the Aircraft; WHEREAS, a counterpart of the Lease to which was attached and made a part thereof a counterpart of Lease Schedule, was recorded with the Federal Aviation Administration on December 6, 1999 under conveyance number 2A279206; WHEREAS, Lessor and Lessee desire to amend the Lease in certain respects. NOW, THEREFORE, in consideration of the mutual agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. Amendment to Paragraph F of the Appendix to Lease Intended as Security. 1.1 Amendment to Clause 1. Clause 1 of Paragraph F of the Appendix to Lease Intended as Security is hereby amended to be read in its entirety as follows: "1. Interim Rent. On each Payment Date during the Interim Term, Lessee shall pay to Lessor arrears rent for the Aircraft (the "Interim Rent") in an amount equal to the sum of (i) an amount equal to interest accrued at the Interest Rate on the portion of the Lease Balance outstanding on the first day of the Rent Period for which Interim Rent is being paid, plus (ii) an amount equal to interest accrued at the Interest Rate on the portion of the Lease Balance advanced after the first day of the Rent Period specified in the preceding clause (i)." 1.2 Amendment to Certain Definitions. The definitions of "LIBO Rate" and "Rent Period" appearing in Clause 3 of Paragraph F of the Appendix to Lease Intended as Security are hereby amended to be read in their entirety as follows: "LIBO Rate" shall mean, relative to any Rent Period with respect to the Lease Balance (or, during the Interim Term, the portion of the Lease Balance to which such Rent Period applies) and each Schedule Balance, the rate of interest equal to the average (rounded upwards, if necessary, to the nearest 1/16 of 1%) of the rates per annum at which Dollar deposits in immediately available funds are offered by Bank of America, National Association's LIBOR Office in the London interbank market as at or about 11:00 a.m. London time two Business Days prior to the beginning of such Rent Period for delivery on the first day of such Rent Period, and in an amount approximately equal to the amount of the Lease Balance (or, during the Interim Term, the portion of the Lease Balance to which such Rent Period applies) and for a period equal to one month. "Rent Period" shall mean, (i) for the Interim Term and with respect to that portion of the Lease Balance advanced at the commencement of the Interim Term or on or prior to the first day of such Rent Period, the period beginning on the first day of the Interim Term and ending on (but excluding) the date which numerically corresponds to such date one month thereafter and each consecutive one-month period thereafter, with each such successive period ending on the date which numerically corresponds to the date on which such period commenced or, if earlier, the Base Date, (ii) for the Interim Term and with respect to that portion of the Lease Balance advanced after the first day of a Rent Period specified in clause (i) hereof, the period beginning on the date of such advance and ending on (but excluding) the last day of such Rent Period, (iii) for the Base Term and any Renewal Term the period beginning on the first day of such Base Term and ending on (but excluding) the date which numerically corresponds to such date one month thereafter and each consecutive one-month period thereafter, with each such period ending on the date which numerically corresponds to the date on which such period commenced; provided, however, that (a) if such Rent Period would otherwise end on a day which is not a Business Day, then such Rent period shall end on the next following Business Day, unless (solely for purposes of determining Rent periods in connection with calculating Variable Rent on a LIBO Rate basis) such next following Business Day is the first Business Day of a calendar month, in which case such Rent period shall end on the Business Day immediately preceding such numerically corresponding day, and (b) no Rent Period may end later than the last day of the Lease Term. SECTION 2. Miscellaneous. 2.1 Continued Effectiveness of Lease. Except as modified hereby, all of the terms and conditions of the Lease shall remain in full force and effect. 2 2.2 Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA, WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES OF SUCH STATE. 2.3 Counterparts. This Amendment may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same agreement. [Remainder of Page Intentionally Left Blank] 3 IN WITNESS WHEREOF, Lessor and Lessee have caused this Amendment to be executed by their duly authorized representatives as of the date first above written. LESSOR: BANC OF AMERICA LEASING & CAPITAL, LLC By: /s/ Albert Z. Norona ------------------------------------ Name: Albert Z. Norona Title: Vice President LESSEE: LAKES GAMING, INC. By: /s/ Timothy Cope ------------------------------------ Name: Timothy Cope ---------------------------------- Title: CFO --------------------------------- ================================================================================ SECOND AMENDMENT TO LEASE INTENDED AS SECURITY dated May 12, 2000 between BANC AMERICA LEASING & CAPITAL, LLC, as Lessor and LAKES GAMING, INC., as Lessee ================================================================================ SECOND AMENDMENT TO LEASE INTENDED AS SECURITY THIS SECOND AMENDMENT TO LEASE INTENDED AS SECURITY, dated May 12, 2000 (this "Amendment") between BANC OF AMERICA LEASING & CAPITAL, LLC, a Delaware limited liability company ("Lessor"), and LAKES GAMING, INC., a Minnesota corporation ("Lessee"), amends that certain Lease Intended as Security dated as of December 3, 1999 (as amended through the date hereof, the "Lease") as supplemented by Lease Schedule and Acceptance Certificate dated as of December 3, 1999 ("Lease Schedule"; the Lease, as supplemented by Lease Schedule, being referred to herein as the "Lease"), in each case between the Lessor and the Lessee. WITNESSETH: WHEREAS, except as otherwise defined in this Amendment, capitalized terms used herein and not otherwise defined herein shall have the meanings attributed thereto in the Lease as amended hereby; WHEREAS, pursuant to the Lease, Lessee has leased from Lessor the Aircraft; WHEREAS, a counterpart of the Lease to which was attached and made a part thereof a counterpart of Lease Schedule, was recorded with the Federal Aviation Administration on December 6, 1999 under conveyance number 2A279206; and WHEREAS, Lessor and Lessee desire to amend the Lease to in certain respects. NOW, THEREFORE, in consideration of the mutual agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1 Amendment to Paragraph B of the Appendix to Lease Intended as Security. 1.1 Amendment to Paragraph B of the Appendix to Lease Intended as Security. Paragraph B of the Appendix to Lease Intended as Security is hereby amended by inserting the following sentence at the end thereof: The Purchase Price with respect to the Aircraft is set forth on Annex II to the Schedule." SECTION 2. Amendment to Annex II to Lease Schedule and Acceptance Certificate. 2.1 Amendment to Annex II to Lease Schedule and Acceptance Certificate. Annex II to Lease Schedule and Acceptance Certificate is hereby deleted in its entirety and replaced with the Annex II to Lease Schedule and Acceptance Certificate attached to this Amendment. SECTION 3. Miscellaneous. 3.1 Continued Effectiveness of Lease. Except as modified hereby, all of the terms and conditions of the Lease shall remain in full force and effect. 3.2 Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA, WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES OF SUCH STATE. 3.3 Counterparts. This Amendment may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same agreement. [The remainder of this page is intentionally left blank.] 2 IN WITNESS WHEREOF, Lessor and Lessee have caused this Amendment to be executed by their duly authorized representatives as of the date first above written. LESSOR: BANC OF AMERICA LEASING & CAPITAL, LLC By: /s/ Albert Z. Norona ------------------------------------ Name: Albert Z. Norona Title: Vice President LESSEE: LAKES GAMING, INC. By: /s/ Timothy J. Cope ------------------------------------ Name: Timothy J. Cope ---------------------------------- Title: CFO --------------------------------- ANNEX II TO LEASE SCHEDULE AND ACCEPTANCE CERTIFICATE Delivery Date: December 3, 1999 Purchase Price: $8,500,000 Base Date: May 1, 2000 "Applicable Percentage" shall mean, with respect to the end of the Base Term and each Renewal Term, the percentage set forth below opposite each such date:

The percentage used to calculate the Recourse Deficiency Amount with respect to the Aircraft described in this Schedule shall be 16.33%. Fixed Rent Payments & Schedule Balance:

3 THIRD AMENDMENT TO LEASE INTENDED AS SECURITY THIS THIRD AMENDMENT TO LEASE INTENDED AS SECURITY, dated May 1, 2005 (this "Amendment") Between BANC OF AMERICA LEASING & CAPITAL, LLC, a Delaware limited liability company ("Lessor") and LAKES ENTERTAINMENT, INC. a Minnesota corporation ("Lessee"), amends that certain Lease Intended as Security dated as of December 3, 1999 (as amended through the date hereof, the "Lease") as supplemented by Lease Schedule and Acceptance Certificate dated as of December 3, 1999 ("Lease Schedule"; the lease, as supplemented by Lease Schedule, being referred to herein as the "Lease"), in each case between the Lessor and the Lessee. WITNESSETH: WHEREAS, except as otherwise defined in this Amendment, capitalized terms used herein and not otherwise defined herein shall have the meanings attributed thereto in the Lease as amended hereby; WHEREAS, pursuant to the Lease, Lessee has leased from the Lessor the Aircraft; WHEREAS, a counterpart of the Lease to which was attached and made a part thereof a counterpart of lease Schedule, was recorded with the Federal Aviation Administration on December 6, 1999 under conveyance number 2A279206; and WHEREAS, Lessor and Lessee desire to amend the Lease in certain respects. NOW, THEREFORE, in consideration of the mutual agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. Amendment to the Appendix to Lease Intended as Security. 1.1 Paragraph B is hereby deleted in its entirety and replaced with the following: "Purchase Price" with respect to the Aircraft shall mean the amount set forth in Annex II to Lease Schedule and Acceptance Certificate." 1.2 The first four sentences of Paragraph C shall be deleted in their entirety and replaced with the following: The Lease Term for the Aircraft shall consist of a Base Term and any applicable Renewal Terms. The "Base Date" shall be the date set forth in Annex II to Lease Schedule and Acceptance Certificate. The Base Term for the Aircraft shall commence on its Base Date and continue for one (1) year." 1.3 Subparagraphs 1, 2 and 3 of Paragraph D are hereby deleted in their entirety and replaced with the following: "The Lessor agrees to make an advance ("Advance") to the Lessee on the Base Date in the amount of the Purchase Price." 1.4 Paragraph F is hereby amended as follows: (a) All references and definitions pertaining to Interim Rent and all other defined terms and definitions relating to Interim Rent are deleted in their entirety. (b) The definition of "Interest Rate" set forth in Paragraph F of the Appendix to Lease Intended as Security is hereby deleted in its entirety and replaced with the following: "Interest Rate shall mean, with respect to any Rent Period, the rate per annum equal to the sum of (i) the LIBO Rate for such Rent Period, plus (ii) 2.25%. SECTION 2. Amendment to Lease Intended as Security 2.1 Section 2.5 shall be deleted in its entirety and replaced with the following: "Payments shall be applied in the following order: (a) expenses and attorneys fees except those attorneys fees associated with the negotiation and execution of the Third Amendment to Lease Intended as Security; (b) interest on late payments; and (c) rent and all other items due hereunder. Payments shall be evidenced by entries in records made by Lessor." SECTION 3. Amendment to Lease Schedule and Acceptance Certificate. 3.1 The first two sentences of Paragraph 2 are hereby deleted in their entirety and replaced with the following: "The Lease Term of this Schedule shall commence on the Base Date set forth in Annex II. The Applicable Percentage and the Lease Balance as to each Payment Date are set forth, respectively, in Annex II (as the same may be adjusted pursuant to Section 1.2(c)(ii) of the Lease)." 3.2 The reference to Interim Rent in the first sentence of Paragraph 3 is deleted in its entirety. SECTION 4. Amendment to Annex II to Lease Schedule and Acceptance Certificate. 4.1 Annex II to Lease Schedule and Acceptance Certificate is hereby deleted in its entirety and replaced with the Annex II to Lease Schedule and Acceptance Certificate attached is the Amendment. SECTION 5. Miscellaneous 5.1 Continued Effectiveness of Lease. Except as modified hereby, all of the terms and conditions of the Lease shall remain in full force and effect. 5.2 Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUCTED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA, WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES OF SUCH STATE. 5.3 Counterparts. This Amendment may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same agreement. [Remainder of Page Intentionally Left Blank] IN WITNESS WHEREOF, Lessor and Lessee have caused this Amendment to be executed by their duly authorized representatives as of the date first above written. LESSOR: BANC OF AMERICA LEASING & CAPITAL LLC By: /s/ ALBERT Z. NORONA ------------------------------------ Name: ALBERT Z. NORONA ---------------------------------- Title: VICE PRESIDENT --------------------------------- LESSEE: LAKES ENTERTAINMENT, INC. By: /s/ TIMOTHY J. COPE ------------------------------------ Name: TIMOTHY J. COPE ---------------------------------- Title: CFO --------------------------------- ANNEX II TO LEASE SCHEDULE AND ACCEPTANCE CERTIFICATE Purchase Price: $6,105,000.00 Base Date: May 1, 2005 "Applicable Percentage" shall mean, with respect to the end of the Base Term and each Renewal Term, the percentage set forth below opposite each such date:

The percentage used to calculate the Recourse Deficiency Amount with respect to the Aircraft described in this Schedule shall mean the percentages set forth above. Fixed Rent Payments & Schedule Balance:

14 7/1/2006 24,908.76 5,750,047.76 15 8/1/2006 25,024.59 5,725,023.16 16 9/1/2006 25,140.95 5,699,882.21 17 10/1/2006 25.257.86 5,674,624.35 18 11/1/2006 25,375.31 5,649,249.04 19 12/1/2006 25,493.30 5,623,755.74 20 1/1/2007 25,611.85 5,598,143.88 21 2/1/2007 25,730.94 5,572,412.94 22 3/1/2007 25,850.59 5,546,562.35 23 4/1/2007 25,970.80 5,520,591.55 24 5/1/2007 26,091.56 5,494,499.98 3 25 6/1/2007 24,793.48 5,469,706.50 26 7/1/2007 24,908.76 5,444,797.74 27 8/1/2007 25,024.59 5,419,773.15 28 9/1/2007 25,140.95 5,394,632.20 29 10/1/2007 25,257.86 5,369,374.34 30 11/1/2007 25,375.31 5,343,999.03 31 12/1/2007 25,493.30 5,318,505.74 32 1/1/2008 25,611.85 5,292,893.89 33 2/1/2008 25,730.94 5,267,162.95 34 3/1/2008 25,850.59 5,241,312.36 35 4/1/2008 25,970.80 5,215,341.56 36 5/1/2008 26,091.56 5,189,250.00

EX-10.169 3 c02716exv10w169.txt CONDITIONAL RELEASE AND TERMINATION AGREEMENT Exhibit 10.169 CONDITIONAL RELEASE AND TERMINATION AGREEMENT THIS CONDITIONAL RELEASE AND TERMINATION AGREEMENT (the Termination Agreement") is made this 20 day of May, 1999, by and between Lakes Gaming. Inc., a Minnesota corporation ("Lakes") and Casino Resource Corporation, a Minnesota corporation ("CRC"). WITNESSETH WHEREAS, Lakes and CRC executed that certain Memorandum of Understanding, dated as of December 29, 1998 (the "Memorandum"), pursuant to which they each, evidenced their intention to negotiate in good faith towards the execution of a joint venture agreement, on the terms and subject to the conditions set forth in the Memorandum, for purposes of seeking to obtain an Indian, gaming management and, development agreement (the "Management Agreement") with the Pokagon Band of Potawatomi Indians (the "Tribe"), for planned casinos in Michigan and Indiana; WHEREAS, as of the date hereof, the parties have not executed a joint venture agreement, nor has the Tribe awarded Lakes by CRC the Management Agreement; WHEREAS, it is the understanding of the parties hereto, that the Tribe may or may not be amenable to awarding the Management Agreement solely to Lakes so long as Lakes terminates its affiliation with CRC with respect to such Management Agreement: and WHEREAS, in the event the Tribe determines to award the Management Agreement to Lakes, and such selection, is conditioned on the CRC's noninvolvement in the management or development of the casinos, the parties, wish to terminate the Memorandum and release each from, any and all liability and claims they might otherwise have against each other related to or otherwise arising out of Ac transactions contemplated by the Memorandum, in each case on the terms and subject to the conditions set forth herein. NOW THEREFORE, in consideration of the foregoing and the mutual covenants and promises set forth herein, the parties intending to be legally bound hereby agree as follows: 1. Subject to the conditions set forth in Section 3 below, Lakes hereby acquits, and forever discharges CRC, and each of its officers, directors, employees mid affiliates, and its and their respective successors and assigns of and from all actions, causes of actions, claims, suits, debts, dues, account, bonds, covenants, contracts, agreements, judgments, damages and costs whatsoever in law or in equity arising out of the Memorandum and the transactions contemplated thereby, which Lakes can, shall or may have from the beginning of the world to the date of these presents. 2. Subject to the conditions set forth in Section 3 below, CRC hereby releases, acquits, and forever discharges Lakes, and each of its officers, directors, employees and affiliates. Confidential SCHEDULE I
AMOUNT PAYABLE WHEN PAYABLE - -------------- ------------ Michigan Casino $ 4,000,000 Year 1 - Payable $1,000,000 quarterly in arrears $ 4,000,000 Year 2 - Payable $1,000,000 quarterly in arrears $ 4,000,000 Year 3 - Payable $1,000,000 quarterly in arrears $ 4,000,000 Year 4 - Payable $1,000,000 quarterly in arrears $ 4,000,000 Year 5 - Payable $1,000,000 quarterly in arrears Indiana Casino $ 2,000,000 Year 1 - Payable $500,000 quarterly in arrears $ 2,000,000 Year 2 - Payable $500,000 quarterly in arrears $ 2,000.000 Year 3 - Payable $500,000 quarterly in arrears $ 2,000,000 Year 4 - Payable $500,000 quarterly in arrears S 2,000,000 Year 5 - Payable $500,000 quarterly in arrears ----------- $30,000,000 Total
None of the above payments shall exceed on an annual basis twenty percent (20%) of Lakes Gaming Management Fee. If these payments during Year 1 exceed 20% of Lakes annual Management Fee, a credit will be given on the following years payments. Both parties agree that at the end of the five year period, an average annual Management Fee will be calculated, with any appropriate adjustments made so as to assure that both Lakes Gaming and CRC that the amounts payable on Schedule I are no less than the amounts listed payable, but no greater than 20% of the Lakes Management Fee received by Lakes over the five year period. However, the overriding formula shall be that the fee paid to CRC shall be no more than 20% of the five year Management Fee received by Lakes. AMENDMENT TO CONDITIONAL RELEASE AND TERMINATION AGREEMENT THIS AMENDMENT TO CONDITIONAL RELEASE AND TERMINATION AGREEMENT (the "Amendment") is made this 1st day of July, 1999, by and between Lakes Gaming, Inc., a Minnesota corporation ("Lakes") and Casino Resource Corporation, a Minnesota corporation ("CRC"). BACKGROUND Lakes and CRC executed that certain Memorandum of Understanding, dated as of December 29, 1998 (the "Memorandum"), pursuant to which they each evidenced their intention to negotiate in good faith towards the execution of a joint venture agreement, on the terms and subject to the conditions set forth in the Memorandum. The Joint Venture intended to seek to obtain an Indian gaming management and development agreement (the "Management Agreement") with the Pokagon Band of Potawatomi Indians (the "Tribe"), for planned casinos in Michigan and Indiana. It was the understanding of the parties that the Tribe might be amenable to awarding the Management Agreement to Lakes if CRC terminated its affiliation with Lakes and the proposed Joint Venture with, respect to the Management Agreement. Based on the foregoing understanding, the parties entered into a Conditional Release and Termination Agreement dated May 20, 1999 (the "Termination Agreement"). Subsequent to the entering into of the Termination Agreement, the Tribe determined to negotiate exclusively with Lakes with a view to entering a Management Agreement. As part of the negotiations with the Tribe. The Tribe required that the Termination Agreement between Lakes and CRC be modified so that CRC would not be receiving any payments based on the revenues received by Lakes under the Management Agreement. In order to comply with the requirements of the Tribe, Lakes and CRC determined to amend the Termination Agreement and fix the payments from Lakes to CRC in full satisfaction of Lakes' financial obligations to CRC under the Memorandum and Termination Agreement. NOW THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, and intending to be legally bound hereby, the parties hereto agree as follows: 1. Paragraph 5 of the Termination Agreement be and the same is hereby restated in its entirety as follows: 5. In consideration of CRC's prompt termination, withdrawal and disassociation from its relationship with each of Lakes, the proposed Joint Venture and the Tribe under the Memorandum or the Management Agreement. Lakes agrees to pay in full satisfaction of any and all obligations it owes to CRC the aggregate maximum sum of $16,100,000 (assuming the Casino is opened in the New Buffalo area) payable as follows: 5.1 $2 million shall be payable upon the later to occur of the signing of a Management Agreement and ratification of' same by the new Tribal Council pertaining to the proposed Michigan casino (as ratification is defined in the development agreement between the Tribe and Lakes, attached hereto as Exhibit B). Except for a change in the location not contemplated herein; any changes in the Management Agreement that the Tribe or Lakes Gaiming, Inc. might make in the Management Agreement will have no bearing on the payment to Casino Resource Corporation. The payment to Casino Resource Corporation will be triggered by the release of or payment of any funds, in excess of an aggregate of $250,000, by Lakes Gaming under their Management Agreement to the Tribe. Lakes Gaming, Inc. agrees to notify and pay CRC within 24 hours of the payment of funds, as described above. Lakes shall be given credit for a $2,604,923 million payment against the maximum $16.1 million aggregate amount in recognition of present valuing the advance cash payment being made. 5.2 $10,995,077 or the adjusted lesser amount per this Agreement shall be payable as set forth on Schedule A, attached hereto. Such payments shall commence on the last day of the calendar quarter in which the Tribe's Michigan casino opens, and continue only so long as Lakes Gaming, Inc. or an affiliate is and continues to be the manager and the casino is open. 5.3 Notwithstanding the foregoing, in the event the Tribe's Michigan casino is not substantially ready to open on or before June 30, 2004, and the Tribe has not granted an extension to open the casino within six months to Lakes, CRC shall repay to Lakes the $2 million paid to CRC pursuant to Paragraph 5.1 above, together with simple interest at the rate of 10% per annum from and after July 1, 2004. Such payment of principal and interest shall be made on July 30, 2004. If however, the Tribe's Michigan casino opens after the provisions of this subsection 5.3 become effective, and Lakes or an affiliate of Lakes is the manager, on such date, Lakes shall pay back to CRC any principal paid by CRC to Lakes pursuant to this Section 5.3 and CRC shall be released of any further payments to Lakes under this Section 5.3 except for any unpaid interest due. 5.4 Notwithstanding anything herein to the contrary, in the event the Tribe's Michigan casino is opened in the Benton Harbor area, the payments pursuant to Paragraph 5.2 above, shall be reduced from $10,995,077 to $7,095,077 and that amount shall be paid to CRC as follows: 16.1% of the amount shall be paid in year 1 on a quarterly basis in (2) arrears; 17.7% of the amount shall be paid in year 2 on a quarterly basis in arrears; 21.2% of the amount shall be paid in year 3 on a quarterly basis in arrears; 22.1% of the amount shall be paid in year 4 on a quarterly basis in arrears; and 23.0% of the amount shall be paid in year 5 on a quarterly basis in arrears. In the event the Tribe's Michigan casino is opened in the Hartford area, the payments pursuant to Paragraph 5.2 above, stall be reduced from $10,995,077 to $3,515,077 and that amount shall be paid to CRC as follows: 16.1% of the amount shall be paid in year 1 on a quarterly basis in arrears; 17.7% of the amount shall be paid in year 2 on a quarterly basis in arrears; 21.2% of The amount shall be paid in year 3 on a quarterly basis in arrears; 22.1 % of the amount shall be paid in year 4 on a quarterly basis in arrears; and 23.0% of the amount shall be paid in year 5 on a quarterly basis in arrears. All payments are conditioned on the facts that the Casino is open and Lakes is the manager. 5.5 At the end of the calendar quarter in which the Tribe's Indiana casino is opened, if ever, Lakes shall pay CRC an aggregate of $2.5 million payable quarterly in the amount of $125,000 (without interest) each (but only if Lakes, or an affiliate of Lakes, is, all the time the payment is due, serving as the manager or developer of such casino and the casino is open. 5.6 Any payments made pursuant to this Paragraph 5 may be prepaid, at any time, by Lakes for the "present value" of the remaining payments due, using 10% as the discount rate." 5.7 Should Lakes fail to make any payments due CRC under this Section 5 as and when due, or within 10 business days after written notice of nonpayment has been given by CRC to Lakes, all remaining payments shall be and become immediately due and payable. 5.8 The releases in Section 2 of the Termination Agreement shall not apply to any payment due under this Section 5 or agreement contained in the Amendment to Conditional Release and Termination Agreement. 2. It is understood by the parties that any costs incurred in obtaining the Management Agreement will be borne by Lakes Gaming, Inc. as the sole manager and developer of the gaming facility. 3. Sections 3, 4, 6,7 and 8 of the Termination Agreement be and they are hereby stricken in their entirety and shall be of no further force or effect. Notwithstanding the deletion of Section 3 of the Termination Agreement, the parties hereto agree that the mutual releases set forth in Sections 1 and 2 of the Termination Agreement (the effectiveness of which were conditioned on the occurrence of events identified in Section 3 of the Termination Agreement) are effective, valid and binding. (3) 4. CRC will execute a release in form and substance satisfactory to the Tribe as called for in Section 11.4 (V of the Development Agreement) between Lakes and the Tribe. 5. The remaining teems and provisions of the Termination Agreement be and the same are hereby ratified, approved and confirmed. 6. This Amendment and Termination Agreement contains the entire agreement and understanding of the parties hereto with respect to the subject matter hereof and supersedes any inconsistent provisions in the Termination Agreement or Memorandum. 7. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. 8. Both parties represent and warrant that they ate duly authorized by their respective Board of Directors to execute this Amendment. 9. CRC agrees to execute Certification as called for in the Management Agreement in Section 10.3.4. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date and year first above written. LAKES GAMING, INC. CASINO RESOURCE CORPORATION By /s/ Lyle Berman By /s/ John J. Pilger ---------------------------------- ------------------------------------- Lyle Berman, CEO John J. Pilger. CEO (4) EXHIBIT A 10.6 MILLION ESTIMATED INCOME DUE CRC BY LAKES GAMING
Year 3 Year 4 Year 5 Year 6 Year 7 0.1608105 0.176614 0.211619 0.220828 0.230128 Total --------- --------- --------- --------- --------- ---------- 1st Qtr 442,031 485,471 581,692 607,005 632,569 2,748,768 2nd Qtr 442,031 485,471 581,692 607,005 632,569 2,748,768 3rd Qtr 442,031 485,471 581,692 607,005 632,569 2,748,768 4th Qtr 442,031 485,471 581,692 607,005 632,569 2,748,773 --------- --------- --------- --------- --------- ---------- 1,768,124 1,941,884 2,326,768 2,428,020 2,530,276 10,995,077 ========= ========= ========= ========= ========= ==========
CERTIFICATE The undersigned Casino Resource Corporation ("CRC") certifies to the Pokagon Band of Potawatomi Indians (the "Band") and Lakes Gaming, Inc. as follows: 1. Neither CRC nor any Insider of CRC has engaged the services of any member of the Pokagon Band, for consideration or otherwise. In connection with or in any way related to a Casino. 2. Neither CRC nor any Insider of CRC has attempted to influence any member of the Band, including any member of the Band government, directly or indirectly, concerning consideration of any Proposal. 3. Unless described in writing attached hereto to the best of its knowledge neither CRC nor any Insider of CRC employs, as an employee, consultant or otherwise, any member of the Band, or any member of the Immediate Family of any Band member. 4. Neither CRC nor any Insider of CRC has paid any fee, consideration or other remuneration of any kind to any member of the Band or any member of the Immediate Family of any Band member in connection with any Proposal, the Casino, or Band's gaming activity generally. 5. Unless described in writing attached hereto to the best of CRC's knowledge neither CRC nor any Insider of CRC has any agreement, written or oral, to employ, as an employee, consultant or otherwise, any member of the Band or any member of the Immediate Family of any Band member. 6. Neither CRC nor any Insider of CRC has any agreement, written or oral, to pay any fee, consideration or other remuneration of any kind to any member of the Band or any member of the Immediate Family of any Band member in connection with any Proposal, the Casino, or Band's gaming activity generally. For purposes of this Certificate the following definitions control: "Casino" means a casino to be owned or operated by the Band in Michigan. "Immediate Family" means a person's spouse, children, step-children, parents, including spouse's parents, siblings, grandparents, including spouse's grandparents, and grandchildren, including step-grandchildren. "Insider" has the meaning defined in 11 U.S.C. Section 101(31), assuming CRC were the debtor in that definition. "Proposal" means any proposal submitted to the Band by CRC or Lakes relating to a Casino. CRC understands that the Band and Lakes Gaming, Inc. are relying on this Certificate in closing on a Development Agreement, a Management Agreement and related documents of near or even date. Dated: July 7, 1999 Witness: Casino Resource Corporation /s/ Robert J. Allen by: /s/ John J. Pilger - ------------------------------------- ------------------------------------ V.P. its CEO GENERAL RELEASE Casino Resource Corporation ("CRC"), for itself and its officers, employees, directors, attorneys, agents, shareholders, successors and assigns (collectively "Releasors"), hereby releases and discharges the Pokagon Band of Potawatomi Indians (the "Band"), its council members, officers, employees, attorneys, agents, successors and assigns, and all members of the Band, their respective heirs, personal representatives and assigns (collectively "Releasees"), from any and all debts, demands, actions, causes of action, attachments, liens, contracts, agreements, promises, doings, omissions, variances, damages, claims, rights, liabilities, suits at law, in equity, and administrative law, which now exist or may in the future result from the existing state of facts, whether known or unknown, whether direct or indirect, of whatever kind or nature, which each of them have or may have against Releasees as of the date hereof or which may in the future arise from the existing state of things. This Release contains the entire Agreement relating to such Release and supersedes all prior oral and written Agreements between the parties hereto on the subject matter hereof. There are no oral understandings or agreements between the parties hereto. The terms of this Release are contractual and are not a mere recital. No cross release shall be inferred from this release. The person executing this Release on behalf of CRC warrants that he is duly authorized to do so. This Release is governed by the law of the State of Michigan. This Release may be executed in counterparts, all of which together shall be one original. CAUTION: READ BEFORE SIGNING Dated: July 7, 1999 Witness: Casino Resource Corporation /s/ Robert J. Allen by: /s/ John J. Pilger - ------------------------------------- ------------------------------------ V.P. its: CEO print name: John J. Pilger State of Mississippi Hancock, County July 7, 1999 Personally appeared before me the above named John J. Pilger CEO of Casino Resource Corporation, and swore that the foregoing was his free act and deed in his said capacity and the free act and deed of that corporation. /s/ V.P. Hall ---------------------------------------- Notary Public 2551 (STAMP) -2- and its and their respective successors and assigns of and from all actions, causes of actions, claims, suits, debts, dues, accounts, bonds, covenants, contracts, agreements, judgments, damages and costs whatsoever in law or in equity arising out of the Memorandum and the transactions contemplated thereby, which CRC can, shall or may have from the beginning of the world to the date of these presents. 3. The effectiveness of the foregoing releases are conditioned on the occurrence of each of the following: (a) The Tribe shall award Lakes or one of its affiliates the Management Agreement for either or both of the Tribe's planned casinos in Michigan or Indiana. (b) The Tribe shall request, either orally or in writing, for any reason or for no reason, and either before or after awarding of the Management Agreement, that Lakes disassociate itself from CRC or any of its officers, directors or employees. 4. In the event the conditions set forth in Section 3 occur, the Memorandum shall be of no further force or effect, and CRC covenants and agrees with Lakes that it will promptly withdraw from the Tribal selection process and terminate any interest it may have or otherwise be entitled to under the Memorandum or any Management Agreement, subject to the payment by Lakes of the consideration set forth in Section 5. 5. In consideration of CRC's prompt termination, withdrawal and disassociation from its relationship with each of Lakes and the Tribe under the Memorandum or the Management Agreement Lakes agrees to pay CRC not less than a sum equal to twenty percent (20%) of any management fee or like fee that Lakes' actually earns and collects under any Management Agreement with the Tribe, (i) up to an annual maximum payment of $4 million to CRC or an aggregate maximum payment of $20 million to CRC with respect to the Tribe's planned Michigan casino, and (ii) not less than a sum equal to twenty percent (20%) of any management fee or like fee that Lakes' actually earns and collects under any Management Agreement with the Tribe, up to an annual maximum payment of $2 million to CRC or an aggregate maximum payment of $10 million to CRC with respect to the Tribe's planned Indiana casino, in each case pursuant to the terms of Schedule I attached hereto. 6. Notwithstanding anything to the contrary contained herein, in the Memorandum or in the Management Agreement, the calculation of Lakes' management fee or like fee shall be made without regard to the receipt by Lakes at any time of interest income from the Tribe on any amount of outstanding indebtedness to the Tribe or any principal payments made by the Tribe on such indebtedness. It is the further agreed by the parties hereto, that any amounts owing from Lakes to CRC under this Agreement, shall only be paid by Lakes following Lakes' prior receipt and collection of such management fee from the Tribe, and any risk of Lakes' noncollection, risk of setoff or other forfeiture of the management fee or like fee, for whatever reason, any reason or no reason shall be borne 80% by Lakes and 20% by CRC, and such nonreceipt or noncollection shall reduce the amount of consideration payable by Lakes or any affiliate of Lakes owing to CRC under Section 5 hereof. (2) 7. All monies due CRC under this Termination Agreement are further conditioned upon, due and payable only if received by Lakes, or its subsidiary or affiliate. If for any reason or for no reason Lakes, a subsidiary of Lakes, or an affiliate of Lakes does not receive management fee income or like fee from the venture then nothing is due or payable or does not earn a management fee. 8. Further, if NIGC does not approve the proposed Management Agreement between Lakes and the Pokagon Band alone, then both parties agree to negotiate in good faith, and Lakes agrees to compensate CRC in a like manner, mirroring the terms of this Termination Agreement, and subject to NIGC approval. IN WITNESS WHEREOF, the parties have executed this agreement as of the date set forth above. LAKES GAMING, INC. CASINO RESOURCE CORPORATION By /s/ Lyle Berman By /s/ John J. Pilger ---------------------------------- ------------------------------------- Its CEO Its CEO (3) EX-10.170 4 c02716exv10w170.txt THIRD AMENDED AND RESTATED MANAGEMENT AGREEMENT Exhibit 10.170 EXECUTION COPY THIRD AMENDED AND RESTATED MANAGEMENT AGREEMENT BETWEEN THE POKAGON BAND OF POTAWATOMI INDIANS AND GREAT LAKES GAMING OF MICHIGAN, LLC, (F/K/A GREAT LAKES OF MICHIGAN, LLC) DATED AS OF JANUARY 25, 2006 TABLE OF CONTENTS 1. RECITALS ............................................................... 1 2. DEFINITIONS ............................................................ 3 "Agreement" ............................................................ 3 "Agreements" ........................................................... 3 "Affiliate" ............................................................ 3 "Assignment and Assumption Agreement" .................................. 4 "Band Event of Default" ................................................ 4 "Band Gaming Ordinance" ................................................ 4 "Band Interest Rate" ................................................... 4 "Band Representatives" ................................................. 4 "Band Working Capital Advances" ........................................ 4 "Bank Closing" ......................................................... 4 "Bank Lender" .......................................................... 4 "Bank Loan" ............................................................ 4 "BIA" .................................................................. 4 "Business Board" ....................................................... 4 "Buy-Out Option" ....................................................... 4 "Calculation Year" ..................................................... 5 "Capital Budget" ....................................................... 5 "Capital Replacement(s)" ............................................... 5 "Capital Replacement Reserve" .......................................... 5 "Change of Control" .................................................... 5 "Class II Gaming" ...................................................... 5 "Class III Gaming" ..................................................... 5 "Collateral Agreements" ................................................ 5 "Commencement Date" .................................................... 5 "Compact" .............................................................. 5 "Compensation" ......................................................... 5 "Confidential Information" ............................................. 5 "Constitution" ......................................................... 6 "Corporate Commission" ................................................. 6 "CRC" .................................................................. 6 "Development Agreement" ................................................ 6 "Development Expenditures" ............................................. 6 "Disbursement Accounts" ................................................ 6 "Dominion Account" ..................................................... 6 "Dominion Agreement" ................................................... 6 "Effective Date" ....................................................... 6 "Emergency Condition" .................................................. 6 "Enterprise" ........................................................... 6 "Enterprise Accounts" .................................................. 7 "Enterprise Employee" .................................................. 7 "Enterprise Employee Policies" ......................................... 7

i "Enterprise Investment Policy" ......................................... 7 "Equipment Lender" ..................................................... 7 "Equipment Loan" ....................................................... 7 "Facility" ............................................................. 7 "Financial Support" .................................................... 7 "Fiscal Year" .......................................................... 7 "Furnishings and Equipment" ............................................ 7 "Gaming" ............................................................... 8 "Gaming Regulatory Authority" or "GRA" ................................. 8 "Gaming Site" .......................................................... 8 "Guaranty Reserve" ..................................................... 8 "General Manager" ...................................................... 8 "Generally Accepted Accounting Principles" or "GAAP" ................... 8 "Governmental Action" .................................................. 8 "Great Lakes" .......................................................... 8 "Gross Gaming Revenue (Win)" ........................................... 8 "Gross Revenues" ....................................................... 9 "House Bank" ........................................................... 9 "IGRA" ................................................................. 9 "Insider" .............................................................. 9 "Internal Control Systems" ............................................. 9 "Lakes" ................................................................ 9 "Lakes Certification" .................................................. 9 "Lakes Development Loan" ............................................... 9 "Lakes Development Note" ............................................... 9 "Lakes Facility Loan" .................................................. 9 "Lakes Facility Note" .................................................. 9 "Lakes Refinancing Guaranty" ........................................... 9 "Lakes Security Agreement" ............................................. 9 "Lakes Worldng Capital Advance Note" ................................... 10 "Lakes Working Capital Advances" ....................................... 10 "Legal Requirements" ................................................... 10 "Limited Recourse" ..................................................... 10 "Loans" ................................................................ 11 "Local Agreement" ...................................................... 11 "Manager" .............................................................. 11 "Manager's Internal Expenses" .......................................... 11 "Manager's Representatives" ............................................ 11 "Management Agreement" ................................................. 11 "Management Fee" ....................................................... 11 "Manager Event of Default" ............................................. 11 "Managing Officer" ..................................................... 11 "Marks" ................................................................ 11 "Material Adverse Change" .............................................. 11 "Material Breach" ...................................................... 11 "Member of the Band Government" ........................................ 11

ii "Minimum Balance" ...................................................... 12 "Minimum Guaranteed Monthly Payment" ................................... 12 "Minimum Guaranteed Payment Advances" .................................. 12 "Minimum Payment Note" ................................................. 12 "Monthly Distribution Payment" ......................................... 12 "National Indian Gaming Commission" or "NIGC" .......................... 12 "Net Revenues" ......................................................... 12 "Net Revenues (gaming)" ................................................ 12 "Net Revenues (other)" ................................................. 13 "NIGC Approval" ........................................................ 13 "Non-Gaming Land Acquisition Line of Credit" ........................... 13 "Operating Budget and Annual Plan" ..................................... 13 "Operating Expenses" ................................................... 14 "Operating Supplies" ................................................... 15 "Permitted Taxes" ...................................................... 15 "Plans and Specifications" ............................................. 15 "Pokagon Council" ...................................................... 15 "Pokagon Fund" ......................................................... 15 "Pre-Opening Budget" ................................................... 15 "Pre-Opening Expenses" ................................................. 16 "Project" .............................................................. 16 "Promotional Allowances" ............................................... 16 "Relative" ............................................................. 16 "Remaining Loan Availability Amount" ................................... 16 "Reserve Amount" ....................................................... 16 "Restoration Act" ...................................................... 16 "Restricted Territory" ................................................. 16 "Specific Performance Restriction" ..................................... 16 "State" ................................................................ 16 "Subsequent Gaming Facility Revenues" .................................. 16 "Term" ................................................................. 16 "Transition Loan Note" ................................................. 17 "Tribal Distributions" ................................................. 17 3. ENGAGEMENT; BUSINESS BOARD; COMPLIANCE ................................. 17 3.1. Engagement of Manager ........................................... 17 3.2. Term ............................................................ 17 3.3. Status of Gaming Site ........................................... 19 3.4. Creation and Operation of Business Board ........................ 20 3.5. Manager Compliance with Law; Licenses ........................... 20 3.6. Compliance with Compact ......................................... 20 3.7. Fire and Safety ................................................. 20 3.8. Compliance with the National Environmental Policy Act ........... 20 3.9. Commencement Date ............................................... 21 4. BUSINESS AND AFFAIRS OF THE ENTERPRISE ................................. 21 4.1. Manager's Authority and Responsibility .......................... 21

iii 4.2. Duties of Manager ............................................... 21 4.3. Damage, Condemnation or Impossibility of the Enterprise ......... 22 4.4. Alcoholic Beverages and Tobacco Sales ........................... 22 4.5. Employees ....................................................... 22 4.6. No Manager Internal Expenses; Limitation on Manager Payments .... 24 4.7. GRA Expenses .................................................... 25 4.8. Employee Background Checks ...................................... 25 4.9. Indian Preference Recruiting and Training; Local Preference ..... 25 4.10. Pre-Opening ..................................................... 26 4.11. Operating Budget and Annual Plan ................................ 27 4.12. Capital Budgets ................................................. 29 4.13. Capital Replacements ............................................ 30 4.14. Capital Replacement Reserve ..................................... 30 4.15. Periodic Contributions to Capital Replacement Reserve ........... 30 4.16. Use and Allocation of Capital Replacement Reserve ............... 31 4.17. [intentionally omitted] ......................................... 31 4.18. Internal Control Systems ........................................ 31 4.19. Banking and Bank Accounts ....................................... 31 4.20. Insurance ....................................................... 33 4.21. Accounting and Books of Account ................................. 34 4.22. Annual Audit .................................................... 36 4.23. Manager's Contractual Authority ................................. 36 4.24. Retail Shops and Concessions .................................... 36 4.25. Entertainment Approvals ......................................... 36 4.26. Litigation ...................................................... 36 5. MANAGEMENT FEE, DISBURSEMENTS, AND OTHER PAYMENTS BY MANAGER ........... 37 5.1. Management Fee .................................................. 37 5.2. Fee Subordinated ................................................ 37 5.3. Disbursements ................................................... 38 5.4. Adjustment to Bank Account ...................................... 38 5.5. Payment of Fees and Band Disbursement ........................... 39 5.6. Minimum Guaranteed Monthly Payment .............................. 39 5.7. Payment of Net Revenues ......................................... 41 5.8. Harrah's Termination Agreement .................................. 41 5.9. Band Indemnification - Indiana Casino ........................... 41 5.10. Maximum Dollar Amount for Recoupment ............................ 41 6. ENTERPRISE NAME; MARKS ................................................. 42 6.1. Enterprise Name ................................................. 42 6.2. Marks ........................................................... 42 6.3. Signage ......................................................... 42 7. TAXES .................................................................. 42 7.1. State and Local Taxes ........................................... 42

iv 7.2. Band Taxes ...................................................... 42 7.3. Compliance with Internal Revenue Code ........................... 43 8. BUY-OUT OPTION ......................................................... 43 9. EXCLUSIVITY; NON-COMPETITION ........................................... 43 9.1. Exclusivity in Michigan ......................................... 43 9.2. Indiana Casino .................................................. 43 9.3. Non-Competition ................................................. 44 9.4. Permitted Assignment; Change of Control ......................... 44 9.5. Restrictions on Collateral Development .......................... 45 10. REPRESENTATIONS, WARRANTIES, AND COVENANTS ............................ 45 10.1. Representations and Warranties of the Band ...................... 45 10.2. Band Covenants .................................................. 46 10.3. Representations and Warranties of Manager and Lakes ............. 47 10.4. Manager Covenants ............................................... 48 10.5. No Liens ........................................................ 49 10.6. Permitted Liens ................................................. 50 10.7. Brokerage ....................................................... 50 11. DEFAULT ............................................................... 51 11.1. Events of Default by the Band ................................... 51 11.2. Events of Default by Manager .................................... 51 11.3. Material Breach; Right to Cure .................................. 52 12. TERMINATION ........................................................... 53 12.1. Voluntary Termination ........................................... 53 12.2. Termination if No NIGC Approval ................................. 53 12.3. Manager Right to Terminate on Band Event of Default ............. 53 12.4. Band Right to Terminate on Manager Event of Default ............. 53 12.5. Band Right to Terminate for Material Adverse Change ............. 53 12.6. Termination if Manager License Withdrawn or on Conviction ....... 55 12.7. Termination on Buy-Out .......................................... 55 12.8. Involuntary Termination Due to Changes in Legal Requirements .... 55 13. DISPUTE RESOLUTION; LIQUIDATED DAMAGES ................................ 56 13.1. Band's Waiver of Sovereign Immunity and Consent to Suit ......... 56 13.2. Arbitration ..................................................... 57 13.3. Limitation of Actions ........................................... 58 13.4. Damages on Termination for Failure to Obtain NIGC Approval ...... 59 13.5. Liquidated Damages and Limitations on Remedies .................. 59 13.6. Manager Continuing Obligations .................................. 59 13.7. Termination of Exclusivity ...................................... 60 13.8. Remedies ........................................................ 60 13.9. Band Injunctive Relief .......................................... 60 13.10. No Setoff Against Payments to Band .............................. 60 13.11. Indemnification on Termination .................................. 60 13.12. Fees not Damages ................................................ 61

v 13.13. Undistributed Net Revenues ...................................... 61 13.14. Damages for Governmental Action ................................. 61 14. CONSENTS AND APPROVALS ................................................ 61 14.1. Band ............................................................ 61 14.2. Manager ......................................................... 61 14 3. Business Board .................................................. 61 15. DISCLOSURES ........................................................... 61 15.1. Shareholders and Directors ...................................... 61 15.2. Warranties ...................................................... 62 15.3. Disclosure Amendments ........................................... 63 15.4. Breach of Manager's Warranties and Agreements ................... 63 16. NO PRESENT LIEN, LEASE OR JOINT VENTURE ............................... 63 17. CONCLUSION OF THE MANAGEMENT TERM ..................................... 64 18. MISCELLANEOUS ......................................................... 64 18.1. Situs of the Contracts .......................................... 64 18.2. Notice .......................................................... 64 18.3. Relationship .................................................... 65 18.4. Further Actions ................................................. 65 18.5. Waivers ......................................................... 65 18.6. Captions ........................................................ 66 18.7. Severability .................................................... 66 18.8. Advances ........................................................ 66 18.9. Third Party Beneficiary ......................................... 66 18.10. Survival of Covenants ........................................... 66 18.11. Estoppel Certificate ............................................ 66 18.12. Periods of Time; Time of Essence ................................ 66 18.13. Exhibits ........................................................ 66 18.14. Successors and Assigns .......................................... 67 18.15. Confidential and Proprietary Information ........................ 67 18.16. Patron Dispute Resolution ....................................... 67 18.17. Modification .................................................... 67 18.18. Entire Agreement ................................................ 67 18.19. Government Savings Clause ....................................... 69 18.20. Preparation of Agreement ........................................ 70 18.21. Consents ........................................................ 70 18.22. Execution ....................................................... 70 18.23. Limited Joinder ................................................. 70

vi LIST OF EXHIBITS Exhibit A Gaming Site Exhibit B Pending Band Litigation vii EXECUTION COPY THIRD AMENDED AND RESTATED MANAGEMENT AGREEMENT THIS THIRD AMENDED AND RESTATED MANAGEMENT AGREEMENT has been entered into as of January 25, 2006, by and between the POKAGON BAND OF POTAWATOMI INDIANS (the "Band"), and GREAT LAKES GAMING OF MICHIGAN, LLC, a Minnesota limited liability company (f/k/a Great Lakes of Michigan, LLC) ("Manager" or "Great Lakes") for the operation of a gaming facility in the State of Michigan. 1. RECITALS 1.1. The Band, pursuant to 25 U.S.C. Sections 1300j et seq. (the "Restoration Act"), is a federally recognized Indian tribe recognized as eligible by the Secretary of the Interior for the special programs and services provided by the United States to Indians because of their status as Indians and is recognized as possessing powers of self-government. 1.2. As authorized by the Restoration Act, the Band intends to acquire the Gaming Site in the State of Michigan, to be held by the federal government in trust for the Band, on which the Band intends to construct and operate a permanent Class III gaming facility (the "Facility"); and the Band will possess sovereign governmental powers over the Gaming Site pursuant to the Band's recognized powers of self government, and the Band desires to use the Gaming Site to improve the economic conditions of its members. 1.3. Upon the transfer of the Gaming Site to the United States in trust for the Band, the Band will possess sovereign powers over the Gaming Site pursuant to the Band's recognized powers of self-government. 1.4. The Band desires to use the Gaming Site and the Facility to improve the economic conditions of its members, to enable it to serve the social, economic, educational and health needs of the Band, to increase the revenues of the Band and to enhance the Band's economic self sufficiency and self determination. 1.5. The Band wishes to establish an Enterprise, as hereinafter defined, to conduct Class II and Class III Gaming as hereinafter defined on the Gaming Site. This Agreement sets forth the manner in which the Enterprise will be managed. 1.6. Manager has agreed to certain terms and has represented to the Band that it has the managerial and financial capacity to provide and to secure financing for the funds necessary to develop and construct the Facility, as defined herein, and to commence the operation of the Enterprise on the Gaming Site. 1 1.7. The Band is seeking technical experience and expertise for the operation of the Enterprise and instruction for members of the Band in the operation of the Enterprise. Manager is willing, and has represented to the Band that it is able, to provide such experience, expertise and instruction. 1.8. The Band desires to grant Manager the exclusive right and obligation to develop, manage, operate and maintain the Enterprise as described in this Agreement and to train Band members and others in the operation and maintenance of the Enterprise during the term of this Agreement. Manager wishes to perform these functions for the Band. 1.9. The Band and Lakes Entertainment, Inc., f/k/a Lakes Gaming, Inc. ("Lakes") entered into a Management Agreement dated as of July 8, 1999 (the "Management Agreement"). 1.10. Lakes has assigned its rights and obligations under the Management Agreement to Great Lakes pursuant to an Assignment and Assumption Agreement dated as of October 16, 2000, subject to certain terms and conditions. 1.11. Great Lakes and the Band entered into a First Amended and Restated Management Agreement dated as of October 16, 2000 (the "First Amended Management Agreement"). 1.12. Great Lakes and the Band entered into a Second Amended and Restated Management Agreement dated as of December 22, 2004 (the "Second Amended Management Agreement"). 1.13. Pursuant to a Third Amended and Restated Development Agreement of near or even date, Great Lakes has agreed to furnish certain additional financing and to provide certain other assistance with regard to the Facility. For example: - The cost of developing, constructing and equipping the Initial Phase of the Project is now understood as totaling approximately $298,000,000, which will be financed as follows: the Lakes Development Loan in the amount of $46,000,000, and an additional $252,000,000 to be provided by an Equipment Loan and a Bank Loan. To the extent that the Band is unable to raise additional funding of $252,000,000 from third parties at an interest rate not to exceed 13% (the "252MM Shortfall"), Great Lakes shall provide $54,000,000 (or such lesser amount as may be necessary to make up the 252MM Shortfall) through, at its option, a direct loan, third party loans enabled by credit enhancements provided by Great Lakes, or third-party loans with interest subsidies provided by Great Lakes, in each case an interest rate not to exceed 13%, such $54,000,000 loan and the Lakes Development Loan to be subordinated to certain other third-party financing. 2 Great Lakes shall not have any other responsibility to fund, or provide credit enhancements or interest subsidies for, the 252MM Shortfall (if any); and - Great Lakes has funded under the Lakes Development Loan approximately $23,653,525 as of January 25, 2006 for long-lead-time items and to permit the Band to start preliminary site work that can be done now under local and/or county or state permits and, to the extent necessary, permits from the Band or the federal government. Great Lakes and the Band have agreed that the term of this Agreement shall begin on the date this Agreement, the Development Agreement (if required) and the Lakes Development Note (if required) are approved by the Chairman of the NIGC, and/or the BIA (if required), and continue until, unless earlier terminated in accordance with its terms, seven (7) years from commencement of Gaming at the Initial Phase of the Facility, provided that the Term of the Management Agreement will be five (5) years from the Commencement Date if (a) the Development Expenditures of the Initial Phase of the Facility are equal to or more than $138,000,000, and (b) Lakes' Financial Support for such Initial Phase has not exceeded $46,000,000, as provided in Section 3.2 of this Agreement. 1.14. This Agreement is entered into pursuant to the Indian Gaming Regulatory Act of 1988, PL 100-497, 25 U.S.C. Section 2701 et seq. (the "IGRA") as that statute may be amended. All gaming conducted at the Facility will at all times comply with the IGRA, applicable Band law and the Compact. 1.15. This Third Amended and Restated Management Agreement incorporates certain amendments to the First Amended Management Agreement and the Second Amended Management Agreement agreed to by the parties and is intended to conform this Agreement to the requirements of the National Indian Gaming Commission. 2. DEFINITIONS As they are used in this Agreement, the terms listed below shall have the meaning assigned to them in this Section: "AGREEMENT" shall mean this Management Agreement. "AGREEMENTS" shall mean this Agreement and the Development Agreement. "AFFILIATE" means as to Manager or Lakes, any corporation, partnership, limited liability company, joint venture, trust department or agency or individual controlled by, 3 under common control with, or which directly or indirectly controls, Manager or Lakes; and as to the Band, any corporation, partnership, limited liability company, joint venture, trust department or agency or individual controlled by, under common control with, or which directly or indirectly controls, the Band. "ASSIGNMENT AND ASSUMPTION AGREEMENT" means the Assignment and Assumption Agreement among Manager, Lakes and the Band dated as of October 16, 2000, as amended by First Amendment dated as of December 22, 2004 and a Second Amended and Restated Assignment and Assumption Agreement dated as of January 25, 2006. "BAND EVENT OF DEFAULT" has the meaning described in Section 11.1. "BAND GAMING ORDINANCE" shall mean the ordinance and any amendments thereto to be enacted by the Band, which authorizes and regulates Class II and Class III Gaming on Indian lands subject to the governmental power of the Band. "BAND INTEREST RATE" shall mean the lesser of (a) Wall Street Journal prime rate as of the Bank Closing plus 1%, or (b) 10%. "BAND REPRESENTATIVES" shall mean the persons designated by the Pokagon Council to sit on the Business Board. "BAND WORKING CAPITAL ADVANCES" shall have the meaning set out in Section 5.3.2 below. "BANK CLOSING" means the closing on the Bank Loan. "BANK LENDER" shall mean one or more financial institutions agreed upon by the parties to provide certain funding necessary to design, construct, and equip the Facility, and provide start-up capital for the Enterprise. "BANK LOAN" shall have the meaning defined in the Development Agreement. "BIA" shall mean the Bureau of Indian Affairs of the Department of the Interior of the United States of America. "BUSINESS BOARD" shall mean the decision making body created pursuant to Section 3.4 of this Agreement. "BUY-OUT OPTION" shall mean the Band's option to buy out this Agreement under Section 8. 4 "CALCULATION YEAR" shall mean the twelve (12) month period commencing on the Commencement Date and each successive twelve (12) month period. "CAPITAL BUDGET" shall mean the capital budget described in Section 4.12. "CAPITAL REPLACEMENT(S)" shall mean any alteration or rebuilding or renovation of the Facility, and any replacement of Furnishings and Equipment, the cost of which is capitalized and depreciated rather than being expensed under GAAP. "CAPITAL REPLACEMENT RESERVE" shall mean the reserve described in Section 4.14, into which periodic contributions are paid pursuant to Section 4.15. "CHANGE OF CONTROL" shall have the meaning set out in Section 9.4.3. "CLASS II GAMING" shall mean Class II Gaming as defined in the IGRA. "CLASS III GAMING" shall mean Class III Gaming as defined in the IGRA. "COLLATERAL AGREEMENTS" shall mean any agreements defined as collateral agreements under 25 USC Section 271l(a)(3) and regulations issued thereto at 25 C.F.R. Section 502.5. "COMMENCEMENT DATE" shall mean the first date that Gaming is conducted pursuant to the terms of the Management Agreement in a Facility, including Gaming conducted on completion of the Initial Phase of the Facility. "COMPACT" shall mean the Compact between the Band and the State dated December 3, 1998 and approved in 64 Fed. Reg. No. 32, Thursday, February 18, 1999, at 8111, as the same may, from time to time, be amended; or such other compact or consent decree that may be substituted therefor. "COMPENSATION" shall mean the direct salaries and wages paid to, or accrued for the benefit of, any employee, including incentive compensation, together with all fringe benefits payable to or accrued for the benefit of such executive or other employee, including employer's contribution under F.I.C.A., unemployment compensation or other employment taxes, pension fund contributions, workers' compensation, group life, accident and health insurance premiums and costs, and profit sharing, severance, retirement, disability, relocation, housing and other similar benefits. "CONFIDENTIAL INFORMATION" shall mean the information described in Section 18.15. 5 "CONSTITUTION" shall mean the document or documents which govern the actions of the Band and, upon enactment, the Constitution of the Pokagon Band of Potawatomi Indians as ultimately approved by the Band and approved by the Secretary of the Interior. "CORPORATE COMMISSION" shall mean a body corporate and politic established, at the Band's discretion, by the Pokagon Council to own the Enterprise and such other businesses and assets as the Band may deem appropriate. "CRC" means Casino Resource Corporation, a Minnesota corporation and its Insiders. "DEVELOPMENT AGREEMENT" shall mean the agreement dated as of July 8, 1999 between Lakes and the Band, as assumed by Manager under the Assignment and Assumption Agreement and as amended and restated by the First Amended and Restated Development Agreement dated as of October 16, 2000, by the Second Amended and Restated Development Agreement dated as of December 22, 2004 and the Third Amended and Restated Development Agreement dated as of January 25, 2006. "DEVELOPMENT EXPENDITURES" shall have the meaning defined in the Development Agreement. "DISBURSEMENT ACCOUNTS" shall mean the bank account or accounts described in Section 4.19.3. "DOMINION ACCOUNT" mean the collateral account in favor of Great Lakes established under Section 4.19.2. "DOMINION AGREEMENT" shall have the meaning defined in the Development Agreement. "EFFECTIVE DATE" shall have the meaning provided in Section 18.22. "EMERGENCY CONDITION" shall have the meaning set forth in Section 4.13. "ENTERPRISE" shall mean the enterprise of the Band created by the Band to engage in Class II and Class III Gaming at the Facility, and which shall include all gaming at the Facility and any other lawful commercial activity allowed in the Facility, including but not limited to the sale of alcohol, tobacco, gifts and souvenirs; provided, however, the Enterprise shall only include any hotel operated by the Band, ancillary non-Gaming activity within the Facility, or other commercial enterprise conducted by the Band which is not generally related to Class II or Class III Gaming if such hotel, non-Gaming activity or other commercial enterprise (a) is financed by, or through the guaranty of, Manager, (b) is specifically included within the Initial Scope of Work or the Final Scope of Work 6 or is not a material expansion of the Initial Scope of Work or the Final Scope of Work, or (c) is specified by the Business Board and the Pokagon Council as being included in the Enterprise, in which case depreciation and other expenses relating to such hotel, non-Gaming activity or other commercial enterprise shall be an Operating Expense, all related revenues shall be included in Gross Revenues, and interest on all related financing shall be paid by the Enterprise; and provided further that the Enterprise shall not include a tribal gift/craft business which the Band may elect to operate, rent free, on an area of about 2,400 square feet at the Facility. The design and operation of such gift/craft shop shall be consistent with the theme and quality of the Facility, and the location of such gift/craft shop shall be approved by the Business Board. "ENTERPRISE ACCOUNTS" shall mean those accounts described in Section 4.19.1. "ENTERPRISE EMPLOYEE" shall mean all employees who work at the Facility. "ENTERPRISE EMPLOYEE POLICIES" shall mean those employee policies described in Section 4.5.2. "ENTERPRISE INVESTMENT POLICY" SHALL have the meaning described in Section 4.19.1. "EQUIPMENT LENDER" shall mean the entity making the Equipment Loan. "EQUIPMENT LOAN" shall have the meaning provided in the Development Agreement. "FACILITY" shall mean all buildings, structures, and improvements located on the Gaming Site and all fixtures, Furnishings and Equipment attached to, forming a part of, or necessary for the operation of the Enterprise. "FINANCIAL SUPPORT" shall have the meaning described in Section 3.2.1. "FISCAL YEAR" shall mean commencing as of the Commencement Date, each twelve (12) month period or portion thereof ending on September 30 of each year as currently used by the Band as the fiscal year for its financial statements. "FURNISHINGS AND EQUIPMENT" shall mean all furniture, furnishings and equipment required for the operation of the Enterprise in accordance with the standards set forth in this Agreement, including, without limitation: (i) cashier, money sorting and money counting equipment, surveillance and communication equipment, and security equipment; (ii) slot machines, video games of chance, table games, keno equipment and other gaming equipment; 7 (iii) office furnishings and equipment; (iv) hotel equipment (to the extent a hotel is included in the Enterprise); (v) specialized equipment necessary for the operation of any portion of the Enterprise for accessory purposes, including equipment for kitchens, laundries, dry cleaning, cocktail lounges, restaurants, public rooms, commercial and parking spaces, child care, arcades and recreational facilities; and (vi) all other furnishings and equipment hereafter located and installed in or about the Facility which are used in the operation of the Enterprise in accordance with the standards set forth in this Agreement. "GAMING" shall mean any and all activities defined as Class II and Class III Gaming. "GAMING REGULATORY AUTHORITY" or "GRA" shall mean the Band body created pursuant to the Band Gaming Ordinance to regulate the Class II and Class III Gaming of the Band in accordance with the Compact, the IGRA and the Band Gaming Ordinance. "GAMING SITE" shall mean the parcels of land in New Buffalo, Michigan described on the attached Exhibit A. "GUARANTY RESERVE" shall have the meaning described in Section 9.2.1(a)((ii)(A) of the Development Agreement. "GENERAL MANAGER" shall mean the person employed by the Band to direct the operation of the Enterprise. "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" or "GAAP" shall mean the principles defined by the Financial Accounting Standards Board. "GOVERNMENTAL ACTION" means any resolution, ordinance, statute, regulation, order or decision of the Band or any instrumentality or agency of the Band, regardless of how constituted, that has the force of law. "GREAT LAKES" means Great Lakes Gaming of Michigan, LLC, a Minnesota limited liability company (f/k/a Great Lakes of Michigan, LLC). "GROSS GAMING REVENUE (WIN)" shall mean the net win from gaming activities which is the difference between gaming wins and losses before deducting costs and expenses. 8 "GROSS REVENUES" shall mean all revenues of any nature derived directly or indirectly from the Enterprise including, without limitation, Gross Gaming Revenue (Win), food and beverage sales and other rental or other receipts from lessees, sublessees, licensees and concessionaires (but not the gross receipts of such lessees, sublessees, licensees and concessionaires provided that such lessees, sublessees, licensees and concessionaires are not Affiliates or Insiders of Manager or Lakes), and revenue recorded from Promotional Allowances, but excluding any Permitted Taxes. "HOUSE BANK" shall mean the amount of cash, chips, tokens and plaques that Manager from time to time determines necessary to have at the Facility daily to meet its cash needs. "IGRA" shall mean the Indian Gaming Regulatory Act of 1988, PL 100-497, 25 U.S.C. Section 2701 et seq. as it may from time to time be amended. "INSIDER" has the meaning defined in 11 U.S.C. Section 101(31), assuming Manager and Lakes were both the debtor in that definition, and shall include persons or entities that become Insiders after the date of this Agreement, whether as the result of a merger, acquisition, restructuring or otherwise. "INTERNAL CONTROL SYSTEMS" shall mean the systems described in Section 4.18. "LAKES" shall mean both Lakes Entertainment, Inc., f/k/a Lakes Gaming, Inc., a Minnesota corporation, and Lakes Gaming and Resorts, LLC, a Minnesota limited liability company. "LAKES CERTIFICATION"HAS the meaning defined in Section 15.1 of this Agreement. "LAKES DEVELOPMENT LOAN" shall have the meaning defined in the Development Agreement. "LAKES DEVELOPMENT Note" shall have the meaning defined in the Development Agreement. "LAKES FACILITY LOAN" shall mean the Loan to be made by Great Lakes to the Band pursuant to Section 9.2.4 of the Development Agreement. The Lakes Facility Loan shall not include any loan to the extent it is subject to a Lakes Refinancing Guaranty. "LAKES FACILITY Note" shall have the meaning defined in the Development Agreement. "LAKES REFINANCING GUARANTY"SHALL have the meaning defined in the Development Agreement. "LAKES SECURITY AGREEMENT" shall have the meaning defined in the Development Agreement. 9 "LAKES WORKING CAPITAL ADVANCE NOTE" shall have the meaning defined in the Development Agreement. "LAKES WORKING CAPITAL ADVANCES" shall have the meaning set out in Section 5.3.1 below. "LEGAL REQUIREMENTS" shall mean any and all present and future judicial, administrative, and tribal rulings or decisions, and any and all present and future federal, state, local and tribal laws, ordinances, rules, regulations, permits, licenses and certificates, in any way applicable to the Band, Manager, the Gaming Site, the Facility and the Enterprise, including without limitation, the IGRA, the Compact, and the Band Gaming Ordinance. "LIMITED RECOURSE" shall mean that all Loans and all liabilities of the Band under or related to the Agreements and the other Transaction Documents, the Enterprise or the Gaming Regulatory Authority, and any related awards, judgments or decrees, shall be payable solely out of undistributed or future Net Revenues of the Enterprise and shall be a limited recourse obligation of the Band, with no recourse to tribal assets other than such Net Revenues (except (i), as to the Equipment Loan, a security interest in the Furnishings and Equipment purchased with Equipment Loan proceeds, (ii) a security interest in the Furnishings and Equipment to the extent proceeds of the Lakes Development Loan or the Lakes Facility Loan were used to fund acquisition of Furnishings and Equipment, and as otherwise permitted under Section 9.2.l(j) of the Development Agreement, (iii) if the Commencement Date does not occur, Subsequent Gaming Facility Revenues to the extent provided in the Development Agreement, (iv) mortgages on the Non-Gaming Lands prior to their transfer into trust, and (v) after the Commencement Date occurs, funds on deposit in the Dominion Account to the extent provided in Section 9.2.1 (j) of the Development Agreement and the Dominion Agreement, or in any other dominion agreement executed by the Band). In no event shall Great Lakes, Lakes or any lender or other claimant have recourse to (a) the physical property of the Facility (other than Furnishings and Equipment subject to the security interest securing the Equipment Loan and the security interest of Great Lakes, if any), (b) Tribal Distributions, (c) assets of the Band purchased with Tribal Distributions, (d) revenues or assets of any other gaming facility owned or operated by the Band, or (e) any other asset of the Band (other than (i) as to the Transition Loan and the Non-Gaming Acquisition Line of Credit, if the Commencement Date does not occur, Subsequent Gaming Facility Revenues to the extent provided in the Development Agreement, (ii) as to the Lakes Development Note and the Non-Gaming Acquisition Line of Credit, mortgages on the Non-Gaming Lands prior to their transfer into trust, (iii) funds on deposit in the Dominion Account to the extent provided in the Agreements, the Dominion Agreement and any other dominion agreement executed by the Band, and (iv) such Net Revenues of the Enterprise). 10 "LOANS" shall mean the Lakes Development Loan, the Lakes Facility Loan, the Lakes Working Capital Advances, the Minimum Payment Note, the Bank Loan and the Equipment Loan. "LOCAL AGREEMENT" shall mean the agreement among the Band, the City of New Buffalo and the Township of New Buffalo dated as of February 15, 2000. "MANAGER" shall mean Great Lakes Gaming of Michigan, LLC. "MANAGER'S INTERNAL EXPENSES" shall mean Manager's and Lakes' corporate overhead, including without limitation salaries or benefits of any of Manager's and Lakes' officers and employees, whether or not they perform services for the Project or the Enterprise, and any travel or other expenses of Manager's and Lakes' employees. "MANAGER'S REPRESENTATIVES" shall mean the persons designated by Manager to sit on the Business Board. "MANAGEMENT AGREEMENT" shall mean this Agreement and may be referred to herein as the "Agreement". "MANAGEMENT FEE shall mean the management fee described in Section 5.1. "MANAGER EVENT OF DEFAULT" has the meaning described in Section 11.2."MANAGING OFFICER" shall mean the person designated by Manager to serve as a liaison between Manager and the Band and to serve on the Business Board. "MARKS" means all trade names, trade marks and service marks used by the Facility or the Enterprise. "MATERIAL ADVERSE CHANGE" shall mean a material adverse change in Lakes' or Great Lakes' financial condition which materially and substantially impairs Lakes' or Great Lakes' respective ability to perform under the Agreements and the Guaranty. "MATERIAL BREACH" means a failure of any party to perform any material duty or obligation on its part, if such party fails to (i) cure the specified default within thirty (30) days following receipt of the notice provided under Section 11.3, or (ii) if the default is not capable of being cured within 30 days, commences such cure within 30 days, proceeds diligently to complete the cure, and completes the cure no later than 90 days after receipt of such notice. "MEMBER OF THE BAND GOVERNMENT" shall mean any member of the Pokagon Council, the GRA or any independent board or body created to oversee any aspect of Gaming and any Pokagon court official. 11 "MINIMUM BALANCE" shall mean the amount described in Section 4.19.1. "MINIMUM GUARANTEED MONTHLY PAYMENT" shall mean the payment due the Band each month commencing in the month after the Commencement Date occurs in accordance with 25 U.S.C. Section 271 l(b)(3) and Section 5.6 hereof. "MINIMUM GUARANTEED PAYMENT ADVANCES" shall have the meaning set out in Section 5.6.2 and shall be subject to repayment to the limited extent provided in that section. "MINIMUM PAYMENT NOTE" shall have the meaning defined in the Development Agreement. "MONTHLY DISTRIBUTION PAYMENT" shall have the meaning set forth in Section 5.5. "NATIONAL INDIAN GAMING COMMISSION" OR "NIGC" means the commission established pursuant to 25 U.S.C. Section 2704. "NET REVENUES" shall mean the sum of "Net Revenues (gaming)" and "Net Revenues (other)". "NET REVENUES (GAMING)" shall mean the Gross Gaming Revenue (Win), of the Enterprise from Class II or Class III gaming less all gaming related Operating Expenses, excluding the Management Fee, and less the retail value of any Promotional Allowances, and less the following revenues actually received by the Enterprise and included in Gross Revenues: (i) any gratuities or service charges added to a customer's bill: (ii) any credits or refunds made to customers, guests or patrons; (iii) any sums and credits received by the Enterprise for lost or damaged merchandise; (iv) any sales taxes, excise taxes, gross receipt taxes, admission taxes, entertainment taxes, tourist taxes or charges received from patrons and passed on to a governmental or quasi governmental entity, including without limitation any Permitted Taxes; (v) any proceeds from the sale or other disposition of furnishings and equipment or other capital assets; (vi) any fire and extended coverage insurance proceeds other than for business interruption; (vii) any condemnation awards other than for temporary condemnation; and 12 (viii) any proceeds of financing or refinancing. It is intended that this provision be consistent with 25 U.S.C. Section 2703(9). "NET REVENUES (OTHER)" shall mean all Gross Revenues of the Enterprise from all other sources in support of Class II or Class III gaming not included in "Net Revenues (gaming)," such as food and beverage, hotel, entertainment and retail (in each case, only to the extent such Gross Revenues are derived from activities included in the Enterprise, in accordance with the definition thereof), less all Operating Expenses, excluding the Management Fee and less the retail value of Promotional Allowances, if any, and less the following revenues actually received by the Enterprise and included in Gross Revenues: (i) any gratuities or service charges added to a customer's bill; (ii) any credits or refunds made to customer, guests or patrons; (iii) any sums and credits received by the Enterprise for lost or damaged merchandise; (iv) any sales taxes, excise taxes, gross receipt taxes, admission taxes, entertainment taxes, tourist taxes or charges received from patrons and passed on to a governmental or quasi governmental entity, including without limitation any Permitted Taxes; (v) any proceeds from the sale or other disposition of furnishing and equipment or other capital assets; (vi) any fire and extended coverage insurance proceeds other than for business interruption; (vii) any condemnation awards other than for temporary condemnation; and (viii) any proceeds of financing or refinancing. It is intended that this provision be consistent with 25 U.S.C. Section 2703(9). "NIGC APPROVAL" means the written approval by the NIGC of this Agreement. "NON-GAMING LAND ACQUISITION LINE OF CREDIT" shall have the meaning defined in the Development Agreement. "OPERATING BUDGET AND ANNUAL PLAN" shall mean the operating budget and plan described in Section 4.11. 13 "OPERATING EXPENSES" shall mean all expenses of the operation of the Enterprise (but, as to hotels and other non-casino activities, only to the extent such Operating Expenses are incurred in activities included in the Enterprise, in accordance with the definition thereof), pursuant to GAAP, including but not limited to the following: (i) the Compensation of Enterprise Employees; (ii) Operating Supplies for the Enterprise; (iii) utilities; (iv) repairs and maintenance of the Facility (excluding Capital Replacements) (v) interest on the Loans and all other loans or capital leases pertaining to the Facility and the Enterprise, but shall exclude interest on the Non-Gaming Land Acquisition Line of Credit and the Transition Loan; (vi) interest on installment contract purchases or other interest charges on debt approved by the Business Board; (vii) insurance and bonding; (viii) advertising and marketing, including busing and transportation of patrons to the Facility; (ix) accounting, audit, legal and other professional fees; (x) security costs; (xi) operating lease payments for Furnishings and Equipment to the extent approved by the Business Board, and capital lease payments to the extent approved by the Business Board and properly expensed under GAAP; (xii) trash removal; (xiii) cost of goods sold; (xiv) other expenses designated as Operating Expenses in accordance with the accounting standards as referred to in Section 4.21.3; (xv) expenses specifically designated as Operating Expenses in this Agreement; (xvi) depreciation and amortization of the Facility based on an assumed 30 year life, and depreciation and amortization of all other assets in accordance with GAAP; 14 (xvii) recruiting and training expenses; (xviii) fees due to the NIGC under the IGRA; (xix) any required payments to or on behalf of the State, any local governments or the Pokagon Fund made by or on behalf of the Enterprise or the Band pursuant to the Compact or any related consent decree, or pursuant to the Local Agreement; (xx) any budgeted charitable contributions by the Enterprise for the benefit of charities located or providing services in the vicinity of the Gaming Site which are approved by the Business Board; (xxi) Pre-opening expenses shall be capitalized and treated as an expense during the first year after opening; and (xxii) charges, assessments, fines or fees imposed by governmental entities of the Band which are reasonably related to the cost of Tribal governmental regulation of public health, safety or welfare, or the integrity of Tribal gaming operations. but Operating Expenses shall not include any portion of Manager's Internal Expenses or Permitted Taxes (other than as described in clause xxiii above). "OPERATING SUPPLIES" shall mean food and beverages (alcoholic and nonalcoholic) and other consumable items used in the operation of a casino, such as playing cards, tokens, chips, plaques, dice, fuel, soap, cleaning materials, matches, paper goods, stationary and all other similar items. "PERMITTED TAXES" shall mean taxes, fees, assessments or other charges imposed by the Band that are permitted under Section 7.2. "PLANS AND SPECIFICATIONS" shall mean the final Plans and Specifications approved for the Facility as described in the Development Agreement. "POKAGON COUNCIL" shall mean the duly elected, governing legislative body of the Band described pursuant to Public Law 102-323 or, at the option of the Band, a designee committee or council created pursuant to resolution or ordinance of the Pokagon Council. "POKAGON FUND" shall mean the non-profit corporation established pursuant to the Local Agreement. "PRE-OPENING BUDGET" shall have the meaning described in Section 4.10. 15 "PRE-OPENING EXPENSES" shall have the meaning described in Section 4.10. "PROJECT" shall have the meaning described in Section 4.1 of the Development Agreement. "PROMOTIONAL ALLOWANCES" shall mean the retail value of complimentary food, beverages, merchandise, and tokens for gaming, provided to patrons as promotional items. "RELATIVE" shall mean an individual residing in the same household who is related as a spouse, father, mother, son or daughter. "REMAINING LOAN AVAILABILITY AMOUNT" SHALL have the meaning described in Section 9.2.1(a)((ii)(A) of the Development Agreement. "RESERVE AMOUNT" shall have the meaning described in Section 9.2.1(a)((ii)(A) of the Development Agreement. "RESTORATION ACT" shall mean 25 U.S.C. Sections 1300j et seq. "RESTRICTED TERRITORY" shall mean the States of Ohio, Illinois, Indiana and Michigan. "SPECIFIC PERFORMANCE RESTRICTION" shall mean that no arbitrator or court shall have the power to compel, overturn, negate or in any manner modify any Governmental Action; but such restriction shall not prevent an arbitrator from determining that the taking of any Governmental Action or the failure to take any Governmental Action, which is not caused by a breach of Great Lakes or Lakes' obligations under the Agreements or the Guaranty, constitutes a breach of this Agreement by the Band or the impairment of rights of Great Lakes under this Agreement; and which therefore results in liability on the part of the Band for damages in favor of Great Lakes as provided in this Agreement and enforcement of the obligations of the Band to Great Lakes, including any security agreements and collateral instruments, in accordance with their terms. "STATE" shall refer to the State of Michigan. "SUBSEQUENT GAMING FACILITY REVENUES" means gaming revenues from a gaming facility (including the Facility) owned or operated by the Band in Michigan, but only to the following extent: (i) all Class III Gaming Net Revenue, and (ii) Class II Gaming Net Revenue to the extent that such Class II Net Revenue exceeds $1,000,000. "TERM" shall mean the term of this Agreement as described in Section 3.2. 16 "TRANSITION LOAN NOTE" shall have the meaning defined in the Development Agreement. "TRIBAL DISTRIBUTIONS" shall mean Monthly Distribution Payments, Minimum Guaranteed Monthly Payments and any other payments received by the Band from the Enterprise pursuant to or in connection this Agreement. 2.1. Terms defined in the Development Agreement not otherwise defined in this Agreement shall have the same meaning herein as therein. 3. ENGAGEMENT; BUSINESS BOARD; COMPLIANCE In consideration of the mutual covenants contained in this Agreement, the parties agree and covenant as follows: 3.1. Engagement of Manager. The Band hereby retains and engages Manager as the exclusive manager of the Enterprise pursuant to the terms and conditions of this Agreement, and Manager hereby accepts such retention and engagement, subject to receipt of all necessary regulatory approvals. 3.2. Term. The term of this Agreement shall begin on the date this Agreement, the Development Agreement (if required) and the Lakes Development Note (if required) are approved by the Chairman of the NIGC, and/or the BIA if required, and continue until, unless earlier terminated in accordance with its terms, seven (7) years from commencement of Gaming at the Initial Phase of the Facility, provided that the Term of the Management Agreement will be five (5) years from the Commencement Date if (i) the Development Expenditures of the Initial Phase of the Facility are equal to or more than $138,000,000, and (ii) Lakes' Financial Support for such Initial Phase has not exceeded $46,000,000. 3.2.1. "Financial Support"shall be defined for purposes of this subsection as the sum of the following: (a) the maximum amount of principal outstanding under the Lakes Development Loan and the Lakes Facility Loan (if provided directly by Great Lakes) as of the Commencement Date or any time prior thereto, plus the amount of any Guaranty Reserves established with respect thereto that are outstanding as of the Commencement Date, plus (b) subject to the limits provided in Section 3.2.2(d), the maximum amount, as of the Commencement Date or any time prior thereto, of the greater of the principal 17 amounts outstanding or the principal amounts of the commitments under any other Loans (including the Lakes Facility Loan if provided by a party other than Great Lakes) for which Great Lakes or Lakes have with the consent of the Band provided guaranties or other credit enhancements (including without limitation, any construction completion guaranty granted by Great Lakes or Lakes as a credit enhancement of the Bank Loan and/or Equipment Loan) or interest subsidies, excluding the portion of guarantees, credit enhancements or interest subsidies to the extent of the maximum amount of any Guaranty Reserves, as of the Commencement Date or any time prior thereto, that have been established under Section 9.2.1(a)(ii)(A) of the Development Agreement with respect thereto; plus (c) subject to the limits provided in Section 3.2.2(d), if as of the Commencement Date, any guarantees or credit enhancements previously provided by Great Lakes or Lakes at the request of or consented to by the Band with respect to any Construction Documents (other than the Road Service Agreement, which the parties intend to terminate) remain in existence and have not been terminated or released in writing, the Reserve Amount (as defined in Section 9.2.1(a)(ii)(A) of the Development Agreement) as of the Commencement Date for any such guaranteed or enhanced obligations remaining unpaid, regardless of whether a Guaranty Reserve was in fact established therefor; provided that the amount of any Reserve Amount shall be reduced by the amount of cash collateral posted by Lakes or Great Lakes to secure any such guaranty, credit enhancement or interest subsidy, the amount advanced by Lakes or Great Lakes for such cash collateral being an advance under the Lakes Development Loan. 3.2.2. For purposes of calculating Financial Support: (a) The advances outstanding under the Lakes Development Loan shall be deemed to equal $46,000,000 if at the time of the Commencement Date the sum of advances previously made thereunder in 18 accordance with the terms of the Development Agreement and the amount of any Guaranty Reserves established under Section 9.2.1(a)(ii)(A) of the Development Agreement is less than $46,000,000; (b) If the Band has previously repaid any amount under the Lakes Development Loan and/or the Lakes Facility Loan, such calculation shall include any advances made on such Loan(s) by Great Lakes but which were repaid by the Band on or prior to the Commencement Date; (c) Such calculation shall exclude the Non-Gaming Acquisition Line of Credit and the Transition Loan; interest, fees and expenses under any Loan; and any portion of the Bank Loan, the Equipment Loan or any other indebtedness related to the Enterprise to the extent of the amount of any Lakes Refinancing Guaranty related thereto (i.e. the amount of any such obligation of the Band guaranteed or for which a credit enhancement has been provided by Great Lakes or Lakes and which amount has been used to refinance any portion of the Lakes Development Loan, the Lakes Facility Loan and/or any other obligation of the Band to Great Lakes)); and (d) Financial Support under or relating to guaranties or other credit enhancements or interest subsidies shall not exceed (i) any contractual limitation or cap on Lakes or Great Lakes' liability under such guaranties or other credit enhancements, or (ii) the present value of any such interest subsidy as of the closing on the Bank Loan or the Equipment Loan, as applicable. 3.3. Status of Gaming Site. The Band represents and covenants that it will acquire the Gaming Site in accordance with the terms of the Development Agreement, and will maintain the Gaming Site throughout the Term as land held in Trust by the United States of America for the benefit of the Band, eligible as a location upon which Class II and Class III Gaming can occur. The Band covenants, during the term hereof, that Manager shall and may peaceably have complete access to and presence in the Facility in accordance with the terms of this Agreement, free from molestation, eviction and disturbance by the Band or by any person or entity; provided, however, that such right of 19 access to and presence in the Facility shall cease upon the termination of this Agreement pursuant to its terms. 3.4. Creation and Operation of Business Board. Manager and the Band agree to create a Business Board comprised of an equal number of persons representing and designated by the Band and the Manager. Unless otherwise agreed by the Band and the Manager, the Business Board shall have four (4) members. Any member of the Business Board may designate another person to exercise authority as a member by written notice signed by such Business Board member and given in accordance with Section 18.2 of this Agreement. The Business Board shall remain active during the entire term of this Agreement. Within thirty (30) days following the date of this Agreement, each party shall give the other notice of the individuals initially designated by each to serve on the Business Board. The Business Board shall have the obligations, rights and powers described in this Agreement. In order to be effective, any action of the Business Board must be the result of mutual agreement of a majority of the Business Board members or their designees at a meeting at which both Band Representatives (or their duly designated designees) are present; or, in the event of action by written consent, by consent signed by both Band Representatives (or their designees) and at least one Manager Representative (or his/her designee). In the event mutual agreement cannot be reached, the appropriate action shall be determined in the manner provided in Article 13. 3.5. Manager Compliance with Law; Licenses. Manager and Lakes each covenant that it will at all times comply with Legal Requirements, including the Band Gaming Ordinance, the IGRA, the Compact, State statutes, to the extent applicable, and any licenses issued under any of the foregoing. The Band shall not unreasonably withhold, delay, withdraw, qualify or condition such licenses as the Band is authorized to grant. 3.6. Compliance with Compact. The parties shall at times comply with the provisions of the Compact. 3.7. Fire and Safety. Manager shall ensure that the Facility shall be constructed and maintained in compliance with all fire and safety statutes, ordinances, and regulations which would be applicable if the Facility were located outside of the jurisdiction of the Band although those requirements would not otherwise apply within that jurisdiction. Nothing in this Section shall grant any jurisdiction to the State or any political subdivision thereof over the Gaming Site or the Facility. The Band shall be responsible for arranging fire protection and police services for the Facility. 3.8. Compliance with the National Environmental Policy Act. With the assistance of Manager, the Band shall supply the NIGC with all information necessary for the NIGC to comply with any regulations of the NIGC issued pursuant to the National Environmental Policy Act (NEPA). 20 3.9. Commencement Date. Manager shall memorialize the Commencement Date in a writing signed by Manager and delivered to the Band and to the Chairman of the NIGC. 4. BUSINESS AND AFFAIRS OF THE ENTERPRISE 4.1. Manager's Authority and Responsibility. Manager shall conduct and direct all business and affairs in connection with the day-to-day operation, management and maintenance of the Enterprise and the Facility, including the establishment of operating days and hours. It is the parties' intention that the Enterprise be open 24 hours daily, seven days a week. Manager is hereby granted the necessary power and authority to act, through the General Manager, in order to fulfill all of its responsibilities under this Agreement. Nothing herein grants or is intended to grant Manager a titled interest to the Facility or to the Enterprise. Manager hereby accepts such retention and engagement. The Band shall have the sole proprietary interest in and ultimate responsibility for the conduct of all Gaming conducted by the Enterprise, subject to the rights and responsibilities of Manager under this Agreement. 4.2. Duties of Manager. In managing, operating, maintaining and repairing the Enterprise and the Facility, under this Agreement, Manager's duties shall include, without limitation, the following: 4.2.1. Physical Duties. Manager shall use reasonable measures for the orderly physical administration, management, and operation of the Enterprise and the Facility, including without limitation cleaning, painting, decorating, plumbing, carpeting, grounds care and such other maintenance and repair work as is reasonably necessary. 4.2.2. Compliance with Band Ordinances. Manager shall comply, and, as applicable, shall cause Lakes to comply, with all duly enacted statutes, regulations and ordinances of the Band, subject to the provisions of Section 10.2.1. 4.2.3. Required Filings. Manager shall comply with all applicable provisions of the Internal Revenue Code including, but not limited to, the prompt filing of any cash transaction reports and W-2G reports that may be required by the Internal Revenue Service of the United States or under the Compact. 4.2.4. Contracts in Band's Name Doing Business as the Enterprise and at Arm's Length. Contracts for the operations of the Enterprise shall be entered into in the name of the Band, doing business as the Enterprise, and signed by the General Manager. Any contract requiring an expenditure in any year in excess of $50,000, or such higher amount as may be set by the Business Board, shall be approved by the Business 21 Board. No contracts, of any amount, for the supply of goods or services to the Enterprise shall be entered into with an Affiliate or Insider of the Manager unless that affiliation is disclosed to and approved by the Business Board, and the contract terms are no less favorable for the Enterprise than could be obtained from a nonaffiliated contractor. Nothing contained in this Section 4.2.4 shall be deemed to be or constitute a waiver of the Band's sovereign immunity. 4.2.5. Enterprise Operating Standards. Manager shall use its best efforts to operate the Enterprise in a proper, efficient and competitive manner in accordance with operating standards which are consistent with the highest operating standards of the casino, hospitality and resort industries. 4.2.6. Security. Manager shall provide for appropriate security for the operation of the Enterprise. All aspects of the Facility security shall be the responsibility of Manager. Any security officer shall at the request of the Business Board be bonded and insured in an amount commensurate with his or her enforcement duties and obligations. The cost of any charge for security and increased public safety services will be an Operating Expense. 4.3. Damage, Condemnation or Impossibility of the Enterprise. Damage to or destruction or condemnation of the Facility or the Enterprise shall be governed by the provisions of Section 13.8 of the Development Agreement. 4.4. Alcoholic Beverages and Tobacco Sales. During the term of this Agreement alcoholic beverages may be served at the Facility if permissible in accordance with applicable law. The parties acknowledge that no enabling Band legislation for the sale of alcoholic beverages is now in force, and that such legislation would be necessary in order to serve alcoholic beverages at the Facility. If such legislation is subsequently enacted, and if other requisite approvals are obtained, the Band and Manager may mutually agree to include service of such beverages within the Enterprise. Tobacco may be sold at the Facility subject to and in accordance with the Band's licensing requirements, if any. 4.5. Employees. 4.5.1. Manager's Responsibility. Manager shall have, subject to the terms of this Agreement, the exclusive responsibility and authority to direct the selection, control and discharge of all employees performing regular services for the Enterprise in connection with the maintenance, operation, and management of the Enterprise and the Facility and any activity upon the Gaming Site; and the sole responsibility for determining whether a prospective employee is qualified and the 22 appropriate level of Compensation to be paid, except that the Gaming Commission shall have the exclusive right to determine licensing qualifications. 4.5.2. Enterprise Employee Policies. Manager shall prepare a draft of personnel policies and procedures (the "Enterprise Employee Policies"), including a job classification system with salary levels and scales, which policies and procedures shall be in compliance with applicable Band law and subject to approval by the Business Board. Enterprise employees are employed on an "at-will" basis and, unless expressly stated otherwise, nothing contained in this Agreement or the Enterprise Employee Policies shall be construed to affect the "at-will" nature of employment with the Enterprise. The Enterprise Employee Policies shall include a grievance procedure in order to establish fair and uniform standards for the Enterprise employees, which will include procedures for the resolution of disputes between the Enterprise and Enterprise employees. At a minimum, the Enterprise Employee Policies shall provide for an employee grievance process which provides the following: A written "Board of Review" process will be created by the Enterprise's general manager to provide Enterprise employees with a procedure for bringing grievances involving substantial work related issues to the attention of Enterprise management so they may be promptly and permanently resolved in a fair and equitable manner. The Board of Review process will be available to all Enterprise employees except: (a) job applicants, temporary employees, and part-time employees; (b) employees at the director level and above; and (c) employees discharged for actions involving violations of tribal law, including tribal gaming regulations, or federal, state, or local law. Enterprise employees will be eligible to use the Board of Review process if they have: (i) completed an initial period of employment not to exceed ninety (90) work shifts; (ii) concluded all required preliminary procedures before seeking a Board of Review hearing; (iii) completed a Board of Review hearing request form; and (iv) submitted the hearing request form within the allotted time frame to the Enterprise human resources department and a copy to the head of their home department in the Enterprise. The Enterprise's human resources department shall be responsible for determining the composition of the hearing panel and for establishing hearing rules and procedures, in each case subject to the provisions of the Enterprise Employee Policies. The Board of Review will be empowered to make a range of decisions necessary to fully resolve the grievance, including reinstatement (with or without backpay) or upholding the employee's discharge. The Board of Review's decision on the grievance will be final and binding for the employee and the 23 Enterprise, and there will be no appeal beyond the Board of Review except as may be expressly provided in the Enterprise Employee Policies. Manager shall be responsible for administering the Enterprise Employee Policies. Any amendments to the Enterprise Employee Policies must be consistent with this subsection and shall not be effective unless they are approved by the Business Board. 4.5.3. Senior Employees. The selection of the General Manager, Chief Financial Officer, Casino Manager, and Human Resources Manager of the Enterprise, or the functionally equivalent positions, shall be subject to consultation between, and agreement by, Manager, the Business Board and the Pokagon Council. All such Employees shall be Enterprise Employees. 4.5.4. Enterprise Employees. The terms of employment of all Enterprise Employees shall be structured as though all labor, employment, and unemployment insurance laws applicable in the State which would apply to Enterprise Employees if they were not working on an Indian reservation would also apply to Enterprise Employees; except that the Band reserves the right to by ordinance establish a workman's compensation trust fund and worker's compensation system instead of adopting Michigan workers compensation law, and to adopt other laws and regulations that might preempt otherwise applicable law. 4.5.5. Removal of Employees. Manager will act in accordance with the Enterprise Employee Policies with respect to the discharge, demotion or discipline of any Enterprise Employee. 4.5.6. Band Employees. All Enterprise Employees shall be employees of the Band. 4.6. No Manager Internal Expenses; Limitation on Manager Payments. No Manager Internal Expenses shall be paid by the Enterprise. No officer, director, shareholder or employee of Manager or Lakes shall be compensated by wages from or contract payments by the Enterprise for their efforts or for any work which they perform under this Agreement. Neither Manager nor Lakes shall receive any payments from the Enterprise other than loan repayments (whether under the Lakes Development Note, the Lakes Facility Note, for other advances in accordance with this Agreement, or as subrogee after paying on any Loan guarantee) and the Management Fee to be paid to Manager under Section 5.1. Manager Internal Expenses may be paid from Management Fees and loan repayments after they have been received by Manager. Nothing in this subsection shall restrict the ability of an employee of the Enterprise to purchase or hold stock in Lakes where (a) such stock is publicly held, and (b) such employee acquires, on 24 a cumulative basis, less than five percent (5%) of the outstanding stock in the corporation. 4.7. GRA Expenses. The funding of the operation of the Gaming Regulatory Authority shall, prior to the Commencement Date, be a start up expense of the Enterprise and thereafter shall be an Operating Expense. The budget for the GRA shall reflect the reasonable cost of regulating the Enterprise. Disputes between the parties relating to GRA costs shall be resolved pursuant to the provisions of Article 13 of this Agreement. The decisions and actions of the GRA as to Manager shall be subject to the provisions of Article 13 hereof, including without limitation the Specific Performance Restriction. 4.8. Employee Background Checks. A background investigation shall be conducted by the GRA in compliance with all Legal Requirements, to the extent applicable, on each applicant for employment as soon as reasonably practicable. No individual whose prior activities, criminal record, if any, or reputation, habits and associations are known to pose a threat to the public interest, the effective regulation of Gaming, or to the gaming licenses of Manager or Lakes, or to create or enhance the dangers of unsuitable, unfair, or illegal practices and methods and activities in the conduct of Gaming, shall knowingly be employed by Manager, Lakes or the Band. The background investigation procedures employed by the GRA shall be formulated in consultation with Manager and shall satisfy all regulatory requirements independently applicable to Manager and Lakes. Any cost associated with obtaining such background investigations shall constitute an Operating Expense, provided, however, the costs of background investigations relating to Manager, Lakes and the shareholders, officers, directors or employees of Manager, Lakes or their Affiliates shall be borne solely by Manager, shall be nonrefundable, shall not be treated as part of the Lakes Development Loan or as Operating Expenses of the Enterprise, and shall not exceed $50,000. 4.9. Indian Preference. Recruiting and Training; Local Preference. 4.9.1. Indian Preference. In order to maximize benefits of the Enterprise to the Band, Manager shall, during the term of this Agreement, to the maximum extent reasonably possible under applicable law, including, but not limited to the Indian Civil Rights Act, 25 U.S.C. Section 1301, et seq., give preference in recruiting, training and employment to qualified members of the Band, their spouses, and children in all job categories of the Enterprise, including senior management. Manager shall: 4.9.1.1. conduct job fairs and skills assessment meetings for Band members; 4.9.1.2. in consultation with and subject to the approval of the Band, develop a management training program for Band members or people selected by the Band. This program shall be structured to provide 25 appropriate training for those participating to assume full managerial control at the conclusion of the Term of this Agreement; and 4.9.1.3. within two hundred seventy (270) days of the Commencement Date, Manager shall develop and present to the Band for its approval, a training plan designed so that, by the end of the Term of the Agreement, all Enterprise Employees will be Band members or others designated by the Band. 4.9.2. Local Preference. Manager shall also give preference to residents of the community in which the Gaming Site is located and in hiring and purchasing shall comply with Section 4 of the Local Agreement. Any such preference shall be junior to the Indian Preference established under Section 4.9.1. 4.9.3. Final Determination. Final determination of the qualifications of Band members and all other persons for employment shall be made by Manager, subject to any licensing requirements of the Gaming Regulatory Authority. Not later than 90 days prior to the Commencement Date, Manager shall develop and present to the Band for its approval a training plan designed to meet the goals set out in this section. 4.10. Pre-Opening. Nine months prior to the scheduled Commencement Date, Manager shall commence implementation of a pre-opening program which shall include all activities necessary to financially and operationally prepare the Facility for opening. To implement the pre-opening program, Manager shall prepare a comprehensive pre-opening budget which shall be submitted to the Business Board for its approval no later than seven months prior to the scheduled Commencement Date ("Pre-Opening Budget"). The Pre-Opening Budget shall identify expenses which Manager anticipates to be necessary or desirable in order to prepare the Facility for the Commencement Date, including without limitation, cash for disbursements, Furnishings and Equipment and Operating Supplies, hiring, training, relocation and temporary lodging of employees, advertising and promotion, office overhead and office space (whether on or off the Gaming Site), and travel and business entertainment (including opening celebrations and ceremonies) ("Pre-Opening Expenses"). The Band recognizes that the Pre-Opening Budget has been prepared well in advance of Commencement and is intended only to be a reasonable estimate, subject to variation due to a number of factors, some of which will be outside of Manager's control (e.g. the time of completion, inflationary factors and varying conditions for the goods and services required). The Band agrees that the Pre-Opening Budget may be modified from time to time, subject to approval of the Business Board in accordance with the procedure established by Section 4.11 of this Agreement for adjustments to the Operating Budget and Annual Plan. 26 4.11. Operating Budget and Annual Plan. Manager shall, prior to the scheduled Commencement Date, submit to the Business Board for its approval a proposed Operating Budget and Annual Plan for the Fiscal Year commencing on the Commencement Date. Thereafter, Manager shall, not less than 30 days prior to the commencement of each full or partial Fiscal Year, submit to the Business Board for its approval a proposed Operating Budget and Annual Plan for the ensuing full or partial Fiscal Year, as the case may be. The Operating Budget and Annual Plan shall include a projected income statement, balance sheet, and projection of cash flow for the Enterprise, with detailed justifications explaining the assumptions used therein. The Operating Budget and Annual Plan shall include, without limitation, a schedule of repairs and maintenance (other than Capital Replacements), a business and marketing plan for the Fiscal Year, and the Minimum Balance which must remain in the Enterprise Accounts and the House Bank as of the end of each month during the Fiscal Year to assure sufficient monies for working capital purposes, and detail of other expenditures proposed to be authorized under the Operating Budget and Annual Plan. The Operating Budget and Annual Plan for the Enterprise will be comprised of the following: 4.11.1. A statement of the estimated income and expenses for the coming Fiscal Year, including estimates as to Gross Revenues and Operating Expenses for such Fiscal Year, such operating budget to reflect the estimated results of the operation during each month of the subject Fiscal Year; 4.11.2. Either as part of the statement of the estimated income and expenses referred to Section 4.11.1, or separately, budgets (and timetables and requirements of Manager) for: 4.11.2.1. repairs and maintenance; 4.11.2.2. Capital Replacements; 4.11.2.3. Furnishings and Equipment; 4.11.2.4. advertising and business promotion programs for the Enterprise; 4.11.2.5. the estimated cost of Promotional Allowances; and 4.11.2.6. a business and marketing plan for the subject Fiscal Year. 4.11.3. The Business Board's approval of the Operating Budget and Annual Plan shall not be unreasonably withheld or delayed. Manager shall meet with the Business Board to discuss the proposed Operating Budget and 27 Annual Plan and the Business Board's approval shall be deemed given unless a specific written objection thereto is delivered by the Band Representatives to Manager within thirty (30) days after Manager and the Business Board have met to discuss the proposed Operating Budget and Annual Plan. If the Band Representatives for any reason decline to meet with Manager to discuss a proposed Operating Budget and Annual Plan after not less than twenty (20) days written notice, the Band Representatives shall be deemed to have consented unless a specific written objection is delivered to Manager within thirty (30) days after the date of the proposed meeting. The Business Board shall review the Operating Budget and Annual Plan on a line-by-line basis, if requested by the Band Representative. 4.11.4. If the initial proposed Operating Budget and Annual Plan contains disputed budget item(s), the Band Representatives on the Business Board and the Manager agree to cooperate with each other in good faith to resolve the disputed or objectionable proposed item(s). In the event that the Band Representatives on the Business Board and the Manager are not able to reach mutual agreement concerning any disputed or objectionable item(s) within a period of fifteen (15) days after the date the Band Representatives on the Business Board provide written notice of the Band's objection to Manager, either party shall be entitled to submit the dispute to arbitration in accordance with Article 13. If the Band Representatives on the Business Board and the Manager are unable to resolve the disputed or objectionable item(s) prior to the commencement of the applicable Fiscal Year, the undisputed portions of the proposed Operating Budget and Annual Plan shall be deemed to be adopted and approved and the corresponding line item(s) contained in the Operating Budget and Annual Plan for the preceding Fiscal Year shall be adjusted as set forth herein and shall be substituted in lieu of the disputed item(s) in the proposed Operating Budget and Annual Plan. Those line items which are in dispute shall be determined by increasing the preceding Fiscal Year's actual expense for the corresponding line items by an amount determined by Manager which does not exceed the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics of the United States Department of Labor, U.S. City Average, all items (1997-98 = 100) for the Fiscal Year prior to the Fiscal Year with respect to which the adjustment to the line item(s) is being calculated or any successor or replacement index thereto. The resulting Operating Budget and Annual Plan obtained in accordance with the preceding sentence shall be deemed to be the Operating Budget and Annual Plan in effect until such time as Manager and the Band Representatives on the Business Board have resolved the items objected 28 to by the Band Representatives on the Business Board or an arbitrator has rendered his award on the dispute. 4.11.5. Adjustments to Operating Budget and Annual Plan and Capital Budget. Manager may, after notice to and approval by the Business Board, revise the Operating Budget and Annual Plan and the Capital Budget from time to time, as necessary, to reflect any unpredicted significant changes, variables or events or to include significant, additional, unanticipated items of expense. Expenditures shall not materially vary from the approved budgets nor exceed the aggregate Operating Budget and Annual Plan (as approved by the Business Board, and revised with the reasonable approval of the Business Board) absent the written consent of the Business Board; provided that the Band recognizes that (a) the absolute amounts of expenditures may exceed budgeted amounts if the volume of business at the Facility exceeds projections, (b) the relative amounts of income and expense may vary from budgeted amounts if the volume of business is less than projected, and (c) Manager does not guarantee the economic performance shown in budgets. Manager shall submit a revision of the Operating Budget and Annual Plan to the Business Board for review on a quarterly or other appropriate basis. 4.12. Capital Budgets. Manager shall, not less than 30 days prior to the commencement of each Fiscal Year, or partial Fiscal Year, submit to the Business Board a recommended capital budget (the "Capital Budget") describing the present value, estimated useful life and estimated replacement costs for the ensuing full or partial year, as the case may be, for the physical plant, furnishings, equipment, and ordinary capital replacement items, all of which are defined to be any items, the cost of which is capitalized and depreciated, rather than expended, using GAAP ("Capital Replacements") as shall be required to operate the Enterprise in accordance with sound business practices. Capital Replacements in the Capital Budget in an aggregate sum equal to or less than the sum of the Capital Replacement Reserve for the Fiscal Year shall be approved by the Business Board; and any amounts in excess of the Capital Replacement Reserve for the Fiscal Year shall be subject to approval of the Pokagon Council in its sole discretion. The Pokagon Council, Business Board, and Manager shall meet to discuss the proposed Capital Budget and the Business Board and Pokagon Council shall be required to make specific written objections to a proposed Capital Budget in the same manner and within the same time periods specified in Section 4.11.4 with respect to an Operating Budget and Annual Plan. The Busmess Board and Pokagon Council shall not unreasonably withhold or delay its consent. Unless the Pokagon Council, Business Board, and Manager otherwise agree, Manager shall be responsible for the design and installation of Capital Replacements, subject to the Business Board's approval and ratification by the Pokagon Council and right to inspect. 29 4.13. Capital Replacements. The Band shall effect and expend such amounts for any Capital Replacements as shall be required, in the course of the operation of the Enterprise, to maintain, at a minimum, the Enterprise in compliance with any Legal Requirements and to comply with Manager's recommended programs for renovation, modernization and improvement intended to keep the Enterprise competitive in its market; or to correct any condition of an emergency nature, including without limitation, maintenance, replacements or repairs which are required to be effected by the Band, which in Manager's sole discretion requires immediate action to preserve and protect the Facility, assure its continued operation, and/or protect the comfort, health, safety and/or welfare of the Facility's guests or employees (an "Emergency Condition"); provided, however, that the Band shall be under no obligation to fund Capital Replacements in aggregate amount greater than its periodic required contributions to the Capital Replacement Reserve described in Section 4.15. Manager is authorized to take all steps and to make all expenditures from the Disbursement Accounts described in Section 4.19.3 (in the case of non-capitalized repairs and maintenance), or Capital Replacement Reserve described at Section 4.14 (in the case of expenditures for Capital Replacements), as it deems necessary to repair and correct any Emergency Condition, regardless whether such provisions have been made in the Capital Budget or the Operating Budget and Annual Plan for any such expenditures; or the cost thereof may be advanced by Manager and reimbursed from future revenues. Design and installation of Capital Replacements shall be effected in a time period and subject to such conditions as the Business Board may establish to minimize interference with or disruption of ongoing operations. 4.14. Capital Replacement Reserve. Manager shall establish a Capital Replacement Reserve on the books of account of the Enterprise, and the periodic contributions of cash required by Section 4.15 shall be deposited by the Enterprise into an account (the "Capital Replacement Reserve") established in the Band's name at a bank designated by the Business Board in accordance with Section 4.19.1 of this Agreement. All amounts in the Capital Replacement Reserve shall be invested in interest bearing investments in accordance with the Enterprise Investment Policy to the extent that availability of funds, when required, is not thereby impaired. Interest earned on amounts deposited in the Capital Replacement Reserve shall be credited to the Capital Replacement Reserve and shall be available for payment of expenditures for Capital Replacements to the Facility. Manager shall draw on the Capital Replacement Reserve for Capital Replacements to purchase those items included in the Capital Budget approved by the Business Board or such emergency additions, repairs or replacements as shall be required to correct an Emergency Condition. 4.15. Periodic Contributions to Capital Replacement Reserve. In accordance with Section 5.5 of this Agreement, Manager shall make monthly deposits into the Capital Replacement Reserve in amounts equivalent to an annual rate of 1% (one percent) of Gross Revenues during the first twelve (12) month period after the Commencement Date and equivalent to an annual rate of 3% (three percent) of Gross Revenues during the remainder of the 30 Fiscal Year in which such twelve (12) month period ends and during each successive Fiscal Year over the remainder of the Term; such reserve shall be funded out of Monthly Distribution Payments. The cash amounts required to be so deposited shall be calculated and deposited into the Capital Replacement Reserve, in arrears, no later than the twenty-first (21st) day of the month immediately following the month with respect to which a deposit is made. If any adjustment of Gross Revenues is made as result of an audit or for other accounting reasons, a corresponding adjustment in the Capital Replacement Reserve deposit shall be made. In addition, all proceeds from the sale of capital items no longer needed for the operation of the Enterprise, and the proceeds of any insurance received in reimbursement for any items previously paid from the Capital Replacement Reserve, shall be deposited into the Capital Replacement Reserve upon receipt. 4.16. Use and Allocation of Capital Replacement Reserve. Any expenditures for Capital Replacements which have been budgeted and previously approved may be paid from the Capital Replacement Reserve without further approval from the Business Board. Any amounts remaining in the Capital Replacement Reserve at the close of any year shall be carried forward and retained in the Capital Replacement Reserve until fully used. If the amounts in the Capital Replacement Reserve at the end of any year plus the anticipated contributions to the Capital Replacement Reserve for the next ensuing year are not sufficient to pay for Capital Replacements authorized by the Capital Budget for such ensuing year, then additional funds, in the amount of the projected deficiency, may be advanced by the Manager and reimbursed by the Enterprise from future revenues. 4.17. [intentionally omitted] 4.18. Internal Control Systems. Manager shall install systems for monitor of all funds (the "Internal Control Systems"), which systems shall comply with all Legal Requirements, and shall be submitted to the Business Board and the Band Regulatory Authority for approval in advance of implementation, which approval shall not be unreasonably withheld. The Band shall retain the right to review all Internal Control Systems and any changes instituted to the Internal Control Systems of the Enterprise. The Band shall have the right to retain an auditor to review the adequacy of the Internal Control Systems prior to the Commencement Date. The cost of such review shall be a Pre-Opening Expense. Any significant changes in such systems after the Commencement Date also shall be subject to review and approval by the Gaming Regulatory Authority. The Gaming Regulatory Authority and Manager shall have the right and duty to maintain and police the Internal Control Systems in order to prevent any loss of proceeds from the Enterprise. The Gaming Regulatory Authority shall have the right to inspect and oversee the Internal Control System at all times. Manager shall install a closed circuit television system to be used for monitoring the cash handling activities of the Enterprise sufficient to meet all Legal Requirements. 4.19. Banking and Bank Accounts. 31 4.19.1. Enterprise Accounts. The Business Board shall select, and the Pokagon Council shall approve, a bank or banks for the deposit and maintenance of funds and shall establish in such bank or banks accounts as Manager deems appropriate and necessary in the course of business and as consistent with this Agreement, including the Dominion Account ("Enterprise Accounts"). Establishment of any Enterprise Bank Account shall be subject to the approval of the Business Board. The sum of money agreed to by the Business Board to be maintained in the Enterprise Bank Account(s) to serve as working capital for Enterprise operations, shall include all sums needed for the House Bank, and all sums needed to accrue for payment of expenses not paid on a monthly basis (the "Minimum Balance"). Manager shall propose a policy for investing funds in excess of the Minimum Balance (the "Enterprise Investment Policy"), which shall be subject to the approval of the Business Board. 4.19.2. Daily Deposits to Dominion Account. Manager shall establish for the benefit of the Band in the Enterprise's name a Dominion Account, which shall be subject to the lien and security interest of Manager to the extent provided in Section 9.2.l(j) of the Development Agreement and the Dominion Agreement. Manager shall collect all Gross Revenues and other proceeds connected with or arising from the operation of the Enterprise, the sale of all products, food and beverage, and all other activities of the Enterprise and deposit the related cash daily into the Dominion Account at least once during each 24-hour period unless otherwise agreed by the Business Board. All money received by the Enterprise on each day that it is open must be counted at the close of operations for that day or at least once during each 24-hour period. Manager agrees to obtain a bonded transportation service to effect the safe transportation of the daily receipts to the bank, which expense shall constitute an Operating Expense. 4.19.3. Disbursement Accounts. Manager shall establish for the benefit of the Band in the Enterprise's name one or more Disbursement Accounts. Manager shall, consistent with and pursuant to the approved annual Operating Budget and Annual Plan and Capital Budget, have responsibility and authority for making all payments for Operating Expenses, debt service, Management Fees, and Tribal Distributions from the Disbursement Accounts. 4.19.4. No Cash Disbursements. Manager shall not make any cash disbursements from the Enterprise Accounts except for the payment of cash prizes from the House Bank; and except for such cash 32 disbursements from the House Bank, any and all payments or disbursements by the Manager shall be made by check or wire transfer drawn against an Enterprise Bank Account. 4.19.5. Transfers Between Accounts. Manager has the authority to transfer funds from and between the Enterprise Accounts to the Disbursement Accounts in order to pay Operating Expenses and to pay debt service pursuant to the Loans, to invest funds in accordance with the Enterprise Investment Policy, and to pay the Management Fees and Tribal Distributions pursuant to this Agreement, and to make other payments required by Section 5.5 below. 4.19.6. Transfers from Dominion Account to Disbursement Accounts. Manager agrees that, notwithstanding any provision of the Dominion Agreement or any Band Event of Default or any default by the Band under the Dominion Agreement, it shall make or permit timely transfers from the Dominion Account to Disbursement Accounts of all funds needed to pay (a) Operating Expenses; (b) the Minimum Guaranteed Monthly Payment; (c) all Loans, as well any other third party loans to which Manager has subordinated in writing; (d) deposits into the Capital Replacement Reserve pursuant to Section 4.15 of this Management Agreement; (e) maintenance of the Minimum Balance, and any other reserves approved by the Business Board with the written consent of Manager; and (f) claims of third parties granted priority over Manager under the Agreements, if the events occur which trigger that priority. Manager further agrees that, prior to any Band Event of Default, it shall make timely transfers to Disbursement Accounts to enable the Monthly Distribution Payment to be made to the Band when due, and otherwise in accordance with this Agreement. 4.20. Insurance. Manager, on behalf of the Band, shall arrange for, obtain and maintain, or cause its agents to maintain, with responsible insurance carriers licensed to do business in the State, insurance satisfactory to Manager and the Business Board covering the Facility and the operations of the Enterprise, naming the Band, the Enterprise and Manager as insured parties. Manager shall recommend to the Business Board the minimum amounts of insurance coverage for the Enterprise, which shall be subject to the reasonable approval of the Band but shall be no less than the following: 4.20.1. Commercial General Liability Insurance, including coverage for incidental contracts, on an occurrence basis with minimum limits of liability of not less than One Million Dollars ($1,000,000) per occurrence and Two Million Dollars ($2,000,000) in the aggregate for bodily injury and/or property damage. 33 4.20.2. Property Insurance in an amount adequate to cover the full replacement value of all buildings, personal property, decorations, trade fixtures, furnishings, equipment, alterations, leasehold improvements and betterments, and all other contents located or placed in the Facility. Coverage shall insure against those risks of loss as are commonly covered under the Insurance Services Offices Special Cause of Loss form. 4.20.3. Boiler or Machinery Insurance covering all pressure vessels, boilers, air conditioning equipment or similar equipment, if any, in, on, adjoining, above or beneath the Facility. 4.20.4. Business Income Insurance covering at least those risks referred to in subparagraph 4.20.2. 4.20.5. Worker's Compensation Insurance including statutory coverage and employers liability in an amount not less than one million ($1,000,000) per person covering all employees as required by the laws of Michigan or of the United States. 4.20.6. Crime coverage - Employee Dishonesty coverage; Loss inside/outside the premises coverage; Depositor's forgery coverage; Computer Fraud coverage. Coverage shall include any employee welfare, 401k plan or pension benefit as required under ERISA. 4.20.7. Automobile liability insurance including hired and non-owned liability for not less than One Million Dollars ($1,000,000.00) combined single limit for bodily injury and property damage. Such non-owned and hired liability insurance shall include coverage for physical damage. 4.20.8. If liquor is to be sold or dispensed, a policy of liquor liability insurance with limits of not less than One Million Dollars ($1,000,000.00) per occurrence. 4.20.9. Umbrella or Excess Liability insurance with limits of not less that Ten Million Dollars ($10,000,000.00) per occurrence and Ten Million Dollars ($10,000,000.00) annual aggregate providing excess limits over the Commercial General Liability, Employers Liability, Automobile Liability and Liquor Liability described above. 4.20.10. All of the above insurance shall be written by one or more responsible insurance companies with an A.M. Best Ratings of A-8 or better. 4.21. Accounting and Books of Account. 34 4.21.1. Statements. Manager shall prepare and provide to the Band on a monthly, quarterly, and annual basis, operating statements on behalf of the Enterprise. The operating statements shall comply with all Legal Requirements and shall include an income statement, statement of cash flows, and balance sheet for the Enterprise. Such statements shall include the Operating Budget and Annual Plan and Capital Budget projections as comparative statements, and, after the first full year of operation, will include comparative statements from the comparable period for the prior year; and shall reflect in accordance with GAAP all amounts collected and received and all expenses, deductions and disbursements made therefrom in connection with the Enterprise. 4.21.2. Books of Account. Manager shall maintain full and accurate books of account on behalf of the Enterprise at an office in the Facility and at such other location as may be determined by Manager. The GRA and other designated representatives of the Pokagon Council shall have immediate access to the daily operations of the Enterprise and shall have the unlimited right to inspect, examine, and copy all such books and supporting business records. Such rights may be exercised through the Gaming Regulatory Authority or through an agent, employee, attorney, or independent accountant acting on behalf of the Band. 4.21.3. Accounting Standards. Manager shall maintain the books and records on behalf of the Enterprise reflecting the operations of the Enterprise in accordance with Generally Accepted Accounting Principles consistently applied and shall adopt and follow the fiscal accounting periods utilized by the Enterprise in its normal course of business (i.e., a month, quarter and year prepared in accordance with the Fiscal Year). The accounting systems and procedures shall comply with Legal Requirements and, at a minimum: 4.21.3.1. include an adequate system of internal accounting controls; 4.21.3.2. permit the preparation of financial statements in accordance with GAAP; 4.21.3.3. be susceptible to audit in accordance with GAAP and all requirements of IGRA and the NIGC: 4.21.3.4. permit the calculation and payment of the Management Fee described in Section 5 below and the calculation by the Tribe and the NIGC of annual fees payable under 25 C.F.R. Section 514.1; and 35 4.21.3.5. provide for the allocation of operating expenses or overhead expenses among the Band, the Enterprise, and any other user of shared facilities and services. 4.21.3.6. All monthly internal and annual audited financial statements shall show separately the Net Revenue (Gaming) and related Operating Expenses and the Net Revenue (Other) and related Operating Expenses, as well as Net Revenue and Operating Expenses for the entire Enterprise. 4.22. Annual Audit. An independent certified public accounting firm selected by the Band which is a "Big Four" accounting firm with not less than five (5) years auditing experience with gaming enterprise operations shall perform an annual audit of the books and records of the Enterprise and of all contracts for supplies, services or concessions reflecting Operating Expenses, and shall provide such other services as the Business Board shall designate. The Band, the BIA and the NIGC shall also have the right to perform special audits of the Enterprise on any aspect of the Enterprise at any time without restriction. The costs incurred for such audits shall constitute an Operating Expense. Such audits shall be provided by the Band to all applicable federal and state agencies, as required by law, and may be used by Manager for reporting purposes under federal and state securities laws, if required. All audited financial statements shall conform to all requirements of IGRA and the NIGC and, to the extent required by Legal Requirements, shall segregate gaming revenue and expenses from non-gaming revenue and expenses. 4.23. Manager's Contractual Authority. Manager is authorized to make, enter into and perform in the name of and for the account of the Band, doing business as the Enterprise, such contracts deemed necessary by Manager to perform its obligations under this Agreement, provided such contracts comply with the terms and conditions of this Agreement, including, but not limited to, Section 4.2.4, and provided such contracts do not obligate the Enterprise to pay sums not approved in the Operating Budget and Annual Plan or the Capital Budget. 4.24. Retail Shops and Concessions. The Business Board shall approve in advance in writing the specific type or types of shops or concessions to be authorized for inclusion in the Facility. 4.25. Entertainment Approvals. The Pokagon Council may require that the Business Board approve in advance in writing entertainment and/or sporting events to provide at the Facility. 4.26. Litigation. Except for disputes between the Band and Manager, and claims relating to the Band's status as a Tribe or the trust status of the Gaming Site, Manager shall bring and/or defend and/or settle any claim or legal action brought against Manager, 36 the Enterprise or the Band, individually, jointly or severally, or any Enterprise Employee, in connection with the operation of the Enterprise if the basis of such claim or legal action was within the scope of Manager's authority under the Agreements; except that bringing litigation or arbitration relating to claims in excess of $100,000 must be approved by the Business Board and, as to claims in excess of $500,000, by the Pokagon Council (which consent shall not be unreasonably withheld); and Manager shall furnish such information regarding claims, litigation and arbitration as the Band may request. Subject to the Band's approval of legal counsel, Manager shall retain and supervise legal counsel, accountants and such other professionals, consultants and specialists as Manager deems appropriate to assert or defend any such claim or cause of action. All liabilities, costs and expenses, including reasonable attorneys' fees and disbursements incurred in defending and/or settling any such claim or legal action which are not covered by insurance and which, as to Manager, relate to acts or omissions of Manager within the scope of its authority under the Agreements, shall be an Operating Expense, or, if incurred prior to the Commencement Date, shall be a Pre-Opening Expense. Nothing contained herein is a grant to Manager of the right to waive the Band's or the Enterprise's sovereign immunity. That right is strictly reserved to the Band, and shall at the option of the Pokagon Council be asserted by the Band through its counsel (whose fees and expenses relating to the Enterprise shall be an Operating Expense). Any settlement of a third party claim or cause of action shall require approval of the Business Board and, as to claims in excess of $100,000 not covered by insurance, by the Pokagon Council (which consent shall not be unreasonably withheld). 5. MANAGEMENT FEE, DISBURSEMENTS, AND OTHER PAYMENTS BY MANAGER 5.1. Management Fee. Subject to the provisions of Section 5.5, on or before the twenty first (21st) day of each month after the month in which the Commencement Date occurs, Manager is authorized by the Band to pay itself from the Enterprise Bank Account(s) a fee as follows: 24% of the Net Revenues of the Enterprise in the period from the Commencement Date until the first day of the month next following the Commencement Date (which shall constitute the commencement of the next Fiscal Year), payable on or before the twenty-first day of that next month; then 24% of the Net Revenues of each succeeding month, payable monthly in arrears, until the Net Revenues in a Fiscal Year have totaled $80 million; and thereafter 19% of Net Revenues of each succeeding month, payable monthly in arrears, to the extent that aggregate Net Revenues in such Fiscal Year exceed $80 million. To the extent that aggregate Net Revenues reach $80 million during a month, the fee shall be prorated. 5.2. Fee Subordinated. The Management Fee shall be subordinated to the Bank Loan, the Equipment Loan, any other third-party loans or equipment leases pertaining to the Enterprise, and the Minimum Guaranteed Monthly Payment. Manager agrees to execute and deliver subordination agreements evidencing such subordination in form reasonably 37 acceptable to the Bank Lender, the Equipment Lender, or any other third-party lender or equipment lessor. 5.3. Disbursements. As and when received by the Enterprise, Gross Revenues shall be deposited in the Dominion Account created pursuant to Section 4.19.2 of this Agreement. There shall, in turn, be disbursed by Manager, on a monthly basis, for and on behalf of the Band, funds from the Enterprise Bank Account(s) in accordance with Section 4.19.6 of this Agreement to pay, to the extent available, Operating Expenses and, subject to the terms of Section 5.5, required deposits into the Capital Replacement Reserve for Capital Replacements. Manager will reserve funds in the Enterprise in amounts equal to the Minimum Balance. Additionally, to cover any operating cash shortfall, the Band and the Manager shall advance monies to the Enterprise sufficient to cover any operating cash shortfall, such advances being made by the Band and Manager as follows: all such operating cash shortfalls shall be covered by Manager until six months after the Commencement Date (provided that Manager shall not be required to make advances at any time that outstanding advances under this subsection total more than $2,000,000); thereafter, any such shortfalls shall be covered by the Band. 5.3.1. Any advances made by Manager under this subsection (the "Lakes Working Capital Advances") shall be evidenced by the Lakes Working Capital Advance Note, shall accrue interest at an annual rate equal to the Band Interest Rate from the date that advances are made, and shall be repaid as provided in Section 5.5 below. Any amounts outstanding on termination of this Management Agreement on account of Lakes Working Capital Advances shall be payable on the same terms as the Lakes Development Loan under the Development Agreement. The Lakes Working Capital Advance Note shall be a Limited Recourse obligation of the Band and shall be secured by the Dominion Agreement and the Lakes Security Agreement. 5.3.2. Any advances made by the Band under this subsection (the "Band Working Capital Advances") shall accrue interest at an annual rate equal to the Band Interest Rate from the date that advances are made, and shall be repaid as provided in Section 5.5 below. 5.4. Adjustment to Bank Account. After the disbursements pursuant to Section 5.3 and establishment of any additional reserves for future disbursements as Manager deems necessary and as are approved by the Business Board, taking into account anticipated cash flow and Operating Costs of the Enterprise, any excess funds remaining in the Enterprise Bank Account(s) over the Minimum Balance, the Capital Replacement Reserve, and such additional reserves as may be approved by the Business Board shall be disbursed monthly in accordance with Section 5.5. 38 5.5. Payment of Fees and Band Disbursement. Within twenty one (21) days after the end of each calendar month of operations, Manager shall calculate Gross Revenues, Operating Expenses, and Net Revenues of the Enterprise for the previous month's operations and the Fiscal Year's operations to date. Such Net Revenues shall be disbursed from the Enterprise Bank Account(s) prior to a Band Event of Default to the extent available in the following order of priority: 5.5.1. the Minimum Guaranteed Monthly Payment described in Section 5.6; 5.5.2. Principal due on the Lakes Working Capital Advance Note; 5.5.3. Principal due to the Band on account of Band Working Capital Advances; 5.5.4. Principal due on the Minimum Payments Note (subject to the provisions of Section 5.6.2); 5.5.5. Current principal and any other payments due on all Loans (and if payments are due quarterly, a reserve equal to one third of the scheduled quarterly payment shall be deposited in a designated Enterprise Bank Account for such payment, and may be invested in accordance with the Enterprise Investment Policies pending payment); 5.5.6. Capital Replacement Reserve contributions as described in Section 4.15; and 5.5.7. The Management Fee. All remaining Net Revenues (the "Monthly Distribution Payment") shall be distributed to the Band, prior to a Band Event of Default and such notice as Manager may be required to give before exercising rights under the Dominion Agreement, at the same time the Management Fee is paid. After a Band Event of Default and the giving of such notice, payments shall be made in accordance with Section 4.19.6 above and, to the extent not inconsistent with that subsection, the Dominion Agreement, prior to payments of any remaining Net Revenues to the Band. 5.6. Minimum Guaranteed Monthly Payment. 5.6.1. The Enterprise shall, subject to the provisions of Sections 5.6.2 through 5.6.5, pay the Band $1,000,000 per month (the "Minimum Guaranteed Monthly Payment"), beginning on the Commencement Date and continuing for the remainder of the Term. The Minimum Guaranteed Monthly Payment shall be payable to the Band in arrears on the twenty first (21st) day of each calendar month following the month in which the Commencement Date occurs, which payment shall have priority 39 over the Management Fee. If the Commencement Date is a date other than the first day of a calendar month, the first payment will be prorated from the Commencement Date to the end of the month. Minimum Guaranteed Monthly Payments shall also be prorated if gaming is conducted at the Facility for any other partial months. 5.6.2. Minimum Guaranteed Monthly Payments shall be deducted from any Monthly Distribution Payments to be received by the Band under Section 5.5 above in any given month; provided, however, that if the Net Revenues in a given month are less than $1,000,000, Manager shall pay the funds necessary to compensate for the deficiency from its own funds (the "Minimum Guaranteed Payment Advances"); and provided further that the Minimum Guaranteed Monthly Payments shall be reduced to $10,000 per month for the remaining months during each Calculation Year after the Band has received in such Calculation Year total Net Revenue distributions of $12,000,000. Pursuant to Section 5.5.4, Manager shall be entitled to recoup from the Band's Monthly Distribution Payment in succeeding months of a Calculation Year any Minimum Guaranteed Payment Advances made under this paragraph in that same Calculation Year, but in no event shall this recoupment payment result in the Band's receiving less than its Minimum Guaranteed Monthly Payment in any month. Manager shall not otherwise be entitled to reimbursement from the Enterprise or the Band for Minimum Guaranteed Payment Advances and shall not be entitled to charge any interest on any Minimum Guaranteed Payment Advances made hereunder. Minimum Guaranteed Monthly Payments shall have priority over retirement of development and construction costs. Minimum Guaranteed Payment Advances shall not have such priority, shall not accrue interest, and shall be evidenced by the Minimum Payments Note. The Minimum Payments Note shall be secured by Great Lakes' security interest in the Dominion Account, but such security interest shall not alter its priority of payment under Section 5.5 or the limitations on recoupment imposed under this Section 5.6.2. 5.6.3. The obligation to make Minimum Guaranteed Monthly Payments shall cease upon termination of this Agreement, unless the Agreement is terminated by the Band for a Material Breach by the Manager. 5.6.4. The Minimum Guaranteed Monthly Payment shall be reduced prospectively from $1,000,000 to $500,000 upon the opening, if any, of a casino in Indiana owned by the Band, on the same cumulative basis as provided in Section 5.6.2. 40 5.6.5. Except as provided in this Section 5.6 with regard to cumulation of payments in any Calculation Year or otherwise specifically provided in this Agreement, Manager's obligation to pay the Band the Minimum Guaranteed Monthly Payment is unconditional and shall not be affected by the actual level of funds generated by the Enterprise. Minimum Guaranteed Monthly Payments shall also be prorated if gaming is conducted at the Facility for any partial months. 5.7. Payment of Net Revenues. The Net Revenues paid to the Band pursuant to this Article 5 shall be payable to the Band bank account specified by the Pokagon Council in a notice to Manager pursuant to Section 18.2. 5.8. Harrah's Termination Agreement. Manager shall pay out of its Management Fee all obligations of the Band to make payments under Sections 1.4.1 and 1.4.3 (as it pertains to interest on payments due under Section 1.4.1) of the Termination Agreement dated September 12, 1998 between the Band and Harrah's Southwest Michigan Casino Corporation (the "Harrah's Termination Agreement"), and shall indemnify and hold the Band harmless against all loss, liability and expense relating to its liability under those sections of the Harrah's Termination Agreement. Such payments shall not constitute Operating Expenses of the Gaming Facility and shall not be reimbursed by the Band or the Enterprise. 5.9. Band Indemnification - Indiana Casino. The Band shall, to the extent not prohibited under the IGRA and NIGC regulations, indemnify Manager against any decrease in Management Fee caused by an Indiana casino owned or operated by the Band, provided that (a) the alleged reduction in fees shall be measured against the Management Fees actually earned by Manager in the 12-month period preceding the date on which the Manager notifies the Band of the claim for indemnification under this section, without giving effect to any subsequent actual or projected increase in such fees over that level; and (b) in any arbitration relating to such a claim, Manager must prove its claim by clear and convincing evidence. The Band and Manager recognize that the NIGC has not approved, and will not by its approval of this Agreement approve, any increase in the management fee payable to Manager under this Agreement as a result of the indemnification provided under this section; and further agree that the sum of payments to Manager under this section and management fees paid to Manager under Section 5.1 of this Agreement shall in no event exceed 30% of actual Net Revenues unless an amendment of this Agreement is first approved by the NIGC. 5.10. Maximum Dollar Amount for Recoupment. The maximum dollar amount for recoupment of the development and construction costs of the Facility and the Enterprise shall be the aggregate amount of (a) all Loans made under Section 9.2 of the Development Agreement, including the Lakes Development Loan, the Bank Development Loan, the Lakes Facility Loan and the Equipment Loan, plus (b) all amounts loaned under the 41 Minimum Payments Note, the Lakes Working Capital Advance Note, the Non-Gaming Land Acquisition Line of Credit and the Transition Loan Note, provided that such aggregate amount shall not exceed $379,500,000. 6. ENTERPRISE NAME; MARKS 6.1. Enterprise Name. The Enterprise shall be operated under the name "Four Winds Casino Resort," or such other business name as may be approved by the Manager and the Band (the "Enterprise Name"). 6.2. Marks. All Marks shall be approved by the Business Board and shall be subject to the reasonable approval of the Pokagon Council. Prior to the Commencement Date and from time to time during the Term hereof, Manager agrees to take such actions on behalf of the Band as are reasonably necessary to register and protect all Marks. 6.3. Signage. Manager shall erect and install in accordance with local codes and regulations appropriate signs in, on or about the Facility, including, but not limited to, signs bearing Marks as part of the Enterprise Name. The costs of purchasing, leasing, transporting, constructing, maintaining and installing the required signs and systems, and of registering and protecting all Marks, shall be part of the Operating Expenses. 7. TAXES 7.1. State and Local Taxes. If the State or any local government attempts to impose any tax including any possessor interest tax upon any party to this Agreement or upon the Enterprise, the Facility or the Gaming Site, the Pokagon Band may direct the Enterprise, in the name of the appropriate party or parties in interest, to resist such attempt through legal action. The costs of such action and the compensation of legal counsel shall be an Operating Expense of the Enterprise. Any such tax shall constitute an Operating Expense of the Enterprise. This section shall in no manner be construed to imply that any party to this Agreement or the Enterprise is liable for any such tax. 7.2. Band Taxes. The Band agrees that neither it nor any agent, agency, affiliate or representative of the Band will impose any taxes, fees, assessments or other charges of any nature whatsoever on payments of any debt service on any Loan or on debt service on any other financing for the Facility or for the Enterprise, or on the revenues of the Enterprise or the Facility, or on the Management Fee as described in Section 5.1 of this Agreement; but the Band reserves the right to otherwise impose usual and customary taxes and fees on transactions at or in connection with the Facility or on the Facilities' employees, officers, directors, vendors and patrons. Without limiting the foregoing, the Band shall be specifically permitted to impose (a) charges, assessments, fines or fees imposed by governmental entities of the Band which are reasonably related to the cost of Tribal governmental regulation of public health, safety or welfare, or the integrity of Tribal gaming operations, and (b) other taxes, charges, assessments or fees imposed 42 against the Enterprise or property of the Enterprise, or sales, use, excise, hotel occupancy and other similar taxes (excluding taxes, charges, assessments or fees against real or personal property of the Facility or on gaming revenues or earnings) of such types and percentage amounts not to exceed those imposed by any state or local government within the Restricted Territory. 7.3. Compliance with Internal Revenue Code. Manager shall comply with all applicable provisions of the Internal Revenue Code. 8. BUY-OUT OPTION The Band shall have the right, beginning two years after the Commencement Date, to buy out the remaining term of this Agreement (the "Buyout Option"), provided that such buyout includes repayment in full of all outstanding debt owed by the Band to Manager, including without limitation the Lakes Development Loan, the Lakes Facility Loan (to the extent made by Manager), the Transition Loan, the Non-Gaming Land Acquisition Line of Credit, and either repayment of the Bank Development Loan, the Lakes Facility Loan and the Equipment Loan (to the extent they are guaranteed by Manager or are subject to credit enhancements furnished by Manager) or release of Manager's and Lakes' guarantees and other credit enhancements, if any, relating to those Loans. The Buyout Option price shall be determined by multiplying the average monthly Management Fee earned during the 12 month period prior to exercise of the Buyout by the number of months remaining in the term of this Agreement, and discounting future payments at a discount rate equal to the Band Interest Rate. The Band shall not be required in connection with its exercise of the Buyout Option to pay any termination fee or to make any payment related to the value of gaming equipment, amenities, or any other asset of the Facility or the Enterprise. 9. EXCLUSIVITY; NON-COMPETITION 9.1. Exclusivity in Michigan. The Band shall deal exclusively with Manager for gaming development on Indian lands in Michigan from the date of execution of this Agreement through the earlier of five years from the Commencement Date or termination or buyout of the Agreements. 9.2. Indiana Casino. Manager and Lakes recognize that the Band intends to develop a casino in Indiana, and that the Band shall have no obligations to Manager or Lakes in that regard; except that the Band agrees that, if it decides to engage an outside manager to develop or operate an Indiana casino, it shall discuss contracting with Manager for such development or operation for 45 days before soliciting proposals from third parties as to management or development of that casino. No obligation to enter into an agreement with Manager shall be implied from this undertaking, and the Band shall retain full and absolute discretion in that regard. 43 9.3. Non-Competition. Manager and Lakes each agree that for five years after execution of the Agreements or the Term of the Agreements, whichever is greater, neither it nor any of their respective present or future Insiders will without the prior written approval of the Pokagon Council directly or indirectly in the Restricted Territory develop, operate, consult with regard to, or be in any way affiliated with any non-Indian gaming facility, any Class II or III Gaming facility or any other kind of gaming, or any hotels or other amenities related to such gaming or facility; except that Insiders shall not include (a) Kids Quest, Grand Casinos, Inc., or Innovative Gaming Corp. by reason of (i) the service of (A) Lyle Berman as director or employee (without management responsibility) of such entities,, or (ii) any stock ownership of Manager or Lakes in such entities; or (b) any entity because of the investment banking services of Ron Kramer, a director of Lakes. References in this section shall include such entity's successor, whether by merger, acquisition or otherwise. 9.4. Permitted Assignment; Change of Control. 9.4.1. Manager may not assign its rights under this Agreement without the Band's prior written consent, except that Manager may assign its rights under such Agreement, but not its obligations, to a wholly owned subsidiary of Lakes. 9.4.2. The Band may not assign its rights under this Agreement; except that the Band may, without the consent of Manager, but subject to approval by the Secretary of the Interior or the Chairman of the NIGC or his authorized representative, if required, assign this Agreement and the assets of the Enterprise to a Corporate Commission or other instrumentality of the Band organized to conduct the business of the Project and the Enterprise for the Band that assumes all obligations herein. No assignment authorized hereunder shall be effective until all necessary governmental approvals have been obtained. No such assignment shall relieve the Band of any obligation hereunder, unless otherwise agreed by Manager or the holder of such obligation. 9.4.3. The Band shall be entitled to terminate the Agreements if Manager or Lakes undergoes a Change of Control or if Great Lakes ceases to be a wholly-owned subsidiary of Lakes, in each case without the prior written consent of the Band. The Band shall not be required to prepay any amounts advanced by Manager, Lakes or any third party in the event of such termination, and such obligations shall remain payable in accordance with their payment terms. Manager and Lakes agree to notify the Band in writing within 30 days after the occurrence of any event described in Clauses I or II in the definition of Change of Control, and within 30 days of Manager's knowledge of any event described in 44 Clauses III or IV of that definition. "Change of Control," for purposes of this provision, means (I) the merger, consolidation or other business combination of Manager or Lakes with, or acquisition of all or substantially all of the assets of Manager or Lakes by, any other entity, except that (A) Manager may merge with any other entity wholly owned by Lakes if the surviving entity assumes the obligations of Manager under the Agreements, and (B) Lakes Gaming and Resorts, LLC may merge with any other entity wholly owned by Lakes if the surviving entity assumes the obligations of Lakes Gaming and Resorts, LLC under the Guaranty, provided that in each case Lakes shall remain liable under the Guaranty; (II) Lyle Berman's ceasing to be either Chief Executive Officer or Chairman of the Board of Lakes (other than on account of death or disability, and except as provided at the end of this definition); (III) the acquisition by any person or affiliated group of persons not presently a shareholder of Manager of beneficial ownership of 30% or more in interest of the outstanding voting stock of Lakes, as determined under 17 CFR Sections 240.13d-3 or 240.16a-l; or (IV) the acquisition by any person or affiliated group of persons not presently a shareholder of Lakes of beneficial ownership of 10% or more in interest of the outstanding voting stock of Lakes, as determined under 17 CFR Sections 240.13d-3 or 240.16a-l, if a majority of the Board of Directors of Lakes is replaced within two years after such acquisition by directors not nominated and approved by the Board of Directors. 9.5. Restrictions on Collateral Development. Manager and Lakes each agree that for five years after execution of the Agreements or the Term of the Agreements, whichever is greater, neither it nor any of its present or future Insiders will directly or indirectly purchase any land or operate, manage, develop or have any direct or indirect interest in any commercial facilities or business venture located within 20 miles of the Facility without the prior written consent of the Band. 10. REPRESENTATIONS, WARRANTIES, AND COVENANTS 10.1. Representations and Warranties of the Band. The Band represents and warrants to Manager as follows: 10.1.1. Due Authorization. The Band's execution, delivery and performance of this Agreement and all other instruments and agreements executed in connection with this Agreement have been properly authorized by the Band and do not require further Band approval. 10.1.2. Valid and Binding. This Agreement and all other instruments and agreements executed in connection with this Agreement have been 45 properly executed, and once approved in accordance with Legal Requirements constitutes the Band's legal, valid and binding obligations, enforceable against the Band in accordance with their terms. 10.1.3. Pending Litigation. There are no actions, suits or proceedings, pending or threatened, against or affecting the Band before any court or governmental agency that relate to the Project, the Enterprise or any transaction contemplated by the Transaction Documents, except as disclosed on Exhibit B. 10.2. Band Covenants. The Band covenants and agrees as follows: 10.2.1. No Impairment of Contract. During the term of this Agreement and the Development Agreement, the Band shall enact no law impairing the obligations or contracts entered into in furtherance of the development, construction, operation and promotion of Gaming on the Gaming Site. Neither the Pokagon Council nor any committee, agency, board of any other official body, and no officer or official of the Band shall, by exercise of the police power or otherwise, act to modify, amend, or in any manner impair the obligations of contracts entered into by the Pokagon Council or the GRA or other parties in furtherance of the financing, development, construction, operation, or promotion of Gaming at the Gaming Site without the written consent of the non-tribal parties to such contracts. 10.2.2. Waiver of Sovereign Immunity. The Band will waive sovereign immunity on the limited basis described in Section 13.1 with respect to this Agreement. 10.2.3. Valid and Binding. This Agreement, the Development Agreement, the Lakes Development Note, the Lakes Facility Note, the Lakes Working Capital Advance Note, the Minimum Payments Note, the Transition Note and the Non-Gaming Land Acquisition Line of Credit, and each other contract contemplated by this Agreement shall, once approved in accordance with Legal Requirements, be enforceable in accordance with their terms. 10.2.4. Legal Compliance. In its performance of this Agreement, the Band shall comply with all Legal Requirements. 10.2.5. No Termination. The Band shall not act in any way whatsoever, directly or indirectly, to cause this Agreement to be amended, modified, 46 canceled, or terminated, except pursuant to its express terms or with the consent of Manager. 10.2.6. Title to Assets. During the Term of this Agreement the Band shall retain its interest in the title to (or the leasehold interest in) all Enterprise assets, including the Gross Revenues, the Gaming Site and any fixtures, supplies and equipment, subject to the purchase money security interest in equipment securing the Equipment Loan, Lakes' security interest in the Dominion Account and (to the extent applicable) in the Furnishings and Equipment (until all obligations of the Band to Lakes secured by that account and such Furnishings and Equipment are paid in full, to the extent provided in Section 9.2. l(j) of the Development Agreement), and any other liens granted in accordance with the Development Agreement. 10.2.7. Notwithstanding the foregoing, a breach of this subsection 10.2 shall not be a basis to overturn, negate or in any manner modify any Governmental Action through arbitration or other proceedings, and any remedy for such breach shall be subject to the Specific Performance Restriction. The preceding sentence does not prevent an arbitrator from determining that the taking of any Governmental Action or the failure to take any Governmental Action, which is not caused by a breach of Great Lakes or Lakes' obligations under the Agreements or the Guaranty, constitutes a breach of this Agreement by the Band, thereby resulting in liability on the part of the Band for damages in favor of the Manager as provided in this Agreement. 10.3. Representations and Warranties of Manager and Lakes. Manager and Lakes each represent and warrant to the Band as follows: 10.3.1. Due Authorization. Manager's and Lakes' execution, delivery and performance of this Agreement, the Guaranty and all other instruments and agreements executed in connection with this Agreement have been properly authorized by and Lakes, respectively, to the extent they are parties thereto, and do not require further approval. 10.3.2. Valid and Binding. This Agreement and all other instruments and agreements executed in connection with this Agreement have been properly executed and constitutes Manager's and Lakes' respective legal, valid and binding obligation, enforceable against Manager and Lakes in accordance with their terms to the extent they are parties thereto. 10.3.3. Litigation. There are no actions, suits or proceedings pending or threatened against or affecting Manager or Lakes before any court or 47 governmental agency that would in any material way affect Manager's or Lakes' ability to perform this Agreement and the Guaranty, to the extent they are parties thereto, other than litigation disclosed in filings by Lakes with the Securities and Exchange Commission. Manager and Lakes each warrant that no litigation so disclosed in any material way affects or will affect Managers' and Lakes' ability to perform under the Agreements or the Guaranty. 10.3.4. Certifications. The certifications contained in the Respondent Certifications attached as Exhibit H to Manager's Proposal (the "Certificate") are true and correct as to Manager, Lakes and as to all Insiders of Manager and Lakes, as if each such Insider were the "undersigned respondent" on such Certificate. 10.4. Manager Covenants. Manager and Lakes each covenant and agree as follows: 10.4.1. Noninterference in Band Affairs. Manager and Lakes each agrees not to interfere in or attempt to wrongfully influence the internal affairs or government decisions of the Band government by offering cash incentives, by making written or oral threats to the personal or financial status of any person, or by any other action, except for actions in the normal course of business of Manager that relate to the Enterprise. 10.4.2. Prohibition of Payments to Members of Band Government. Manager and Lakes represent and warrant that no payments have been or will be made by Manager or Lakes, or any Affiliate or Insider of Manager or Lakes, to any Member of the Band Government, any Band official, any Relative of a Member of Band Government or Band official, any Band Government employee, any agent of the Band, or any entity known by Manager or Lakes to be associated with any such person, for the purpose of obtaining any special privilege, gain, advantage or consideration. 10.4.3. Prohibition of Hiring Members of Band Government. No Member of the Band Government, Band official, Relative of a Member of the Band Government or Band official or employee of the Band Government may be employed at the Enterprise without a written waiver of this Section 10.4.3 by the Band. For this purpose, the Band will identify all such persons to Manager in a writing and take reasonable steps to keep the list current; Manager shall not be held responsible if any person not on such written list is employed. 10.4.4. Prohibition of Financial Interest in Enterprise. No Member of the Band Government or Relative of a Member of the Band Government shall 48 have a direct or indirect financial interest in the Enterprise greater than the interest of any other member of the Band; provided, however, nothing in this subsection shall restrict the ability of a Band member who is not a Member of Band Government or Relative of a Member of the Band Government to purchase or hold stock in Lakes where (i) such stock is publicly held and (ii) the Band member acquires less than 5% of the outstanding stock in the corporation. 10.4.5. No Amendment. Neither Manager nor Lakes shall act in any way whatsoever, directly or indirectly, to cause this Agreement to be amended, modified, canceled, or terminated, except pursuant to its express terms or with the consent of the Band. 10.4.6. CRC. CRC shall not during the Term of the Management Agreement (a) be directly or indirectly affiliated with Manager, Lakes or the Facility, whether as joint venturer or otherwise, (b) be employed by Manager or Lakes or, to the knowledge of Manager and Lakes, any entity having any contractual relationship with Manager or Lakes, with regard to the Facility, or (c) directly or indirectly receive any payment or anything of value from Manager from or out of the Management Fee or any other payment made to Manager by the Band or the Facility. Manager agrees to indemnify the Band and its members and hold them harmless against all loss, liability and expense relating to claims, of whatever kind or nature, of CRC against any one or more of them. The Band consents to the execution and delivery by Lakes of a certain Conditional Release and Termination Agreement between Lakes and CRC dated May 20, 1999, as amended by Amendment dated on or about July 7, 1999, true copies of which are attached as Exhibit M of the Development Agreement, provided that CRC executes and delivers to the Band and its members a general release in the form attached as Exhibit N of the Development Agreement. Manager and Lakes each warrant that it has no agreements or understandings with CRC in any way related to the Band or the Enterprise other than as set forth in Exhibit M of the Development Agreement. The Band further agrees that Lakes may hold stock of CRC as collateral for Lakes' guarantee of a loan to a third party, provided that on default it proceeds to liquidate such collateral in a reasonably prompt and orderly manner, and that Lyle Berman may continue to hold approximately 350,000 shares of CRC so long as he plays no role in the management of, and does not sit on, the board of directors of CRC. 10.5. No Liens. Subject to the exceptions stated in Section 10.6, the Band specifically warrants and represents to Manager that during the term of this Agreement the Band shall 49 not act in any way whatsoever, either directly or indirectly, to cause any person or entity to become an encumbrancer or lienholder of the Gaming Site or the Facility except as provided under the Agreements. Except as otherwise specifically provided in the Agreements, Manager specifically warrants and represents to the Band that during the term of this Agreement Manager shall not act in any way, directly or indirectly, to cause any person or entity to become an encumbrancer or lienholder of the Gaming Site or the Facility, or to obtain any interest in this Agreement without the prior written consent of the Band, and, where applicable, the United States. The Band and Manager shall keep the Facility and Gaming Site free and clear of all enforceable mechanics' and other enforceable liens resulting from the construction of the Facility and all other enforceable liens which may attach to the Facility or the Gaming Site, which shall at all times remain the property of the United States in trust for the Band. 10.6. Permitted Liens. The Band shall have the right to grant the following liens and security interests pertaining to the Enterprise and the Facility: 10.6.1. The purchase money security interest in Furnishings and Equipment granted to the Equipment Lender to secure the Equipment Loan and, to the extent provided in Section 9.2.1(j) of the Development Agreement, security interests in Furnishings and Equipment granted to Great Lakes; 10.6.2. Security interests in Facility or Enterprise revenues, subordinate to the right of Manager to receive payment of Management Fees and payments on the Lakes Development Loan, the Lakes Facility Loan, the Lakes Working Capital Advance Note, the Minimum Payments Note, and any other amounts due to the Manager under the Agreements and related documents; 10.6.3. Security interests in Facility or Enterprise assets, as provided in Section 9.2.5(b) of the Development Agreement; and 10.6.4. Other liens and security interests in assets of the Facility and Enterprise with the written consent of Manager and the Bank Lender, which consent will not be unreasonably withheld. 10.6.5. [intentionally omitted] 10.7. Brokerage. Manager, Lakes and the Band represent and warrant to each other that neither has sought the services of a broker, finder or agent in this transaction, and neither has employed, nor authorized, any other person to act in such capacity. Manager, Lakes and the Band each hereby agrees to indemnify and hold the other harmless from and against any and all claims, loss, liability, damage or expenses (including reasonable attorneys' fees) suffered or incurred by the other party as a result of a claim brought by a person or entity engaged or claiming to be engaged as a finder, broker or agent by the 50 indemnifying party; subject, as to Lakes' relations with CRC, to the provisions of Section 10.4.6. 11. DEFAULT 11.1. Events of Default by the Band. Each of the following shall be an event of default by the Band under this Agreement ("Band Event of Default"): 11.1.1. The Band shall commit a Material Breach of any of the Band's obligations under this Agreement or any other Transaction Documents, subject to the rights to cure provided in this Agreement or in any of such documents. 11.1.2. Any of the representations and warranties made by the Band in Section 10.1 of this Agreement or in any other Transaction Documents were not true in any material respect when made or would not be materially true if made on the date such performance would otherwise be due. 11.1.3. The Band violates the provisions of Section 9.1 of this Agreement, subject to notice and right to cure. 11.1.4. The Band commits any Material Breach of the Development Agreement which is not cured within any applicable cure period. If any Band Event of Default occurs, Manager may, upon written notice to Band, exercise the rights and remedies available to Manager provided in this Agreement; provided, however, that all such rights and remedies shall be Limited Recourse. 11.2. Events of Default by Manager. Each of the following shall be an event of default by Manager under this Agreement ("Manager Event of Default"): 11.2.1. Any Minimum Guaranteed Monthly Payment, Monthly Distribution Payment or other payment due the Band under this Agreement is not paid within ten (10) days after its due date. 11.2.2. Manager or Lakes shall commit any other Material Breach of any of Manager's or Lakes' obligations under this Agreement, the Guaranty, or any other Transaction Documents, as applicable. 11.2.3. Any representation or warranty that Manager or Lakes has made under this Agreement or any other Transaction Document shall prove to have been untrue in any material respect when made or would not be materially true if made on the date such performance would otherwise be due. 51 11.2.4. Manager or Lakes violates the provisions of Article 9 of this Agreement applicable to Manager or Lakes, subject to rights of notice and cure to the extent provided in that Article. 11.2.5. Manager or Lakes (to the extent applicable) commits or causes any Material Breach of the Development Agreement which is not cured within any applicable cure period. 11.2.6. [intentionally omitted] 11.2.7. Manager violates Legal Requirements in the management of the Enterprise, including without limitation the Band Gaming Ordinance, and such violation is not cured within (a) thirty (30) days after notice, as to the Band Gaming Ordinance or any other gaming laws or regulations, or (b) within a reasonable period, not to exceed 90 days, as to any other Legal Requirements. If any Manager Event of Default occurs, the Band may, upon written notice to Manager, exercise the rights and remedies available to the Band provided in this Agreement. 11.3. Material Breach; Right to Cure. 11.3.1. Neither Great Lakes nor the Band may terminate this Agreement, recover damages or foreclose on security interests on grounds of a potential Material Breach of this Agreement or any other Transaction Document unless it has provided written notice to the other party of its intention to terminate this Agreement, seek damages or foreclose. During the 30 day period after the receipt of the notice to terminate (as to defaults which can be cured within 30 days) or the 90 day period after such receipt (as to defaults which cannot be cured within 30 days), whichever is applicable, the party receiving the notice may cure the alleged default and (without waiting for the expiration of such periods) any party may submit the matter to arbitration under the dispute resolution provisions of this Agreement set forth at Article 13. The discontinuance or correction of a Material Breach shall constitute a cure thereof. Nothing in this subsection shall affect or impair the obligation of any party to promptly comply with all Legal Requirements, or limit any sanctions that may be imposed for any violation thereof; nor shall this subsection prevent a party taking such actions within such 30 or 90 day periods as may be permitted or required by this Agreement, the Gaming Ordinance or NIGC regulations. The provisions of this subsection and the parallel provisions of Section 12.3 of the Development 52 Agreement shall control over any conflicting provisions in any other Transaction Document. 11.3.2. Nothing in this subsection 11.3 shall apply to termination under Sections 12.1, 12.2, 12.6, 12.7 or 12.8 of this Agreement. 12. TERMINATION 12.1. Voluntary Termination. This Agreement may be terminated by mutual written consent. 12.2. Termination if No NIGC Approval. The Band and Manager may each unilaterally terminate the Agreements by written notice if NIGC Approval has not occurred on or before August 26, 2007. 12.3. Manager Right to Terminate on Band Event of Default. Manager shall be entitled to terminate the Agreements (a) upon a Band Event of Default or (b) as specifically provided in the Agreements, subject to right to cure and arbitration as provided in this Agreement. 12.4. Band Right to Terminate on Manager Event of Default. The Band shall be entitled to terminate the Agreements (a) upon a Manager Event of Default or (b) as specifically provided in the Agreements, subject to right to cure and arbitration as provided in this Agreement. 12.5. Band Right to Terminate for Material Adverse Change. Prior to the Commencement Date, the Band shall be entitled to terminate the Agreements in the event of a Material Adverse Change; provided that the following procedures shall apply: 12.5.1. Manager shall notify the Band in the event of any Material Adverse Change. 12.5.2. Manager shall cause Lakes to send to the Band copies of all filings by Lakes with the Securities and Exchange Commission under Forms 8K, 10Q and 10K; shall furnish the Band with copies of such other SEC filings that the Band may request; and shall furnish the Band with such other information concerning a Material Adverse Change as the Band may reasonably request. 12.5.3. If the Band believes that a Material Adverse Change has occurred, the Band shall so notify Manager and Lakes in writing and shall request specified further assurances of their respective continued ability to perform under the Agreements, the Guaranty, and all related agreements and instruments. 53 12.5.4. Within thirty (30) days after that notification Manager shall admit or deny, and shall cause Lakes if applicable to admit or deny, the alleged Material Adverse Change, giving the specific basis for its response; shall state, and shall cause Lakes to state, whether it agrees to provide the requested further assurances; if it agrees to provide the requested further assurances, shall tender its performance in that regard; and, if it admits a Material Adverse Change but disputes the requested further assurances, shall tender such further assurances by it and Lakes as it deems sufficient to ensure its continued ability to perform under the Agreements, the Guaranty, and all related agreements and instruments. 12.5.5. If Manager or Lakes denies the Material Adverse Change or disputes that the requested further assurances are reasonably required to assure the Band of their respective continued ability to perform under the Agreements, the Guaranty, and all related agreements and instruments, those issues shall be submitted to arbitration. The arbitrator shall determine whether (a) a Material Adverse Change has occurred; (b) the requested further assurances are reasonably required to assure the Band of their respective continued ability to perform under the Agreements, the Guaranty, and all related agreements and instruments; and (c) if a Material Adverse Change has occurred but the requested further assurances are not reasonably required to so assure the Band, what further assurances must be provided by Manager and Lakes to reasonably assure the Band of their continued ability to perform under the Agreements, the Guaranty, and all related agreements and instruments. Any further assurances required under the arbitrator's award must be furnished by Manager and Lakes within thirty (30) days after entry of the award. 12.5.6. If Manager or Lakes admit the Material Adverse Change but does not furnish further assurances, or if Manager or Lakes does not timely provide further assurances pursuant to an arbitrator's award, the Band may terminate the Agreements by written notice to Manager. 12.5.7. Manager, Lakes and the Band agree that the continuing ability of Manager and Lakes to make the payments and advances provided under this Agreement, the Guaranty, and all related agreements and instruments, and to ensure the Band can obtain the Loans to develop, construct, equip and operate the Facility provided in this Agreement, is an essential part of the consideration for which the Band bargained in entering into the Agreements. 54 12.6. Termination if Manager License Withdrawn or on Conviction. The Band may also terminate this Agreement immediately where Manager or Lakes has had its gaming license withdrawn in any jurisdiction by final administrative action (the finality of which shall be determined without regard to pending or possible judicial review or appeal), or if Manager, Lakes or an Insider of Manager or Lakes, has been convicted of a criminal (a) felony or (b) misdemeanor offense involving gaming, fraud or moral turpitude; provided, however, the Band may not terminate this Agreement based on a director or officer's conviction where Manager or Lakes terminates such individual within ten (10) days after receiving notice of the conviction. 12.7. Termination on Buy-Out. This Agreement shall terminate if the Band exercises its option to buy out the Agreement in accordance with Section 8. 12.8. Involuntary Termination Due to Changes in Legal Requirements. It is the understanding and intention of the parties that the development, construction and operation of the Enterprise shall conform to and comply with all Legal Requirements. If during the term of this Agreement, the Enterprise or any material aspect of Gaming at the Gaming Site is determined by the Congress of the United States, Department of the Interior of the United States of America, the NIGC, or the judgment of a court of competent jurisdiction (after expiration of the time within which appeals must be filed or completion of appeals, if any) to be unlawful under federal law, the obligations of the parties hereto shall cease and the Agreements shall be of no further force and effect as of the date of such determination; subject, however, to the following provisions as to damages: 12.8.1. If the date of such determination is prior to the Commencement Date, Manager shall be entitled to damages as provided in Section 14.4 of the Development Agreement with regard to failure to obtain NIGC Approval. 12.8.2. If the date of such determination is after the Commencement Date: (a) The Band shall retain all fees and Monthly Payments previously paid or advanced to it pursuant to the Agreements, as well as all Tribal Distributions and Non-Gaming Lands, the Gaming Site and any other property transferred into trust; (b) Any money loaned to the Band by Lakes or Great Lakes, or owed to Lakes or Great Lakes under the Transaction Documents as of the date of such determination shall be repaid to Great Lakes or Lakes in accordance with the Limited Recourse terms of the Lakes Development Note, the Lakes Facility Note, the Lakes Working Capital Advance Note, the Minimum Payments Note, the Transition 55 Loan Note, the Non-Gaming Acquisition Line of Credit, this Agreement and any other applicable Transaction Documents; and (c) The Band shall retain its interest in the title (and any lease) to all Enterprise assets, including the Gross Revenues, the Gaming Site and any fixtures, supplies and equipment (except, as to Surplus Equipment, as provided in Section 13.7(b)(iv) of the Development Agreement), subject to the purchase money security interest in Furnishings and Equipment securing the Equipment Loan, Manager's security interest in the Dominion Account and Furnishings and Equipment, if any (until all obligations of the Band to Manager secured by that account and Furnishings and Equipment are paid in full, to the extent provided in Section 9.2.1(j) of the Development Agreement), and any other liens granted in accordance with the Development Agreement; and (d) Any Net Revenues accruing through the date of termination shall be distributed in accordance with Article 5 of this Agreement. Upon termination of this Agreement any claim of Manager or Lakes against the Band, or of the Band against the Manager or Lakes, shall be subject to their respective rights of recoupment and setoff, if any. 13. DISPUTE RESOLUTION; LIQUIDATED DAMAGES 13.1. Band's Waiver of Sovereign Immunity and Consent to Suit. The Band expressly waives its sovereign immunity from suit for the purpose of permitting or compelling arbitration as provided in this Article 13 and consents to be sued in the United States District Court for the Western District of Michigan - Southern Division, the United States Court of Appeals for the Sixth Circuit, and the United States Supreme Court for the purpose of compelling arbitration or enforcing any arbitration award or judgment arising out of this Agreement, the Transition Loan Note, the Lakes Development Note, the Lakes Facility Note, the Lakes Working Capital Advance Note, the Minimum Payments Note, the Non-Gaming Land Acquisition Line of Credit, the Development Agreement, any mortgages granted to Manager securing the Lakes Development Note or, the Non-Gaming Land Acquisition Line of Credit, the Dominion Agreement, the Lakes Security Agreement, or other obligations between the parties. If the United States District Court lacks jurisdiction, the Band consents to be sued in the Michigan State Court system. The Band waives any requirement of exhaustion of tribal remedies. Without in any way limiting the generality of the foregoing, the Band expressly authorizes any governmental authorities who have the right and duty under applicable law to take any action 56 authorized or ordered by any such court, and to take such action, including without limitation, repossessing or foreclosing on any real property not in trust and or on equipment subject to a security interest, or on the Dominion Account, or otherwise giving effect to any judgment entered; provided, however, that liability of the Band under any judgment shall always be Limited Recourse, and in no instance shall any enforcement of any kind whatsoever be allowed by Lakes or Manager against any assets of the Band other than the limited assets of the Band specified in Section 13.3.1 below. The Band appoints the Chairman of the Pokagon Council and the Secretary of the Pokagon Council as its agents for service of all process under or relating to the Agreements. The Band agrees that service in hand or by certified mail, return receipt requested, shall be effective for all purposes under or relating to the Agreements if served on such agents. 13.2. Arbitration. All disputes, controversies or claims arising out of or relating to this Agreement, any other Transaction Documents or other obligations between Lakes or Manager and the Band shall be settled by binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association in effect on the date demand for arbitration is made, and the Federal Arbitration Act. The parties agree that binding arbitration shall be the sole remedy as to all disputes arising out of this Agreement, except for disputes requiring injunctive or declaratory relief. Notwithstanding the foregoing, an arbitrator shall not have the power to compel, overturn, negate or in any manner modify any Governmental Action, and any arbitration award or related judicial decree or judgment shall be subject to the Specific Performance Restriction. The preceding sentence does not prevent an arbitrator from determining that the taking of any Governmental Action or the failure to take any Governmental Action, which is not caused by a breach of Manager or Lakes' obligations under the Agreements or the Guaranty, constitutes a breach of this Agreement by the Band or the impairment of rights of Manager under this Agreement, thereby resulting in liability on the part of the Band for damages in favor of the Manager as provided in this Agreement and enforcement of the obligations of the Band to Manager, including any security agreements and collateral instruments, in accordance with their terms. 13.2.1. Choice of Law. In determining any matter the Arbitrator(s) shall apply the terms of this Agreement, without adding to, modifying or changing the terms in any respect, and in their interpretation and construction shall, to the extent not preempted by federal law, apply Michigan law. Use of Michigan law for the foregoing limited purpose of interpretation and construction is not intended by the parties to and shall not otherwise (i) incorporate substantive Michigan laws or regulations, including but not limited to Michigan usury laws or any other present or future provision of the laws of Michigan that would restrict the rate of interest upon any loan contemplated hereunder; or (ii) grant any jurisdiction to the State or any political subdivision thereof over the Gaming Site or the Facility. 57 13.2.2. Place of Hearing. All arbitration hearings shall be held at a place designated by the arbitrator(s) in Kalamazoo, Michigan or at such other place agreed to by the parties. 13.2.3. Confidentiality. The parties and the arbitrator(s) shall maintain strict confidentiality with respect to the arbitration. 13.3. Limitation of Actions. The Band's waiver of immunity from suit is specifically limited to the following actions and judicial remedies: 13.3.1. Damages. The enforcement of an award of money and/or damages by arbitration; provided that the award of any arbitrator and/or court must be Limited Recourse, and no arbitrator or court shall have authority or jurisdiction to order execution against any assets or revenues of the Band except (a) undistributed or future Net Revenues of the Enterprise or Subsequent Gaming Facility Revenues; (b) as to the Equipment Loan, the Furnishings and Equipment securing that Loan; (c) if the Commencement Date does not occur, Subsequent Gaming Facility Revenues to the extent provided in this Agreement; (d) as to the Lakes Development Note and the Non-Gaming Acquisition Line of Credit, mortgages on the Non-Gaming Lands prior to their transfer into trust; (e) after the Commencement Date occurs, funds on deposit in the Dominion Account to the extent provided in Section 9.2.l(j) of the Development Agreement and the Dominion Agreement, or in any other dominion agreement executed by the Band; and (f) as to the Lakes Development Note, the Lakes Facility Note, the Lakes Working Capital Advance Note, the Non-Gaming Land Acquisition Line of Credit and the Transition Loan, Furnishings and Fixtures to the extent provided in Section 9.2.l(j) of the Development Agreement. In no instance shall any enforcement of any kind whatsoever be allowed against any assets of the Band other than the limited assets of the Band specified in this subsection. 13.3.2. Consents and Approvals. The enforcement of a determination by an arbitrator that the Band's consent or approval has been unreasonably withheld contrary to the terms of this Agreement or any other Transaction Document, provided that such enforcement shall be subject to the Specific Performance Restriction. 13.3.3. Injunctive Relief and Specific Performance. The enforcement of a determination by an arbitrator that prohibits the Band from taking any action that would prevent Manager from performing its obligations pursuant to the terms of this Agreement or any other Transaction 58 Document, or that requires the Band to specifically perform any obligation under this Agreement; provided, however, that any injunction against the Band shall be Limited Recourse; shall be subject to the Specific Performance Restriction; shall not mandate, preclude or affect payment of any funds of the Band other than undistributed or future Net Revenues of the Enterprise or funds in the Dominion Account or Subsequent Gaming Facility Revenues; and shall not relate to any asset of the Band other than the Enterprise. 13.3.4. Action to Compel Arbitration. An action to compel arbitration pursuant to this Article 13. 13.4. Damages on Termination for Failure to Obtain NIGC Approval. In the event of termination of this Agreement under Section 12.2 because NIGC Approval has not been obtained on or before August 26, 2007, the Band shall be responsible for damages as provided in Section 14.4 of the Development Agreement but shall not be liable for additional damages under this Agreement. 13.5. Liquidated Damages and Limitations on Remedies. The following liquidated damages and limitations on remedies apply under this Agreement, in addition to those provided elsewhere in this Agreement as to claims and remedies against the Band: 13.5.1. Liquidated Damages Payable by Manager. In the event of a Manager Event of Default prior to the Commencement Date, after such notice and right to cure as may be provided in this Agreement, Manager shall pay liquidated damages as provided in Section 14.5(a) of the Development Agreement and shall not be liable for additional damages under this Agreement. 13.5.2. Liquidated Damages Payable by the Band. In the event of a Band Event of Default prior to the Commencement Date, after such notice and right to cure as may be provided in this Agreement and except as provided in Section 13.14 as to Governmental Actions, the Band shall pay liquidated damages as provided in Section 14.5(b) of the Development Agreement and shall not be liable for additional damages under this Agreement. 13.6. Manager Continuing Obligations. Nothing in this Article shall affect or impair Manager's and Lakes' continuing obligations under Sections 9.3 (non-competition) and 18.15 (confidentiality) of this Agreement, all of which shall remain enforceable for the following terms, notwithstanding the termination of the Agreements and payment of liquidated or other damages: (a) as to Section 9.3, the greater of five years after execution of the Agreements or one year after termination; and (b) as to Section 18.15, the greater of five years after execution of the Agreements or two years after termination. 59 13.7. Termination of Exclusivity. Section 9.1 (Exclusivity in Michigan) of this Agreement shall terminate upon any termination of the Agreements, notwithstanding any breach of the Agreements by the Band. 13.8. Remedies. In consideration of the agreement to liquidated damages to the extent provided above, the Band, Lakes and Manager each waive the right to actual, consequential, exemplary or punitive damages to the extent that liquidated damages are applicable to a default, but shall retain the right to injunctive relief (a) prior to termination of the Agreements, to enforce rights and remedies thereunder, subject to the Limited Recourse provisions of this Agreement as to the Band and the Band's limited waiver of sovereign immunity; and (b) after termination, to the extent that provisions of this Agreement specifically survive such termination, subject to such Limited Recourse provisions and limited waiver. The injured party shall, where liquidated damages are not applicable and damages or remedies are not otherwise specified, be entitled to such damages as it may be entitled to under applicable law, subject to such Limited Recourse provisions and limited waiver of the Band's sovereign immunity (which shall apply to all claims against the Band under or relating to the Agreements, in addition to all Loans). 13.9. Band Injunctive Relief. Manager, Lakes and Band acknowledge and agree that termination of this Agreement and payment of damages may not be a sufficient or appropriate remedy for breach by the Manager or Lakes, and further agree that the Band shall, upon breach of this Agreement by the Manager or Lakes, have the right to pursue such remedies (in addition to termination) at law or equity as it determines are best able to compensate it for such breach, including specifically actions to require payment of the Minimum Guaranteed Monthly payment and the Monthly Distribution Payment, and on the Guaranty. The Manager and Lakes each specifically acknowledge and agree that there will be irreparable harm to the Band and that damages will be difficult to determine if a Manager Event of Default occurs, and the Manager therefore further acknowledges that an injunction and/or other equitable relief will be an appropriate remedy for any such breach. 13.10. No Setoff Against Payments to Band. The Band's right to payment of the Minimum Guaranteed Monthly Payments until termination shall be absolute and not subject to setoff or recoupment by Manager or Lakes. The Band's right to payment of the Monthly Distribution Payments until termination shall be absolute and not subject to setoff or recoupment by Manager or Lakes, except as specifically provided in this Agreement, the Development Agreement, or the Dominion Agreement. 13.11. Indemnification on Termination. In the event of termination, (a) Manager shall indemnify and hold the Band harmless against all loss, liability, damage and expense from or arising out of any acts or omissions of Manager prior to termination in violation of, or beyond the scope of its authority under, this Agreement; and (b) the Band shall indemnify and hold Manager harmless against all loss, liability, damage and expense 60 from or arising out of any acts of Manager prior to termination pursuant to and in accordance with the terms of this Agreement. This covenant shall survive any termination. 13.12. Fees not Damages. In no event shall fees or other non-refundable payments made by Manager or Lakes to Band, or Tribal Distributions, constitute damages to Manager or Lakes or be repayable by the Band. 13.13. Undistributed Net Revenues. If on termination the Enterprise has accrued Net Revenues which have not been distributed under Section 5 of this Agreement, Manager shall receive that Management Fee equal to the Management Fee it would have received for the period prior to termination had the distribution occurred during the term of the Management Agreement, subject to the Band's right of setoff and recoupment. 13.14. Damages for Governmental Action. If the Band takes a Governmental Action or fails to take a Governmental Action, and such action or inaction is not caused by a breach of Manager or Lakes' obligations under the Agreements or the Guaranty and constitutes a breach of this Agreement by the Band or the impairment of rights of Manager under this Agreement, the Band shall be liable for any resulting actual and consequential damages incurred by Manager (subject to the Limited Recourse provisions of this Agreement and the limited waiver of the Band's sovereign immunity). 14. CONSENTS AND APPROVALS 14.1. Band. Where approval or consent or other action of the Band is required, such approval shall mean the written approval of the Pokagon Council evidenced by a resolution thereof, certified by a Band official as having been duly adopted, or such other person or entity designated by resolution of the Pokagon Council. Any such approval, consent or action shall not be unreasonably withheld or delayed; provided that the foregoing does not apply where a specific provision of this Agreement allows the Band an absolute or unilateral right to deny approval or consent or withhold action. 14.2. Manager. Where approval or consent or other action of Manager is required, such approval shall mean the written approval of the Managing Officer. Any such approval, consent or other action shall not be unreasonably withheld or delayed. 14.3. Business Board. Where approval or consent or other action of the Business Board is required, any such approval, consent or other action shall not be unreasonably delayed. 15. DISCLOSURES 15.1. Shareholders and Directors. On the date of this Agreement Manager and Lakes shall each provide a written certification to the Band providing a true and correct certification of their respective Affiliates, directors, officers and shareholders owning five 61 percent (5%) or more of the stock or equity interests of each of them, (the "Lakes Certification"). 15.2. Warranties. Manager and Lakes further warrant and represent as follows: 15.2.1. No officer, director or individual owner of five percent (5%) or more of the stock or equity interests of Manager or Lakes, or any Affiliate of Manager or Lakes, has been arrested, indicted for, convicted of, or pleaded nolo contendere to any felony or any gaming offense, or had any association with individuals or entities known to be connected with organized crime, except, as to Lyle Berman, an arrest prior to 1980 for a gaming offense that did not result in a conviction; and 15.2.2. No person or entity listed on the Lakes Certification, including any officers and directors of Manager and Lakes, has been arrested, indicted for, convicted of, or pleaded nolo contendere to any felony or any gaming offense, or had any association with individuals or entities known to be connected with organized crime, except, as to Lyle Berman, an arrest prior to 1980 for a gaming offense that did not result in a conviction. 15.2.3. Manager agrees that all of its and Lakes' directors and officers and any individual owners of five percent (5%) or more of the stock or equity interests of Manager or Lakes (whether or not involved in the Enterprise), shall: 15.2.3.1. consent to background investigations to be conducted by the Band, the State, the Federal Bureau of Investigation (the "FBI") or any law enforcement authority to the extent required by the IGRA and the Compact; 15.2.3.2. be subject to licensing requirements in accordance with Band law and this Agreement; 15.2.3.3. consent to a background, criminal and credit investigation to be conducted by or for the NIGC, if required; 15.2.3.4. consent to a financial and credit investigation to be conducted by a credit reporting or investigation agency at the request of the Band; 15.2.3.5. cooperate fully with such investigations; and 15.2.3.6. disclose any information requested by the Band which would facilitate the background and financial investigation. 62 Any materially false or deceptive disclosures or failure to cooperate fully with such investigations by an employee of Manager or Lakes or an employee of the Band shall result in the immediate dismissal of such employee. The results of any such investigation may be disclosed by the Band to federal officials and to such other regulatory authorities as required by law. 15.3. Disclosure Amendments. Manager and Lakes each agree that whenever there is any material change in the information disclosed pursuant to this Article 15 it shall notify the Band of such change not later than thirty (30) days following the change or within ten days after it becomes aware of such change, whichever is later. The Band shall, in turn, provide the Secretary of the Interior and/or the NIGC (whichever is applicable) copies of any such notifications. All of the warranties and agreements contained in this Article 15 shall apply to any person or entity who would be listed in this Article 15 as a result of such changes. Nothing in this Section or in this Agreement shall (a) limit Manager's obligation to comply with NIGC regulations, including without limitation 25 C.F.R. Section 537.2, or (b) constitute an assumption by the Band of any obligation to furnish information to the NIGC on Manager's behalf or otherwise fulfill any obligation of Manager under such regulations. 15.4. Breach of Manager's Warranties and Agreements. The material breach of any warranty or agreement of Manager or Lakes contained in this Article 15 shall be grounds for immediate termination of this Agreement; provided that (a) if a breach of the warranties contained in Sections 15.2.2 or 15.2.3 is discovered, and such breach was not disclosed by any background check conducted by the FBI as part of the BIA or other federal approval of this Agreement, or was discovered by the FBI investigation but all officers and directors of Manager and Lakes sign sworn affidavits that they had no knowledge of such breach, then Manager and Lakes shall have thirty (30) days after notice from the Band to terminate the interest of the offending person or entity and if such termination takes place, this Agreement shall remain in full force and effect; and (b) if a breach relates to a failure to update changes in ownership interests, financial position or additional gaming related activities, then Manager and Lakes shall have thirty (30) days after notice from the Band to cure such default prior to termination. 16. NO PRESENT LIEN, LEASE OR JOINT VENTURE The parties agree and expressly warrant that neither the Management Agreement nor any exhibit thereto is a mortgage or lease and, consequently, does not convey any present interest whatsoever in the Facility or the Gaming Site, nor any proprietary interest in the Enterprise itself; except, with regard to the Dominion Account, the security interest created by the Dominion Agreement and, with regard to the Furnishings and Equipment, the security interest created by the Lakes Security Agreement. The parties further agree and acknowledge that it is not their intent, and that this Agreement shall not be construed, 63 to create a joint venture between the Band and Manager; rather, Manager shall be deemed to be an independent contractor for all purposes hereunder. 17. CONCLUSION OF THE MANAGEMENT TERM Upon the conclusion or the termination of this Agreement, Manager shall take reasonable steps for the orderly transition of management of the Enterprise to the Band or its designee pursuant to a transition plan; such transition period shall be for a reasonable period but not less than sixty days. Manager shall cooperate fully with the Band in that regard. No later than four months before the expiration of the Term of this Agreement, Manager shall submit to the Business Board and the Band a transition plan which shall be sufficient to allow the Band to operate the Enterprise and provide for the orderly transition of the management of the Enterprise. 18. MISCELLANEOUS 18.1. Situs of the Contracts. This Agreement, as well as all contracts entered into between the Band and any person or any entity providing services to the Enterprise, shall be deemed entered into in Michigan, and shall be subject to all Legal Requirements of the Band and federal law as well as approval by the Chairman of the NIGC where required by the IGRA. 18.2. Notice. Any notice required to be given pursuant to this Agreement shall be delivered to the appropriate party by Certified Mail Return Receipt Requested, or by overnight mail or courier service to the following addresses: If to the Band: Pokagon Band of Potawatomi Indians 58620 Sink Road Dowagiac, MI 49047 Attn: Chairman, Tribal Council With a copy to: Michael Phelan, General Counsel Pokagon Band of Potawatomi Indians P.O. Box 180 Dowagiac, MI 49047 And Daniel Amory, Esq. Drummond Woodsum & MacMahon P.O. Box 9781 Portland, ME 04104-5081 If to Manager or Lakes: Great Lakes Gaming of Michigan, LLC Lakes Entertainment, Inc. 64 130 Cheshire Lane Minnetonka, MN 55305 Attn: Timothy J. Cope With a copy to: Damon Schramm Lakes Entertainment, Inc. 130 Cheshire Lane Minnetonka, MN 55305 With a copy to: Kevin Quigley, Esq. Hamilton Quigley & Twait, PLC First National Bank Building Suite W1450 332 Minnesota Street Saint Paul, MN 55101-1314 and to: Daniel R. Tenenbaum Gray Plant Mooty 500 I.D.S. Center Minneapolis, MN 55402-3796 or to such other different address(es) as Manager or the Band may specify in writing. Any such notice shall be deemed given three days following deposit in the United States mail, one day following delivery to a courier service or upon actual delivery, whichever first occurs. 18.3. Relationship. Manager, Lakes and the Band shall not be construed as joint venturers or partners of each other by reason of this Agreement and neither shall have the power to bind or obligate the other except as set forth in this Agreement. 18.4. Further Actions. The Band, Lakes and Manager agree to execute or cause to be executed all contracts, agreements and documents and to take all actions reasonably necessary to comply with the provisions of this Agreement and the intent hereof. 18.5. Waivers. No failure or delay by Manager or the Band to insist upon the strict performance of any covenant, agreement, term or condition of this Agreement, or to exercise any right or remedy consequent upon, the breach thereof, shall constitute a waiver of any such breach or any subsequent breach of such covenant, agreement, term or condition. No covenant, agreement, term, or condition of this Agreement and no breach thereof shall be waived, altered or modified except by written instrument. No wavier of any breach shall affect or alter this Agreement, but each and every covenant, agreement, 65 term and condition of this Agreement shall continue in full force and effect with respect to any other then existing or subsequent breach thereof. 18.6. Captions. The captions for each section and subsection are intended for convenience only. 18.7. Severabilitv. If any provision, or any portion of any provision, of this Agreement is found to be invalid or unenforceable, such unenforceable provision, or unenforceable portion of such provision, shall be deemed severed from the remainder of this Agreement and shall not cause the invalidity or unenforceability of the remainder of this Agreement. If any provision, or any portion of any provision, of this Agreement is deemed invalid due to its scope or breadth, such provision shall be deemed valid to the extent of the scope or breadth permitted by law. 18.8. Advances. Except as provided in Section 5.6.2 with regard to Minimum Guaranteed Payment Advances or as otherwise provided in the Agreements, any amounts advanced by Manager or the Band related to the operation of the Enterprise shall accrue interest at the Band Interest Rate and shall be treated according to GAAP. 18.9. Third Party Beneficiary. This Agreement is exclusively for the benefit of the parties hereto and it may not be enforced by any party other than the parties to this Agreement and shall not give rise to liability to any third party other than the authorized successors and assigns of the parties hereto as such are authorized by this Agreement. 18.10. Survival of Covenants. Any covenant, term or provision of this Agreement which, in order to be effective, must survive the termination of this Agreement, shall survive any such termination. 18.11. Estoppel Certificate. Manager and the Band agree to furnish to the other party, from time to time upon request, an estoppel certificate in such reasonable form as the requesting party may request stating whether there have been any defaults under this Agreement known to the party furnishing the estoppel certificate and such other information relating to the Enterprise as may be reasonably requested. 18.12. Periods of Time; Time of Essence. Whenever any determination is to be made or action is to be taken on a date specified in this Agreement, if such date shall fall on a Saturday, Sunday or legal holiday under the laws of the Band or the State of Michigan, then in such event said date shall be extended to the next day which is not a Saturday, Sunday or legal holiday. Time is of the essence. 18.13. Exhibits. All exhibits attached hereto are incorporated herein by reference and made a part hereof as if fully rewritten or reproduced herein. 66 18.14. Successors and Assigns. The benefits and obligations of this Agreement shall inure to and be binding upon the parties hereto and their respective permitted successors and assigns. 18.15. Confidential and Proprietary Information. The Band, Lakes and Manager each agree that any information received concerning the other party during the performance of this Agreement, regarding the parties' organization, financial matters, marketing and development plans for the Enterprise, the Gaming Site, or other information of a proprietary nature (the "Confidential Information") will be treated by all parties in full confidence and except as required to allow Manager, Lakes and the Band to perform their respective covenants and obligations hereunder, or in response to legal process, and will not be revealed to any other persons, firms or organizations. This provision shall survive the termination of this Agreement as provided in Section 13.6. The obligations not to use or disclose the Confidential Information shall not apply to Confidential Information (a) which has been made previously available to the public by the Band, Lakes or Manager or becomes generally available to the public, unless the Confidential Information being made available to the public results in a breach of this Agreement; (b) which prior to disclosure to the Band, Lakes or Manager was already rightfully in any such persons' possession; (c) which is obtained by the Band, Lakes or Manager from a third party who is lawfully in possession of such Information, and not in violation of any contractual, legal or fiduciary obligation to the Band, Lakes or Manager, with respect to such Confidential Information and who does not require the Band, Lakes or Manager to refrain from disclosing such Confidential Information to others; or (d) by the Band, if such Confidential Information pertains to the Gaming Site or the Enterprise, in connection with the Band's development, construction and operation of a gaming facility after termination of the Agreements. 18.16. Patron Dispute Resolution. Manager shall submit all patron disputes concerning play to the Gaming Regulatory Authority pursuant to the Band Gaming Ordinance, and the regulations promulgated thereunder. 18.17. Modification. Any change to or modification of this Agreement must be in writing signed by both parties hereto and shall be effective only upon approval by the Chairman of the NIGC, the date of signature of the parties notwithstanding. 18.18. Entire Agreement. 18.18.1. This Agreement is the entire agreement between Manager and the Band relating to management of the Enterprise and supersedes all prior management agreements and understandings, whether written or oral, between or among the Band, Lakes and Manager; 67 18.18.2. Collateral agreements between or among the Band, Lakes and Manager consist of the following documents, which are not part of this Management Agreement: (a) Third Amended and Restated Development Agreement of near or even date; (b) Third Amended and Restated Lakes Development Note of near or even date; (c) Third Amended and Restated Transition Loan Note of near or even date; (d) Third Amended and Restated Non-Gaming Land Acquisition Line of Credit Agreement of near or even date; (e) Third Amended and Restated Account Control Agreement of near or even date; (f) Third Amended and Restated Pledge and Security Agreement of near or even date; (g) Second Amended and Restated Assignment and Assumption Agreement of near or even date; (h) Second Amended and Restated Unlimited Guaranty of near or even date; (i) First Amended and Restated Lakes Facility Note of near or even date; (j) First Amended and Restated Lakes Working Capital Advance Note of near or even date; (k) First Amended and Restated Lakes Minimum Payments Note of near or even date; (1) First Amended and Restated Security Agreement of near or even date; (m) Form of Dominion Account Agreement; (n) Third Amended and Restated Indemnity Agreement from the Band to Great Lakes (as assignee of Lakes) of near or even date; and 68 (o) Reaffirmation of Guarantees and Mortgages dated as of December 22, 2004 and January 25, 2006, together with the Band Designee Guarantees and the Band Designee Mortgages referenced therein. All such collateral agreements supersede all other prior collateral agreements and understandings, written or oral between the parties. Lakes, Great Lakes and the Band each affirmatively represents that no promises have been made to that party which are not contained in this Agreement, the Development Agreement or any other Transaction Documents, and stipulates that no evidence of any promises not contained in this Agreement, the Development Agreement, or any other Transaction Documents shall be admitted into evidence on their behalf. This Agreement shall not be supplemented, amended or modified by any course of dealing, course of performance or uses of trade and may only be amended or modified by a written instrument duly executed by officers of all parties. 18.19. Savings Clauses. 18.19.1. The Band, Lakes and Manager each agree to execute, deliver and, if necessary, record any and all additional instruments, certifications, amendments, modifications and other documents as may be required by the United States Department of the Interior, Bureau of Indian Affairs, the office of the field Solicitor, the NIGC, or any applicable statute, rule or regulation in order to effectuate, complete, perfect, continue or preserve the respective rights, obligations, liens and interests of the parties hereto to the fullest extent permitted by law; provided, that any such additional instrument, certification, amendment, modification or other document shall not materially change the respective rights, remedies or obligations of the Band, Lakes or Manager under this Agreement, the Guaranty, or any other agreement or document related hereto. 18.19.2. Any other provision of this Agreement to the contrary notwithstanding: (i) in no event shall the rate of interest payable in connection with any indebtedness incurred by the Band pursuant hereto or in connection herewith (including, without limitation, indebtedness evidenced by the Lakes Development Note, the Lakes Facility Note, the Lakes Working Capital Advance Note, the Minimum Payments Note, the Transition Loan Note or the Non-Gaming Land Acquisition Line of Credit) exceed the maximum rate permitted by law (the "Legal Rate"); (ii) if at any time the rate of interest on any such indebtedness computed as provided above (the "Computed Rate") exceeds the Legal Rate, then interest shall accrue thereafter on such indebtedness at the Legal Rate regardless of whether the Computed Rate is greater or less than the Legal Rate until 69 the total amount of interest payable on such indebtedness equals the amount that would have been payable on such indebtedness without regard to this sentence, or until such indebtedness is paid in full, whichever occurs first; and (iii) if the holder receives any interest in excess of the maximum rate permitted by this sentence with respect to any such indebtedness, the excess shall be credited against the principal of such indebtedness or refunded, at the holder's option. 18.20. Preparation of Agreement. This Agreement was drafted and entered into after careful review and upon the advice of competent counsel; it shall not be construed more strongly for or against either party. 18.21. Consents. Except where expressly indicated that an agreement or consent is in the sole or unilateral discretion of a party, no agreement or consent under this Agreement shall be unreasonably withheld or delayed. 18.22. Execution. This Agreement may be executed in four counterparts, two to be retained by each party. Each of the four originals is equally valid. This Agreement shall be binding upon both parties when properly executed and approved by the Chairman of the NIGC (the "Effective Date"). 18.23. Limited Joinder. 18.23.1. Lakes Entertainment, Inc. and Lakes Gaming and Resorts, LLC each join in this Agreement for the limited purpose of agreeing to be bound by the provisions of this Agreement specifically applicable to them, as well as the provisions of Articles 13 and 18 (as they pertain to such provisions of continuing applicability to them). In addition, Lakes Entertainment, Inc. shall have the benefit of any rights and remedies it had prior to the execution of the Assignment and Assumption Agreement as of October 16, 2000 under the following sections of this Agreement: 9.2, 10.2, 11.3, 12.5, 13.8 (as to remedies for claims for breach of its retained rights under this subsection), 13.11 (b) (limited to claims relating to the period before such date of the Assignment and Assumption Agreement), 18.2,18.3, 18.5, 18.7, 18.9, 18.10, 18.12, 18.14, 18.15, 18.17, 18.18, 18.19, 18.20, 18.21 and 18.22. 18.23.2. Sections 10(a) and 10(d) of the Assignment and Assumption Agreement are superseded by this Agreement and the Development Agreement and are no longer in effect. [The balance of this page is intentionally left blank. The signature page follows.] 70 IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. The Pokagon Band of Potawatomi Great Lakes Gaming of Michigan LLC Indians By: /s/ John Miller By: /s/ Timothy Cope --------------------------------- ------------------------------------ Its: Council Chairman Its: PRESIDENT and CFO By: /s/ Daniel F. Rapp Lakes Entertainment, Inc., --------------------------------- f/k/a Lakes Its Gaming, Inc. Its: Secretary By: /s/ Timothy Cope ------------------------------------ Its: PRESIDENT/CFO Lakes Gaming and Resorts, LLC By: /s/ Timothy Cope ------------------------------------ Its: PRESIDENT/CFO Approved pursuant to 25 U.S.C. Section 2711 NATIONAL INDIAN GAMING COMMISSION By ---------------------------------- Print Name: ------------------------- Its: Chairperson 71 EXHIBIT A GAMING SITE THAT PART OF SECTION 14, THE SOUTHEAST QUARTER OF SECTION 11, THE WEST HALF OF SECTION 13 AND THE SOUTHEAST QUARTER OF SECTION 15, TOWNSHIP 8 SOUTH, RANGE 21 WEST, NEW BUFFALO TOWNSHIP, BERRIEN COUNTY, MICHIGAN, DESCRIBED AS: BEGINNING AT THE SOUTH QUARTER CORNER OF SAID SECTION 14; THENCE WEST ON THE SOUTH LINE OF SAID SECTION 14 A DISTANCE OF 1997.12 FEET; THENCE NORTH 00 degrees 01' 30" EAST ON THE EAST LINE EXTENDED OF "ASSESSOR'S PLAT OF PLUTA ACRES", BEING A SUBDIVISION IN THE SOUTHWEST QUARTER OF SAID SECTION 14 A DISTANCE OF 40.00 FEET TO THE SOUTHEAST CORNER OF SAID SUBDIVISION; THENCE WEST (PLATTED NORTH 89 DEGREES 54' 20" WEST) ON THE SOUTH LINE OF SAID SUBDIVISION AND PARALLEL WITH SAID SOUTH SECTION LINE 632.62 FEET (PLATTED 632.51 FEET) TO THE SOUTHWEST CORNER OF SAID SUBDIVISION; THENCE NORTH 00 DEGREES 04' 15" WEST (PLATTED NORTH 00 degrees 01' 40" EAST) ON THE WEST LINE OF SAID SUBDIVISION AND PARALLEL WITH THE LINE COMMON TO SAID SECTIONS 14 AND 15 A DISTANCE OF 620.00 FEET TO THE NORTHWEST CORNER OF SAID SUBDIVISION; THENCE WEST ON THE NORTH LINE EXTENDED OF SAID SUBDIVISION 33.00 FEET TO THE LINE COMMON TO SAID SECTIONS 14 AND 15; THENCE SOUTH 00 DEGREES 04' 15" EAST ON SAID COMMON SECTION LINE 59.49 FEET; THENCE NORTH 89 degrees 46' 01" WEST PARALLEL WITH THE SOUTH LINE OF THE NORTHEAST QUARTER OF THE SOUTHEAST QUARTER OF SAID SECTION 15 A DISTANCE OF 488.78 FEET TO THE EASTERLY RIGHT OF WAY LINE OF INTERSTATE 94 RAMP "D"; THENCE NORTHWESTERLY 65.22 FEET ON A 2789.79 FOOT RADIUS CURVE TO THE RIGHT WHOSE CHORD BEARS NORTH 24 degrees 09' 32" WEST 65.22 FEET; THENCE NORTH 23 DEGREES 29' 22" WEST 222.46 FEET; THENCE NORTHERLY 152.93 FEET ON A 155.00 FOOT RADIUS CURVE TO THE RIGHT WHOSE CHORD BEARS NORTH 04 DEGREES 46' 33" EAST 146.80 FEET; THENCE NORTH 33 DEGREES 02' 28" EAST 201.91 FEET; THENCE NORTHERLY 423.07 FEET ON A 505.00 FOOT RADIUS CURVE TO THE LEFT WHOSE CHORD BEARS NORTH 09 degrees 02' 28" EAST 410.81 FEET; THENCE NORTH 14 DEGREES 57' 32" WEST 180.69 FEET; THENCE NORTHEASTERLY 466.00 FEET ON A 445.00 FOOT RADIUS CURVE TO THE RIGHT WHOSE CHORD BEARS NORTH 15 DEGREES 02' 28" EAST 445.00 FEET; THENCE NORTH 45 degrees 02' 28" EAST 201.89 FEET ALL ON SAID EASTERLY RIGHT OF WAY LINE OF INTERSTATE 94 RAMP "D"; THENCE NORTH 42 DEGREES 09' 28" EAST ON THE EASTERLY RIGHT OF WAY LINE OF INTERSTATE 94 A DISTANCE OF 426.11 FEET TO THE EAST AND WEST QUARTER LINE OF SAID SECTION 14; THENCE NORTH 89 DEGREES 47' 21" EAST ON SAID EAST AND WEST QUARTER LINE AND ON SAID EASTERLY RIGHT OF WAY LINE 131.67 FEET; THENCE NORTHEASTERLY 1721.44 FEET ON A 72 11662.20 FOOT RADIUS CURVE TO THE LEFT WHOSE CHORD BEARS NORTH 42 degrees 45' 47" EAST 1719.87 FEET; THENCE NORTH 40 degrees 12' 25" EAST 529.13 FEET; THENCE SOUTH 84 degrees 48' 44" EAST 258.15 FEET; THENCE NORTH 34 DEGREES 34' 39" EAST 302.96 FEET; THENCE NORTH 85 DEGREES 51' 09" EAST 172.54 FEET; THENCE NORTH 32 DEGREES 07' 05" EAST 883.38 FEET ALL ON SAID EASTERLY RIGHT OF WAY LINE OF INTERSTATE 94 TO THE LINE COMMON TO SECTIONS 11 AND 14; THENCE NORTH 89 degrees 39' 40" EAST ON SAID COMMON SECTION LINE 1200.02 FEET TO THE WEST LINE OF THE EAST HALF OF THE SOUTHEAST QUARTER OF SAID SECTION 11; THENCE NORTH 00 degrees 16' 16" EAST ON SAID WEST LINE 870.83 FEET TO THE CENTERLINE OF MAUDLIN ROAD; THENCE SOUTH 59 DEGREES 44' 03" EAST ON SAID CENTERLINE 250.96 FEET; THENCE SOUTH 00 DEGREES 16' 16" WEST PARALLEL WITH SAID WEST LINE 743.06 FEET TO THE LINE COMMON TO SAID SECTIONS 11 AND 14; THENCE NORTH 89 degrees 39' 40" EAST ON SAID COMMON SECTION LINE 1105.81 FEET TO THE CORNER COMMON TO SECTIONS 11, 12, 13 AND 14; THENCE SOUTH 89 degrees 58' 52" EAST ON THE NORTH LINE OF SAID SECTION 13 A DISTANCE OF 1321.09 FEET TO THE EAST LINE OF THE WEST HALF OF THE NORTHWEST QUARTER OF SAID SECTION 13; THENCE SOUTH 00 degrees 01' 03" EAST ON SAID EAST LINE 2640.34 FEET TO THE EAST AND WEST QUARTER LINE OF SAID SECTION 13; THENCE SOUTH 00 degrees 05' 34" EAST ON THE EAST LINE OF THE WEST HALF OF THE SOUTHWEST QUARTER OF SAID SECTION 13 A DISTANCE OF 2649.26 FEET TO THE SOUTH LINE OF SAID SECTION 13; THENCE SOUTH 89 degrees 33' 42" WEST ON SAID SOUTH SECTION LINE 1309.49 FEET TO THE CORNER COMMON TO SECTIONS 13, 14, 23 AND 24; THENCE NORTH 00 degrees 11' 33" WEST ON THE LINE COMMON TO SAID SECTIONS 13 AND 14 A DISTANCE OF 2650.01 FEET TO THE QUARTER CORNER COMMON TO SAID SECTIONS 13 AND 14; THENCE SOUTH 89 degrees 47' 52" WEST ON THE EAST AND WEST QUARTER LINE OF SAID SECTION 14 A DISTANCE OF 664.34 FEET TO THE WEST LINE OF THE EAST HALF OF THE EAST HALF OF THE SOUTHEAST QUARTER OF SAID SECTION 14; THENCE SOUTH 00 degrees 07' 52" EAST ON SAID WEST LINE 1637.07 FEET TO THE SOUTH LINE OF THE NORTH 25 ACRES OF THE WEST HALF OF THE EAST HALF OF THE SOUTHEAST QUARTER OF SAID SECTION 14; THENCE SOUTH 89 degrees 47' 52" WEST ON SAID SOUTH LINE 666.09 FEET TO THE EAST LINE OF THE WEST HALF OF THE SOUTHEAST QUARTER OF SAID SECTION 14; THENCE SOUTH 00 DEGREES 04' 12" EAST ON SAID EAST LINE 1017.75 FEET TO THE SOUTH LINE OF SAID SECTION 14; THENCE SOUTH 89 degrees 35' 30" WEST ON SAID SOUTH SECTION LINE 667.18 FEET TO THE WEST LINE OF THE EAST HALF OF THE WEST HALF OF THE SOUTHEAST QUARTER OF SAID SECTION 14; THENCE NORTH 00 degrees 00' 32" WEST ON SAID WEST LINE 885.75 FEET TO THE SOUTH LINE OF THE NORTH TWO THIRDS OF THE EAST HALF OF THE WEST HALF OF THE WEST HALF OF THE SOUTHEAST QUARTER OF SAID SECTION 14; THENCE SOUTH 89 DEGREES 39' 35" WEST ON SAID SOUTH LINE 333.12 FEET TO THE WEST LINE OF THE EAST HALF OF THE 73 WEST HALF OF THE WEST HALF OF THE SOUTHEAST QUARTER OF SAID SECTION 14; THENCE SOUTH 00 degrees 01' 18" WEST ON SAID WEST LINE 886.15 FEET TO THE SOUTH LINE OF SAID SECTION 14; THENCE SOUTH 89 degrees 35' 30" WEST ON SAID SOUTH SECTION LINE 333.59 FEET TO THE POINT OF BEGINNING. CONTAINING 673.18 ACRES MORE OR LESS. SUBJECT TO THE RIGHTS OF THE PUBLIC AND OF ANY GOVERNMENTAL UNIT IN ANY PART THEREOF TAKEN, USED, OR DEEDED FOR STREET, ROAD, OR HIGHWAY PURPOSES. THIS SURVEY WAS PERFORMED WITH AN ERROR OF CLOSURE NO GREATER THAN 1 IN 15000. THIS SURVEY COMPLIES WITH THE REQUIREMENTS OF SECTION 3, P.A. 132 OF 1970, AS AMENDED, EXCEPT FOR PAPER SIZE. ASSUMED THE LINE BETWEEN THE SOUTH QUARTER CORNER AND THE SOUTHEAST CORNER OF SAID SECTION 14 TO BEAR WEST. 74 EXHIBIT B PENDING BAND LITIGATION Taxpayers of Michigan Against Casinos et al. v. State of Michigan. The Michigan Supreme Court ruled against plaintiff TOMAC's challenges to the validity of the Compact. 471 Mich. 306, 685 N.W.2d 221 (2004), and the U.S. Supreme Court subsequently denied farther review. TOMAC v. Norton et al., U.S.D.C.D.C, Case No. l:01CV00398-JR. The plaintiff in this action, filed in the U.S. District Court for the District of Columbia, challenged the decision of the Department of Interior to take the Gaming Site into trust. The federal district court entered judgment on all counts against the plaintiff in March, 2005. The plaintiff appealed to the U.S. Court of Appeals for the D.C. Circuit, and on January 6, 2006, a three member panel of that Court rejected the plaintiff's appeal. The plaintiff could seek rehearing before the full U.S. Court of Appeals and/or seek review in the U.S. Supreme Court, but it is not likely to achieve any farther review of the issues. Pokagon Properties. LLC v Leonard A. Kolberg. Jr., Case No. 02-49-765-CK-B, Circuit Court for the County of Van Buren. Claim for non-payment of rent from crop lease. Amount of claim: approximately $36,000.00. Defendant has filed a counterclaim seeking damages in the amount of $118,000.00. The parties have entered into a settlement agreement which includes the Band receiving $9,000 and a dismissal of all claims. Pokagon Properties. LLC v Dean Anderson, Case No. 71C010205CC00602, Circuit Court for the County of St. Joseph. Claim for non-payment of rent from crop lease. Amount of claim: approximately $52,000.00. Defendant has filed a counterclaim in the approximate amount of $63,000.00. 75 EX-10.171 5 c02716exv10w171.txt THIRD AMENDED AND RESTATED DEVELOPMENT AGREEMENT Exhibit 10.171 EXECUTION VERSION THIRD AMENDED AND RESTATED DEVELOPMENT AGREEMENT BETWEEN THE POKAGON BAND OF POTAWATOMI INDIANS AND GREAT LAKES GAMING OF MICHIGAN, LLC, (F/K/A GREAT LAKES OF MICHIGAN, LLC) DATED AS OF JANUARY 25, 2006 TABLE OF CONTENTS ARTICLE 1. DEFINITIONS AND OBJECTIVES...................................... 3 Section 1.1. Definitions................................................ 3 "Account"............................................................ 3 "Accrued Expenses"................................................... 3 "Agreement".......................................................... 3 "Agreements"......................................................... 3 "Approved Construction Costs"........................................ 3 "Approved Development Budget"........................................ 3 "Architect".......................................................... 3 "Assignment and Assumption Agreement"................................ 3 "Band Designee"...................................................... 4 "Band Designee Guarantee"............................................ 4 "Band Designee Mortgage"............................................. 4 "Band Event of Default".............................................. 4 "Band Interest Rate"................................................. 4 "Band Mortgage"...................................................... 4 "Band Security Agreement"............................................ 4 "Band Working Capital Advances"...................................... 4 "Bank Closing"....................................................... 4 "Bank Lender"........................................................ 4 "Bank Loan".......................................................... 4 "Bank Loan Agreement"................................................ 4 "Bank Note".......................................................... 5 "BIA"................................................................ 5 "Business Board"..................................................... 5 "Change of Control".................................................. 5 "Class II Gaming".................................................... 5 "Class III Gaming"................................................... 5 "Commencement Date".................................................. 5 "Compact"............................................................ 5 "Completion Date".................................................... 5 "Constitution"....................................................... 6 "Construction Costs"................................................. 6 "Construction Documents"............................................. 6 "Construction Guaranty Payments"..................................... 6 "Control Agreement".................................................. 6 "Corporate Commission"............................................... 6 "CRC"................................................................ 7 "Design Agreement"................................................... 7 "Design Packages".................................................... 7 "Development Expenditures"........................................... 7 "Development Soft Costs"............................................. 7 "Disbursement Accounts".............................................. 7 "Dominion Account"................................................... 7

i "Dominion Agreement"................................................. 7 "Economically Feasible".............................................. 7 "Enterprise"......................................................... 7 "Enterprise Accounts"................................................ 8 "Equipment Lender"................................................... 8 "Equipment Loan Agreement"........................................... 8 "Equipment Loan"..................................................... 8 "Equipment Note"..................................................... 8 "Facility"........................................................... 8 "Final Scope of Work"................................................ 8 "Firstar"............................................................ 9 "Force Majeure"...................................................... 9 "Furnishings and Equipment".......................................... 9 "Gaming"............................................................. 9 "Gaming Ordinance"................................................... 9 "Gaming Regulatory Authority" or "GRA"............................... 9 "Gaming Site"........................................................ 9 "Gaming Site Acquisition Advances"................................... 9 "Governmental Action"................................................ 10 "Great Lakes"........................................................ 10 "Guaranty"........................................................... 10 "Guaranty Reserve"................................................... 10 "Initial Phase"...................................................... 10 "Initial Scope of Work".............................................. 10 "IGRA"............................................................... 10 "Insider"............................................................ 10 "Lakes".............................................................. 10 "Lakes Development Loan"............................................. 10 "Lakes Development Note"............................................. 11 "Lakes Event of Default"............................................. 11 "Lakes Facility Loan"................................................ 11 "Lakes Facility Note"................................................ 11 "Lakes' Internal Expenses"........................................... 11 "Lakes Refinancing Guaranty"......................................... 11 "Lakes Security Agreement"........................................... 11 "Lakes Working Capital Advance Note"................................. 11 "Lakes Working Capital Advances"..................................... 11 "Legal Requirements"................................................. 11 "Limited Recourse"................................................... 12 "Loans".............................................................. 12 "Local Agreement".................................................... 12 "Management Agreement"............................................... 12 "Material Adverse Change"............................................ 12 "Material Breach".................................................... 12 "Memorandum of Understanding"........................................ 13 "Minimum Payments Note".............................................. 13

ii "Monthly Payments"................................................... 13 "National Indian Gaming Commission" or "NIGC"........................ 13 "Net Revenues"....................................................... 13 "NIGC Approval"...................................................... 13 "NIGC Disapproval"................................................... 13 "Non-Gaming Land".................................................... 13 "Non-Gaming Land Acquisition Line of Credit"......................... 13 "252 MM Shortfall"................................................... 13 "Operating Expense".................................................. 14 "Plans and Specifications"........................................... 14 "Pokagon Council".................................................... 14 "Preliminary Development Budget"..................................... 14 "Project"............................................................ 14 "Remaining Loan Availability Amount"................................. 14 "Reserve Amount"..................................................... 14 "Restoration Act".................................................... 14 "Restricted Territory"............................................... 14 "Road Service Agreement"............................................. 14 "Scholarship Program Fee"............................................ 14 "Signing Fee"........................................................ 14 "Specific Performance Restriction"................................... 14 "State".............................................................. 14 "Subsequent Gaming Facility Revenues"................................ 15 "Term"............................................................... 15 "Transaction Documents".............................................. 15 "Transition Loan".................................................... 15 "Transition Loan Note"............................................... 15 "Tribal Distributions"............................................... 15 "Tribal UCC Code".................................................... 15 Section 1.1. Independent Agreement.................................... 15 ARTICLE 2. ACQUISITION OF GAMING SITE AND NON-GAMING LANDS................. 15 Section 2.1. Selection of Gaming Site................................. 15 Section 2.2. Purchase of Gaming Site; Funding......................... 15 Section 2.3. [intentionally omitted].................................. 16 Section 2.4. Assignment of Other Options.............................. 16 Section 2.5. Selection of Non-Gaming Lands............................ 16 Section 2.6. Closing on Non-Gaming Lands; Funding..................... 16 Section 2.7. Mortgages Prior to Transfer into Trust................... 17 ARTICLE 3. CONSTRUCTION PHASES............................................. 17 Section 3.1. Initial Phase............................................ 17 Section 3.2. Final Scope of Work...................................... 17 Section 3.3. Modification of Final Scope of Work...................... 17 Section 3.4. Bank Loans and Equipment Loans........................... 18 ARTICLE 4. DESIGN PHASE.................................................... 18 Section 4.1. Employment of Architect.................................. 18 Section 4.2. Design and Construction Budgets.......................... 18

iii Section 4.3. Gaming Regulatory Authority Expenses..................... 19 Section 4.4. [intentionally omitted].................................. 19 Section 4.5. Concept Design and Engineering........................... 19 Section 4.6. Preliminary Program Evaluation........................... 19 Section 4.7. Design Development....................................... 19 Section 4.8. Plans and Specifications................................. 20 Section 4.9. Compliance with Construction Standards. Environmental Laws and Regulations..................................... 20 Section 4.10. Advance of Funds for Design Work. Long Lead Time Items and Preliminary Site Work................................ 20 ARTICLE 5. CONSTRUCTION PHASE.............................................. 21 Section 5.1. Selection of Contractor or Construction Manager.......... 21 Section 5.2. Vendor Preferences....................................... 21 Section 5.3. Proposal Review.......................................... 21 Section 5.4. Contracts................................................ 21 Section 5.5. Construction Document Provisions......................... 22 Section 5.6. Construction Administration.............................. 22 Section 5.7. Construction Commencement and Completion................. 22 Section 5.8. Determination of Approved Construction Costs; Cost Overruns................................................. 23 ARTICLE 6. FURNISHINGS AND EQUIPMENT....................................... 23 Section 6.1. Selection of Furnishings and Equipment................... 23 ARTICLE 7. TERM............................................................ 23 Section 7.1. Term..................................................... 23 ARTICLE 8. PAYMENTS AND COMMITMENTS BY GREAT LAKES BEFORE APPROVAL OF MANAGEMENT AGREEMENT.................................................... 24 Section 8.1. Fees Payable By Great Lakes to the Band.................. 24 Section 8.2. Deposit into the Account................................. 25 Section 8.3. Transition Loan.......................................... 25 Section 8.4. Advances on Lakes Development Loan....................... 26 Section 8.5. Non-Gaming Land Acquisition Line of Credit............... 26 ARTICLE 9. PAYMENTS AND COMMITMENTS BY GREAT LAKES AFTER APPROVAL OF MANAGEMENT AGREEMENT.................................................... 27 Section 9.1. Scholarship Program Fee.................................. 27 Section 9.2. Development and Equipment Loans.......................... 27 ARTICLE 10. EXCLUSIVITY; NON-COMPETITION................................... 39 Section 10.1. Exclusivity Regarding Facility........................... 39 Section 10.2. Exclusivity in Michigan.................................. 39 Section 10.3. Indiana Casino........................................... 39 Section 10.4. Non-Competition.......................................... 39 Section 10.5. Assignment; Change of Control............................ 39 Section 10.6. Restrictions on Collateral Development................... 40 ARTICLE 11. REPRESENTATIONS, WARRANTIES, AND COVENANTS.................... 41 Section 11.1. Representations and Warranties of the Band............... 41 Section 11.2. Band Covenants........................................... 41 Section 11.3. Representations and Warranties of Lakes and Great Lakes.. 43 Section 11.4. Covenants of Lakes and Great Lakes....................... 43

iv ARTICLE 12. EVENTS OF DEFAULT.............................................. 44 Section 12.1. Events of Default by the Band............................ 44 Section 12.2. Events of Default by Lakes or Great Lakes................ 45 Section 12.3. Material Breach: Right to Cure........................... 46 ARTICLE 13. TERMINATION.................................................... 47 Section 13.1. Voluntary Termination.................................... 47 Section 13.2. Termination if No NIGC Approval.......................... 47 Section 13.3. Great Lakes Right to Terminate on Band Event of Default.. 47 Section 13.4. Band Right to Terminate on Lakes Event of Default........ 47 Section 13.5. Band Right to Terminate for Material Adverse Change...... 47 Section 13.6. Termination on Buyout.................................... 48 Section 13.7. Involuntary Termination Due to Changes in Legal Requirements............................................. 48 Section 13.8. Repair or Replacement.................................... 50 Section 13.9. Recoupment and Setoff.................................... 50 ARTICLE 14. DISPUTE RESOLUTION; LIQUIDATED DAMAGES......................... 50 Section 14.1. Band's Waiver of Sovereign Immunity and Consent to Suit.. 50 Section 14.2. Arbitration.............................................. 51 Section 14.3. Limitation of Actions.................................... 52 Section 14.4. Damages on Termination for Failure to Obtain NIGC Approval................................................. 53 Section 14.5. Liquidated Damages and Limitations on Remedies........... 53 Section 14.6. Lakes' and Great Lakes' Continuing Obligations........... 55 Section 14.7. Termination of Exclusivity............................... 55 Section 14.8. Remedies................................................. 55 Section 14.9. Fees not Damages......................................... 55 Section 14.10. Damages for Governmental Action.......................... 56 ARTICLE 15. GENERAL........................................................ 56 Section 15.1. Nature of Agreement...................................... 56 Section 15.2. Great Lakes's Interest................................... 56 Section 15.3. Situs of the Agreement................................... 56 Section 15.4. Notice................................................... 56 Section 15.5. Relationship............................................. 57 Section 15.6. Further Actions.......................................... 57 Section 15.7. Waivers.................................................. 57 Section 15.8. Captions................................................. 57 Section 15.9. Third Party Beneficiary.................................. 58 Section 15.10. Survival of Covenants.................................... 58 Section 15.11. Estoppel Certificate..................................... 58 Section 15.12. Periods of Time; Time of the Essence..................... 58 Section 15.13. Confidential and Proprietary Information................. 58 Section 15.14. Government Savings Clause................................ 58 Section 15.15. Successors and Assigns................................... 59 Section 15.16. Severability............................................. 59 Section 15.17. Entire Agreement......................................... 59 Section 15.18. Consents................................................. 61 Section 15.19. [intentionally omitted].................................. 61 Section 15.20. Limited Joinder.......................................... 61

v EXHIBIT LIST EXHIBIT A Third Amended and Restated Pledge and Security Agreement EXHIBIT B Third Amended and Restated Account Control Agreement EXHIBIT C Form of Dominion Account Agreement EXHIBIT D Description of Gaming Site EXHIBIT E Third Amended and Restated Lakes Development Note EXHIBIT F First Amended and Restated Lakes Facility Note EXHIBIT G First Amended and Restated Security Agreement EXHIBIT H First Amended and Restated Lakes Working Capital Advance Note EXHIBIT I First Amended and Restated Lakes Minimum Payments Note EXHIBIT J Third Amended and Restated Non-Gaming Land Acquisition Line of Credit Agreement EXHIBIT K Third Amended and Restated Transition Loan Note EXHIBIT L Band Litigation EXHIBIT M Conditional Release and Termination Agreement between Lakes and CRC dated May 20,1999, as amended by Amendment dated on or about July 7, 1999, as amended by Amendment dated on or about January 2, 2003 EXHIBIT N General Release from CRC to the Band and its members vi THIRD AMENDED AND RESTATED DEVELOPMENT AGREEMENT This Third Amended and Restated Development Agreement is made as of the 25th day of January, 2006, by and between the POKAGON BAND OF POTAWATOMI INDIANS (the "Band"), and GREAT LAKES GAMING OF MICHIGAN, LLC, a Minnesota limited liability company (f/k/a Great Lakes of Michigan, LLC, ("Great Lakes"). RECITALS A. The Band, pursuant to 25 U.S.C. Sections 1300j et seq. (the "Restoration Act"), is a federally recognized Indian tribe recognized as eligible by the Secretary of the Interior for the special programs and services provided by the United States to Indians because of their status as Indians and is recognized as possessing powers of self-government. B. As authorized by the Restoration Act, the Band intends to acquire the Gaming Site in the State of Michigan, to be held by the federal government in trust for the Band, on which the Band intends to construct and operate a permanent Class III gaming facility (the "Facility"); and the Band will possess sovereign governmental powers over the Gaming Site pursuant to the Band's recognized powers of self government, and the Band desires to use the Gaming Site to improve the economic conditions of its members. C. The Band and Lakes Entertainment, Inc., f/k/a Lakes Gaming, Inc. ("Lakes") entered into a Development Agreement dated as of July 8, 1999 (the "Development Agreement") which contains provisions relating to the development of the Facility. D. The Band has ratified the Development Agreement on August 26, 1999, and the Development Agreement is now in full force and effect. E. Lakes has assigned its rights and obligations under the Development Agreement to Great Lakes pursuant to an Assignment and Assumption Agreement dated as of October 16, 2000, subject to the terms and conditions set out in that Agreement. F. Great Lakes and the Band entered into a First Amended and Restated Development Agreement dated as of October 16, 2000 (the "First Amended Development Agreement"). G. Pursuant to the First Amended Development Agreement, Great Lakes agreed to increase the Lakes Development Loan from $43,000,000 to $46,000,000 and the Non-Gaming Land Acquisition Line of Credit from $10,000,000 to $15,000,000, thereby agreeing to loan the Band an additional $8,000,000 for immediate use by the Band in acquiring both gaming and non-gaming land. The Band and Great Lakes agreed to construct the Facility in a phased approach, with the Initial Phase having a then estimated cost of approximately $97,000,000. Great Lakes also agreed, due to uncertainty in the capital markets over the availability of financing for the Facility, to provide a greater proportion of the initial phase of project financing from its own funds, and affirmed its commitment to finance all phases of the project entirely from its own funds if financing at an interest rate of 13% or less is not available from the capital markets. The Band in turn agreed to extend the term of the Management Agreement from five to seven years and to enter into a Dominion Agreement granting Great Lakes a security interest in the 1 Dominion Account as defined in the Management Agreement. H. Great Lakes and the Band entered into a Second Amended and Restated Development Agreement dated as of December 22, 2004 (the "Second Amended Development Agreement"), the primary purposes of which were to extend the termination date in Section 8.l(c) of the Development Agreement, relating to the time period during which the Monthly Payments may be required to be made by Great Lakes to the Band, from August 26, 2004 to August 26, 2007, and to make corresponding changes in Sections 13.2 and 14.4 of the Development Agreement to change the August 26, 2004 date to August 26, 2007. I. Pursuant to the Second Amended Development Agreement, the Band and Great Lakes acknowledged and agreed that the cost of developing, constructing and equipping the Initial Phase of the Project totaled, as of December 22, 2004, approximately $197,000,000, which the parties agreed would be financed as follows: the Lakes Development Loan in the amount of $46,000,000 and an additional $151,000,000 to be provided by an Equipment Loan and a Bank Loan. To the extent that the Band was unable to raise additional funding of $151,000,000 from third parties at an interest rate not to exceed 13% (the "151MM Shortfall"), Great Lakes agreed to provide $54,000,000 (or such lesser amount as may be necessary to make up the 151MM Shortfall) through, at its option, a direct loan, third party loans enabled by credit enhancements provided by Great Lakes, or third-party loans with interest subsidies provided by Great Lakes, in each case at an interest rate not to exceed 13%, such $54,000,000 loan and the Lakes Development Loan to be subordinated to certain other third-party financing. Great Lakes did not have any other responsibility to fund, or provide credit enhancements or interest subsidies for, the 151MM Shortfall (if any). J. The cost of developing, constructing and equipping the Initial Phase of the Project is now understood as totaling approximately $298,000,000, which will be financed as follows: the Lakes Development Loan in the amount of $46,000,000 and an additional $252,000,000 to be provided by an Equipment Loan and a Bank Loan. To the extent that the Band is unable to raise additional funding of $252,000,000 from third parties at an interest rate not to exceed 13% (the "252MM Shortfall"), Great Lakes shall, at the request of the Band, provide $54,000,000 (or such lesser amount as may be necessary to make up the 252MM Shortfall) through, at its option, a direct loan, third party loans enabled by credit enhancements provided by Great Lakes, or third-party loans with interest subsidies provided by Great Lakes, in each case at an interest rate not to exceed 13%, such $54,000,000 loan and the Lakes Development Loan to be subordinated to such third-party financing and to the Bank Loan and the Equipment Loan. Great Lakes shall not have any other responsibility to fund, or provide credit enhancements or interest subsidies for, the 252MM Shortfall (if any). K. Great Lakes and the Band have agreed that the term of this Agreement shall begin on the date the Management Agreement, this Agreement (if required) and the Lakes Development Note (if required) are approved by the Chairman of the NIGC, and/or the BIA (if required), and continue until, unless earlier terminated in accordance with its terms, seven (7) years from commencement of Gaming at the Initial Phase of the Facility, provided that the Term of the Management Agreement will be five (5) years from the Commencement Date if (a) the Development Expenditures of the Initial Phase of the Facility are equal to or more than $138,000,000, and (b) Lakes' Financial Support for such Initial Phase has not exceeded 2 $46,000,000, as provided in Section 3.2 of the Management Agreement. L. Great Lakes has agreed to fund under the Lakes Development Loan, and has advanced funds for architectural work, engineering services, long-lead-time items, and to permit the Band to complete preliminary site work. M. This Third Amended and Restated Development Agreement incorporates changes to reflect the expected increased cost of the Initial Phase of the Project as now contemplated, as described in Section J above, and its impact on the composition of the financing for such Initial Phase, as well as to reflect the parties' desire to have flexibility to modify the scope of the Initial Phase as the parties agree depending on the availability and suitability of financing. NOW, THEREFORE, in consideration of the mutual covenants, conditions and promises herein contained, the receipt and sufficiency of which are expressly acknowledged, the Band and Great Lakes hereby agree as follows: ARTICLE 1. DEFINITIONS AND OBJECTIVES Section 1.1. Definitions. Capitalized terms not otherwise defined herein shall have the meanings set forth in the Management Agreement. In addition to other terms which are defined elsewhere in this Agreement, the following terms, for purposes of this Agreement, shall have the meanings set forth in this Section. "Account" means the account at Firstar established pursuant to Section 8.2 that is subject to the Control Agreement. "Accrued Expenses" shall mean the accrued unpaid development costs and expenses relating to the Gaming Site and the Enterprise. "Agreement" shall mean this Development Agreement. "Agreements" shall mean this Agreement and the Management Agreement. "Approved Construction Costs" shall mean the Architect's estimate of Construction Costs approved by the Band and Great Lakes pursuant to Section 5.8. "Approved Development Budget" has the meaning set out in Section 4.2. "Architect" shall have the meaning described in Section 4.1. "Assignment and Assumption Agreement" means the Assignment and Assumption Agreement among Great Lakes, Lakes and the Band dated as of October 16, 2000, as amended by First Amendment dated as of December 22, 2004 as further amended and restated by a Second Amended and Restated Assignment and Assumption Agreement dated as of January 25, 2006. 3 "Band Designee" shall mean Pokagon Properties, LLC, a Delaware limited liability company, Filbert Land Development, LLC, an Indiana limited liability company, or such other entities as may be designated by the Band in writing. "Band Designee Guarantee" shall mean the guarantee by the Band Designee to Great Lakes of amounts advanced by Great Lakes under the Lakes Development Note and the Non-Gaming Land Acquisition Line of Credit, which shall be substantially in the form of the guaranty executed by Pokagon Properties, LLC in favor of Lakes dated March 9, 2000. "Band Designee Mortgage" means, individually and collectively, each mortgage granted by a Band Designee to Great Lakes securing the applicable Band Designee Guarantee, which shall be substantially in the form of the mortgage granted by Pokagon Properties, LLC to Lakes dated March 9, 2000. "Band Event of Default" has the meaning described in Section 12.1. "Band Interest Rate" shall mean the lesser of (i) Wall Street Journal prime rate as of the Bank Closing plus 1%, or (ii) 10%. "Band Mortgage" means, individually and collectively, each mortgage granted by the Band to Great Lakes securing the Lakes Development Note and the Non-Gaming Land Acquisition Line of Credit, which shall be substantially in the form of the mortgage granted by Pokagon Properties, LLC to Lakes dated March 9, 2000, with appropriate changes reasonably acceptable to Great Lakes and the Band reflecting the change to the Band as mortgagor and to Great Lakes as mortgagee. "Band Security Agreement" shall mean the pledge and security agreement between Lakes and the Band granting the Band a lien and security interest in the Account, in the form attached hereto as Exhibit A, as the same may be amended from time to time. "Band Working Capital Advances" shall have the meaning defined in the Management Agreement. "Bank Closing" means the closing on the Bank Loan Agreement. "Bank Lender" shall mean one or more financial institutions or bond trustees described as the lender or bond trustee in the Bank Loan Agreement. "Bank Loan" shall mean the loan evidenced by the Bank Note. "Bank Loan Agreement" shall mean (a) the capital leases, loan agreements and/or bond indentures to be entered into between the Band and the Bank Lender for the Initial Phase in a principal amount of approximately $193,000,000, which will, when added to the Lakes Development Loan and the Equipment Loan, finance all Development Expenditures for the Initial Phase, provided that the amount of the Bank Loan may be increased or decreased as 4 agreed upon by Great Lakes and the Band; and (b) the subsequent or amended capital leases, loan agreements and/or bond indentures in an additional approximate amount of $38,000,000, which along with the additional Equipment Loan for the Final Scope of Work will finance all Development Expenditures associated with the expansion of the Facility to the Final Scope of Work; provided that the additional amount of the Bank Loan may be increased or decreased as agreed upon by Great Lakes and the Band. The amount borrowed under the Bank Loan Agreement may also be increased and the added proceeds thereof used to refinance all or portions of the Lakes Development Loan, provided that amounts used for such refinancing shall be in addition to (a) the sums needed to fund Development Expenditures for the Initial Phase (as to financing for the Initial Phase) and Final Scope of Work (as to financing for the Final Scope of Work), in the respective maximum amounts set out above, and (b) any sums which the Band is able to borrow without Great Lakes' guaranty, credit enhancements or interest subsidy to expand the Initial Scope of Work to include all or a portion of the Final Scope of Work. "Bank Note" shall mean the promissory notes or bonds to be executed by the Band pursuant to the Bank Loan Agreement. "BIA" shall mean the Bureau of Indian Affairs under the Department of the Interior of the United States of America. "Business Board" shall mean the decision making body created pursuant to Section 3.4 of the Management Agreement. "Change of Control" shall have the meaning set out in Section 10.5(c). "Class II Gaming" shall mean Class II Gaming as defined in the IGRA. "Class III Gaming" shall mean Class III Gaming as defined in the IGRA. "Commencement Date" shall mean the first date that Gaming is conducted pursuant to the terms of the Management Agreement in a Facility, including Gaming conducted on completion of the Initial Phase of the Facility. "Compact" shall mean the Compact between the Band and the State dated December 3, 1998 and approved in 64 Fed. Reg. No. 32, Thursday, February 18, 1999, at 8111, as the same may, from time to time, be amended; or such other compact or consent decree that may be substituted therefor. "Completion Date" shall mean the date upon which Great Lakes receives, as to the Initial Phase or the Final Scope of Work: (i) an architect's certificate from the Architect chosen pursuant to this Agreement as having responsibility for the design and supervision of construction, equipping and furnishing of the Facility certifying that the Initial Phase or the Final Scope of Work, as the case may be, has been fully constructed substantially in accordance with the Plans and 5 Specifications; (ii) certification from the division, department or designee of Great Lakes having responsibility to assure compliance with any operational standards stating that the Initial Phase or the Final Scope of Work, as the case may be, as completed, is in substantial compliance with any such standards; (iii) a permanent or temporary certificate of occupancy, if required, from the regulatory entity within the Band Government with authority to grant such a certificate, permitting the use and operation of the Initial Phase or the Final Scope of Work, as the case may be, in accordance with this Agreement; and (iv) certificates of such professional designers, inspectors or consultants or opinions of counsel, as Great Lakes may reasonably determine to be appropriate, verifying construction and furnishing of the Initial Phase or the Final Scope of Work, as the case may be, in compliance with all Legal Requirements. "Constitution" shall mean the document or documents which govern the actions of the Band and, upon enactment, the Constitution of the Pokagon Band of Potawatomi Indians as ultimately approved by the Band and approved by the Secretary of the Interior. "Construction Costs" means the costs of acquiring the Gaming Site and designing, developing, constructing, furnishing and equipping the Facility, including all related planning and professional fees, Furnishings and Equipment, and a contingency not to exceed 10% of such costs (excluding Furnishings and Equipment). "Construction Documents" shall have the meaning described in Section 5.4. "Construction Guaranty Payments" shall have the meaning described in Section 9.2.1(a)(i) "Control Agreement" shall mean the Account Control Agreement among Firstar, Lakes and the Band dated July 8, 1999, as amended by Amendment to Account Control Agreement dated October 16, 2000 and as further amended and restated by Second Amendment to Account Control Agreement dated December 22, 2004 and by a Third Amended and Restated Account Control Agreement dated January 25, 2006, perfecting the Band's lien and security interest in the Account, a true copy of which is attached as Exhibit B, as the same may be amended from time to time. "Corporate Commission" shall mean a body corporate and politic established, at the Band's discretion, by the Pokagon Council to own the Enterprise and such other businesses and assets as the Band may deem appropriate. 6 "CRC" means Casino Resource Corporation, a Minnesota corporation and its Insiders. "Design Agreement" shall have the meaning described in Section 4.1. "Design Packages" shall have the meaning described in Section 4.1. "Development Expenditures" shall mean all Approved Construction Costs; all other costs of equipping and opening the Facility, including but not limited to all related planning and professional fees, costs of infrastructure, fixtures, Furnishings and Equipment (including gaming equipment), and pre opening costs, fees and expenses; all legal, lobbying, public relations and other professional costs and expenses related to transferring Gaming Lands and Non-Gaming Lands into trust and to the Compact between the Band and the State of Michigan; and all legal, lobbying and other fees and expenses previously incurred by the Band in obtaining, or litigating with regard to, the Compact with the State of Michigan, not to exceed $20,000, as well as all other such fees and expenses subsequently incurred by the Band that the Band reasonably chooses to include in the Development Budget, together with all other Development Soft Costs. "Development Soft Costs" shall mean legal, lobbying, public relations and other professional fees and expenses for work related to the Compact, litigation relating to transfer of the Gaming Site into trust or otherwise affecting the Project, development of Band ordinances required under the Local Agreement or otherwise needed for development of the Project, and other services reasonably related to development of the Project, subject in each case to limitations, if any, set forth in this Agreement. "Disbursement Accounts" shall mean those accounts described in Section 4.19.3 of the Management Agreement. "Dominion Account" means the collateral account in favor of Great Lakes established under Section 4.19.2 of the Management Agreement. "Dominion Agreement" means the collateral agreement granting Great Lakes a security interest in the Dominion Account and perfecting such interest, which shall be in the form attached as Exhibit C, as the same may be amended from time to time. "Economically Feasible" means for purposes of Sections 13.7 and 14.5 hereof, that the Net Revenues from any operations of the Enterprise in question shall on a monthly basis exceed the aggregate debt service payments due and payable during such month on each of the Loans and any other indebtedness to which Great Lakes has subordinated its liens. "Enterprise" shall mean the enterprise of the Band created by the Band to engage in Class II and Class III Gaming at the Facility, and which shall include all gaming at the Facility and any other lawful commercial activity allowed in the Facility, including but not limited to the sale of alcohol, tobacco, gifts and souvenirs; provided, however, the Enterprise shall only include any hotel operated by the Band, ancillary non-Gaming activity within the Facility, or other commercial enterprise conducted by the Band which is not generally related to Class II or Class III Gaming if such hotel, non-Gaming activity or other commercial enterprise (a) is financed by, 7 or through the guaranty of, Manager, (b) is specifically included within the Initial Scope of Work or the Final Scope of Work, or is not a material expansion of the Initial Scope of Work or the Final Scope of Work, or (c) is specified by the Business Board and the Pokagon Council as being included in the Enterprise, in which case depreciation and other expenses relating to such hotel, non-Gaming activity or other commercial enterprise shall be an Operating Expense, all related revenues shall be included in Gross Revenues, and interest on all related financing shall be paid by the Enterprise; and provided further that the Enterprise shall not include a tribal gift/craft business which the Band may elect to operate, rent free, on an area of about 2,400 square feet at the Facility. The design and operation of such gift/craft shop shall be consistent with the theme and quality of the Facility, and the location of such gift/craft shop shall be approved by the Business Board. "Enterprise Accounts" shall mean those accounts described in Section 4.19.1 of the Management Agreement. "Equipment Lender" shall mean the financial institution described as the lender in the Equipment Loan Agreement. "Equipment Loan Agreement" shall mean (a) the bond indentures, loan agreements and/or equipment leases in a principal amount of approximately $59,000,000 to be entered into between the Band and the Equipment Lender to finance acquisition of the Furnishings and Equipment for the Initial Phase, provided that the amount of the Equipment Loan may be increased or decreased as agreed upon by Great Lakes and the Band; and (b) the subsequent or amended bond indenture, loan agreement and/or equipment lease in an additional approximate amount of $6,000,000, which will finance the acquisition of the Furnishings and Equipment for expansion of the Facility to the Final Scope of Work; provided that the additional amount of the Equipment Loan may be increased or decreased as agreed upon by Great Lakes and the Band. "Equipment Loan" means the loan or lease under the Equipment Loan Agreement. "Equipment Note" shall mean the promissory note or bond to be executed by the Band pursuant to the Equipment Loan Agreement. "Facility" shall mean the permanent buildings, structures and improvements located on the Gaming Site and all fixtures, Furnishings and Equipment attached to, forming a part of, or necessary for the operation of the Enterprise. "Final Scope of Work" means the final gaming facility and associated amenities that the parties intend to complete, unless otherwise agreed by Great Lakes and the Band, no later than the third anniversary of the Commencement Date, which, together with the Initial Phase, shall include not less than 110,000 sq. ft. of gaming space, 110 gaming tables, 3,000 slot machines, a 3,100 car garage and additional surface parking for guests, oversized vehicles and employees as needed, a 200 room hotel, expanded food and beverage facilities, and a 2,500 seat bingo and events center, and which shall contain approximately (excluding the hotel and bingo/events center) at least 350,000 to 370,000 sq. ft. of space. The Final Scope of Work will include and be integrated with the Initial Phase. 8 "Firstar" shall mean Firstar Bank N.A., n/k/a U.S. Bank National Association, and its successors in interest. "Force Majeure" shall mean acts of God, fire, flood, storm, earthquake, war, civil disorder, governmental acts, regulations, orders or restrictions, accidents not caused by a party's negligence, strikes or labor disturbances. "Furnishings and Equipment" shall mean all furniture, furnishings and equipment required for the operation of the Enterprise in accordance with the standards set forth in this Agreement, including, without limitation: (i) cashier, money sorting and money counting equipment, surveillance and communication equipment, and security equipment; (ii) slot machines, video games of chance, table games, keno equipment and other gaming equipment; (iii) office furnishings and equipment; (iv) specialized equipment necessary for the operation of any portion of the Enterprise for accessory purposes, including equipment for kitchens, laundries, dry cleaning, cocktail lounges, restaurants, public rooms, commercial and parking spaces, and recreational facilities; and (iv) hotel equipment (to the extent a hotel is included in the Enterprise); (v) all other furnishings and equipment hereafter located and installed in or about the Facility which are used in the operation of the Enterprise in accordance with the standards set forth in this Agreement. "Gaming" shall mean any and all activities defined as Class II and Class III Gaming pursuant to IGRA. "Gaming Ordinance" shall have the meaning described in Section 8.4(c). "Gaming Regulatory Authority" or "GRA" shall mean the Band body created pursuant to the Band Gaming Ordinance to regulate the Class II and Class III Gaming of the Band in accordance with the Compact, the IGRA and the Gaming Ordinance. "Gaming Site" shall mean the parcels of land in New Buffalo, Michigan described on the attached Exhibit D. "Gaming Site Acquisition Advances" shall mean funds advanced under the Lakes 9 Development Loan in such amount or amounts as are needed to option or acquire the Gaming Site, provided that the total amount of Gaming Site Acquisition Advances shall not exceed $11,000,000. "Governmental Action" means any resolution, ordinance, statute, regulation, order or decision of the Band or any instrumentality or agency of the Band, regardless of how constituted, that has the force of law. "Great Lakes" means Great Lakes Gaming of Michigan, LLC, a Minnesota limited liability company (f/k/a Great Lakes of Michigan, LLC). "Guaranty" means the Unlimited Guaranty dated as of October 16, 2000 from Lakes Gaming, Inc. and Lakes Gaming and Resorts, LLC to the Band. "Guaranty Reserve" shall have the meaning described in Section 9.2.1(a)((ii)(A). "Initial Phase" shall mean the first phase of the Facility, which shall include the facilities described in the Initial Scope of Work. The Initial Phase shall be designed and constructed so that it will be an integral part of the Final Scope of Work. "Initial Scope of Work" means a facility including not less than 110,000 sq. ft. of gaming space, 110 gaming tables, 3,000 slot machines, a buffet, casual dining outlet, steakhouse, casino cafe, seafood outlet, coffee/pastry shop, employee dining, Kids Quest/Arcade, and a 2,100 space garage and 1,200 surface parking spaces for guests, parking spaces for oversized vehicles and approximately 700 employee spaces, and which shall contain at least 300,000 sq. ft. of space but shall not include a hotel; provided, however, that depending on the availability and suitability of financing, upon the agreement of Great Lakes and the Band the Initial Scope of Work may be expanded or contracted to include greater or lesser amounts of the Final Scope of Work. "IGRA" shall mean the Indian Gaming Regulatory Act of 1988, P.L. 100-497, 25 U.S.C. Section 2701 et seq. as it may from time to time be amended. "Insider" has the meaning defined in 11 U.S.C. Section 101(31), assuming Lakes and Great Lakes were both the debtor in that definition, and shall include persons or entities that become Insiders after the date of this Agreement, whether as the result of a merger, acquisition, restructuring or otherwise. "Lakes" shall mean both Lakes Entertainment, Inc., f/k/a Lakes Gaming, Inc., a Minnesota corporation, and Lakes Gaming and Resorts, LLC, a Minnesota limited liability company. "Lakes Development Loan" shall mean the loan to the Band to be made by Great Lakes under the Lakes Development Note in a principal amount of up to $46,000,000 (which amount is subject to increase in accordance with Section 9.2.1 hereof), comprised of (a) up to $ 11,000,000 for Gaming Site Acquisition Advances and (b) the balance for Development Expenditures other than acquisition of the Gaming Site. 10 "Lakes Development Note" shall mean the promissory note dated as of January 25, 2006 and executed by the Band to evidence the Lakes Development Loan, which is in the form attached hereto as Exhibit E, together with all amendments, substitutions, restatements, modifications and renewals thereof. "Lakes Event of Default" has the meaning described in Section 12.2. "Lakes Facility Loan" shall mean the Loan to be made by Great Lakes to the Band, or facilitated by Great Lakes through guarantees, credit enhancements or interest subsidies, pursuant to Section 9.2.4 of this Agreement. The Lakes Facility Loan shall not include any loan to the extent it is subject to a Lakes Refinancing Guaranty. "Lakes Facility Note" shall mean the promissory note dated as of January 25, 2006 and executed by the Band to evidence the Lakes Facility Loan if such Loan is made directly by Great Lakes, which is in the form attached hereto as Exhibit F, together with all amendments, substitutions, restatements, modifications and renewals thereof. "Lakes' Internal Expenses" shall mean Lakes' and Great Lakes' corporate overhead, including without limitation salaries or benefits of any of Lakes's and Great Lakes' officers and employees, whether or not they perform services for the Project or the Enterprise, and any travel or other expenses of Lakes's and Great Lakes' employees. "Lakes Refinancing Guaranty" means a guaranty of, or other credit enhancement furnished by, Great Lakes or Lakes, to the extent that the proceeds of the debt so guaranteed or benefited refinances all or a portion of the Lakes Development Loan or any other obligation of the Band to Great Lakes. "Lakes Security Agreement" shall mean the security agreement dated as of January 25, 2006 and executed by the Band in favor of Great Lakes to secure the Lakes Facility Note, the Lakes Development Note and other obligations as described in Section 9.2.l(j), which agreement is in the form attached hereto as Exhibit G, as the same may be amended, substituted, restated, modified and renewed from time to time. "Lakes Working Capital Advance Note" shall mean the promissory note dated as of January 25, 2006 and executed by the Band to evidence Lakes Working Capital Advances, which is in the form attached hereto as Exhibit H. together with all amendments, substitutions and renewals thereof. "Lakes Working Capital Advances" shall have the meaning defined in the Management Agreement. "Legal Requirements" shall mean any and all present and future judicial, administrative, and tribal rulings or decisions, and any and all present and future federal, state, local and tribal laws, ordinances, rules, regulations, permits, licenses and certificates, in any way applicable to the Band, Lakes, the Gaming Site, the Facility, and the Enterprise, including without limitation, 11 the IGRA, the Compact, and the Band Gaming Ordinance. "Limited Recourse" shall mean that all Loans and all liabilities of the Band under or related to the Agreements and the other Transaction Documents, the Enterprise or the Gaming Regulatory Authority, and any related awards, judgments or decrees, shall be payable solely out of undistributed or future Net Revenues of the Enterprise and shall be a limited recourse obligation of the Band, with no recourse to tribal assets other than such Net Revenues (except (i), as to the Equipment Loan, a security interest in the Furnishings and Equipment purchased with Equipment Loan proceeds, (ii) as to Great Lakes, a security interest in the Furnishings and Equipment to the extent proceeds of the Lakes Facility Loan or the Lakes Development Loan were used to fund acquisition of Furnishings and Equipment, and as otherwise permitted under Section 9.2.1(j) of this Agreement, (iii) if the Commencement Date does not occur, Subsequent Gaming Facility Revenues to the extent provided in this Agreement, (iv) mortgages on the Gaming Site and Non-Gaming Lands prior to their transfer into trust, and (v) after the Commencement Date occurs, funds on deposit in the Dominion Account to the extent provided in Section 9.2.1(j) of the Development Agreement and the Dominion Agreement, or in any other dominion agreement executed by the Band). In no event shall Great Lakes, Lakes or any lender or other claimant have recourse to (a) the physical property of the Facility (other than Furnishings and Equipment subject to the security interest securing the Equipment Loan), (b) Tribal Distributions, (c) assets of the Band purchased with Tribal Distributions, (d) revenues or assets of any other gaming facility owned or operated by the Band, or (e) any other asset of the Band (other than (i) as to Great Lakes, if the Commencement Date does not occur, Subsequent Gaming Facility Revenues to the extent provided in this Agreement, (ii) as to the Lakes Development Note and the Non-Gaming Acquisition Line of Credit, mortgages on the Gaming Site and Non-Gaming Lands prior to their transfer into trust, (iii) funds on deposit in the Dominion Account to the extent provided in the Agreements, the Dominion Agreement and any other dominion agreement executed by the Band, and (iv) such Net Revenues of the Enterprise). "Loans" shall mean the Lakes Development Loan, the Lakes Facility Loan, the Lakes Working Capital Advances, the Minimum Payment Note, the Bank Loan and the Equipment Loan. "Local Agreement" means the Local Agreement dated March 13, 2000 among the Band, the City of New Buffalo and the Township of New Buffalo, as it may be supplemented or amended. "Management Agreement" shall mean the Third Amended and Restated Management Agreement of near or even date, pursuant to which Great Lakes shall manage the Enterprise. "Material Adverse Change" shall mean a material adverse change in Lakes' or Great Lakes' financial condition which materially and substantially impairs Lakes' or Great Lakes' respective ability to perform under the Agreements and the Guaranty. "Material Breach" means a failure of either party to perform any material duty or obligation on its part, if such party fails to (i) cure the specified default within thirty (30) days following receipt of the notice provided under Section 12.3, or (ii) if the default is not capable of being 12 cured within 30 days, commences such cure within 30 days, proceeds diligently to complete the cure, and completes the cure no later than 90 days after receipt of such notice. "Memorandum of Understanding" means the Memorandum of Understanding between the Band and the Secretary of the Interior executed on behalf of the Secretary on January 11, 1999. "Minimum Payments Note" shall mean the promissory note dated as of January 25, 2006 and executed by the Band to evidence Minimum Guaranteed Payment Advances, which is in the form attached hereto as Exhibit I, together with all amendments, substitutions, restatements, modifications and renewals thereof. "Monthly Payments" shall have the meaning described in Section 8.1(c). "National Indian Gaming Commission" or "NIGC" means the commission established pursuant to 25 U.S.C. Section 2704. "Net Revenues" shall have the meaning set forth in the Management Agreement, and shall include "Net Revenues (gaming)" and "Net Revenues (other)" as defined in the Management Agreement. "NIGC Approval" means the written approval by the NIGC of the Management Agreement. "NIGC Disapproval" means a written determination by the NIGC that the Management Agreement should be disapproved under 25 C.F.R. Section 533.6(c), if within 120 days after notification of the NIGC decision Lakes and Great Lakes have not cured the reason for such disapproval. "Non-Gaming Land" means any parcels of land in Michigan or Indiana (other than the Gaming Site) which are (a) identified in a writing executed by the Band as suitable for reservation homelands for the Band in accordance with the Memorandum of Understanding, and (b) meet the requirements of United States of America to be accepted in trust for the Band for Gaming or non-Gaming purposes; provided that the Gaming Site and the Non-Gaming Land shall not exceed 4,700 acres in the aggregate. "Non-Gaming Land Acquisition Line of Credit" shall mean an internal line of credit in favor of the Band established by Great Lakes in the amount of $15,000,000, pursuant to the Third Amended and Restated Non-Gaming Land Acquisition Line of Credit Agreement in the form attached hereto as Exhibit J, to enable the Band to option or acquire Non-Gaming Lands, together with all amendments, substitutions, restatements, modifications and renewals thereof. "252 MM Shortfall" means the difference, if any, between (a) $252,000,000 and (b) the aggregate amount of bank commitments and firm underwriting commitments the Band obtains for the Initial Phase for the Bank Loan and the Equipment Loan, without any guaranty, credit enhancement or interest subsidy from Great Lakes or Lakes for such Loans (other than a Lakes 13 Refinancing Guaranty) and on terms not less favorable to the Band than those set out in Sections 9.2.2, 9.2.3 and 9.2.5 with regard to those Loans. "Operating Expense" has the meaning provided in Section 2 of the Management Agreement. "Plans and Specifications" shall mean the final Plans and Specifications approved for the Facility as described in Section 4.8. "Pokagon Council" shall mean the duly elected governing legislative body of the Band described pursuant to 25 U.S.C. Section 1300j-4(b) or, at the option of the Band, a designed committee or council created pursuant to resolution or ordinance of the Pokagon Council. "Preliminary Development Budget" shall have the meaning described in Section 4.2. "Project" shall have the meaning described in Section 4.1. "Remaining Loan Availability Amount" shall have the meaning described in Section 9.2.1(a)((ii)(A). "Reserve Amount" shall have the meaning described in Section 9.2.1(a)(ii)(A). "Restoration Act" shall mean 25 U.S.C. Sections 1300j et seq. "Restricted Territory" shall mean the States of Ohio, Illinois, Indiana and Michigan. "Road Service Agreement" shall mean that certain Service, Maintenance and Reconstruction of County Roads Agreement dated October 24, 2001 by and among the Band, Great Lakes, Lakes and the Board of County Road Commissioners of Berrien County, Michigan. "Scholarship Program Fee" shall mean the $1,000,000 non-refundable fee paid by Lakes under Section 9.1 of this Agreement. "Signing Fee" shall have the meaning described in Section 8.1(b). "Specific Performance Restriction" shall mean that no arbitrator or court shall have the power to compel, overturn, negate or in any manner modify any Governmental Action; but such restriction shall not prevent an arbitrator from determining that the taking of any Governmental Action or the failure to take any Governmental Action, which is not caused by a breach of Great Lakes or Lakes' obligations under the Agreements or the Guaranty, constitutes a breach of this Agreement by the Band or the impairment of rights of Great Lakes under this Agreement; and which therefore results in liability on the part of the Band for damages in favor of Great Lakes as provided in this Agreement and enforcement of the obligations of the Band to Great Lakes, including any security agreements and collateral instruments, in accordance with their terms. "State" shall refer to the State of Michigan. 14 "Subsequent Gaming Facility Revenues" means gaming revenues from a gaming facility (including the Facility) owned or operated by the Band in Michigan, but only to the following extent: (i) all Class III Gaming Net Revenue and (ii) Class II Gaming Net Revenue, to the extent that such Net Revenue exceeds $1,000,000 per annum. "Term" shall mean the term of this Agreement as described in Section 7.1. "Transaction Documents" shall mean, individually or collectively, as the context may require, this Agreement, the Management Agreement, the Dominion Account Agreement, the Band Mortgages, the Security Agreement, and any other documents, instruments and agreements between Great Lakes and the Band referenced therein, each as heretofore and hereafter amended. "Transition Loan" shall have the meaning described in Section 8.3. "Transition Loan Note" shall mean the promissory note dated as of January 25, 2006 and executed by the Band evidencing the Transition Loan, which is in the form attached hereto as Exhibit K. together with all amendments, substitutions, restatements, modifications and renewals thereof. "Tribal Distributions" shall mean Monthly Distribution Payments, Minimum Guaranteed Monthly Payments and any other payments received by the Band pursuant to or in connection with the Management Agreement. "Tribal UCC Code" shall have the meaning assigned to such term in Section 9.2.5(m) hereof. Section 1.1. Independent Agreement. The objective of the Band and Great Lakes in entering into and performing this Agreement is to provide a legally enforceable procedure and agreement pursuant to which Great Lakes will pay certain fees to the Band and make certain loans to the Band, and whereby the Band and Great Lakes can proceed as far as possible with development of the Facility prior to the approval of the Management Agreement by the NIGC so that the Facility can be opened to the public as soon as possible after the approval of the Management Agreement by the NIGC; and to set forth the rights and obligations of the parties if approval of the Management Agreement by the NIGC does not occur or on the occurrence or non-occurrence of certain other events. This is intended to be a legally enforceable agreement, independent of the Management Agreement, which shall enter into effect when executed and delivered by the parties and be enforceable between the parties regardless of whether or not this Agreement or the Management Agreement is approved by the Chairman of the NIGC. ARTICLE 2. ACQUISITION OF GAMING SITE AND NON-GAMING LANDS Section 2.1. Selection of Gaming Site. The parties have selected the Gaming Site for the Facility. Section 2.2. Purchase of Gaming Site; Funding. The Band, through the Band Designee, has purchased the Gaming Site using funds provided by Lakes or Great Lakes under 15 the Lakes Development Loan. All amounts so advanced by Lakes or Great Lakes, together with option or acquisition payments made by Lakes or Great Lakes prior to such purchase, are Development Expenditures and have been advanced under the Lakes Development Note. 2.2.1. The Band Designee has executed and delivered the Band Designee Guarantee to Great Lakes. The Band Designee has executed and delivered to Great Lakes a Band Designee Mortgage securing that guarantee. Section 2.3. [intentionally omitted] Section 2.4. Assignment of Other Options. Great Lakes shall at the Band's sole and absolute discretion assign or cause to be assigned to the Band or the Band Designee any or all options (other than the Gaming Site Option) it, or any other nominee, Insider or agent of Lakes or Great Lakes may have on, or other interests in, the following properties: (a) all lands acquired by Lakes, Great Lakes or any agent or Insider of Lakes or Great Lakes relating to the development of the Facility and related amenities, and (b) any other land located within the 20-mile radius described in Section 10.6 below, unless the Band consents in writing to their retention of specified options or interests for specified purposes. Any such consent given by the Band shall be irrevocable as to the specified property and purposes. Any such assignments shall be without warranty or other recourse. Option payments or acquisition payments made by Lakes or Great Lakes or Lakes' or Great Lakes' other nominees or agents prior to such assignment shall be advances under the Non-Gaming Land Acquisition Line of Credit and repayable in accordance with its terms. Section 2.5. Selection of Non-Gaming Lands. As soon as reasonably possible after the date of this Agreement, the Pokagon Council shall select the Non-Gaming Lands. The Band shall have sole discretion over the selection and terms of acquisition of the Non-Gaming Lands. Section 2.6. Closing on Non-Gaming Lands; Funding. The Band or the Band Designee shall thereafter proceed to purchase the Non-Gaming Lands. Such purchase shall occur on or immediately following NIGC Approval; as may be required to avoid expiration of options or deadlines set in purchase agreements, as they may be extended with the consent of the owners of the proposed Non-Gaming Lands; or as otherwise agreed by the parties. Great Lakes shall advance funds in such amount or amounts as shall be needed to option and/or acquire the Non-Gaming Lands, including without limitation all related fees and transfer taxes, provided that the total amount Great Lakes shall be required to advance shall not exceed $15,000,000. All amounts so advanced by Great Lakes shall be advanced under the Non-Gaming Land Acquisition Line of Credit, which shall be Limited Recourse, shall bear interest at the Band Interest Rate, and shall be repayable in 60 equal monthly installments of principal and interest commencing on the 15th day of the month after the month in which the Commencement Date occurs. 2.6.1. Funding where Non-Gaming Land Acquired by Band Designee. If the Band opts to have the Band Designee enter into options or purchase agreements for Non-Gaming Lands, or acquire any of the Non-Gaming Lands, the cost of obtaining such options and agreements, and of closing under such options and agreements, including all related fees, 16 commissions and expenses, shall be advanced by Great Lakes to the Band under the Non-Gaming Land Acquisition Line of Credit, through a designee other than Great Lakes, which designee shall be the nominee of and agent for Great Lakes. The Band shall in turn advance or contribute such amounts to or for the benefit of the Band Designee. The Band Designee shall execute and deliver to Great Lakes the Band Designee Guarantee. The Band Designee shall also execute and deliver to Great Lakes' nominee a Band Designee Mortgage securing that guarantee, or an amendment to such mortgage, upon each closing on the Band Designee's acquisition of any such real property. Great Lakes' Designee shall act solely as agent and nominee for Great Lakes in advancing funds under the Non-Gaming Land Acquisition Line of Credit and holding the Band Designee Mortgage, and shall not have any independent capacity; shall be subject to all claims and defenses of the Band and the Band Designee against Great Lakes and Lakes, to the same extent as if the property in question had been acquired by the Band and mortgaged by the Band to Great Lakes or Lakes; and shall be subject to the arbitration, limited waiver of immunity, Limited Recourse and other provisions of Article 14 of the Development Agreement. Great Lakes' designee shall only be entitled to enforce the Band Designee Mortgage against the Band Designee to the extent that, and in the same manner as, Great Lakes would be entitled to enforce a Band Mortgage against the Band. Any Great Lakes' designee shall execute and deliver to the Band an agency agreement reasonably acceptable to the Band and Great Lakes. Section 2.7. Mortgages Prior to Transfer into Trust. Prior to transfer of the Gaming Site or Non-Gaming Lands into trust, amounts advanced under the Lakes Development Note and under the Non-Gaming Land Acquisition Line of Credit shall be secured by a Band Mortgage or Band Designee Mortgage on all such properties. Lakes and Great Lakes shall release such mortgages upon transfer of the respective lands subject to such mortgages into trust, or as otherwise provided in this Agreement. ARTICLE 3. CONSTRUCTION PHASES Section 3.1. Initial Phase. The Facility shall be constructed in two phases, the Initial Phase and the Final Scope of Work. Great Lakes and the Band agree to proceed with the Design Phase and the Construction Phase of the Initial Phase in accordance with Articles 4 and 5, and to equip the Initial Phase of the Facility in accordance with Article 6. The intent of the parties is to take all steps necessary in accordance with Articles 4 and 5 to permit the Band to commence construction of the Initial Phase immediately upon the taking into trust of the Gaming Site and receipt of NIGC Approval, and to complete construction of the Initial Phase, equip the Initial Phase of the Facility and commence Gaming as soon as reasonably practicable thereafter. Section 3.2. Final Scope of Work. No later than six months after the Commencement Date, Great Lakes shall submit to the Band a proposed Preliminary Development Budget, plans and specifications for the Final Scope of Work. Upon approval of such budget, plans and specifications, Great Lakes and the Band shall proceed in accordance with Articles 4, 5 and 6 to design, construct and equip the Facility in accordance with the Final Scope of Work in a timely manner so as to permit opening of the Facility expansion no later than two years after the Commencement Date. Section 3.3. Modification of Final Scope of Work. Notwithstanding any provision of 17 this Article, the Final Scope of Work may be reduced as follows: The Band and Great Lakes may at any time notify the other party that it believes that unanticipated material adverse changes in local gaming market conditions (not including changed economic conditions, whether locally or in the economy generally) make construction of the Facility to the Final Scope of Work not economically feasible. In that event both parties shall negotiate in good faith to determine what adjustments, if any, in the Final Scope of Work are appropriate in light of the changed local gaming market conditions; provided that such adjustments shall not result in a Facility smaller than the Initial Phase. The Band and Great Lakes shall mutually agree upon the final budget, plans and specifications for the Final Scope of Work. Section 3.4. Bank Loans and Equipment Loans. Any references in Articles 4, 5 and 6 to the Bank Loan, the Equipment Loan or the Bank Closing shall refer to such loans or closings as they pertain to the financing of the Initial Phase or the expansion to the Final Scope of Work, as appropriate. ARTICLE 4. DESIGN PHASE Section 4.1. Employment of Architect. Great Lakes shall recommend to the Band a minimum of three duly licensed architects, who shall be familiar with the design of gaming facilities, for interview by the Pokagon Council, and the Band shall select an architect from the group or, if none of the first group is found acceptable to the Band, groups recommended by Great Lakes. The Band shall employ such architect (the "Architect") for the purpose of performing certain services in connection with the design and construction of the Facility, including site development. The Band's agreement with the Architect shall be in the form of a contract (the "Design Agreement") approved by Great Lakes and the Pokagon Council. The scope of the project contemplated by this Agreement (the "Project") shall be stated and established in the Design Agreement and shall be subject to the mutual approval of the parties, but shall incorporate at a minimum the Initial Phase and the Final Scope of Work (subject to the provisions of Section 3.3). The scope of design shall not include, but the design shall facilitate, the possibility of the Band later designing and constructing phased expansions of the hotel, theme retail space, golf course and other amenities. The Design Agreement shall also provide for and establish appropriate design packages ("Design Packages"), each pertaining to a discrete portion or phase of the Project. The Design Agreement shall allow Great Lakes the right and responsibility to supervise, direct, control and administer the duties, activities and functions of the Architect and to efficiently carry out its covenants and obligations under this Agreement; but the Design Agreement shall provide that the Architect will consult closely with the Band and the Band's advisers, and that all design elements shall be subject to review and approval by the Band. Section 4.2. Design and Construction Budgets. Great Lakes, with the assistance and input of the Architect and subject to the approval of the Pokagon Council, shall establish a preliminary Development Budget (the "Preliminary Development Budget") for designing, constructing, furnishing and equipping the Facility and related costs and Development Expenditures. The Preliminary Development Budget, as approved by the Pokagon Council and as it may be amended with the approval of the Pokagon Council, is referred to as the "Approved Development Budget." The Approved Development Budget shall reflect the Initial Phase and, as 18 to the expansion to include the Final Scope of Work, the Final Scope of Work (subject to revision as provided in Section 3.3), as well as any other planned phasing. Great Lakes may, after notice to and approval by the Pokagon Council, revise the aggregate Approved Development Budget from time to time as necessary or appropriate to reflect any unpredicted changes, variables or events or to include additional and unanticipated Project costs. Great Lakes may, at is sole discretion after notice to and approval by the Business Board, reallocate part or all of the amount budgeted with respect to any line item to another line item and to make such other modifications to the Approved Development Budget as Great Lakes deems necessary or appropriate, provided that: (i) the cumulative modifications of the Approved Development Budget for all Design Packages shall not, without Great Lakes' prior approval and the Pokagon Council's prior approval, exceed the aggregate Approved Development Budget, and (ii) any modifications shall not otherwise conflict with the terms of this Agreement. Approved Development Budget adjustments which otherwise vary from the terms of the Agreement, shall, in addition to requiring Great Lakes' approval, require the approval of the Pokagon Council. The Band acknowledges that the Approved Development Budget is intended only to be a reasonable estimate of Project costs, subject, however, to the provisions of Section 5.8 with regard to cost overruns. Section 4.3. Gaming Regulatory Authority Expenses. The Approved Development Budget shall include such amounts as the Band determines, after consultation with Great Lakes, are reasonable and necessary to assure that the GRA is able to fulfill its regulatory role in a manner that does not slow the opening of the Facility; provided that the cost of final preparation and approval of the Gaming Ordinance shall not exceed $20,000. Section 4.4. [intentionally omitted]. Section 4.5. Concept Design and Engineering. Great Lakes, after consultation with the Business Board and the Architect, shall prepare for the review and approval of the Pokagon Council, a statement of requirements for the Facility, if any, including, but not limited to, planned phasing, if any, a program of preliminary objectives, schedule requirements, design criteria, including assumptions regarding HVAC demands, space requirements and relationships, special equipment and site requirements. Section 4.6. Preliminary Program Evaluation. Great Lakes shall prepare for review by the Business Board and approval of the Pokagon Council, a preliminary evaluation of the proposed Project including, but not limited to, planned phasing, if any, schedule, Development Budget requirements, and alternative approaches to Project design and construction. Based upon the agreed-upon schedule, Development Budget requirements and design, the Architect shall prepare schematic design documents consisting of drawings and other documents illustrating the scale and relationship of the Facility and any other Enterprise components, as well as a preliminary estimate of Enterprise costs based upon the proposed area, size and scope of the Enterprise. Section 4.7. Design Development. After review by the Business Board and upon final approval of the schematic design documents by the Pokagon Council and Great Lakes, the Architect shall prepare design development documents consisting of drawings and other 19 documents to fix and describe the size and character of the Project as to architectural, structural, mechanical and electrical systems, materials and such other elements and/or Design Packages as may be appropriate. Further, the Architect shall advise Great Lakes with respect to, and update, any Development Budget estimates. Great Lakes shall submit to the Pokagon Council, for its review and approval, finalized versions of the design development documents prepared by the Architect and agreed to by Great Lakes. Section 4.8. Plans and Specifications. Based upon the approved design development documents and any further adjustments in the scope and quality of the Project or in the Development Budget, the Architect shall prepare for approval by Great Lakes and the Business Board constraction documents consisting of preliminary drawings and specifications setting forth the general requirements for construction of the Project. The Architect shall proceed with completion of detailed plans and specifications (the "Plans and Specifications") as they relate to construction of portions of the Facility in the order such portions are to be completed or in the order required for sequential completion, and shall proceed with completion of all Plans and Specifications as soon as reasonably possible given construction scheduling and the intended progress of Project work. The Architect shall advise the Business Board of any adjustments to previous Development Budget estimates. The Plans and Specifications of the Initial Phase shall be designed to accommodate the addition of further amenities, including without limitation a hotel, expansion of the parking garage, and a bingo/multi-purpose entertainment hall. As portions of the detailed Plans and Specifications are completed for segments of the Project, the Architect shall be required to submit duplicate copies of those portions of the Plans and Specifications to Great Lakes and to the Business Board (for approval prior to release of such documents to prospective bidders for bidding and prior to commencement of construction of such portions) and to the Pokagon Council (for information). Section 4.9. Compliance with Construction Standards, Environmental Laws and Regulations. The Facility shall be designed and constructed so as to adequately protect the environment and the public health and safety and to comply with all requirements of IGRA and the NIGC. The design, construction and maintenance of the Facility shall, except to the extent a particular requirement or requirements may be waived in writing by the Pokagon Council, meet or exceed all reasonable minimum standards pertaining to the Band and national, State and local building codes, fire codes and safety and traffic requirements (but excluding planning, zoning and land use laws, ordinances, regulations and requirements), which would be imposed on the Enterprise by existing State or Federal statutes or regulations which would be applicable if the Facility were located outside of the jurisdictional boundaries of the Band, even though those requirements may not apply within the Band's jurisdictional boundaries. To the extent that the Band has adopted or may in the future adopt more stringent requirements, those requirements shall govern. Nothing in this subsection shall grant to the State or any political subdivision thereof any jurisdiction (including but not limited to, jurisdiction regarding zoning or Gaming Site use) over the Facility or Enterprise or its development, management and operation. Section 4.10. Advance of Funds for Design Work, Long Lead Time Items and Preliminary Site Work. Notwithstanding any lack of approval of the Management Agreement or this Agreement by the NIGC, Great Lakes shall advance such funds under the Lakes Development Loan as are reasonably necessary to proceed prior to Bank Closing with site and 20 facility planning, architectural renderings and plans, including payments to the Architect pursuant to the Design Agreement, engineering and environmental services, Development Soft Costs, working drawings and construction contract bidding documents. Great Lakes has also advanced under the Lakes Development Loan, notwithstanding lack of such approvals, such funds (in the approximate amount of $4,500,000) as were reasonably necessary to order long-lead-time items and to permit the Band to begin preliminary site work. All amounts so advanced by Great Lakes prior to NIGC Approval and Bank Closing shall be a part of the development cost of the Enterprise and shall be advanced under the Lakes Development Note as part of the Lakes Development Loan. ARTICLE 5. CONSTRUCTION PHASE Section 5.1. Selection of Contractor or Construction Manager. Great Lakes shall, in consultation with the Architect and the Business Board, initiate a pre-bid selection process in order to pre-qualify prospective general contractors and/or construction management in connection with the construction of the Facility. Great Lakes shall submit the list of pre-qualified general contractors and/or construction managers to the Pokagon Council, together with Great Lakes' recommendations, for the Pokagon Council's review, comment and approval. Special consideration shall be given in the selection of contractors and/or construction managers to companies with a proven history of effective employment of Native American and local subcontractors. Section 5.2. Vendor Preferences. In entering contracts for the supply of goods and services for the Enterprise, including the selection of contractors and/or construction managers, subcontractors and suppliers, Great Lakes shall comply with the Band's Member Preference Program adopted on August 1, 2001, as it may be amended, the provisions of Section 4 of the Local Agreement, and the Labor Management Cooperation Agreement between Christman Kraus-Anderson, a joint venture, and the Michigan State Building and Construction Trades Council and the Southwest Michigan State Building and Construction Trades Council and Michigan Regional Council of Carpenters dated May 14, 2002, as amended. Great Lakes shall provide written notice to the Band in advance of all such contracting, subcontracting and construction opportunities. The Band reserves the right to require use of union labor on some or all contracts, subject to review with Great Lakes of any related budgetary impact. Section 5.3. Proposal Review. Subsequent to the pre-qualification of prospective contractors and/or construction managers, Great Lakes shall conduct a review of responsive proposals for the construction of the Project, and Great Lakes shall recommend to the Band a well-qualified construction manager, contractor and/or contractors. The recommended contractor, contractors and/or construction manager shall be subject to the approval of the Pokagon Council, shall be properly licensed in the State of Michigan, and shall be capable of furnishing a payment and performance bond satisfactory to the Business Board to cover the construction for which the contractor, contractors and/or construction manager may be retained. Section 5.4. Contracts. The Band shall enter into a construction management agreement and/or construction contract or contracts (the "Construction Documents") with the parties selected and approved in the form negotiated by Great Lakes and approved by the 21 Business Board for each Construction Document. The Construction Documents shall provide that work shall begin only after NIGC Approval, and the Construction Documents may provide that they shall be canceled by either party if NIGC Approval has not occurred by a specified fixed calendar date. The selected contractor, construction manager and/or other contracting parties shall be compensated solely from the proceeds of the Lakes Development Loan and the Bank Loan and/or the Lakes Facility Loan, if applicable, subject to, and in accordance with the terms, conditions and provisions of the Construction Documents and the respective Loan Agreements. Section 5.5. Construction Document Provisions. The Construction Documents shall (i) require the successful construction manager or general contractor and all contractors to be responsible for providing all materials, equipment and labor necessary to construct and equip the Project as necessary including site development; (ii) shall include appropriate provisions assuring non-payment of Michigan sales and use tax for goods and materials in the Project (to the extent said exemption is available for the Project); and (iii) require said construction manager or general contractor and all contractors to construct the Project in accordance with the Plans and Specifications, including any changes or modifications thereto approved by the Business Board. The Band agrees to indemnify Great Lakes against loss or liability caused by any written direction by the Pokagon Council not to collect or remit Michigan sales tax. The Construction Documents will provide for insurance conforming to the applicable insurance requirements of the Management Agreement, appropriate lien waivers, and for construction schedules by which milestones, progress payments and late penalties, if any, may be calculated. Section 5.6. Construction Administration. The Construction Documents shall provide that Great Lakes shall be responsible for all construction administration during the construction phase of the Project. Great Lakes shall act as the Band's designated representative and shall have full power and complete authority to act on behalf of the Band in connection with the Construction Documents. To the extent allowed by the Design Agreement and the Construction Documents, Great Lakes shall have control and charge of any persons performing work on the Project site, and shall interpret and decide on matters concerning the performance of any requirements of the Construction Documents. Great Lakes shall have the authority to reject work which does not conform to the Construction Documents. Great Lakes may conduct inspections to determine the date or dates of substantial completion and the Completion Date. Great Lakes shall observe and evaluate or authorize the observation and evaluation of Project work performed, review or authorize review of applications for payment for submission to the Band and review or authorize review and certification of the amounts due the contractors and/or construction managers. Section 5.7. Construction Commencement and Completion. The Construction Documents shall contain such provisions for the protection of the Band and Great Lakes as the Band and Great Lakes shall deem appropriate; shall provide that the construction of the Initial Phase of the Project shall commence on NIGC Approval, following and subject to the granting of all approvals necessary to commence construction; and shall also provide that any contractor shall exert its best efforts to complete construction within such time as the Band and Great Lakes agree following the commencement of construction. If the Band decides to proceed with an expansion to the Final Scope of Work, Great Lakes and the Band shall proceed in good faith with construction of a permanent Facility in accordance with the Final Scope of Work, as modified 22 under Section 3.3, with such construction to be completed no later than two years after the Commencement Date unless otherwise agreed by the Band, but subject to any delay caused by the Band's approval process. All contractors shall, at a minimum, warrant their respective portions of the work to be performed to be free of defects for at least one year after the Completion Date of the Initial Phase and Final Scope of Work, respectively. Section 5.8. Determination of Approved Construction Costs: Cost Overruns. Promptly upon the Band's execution of the Construction Documents, the Architect shall submit a final estimate of Construction Costs, which estimate shall be subject to the reasonable approval of Great Lakes and the Pokagon Council. This estimate of Construction Costs, as so approved, is referred to as "Approved Construction Costs." Great Lakes shall pay, without repayment from the Enterprise or recourse to the Band, Construction Costs of the Initial Phase to the extent they exceed the lesser of (a) such Approved Construction Costs of the Initial Phase (including the approved contingency reserve), as such costs may change because of change orders approved by the Band and Great Lakes or amendments to the Approved Development Budget approved by the Band and Great Lakes, or (b) $298,000,000, or such other amount as the Pokagon Council and Great Lakes may agree; in each case except insofar as such overruns are caused by Force Majeure or by acts or omissions of the Band. Construction Costs do not include amounts advanced under the Non-Gaming Acquisition Line of Credit or the Transition Loan, and Great Lakes' liability for cost overruns under this subsection shall be computed without regard to any amounts advanced by Lakes or Great Lakes under such line of credit or loan. ARTICLE 6. FURNISHINGS AND EQUIPMENT Section 6.1. Selection of Furnishings and Equipment. Great Lakes shall submit to the Business Board, for its review and approval, the specifications for Furnishings and Equipment. Thereafter, Great Lakes shall select and procure vendors for purchase by the Band of Furnishings and Equipment required to operate the Enterprise in conformity with such specifications. The cost of Furnishings and Equipment shall be financed through the Equipment Loan. Alternatively, in the sole discretion of the Band, Great Lakes may arrange for the procurement of Furnishings and Equipment on lease terms consistent with the terms provided below as to the Equipment Loan, with such changes as may be approved by the Business Board. Any commitments for the procurement of Furnishings and Equipment shall, however, become binding on the Band only upon later of (a) NIGC Approval or (b) the receipt by Band of a commitment for the Equipment Loan consistent with the terms of this Agreement (or on such modified terms as shall be agreed to by the Band). ARTICLE 7. TERM Section 7.1. Term. This Agreement shall enter into and remain in full force and effect from the date of execution hereof until, unless earlier terminated in accordance with its terms, the later of: (a) seven (7) years from the Commencement Date, provided that if the Term of the Management Agreement is reduced to five (5) years pursuant to Section 3.2 23 of the Management Agreement, the term of this Agreement shall be five (5) years plus the period of development and construction, or such earlier date as the Management Agreement shall have been terminated in accordance with its terms; (b) the date on which all obligations owed to Great Lakes by the Band pursuant to this Agreement and any related notes have been satisfied in full or otherwise discharged. ARTICLE 8. PAYMENTS AND COMMITMENTS BY GREAT LAKES BEFORE APPROVAL OF MANAGEMENT AGREEMENT Section 8.1. Fees Payable By Great Lakes to the Band. Great Lakes will pay the following fees and advances to the Band: (a) Initial Fee. Lakes has paid the Band a non-refundable fee of $150,000 on execution of Term Sheet, the receipt of which is hereby acknowledged by the Band. Such payment shall be for the account of Great Lakes. (b) Signing Fee. Lakes has paid the Band a non-refundable signing fee of $1,000,000 (the "Signing Fee"). The Band acknowledges receipt of the Signing Fee, which shall be for the account of Great Lakes. Use and disbursement of Signing Fee monies shall be at the sole discretion of the Band, and Great Lakes shall have no responsibility for such funds after receipt thereof by the Band. (c) Monthly Payments. Great Lakes advanced $125,000 to the Band (the "Monthly Payments") on or about August 31, 1999, and shall thereafter advance on the 15th day of each month, beginning on September 15, 1999, and continuing until the date on which one of the following, whichever is earlier, has occurred: (i) the Commencement Date; or (ii) this Agreement and the Management Agreement have been terminated in accordance with their terms, and all related payments have been made; or (iii) August 26, 2007. Use and disbursement of the Monthly Payments, once received by the Band, shall be at the sole discretion of the Band, and Great Lakes shall have no responsibility for such funds after receipt thereof by the Band. All Monthly Payments shall constitute advances under the Transition Loan pursuant to Section 8.3 of this Agreement and shall be repayable as provided in that section. 24 Section 8.2. Deposit into the Account. Upon execution of the Development Agreement, Lakes deposited $20,900,000 into the Account, subject to the Security Agreement and the Control Agreement. Such deposit shall be for the account of Great Lakes. Great Lakes shall also deposit such further sums from time to time as shall be necessary to maintain a minimum balance in the Account of at least $2,000,000 at all times prior to the Commencement Date; provided that Great Lakes shall not be required to make aggregate deposits that exceed the total amount of fees, loans and other payments to be made by it to or for the account of the Band under this Agreement. The Account shall: (a) serve as collateral for liquidated or other damages payable to the Band as provided in the Agreements; and (b) serve as a funding mechanism as provided in the Control Agreement, at Great Lakes' option, for Great Lakes's obligation to make payments to the Band (other than the Scholarship Program Fee) and to make advances under the Lakes Development Loan and the Lakes Facility Loan. Great Lakes agrees to execute and deliver the Security Agreement, the Control Agreement, and such financing statements and other instruments as the Band requests to perfect this security interest. Nothing in this section shall limit Great Lakes's obligations to make payments as required under this Agreement or limit the Band's remedies in the event of Great Lakes's default. Funds in the Account shall be invested in such manner as Great Lakes reasonably deems prudent, provided that the investment vehicles are liquid and do not include equities, swaps, derivatives, commodities, or speculative instruments. Great Lakes shall inform the Band of the nature and terms of the financial instruments in which the escrowed funds are invested. Income from the Account shall be payable to Great Lakes prior to a Lakes Event of Default. After a Lakes Event of Default, income shall be payable to the Band to the extent needed to fund damages payable to the Band. Firstar shall be entitled to reasonable compensation acceptable to the Band and Great Lakes and to reimbursement of expenses, all of which shall be payable from the Account prior to a Lakes Event of Default and, after such an Event of Default, by Great Lakes. Payments into the Account shall not be deemed advances to the Band for purposes of accrual of interest, and interest shall only accrue as to funds advanced by Great Lakes through the Account upon disbursement from the Account. Section 8.3. Transition Loan. Great Lakes shall make a loan to the Band for the purposes and as set forth in clause (c) of Section 8.1, upon the terms set forth in the form of Transition Loan Note (the "Transition Loan"). Each advance of funds to the Band by Great Lakes as part of the Transition Loan shall be evidenced by the Transition Loan Note, duly authorized and executed by the Band. All amounts advanced under the Transition Loan shall be repayable to Great Lakes as Limited Recourse obligations of the Band; shall not accrue interest for the first two years after execution of the Management Agreement; shall, after the expiration of that two year period, bear interest at the Band Interest Rate, as defined below; and shall be payable monthly in arrears, beginning on the 15th day of the month after the Commencement Date, in 60 equal monthly payments of principal and interest. If the Bank Closing does not occur, interest shall accrue on amounts advanced under the Transition Loan at Wall Street Journal prime plus 1%, not to exceed 10%. 25 Section 8.4. Advances on Lakes Development Loan. Great Lakes will provide the following funds to the Band prior to NIGC Approval and the Bank Closing as advances on the Lakes Development Loan, to be repaid with interest in accordance with the terms provided in Section 9.2.1: (a) Gaming Site Acquisition Funds. Lakes or Great Lakes have advanced funds to permit the Band to acquire the Gaming Site, pursuant to Section 2.2. (b) Site Planning, Design Development and other Preliminary Expenditures. Great Lakes shall advance funds reasonably necessary for the work described in Articles 3, 4 and 5 of this Agreement to be performed prior to NIGC Approval and the Bank Closing, pursuant to those Articles. (c) Advances to the Band for Gaming Ordinance. In order to enable the Band to fulfill its covenant set forth in Section 11.2(a) below to timely adopt a Gaming Ordinance and regulations (the "Gaming Ordinance"), Great Lakes shall advance to the Band prior to NIGC Approval the reasonable cost of preparation and approval of the Gaming Ordinance, not to exceed $20,000. (d) Advances to the Band for Development Soft Costs. Great Lakes shall advance funds reasonably necessary for Development Soft Costs. Such advances shall be in accordance with a budget to be prepared by the Band and submitted to Great Lakes for its reasonable approval, as such budget may be modified from time to time. Great Lakes and the Band shall consult periodically with regard to Development Soft Costs. Section 8.5. Non-Gaming Land Acquisition Line of Credit. Great Lakes will provide advances to the Band under the Non-Gaming Land Acquisition Line of Credit but prior to the Commencement Date as provided in Sections 2.6 and 2.6.1, upon the terms set forth in the form of Non-Gaming Land Acquisition Line of Credit Agreement attached hereto as Exhibit J (the "Non-Gaming Land Acquisition Line of Credit"). Each advance of funds to the Band by Great Lakes as part of the Non-Gaming Land Acquisition Line of Credit shall be evidenced by such Line of Credit, duly authorized and executed by the Band and setting forth the applicable terms of this Agreement. All such advances shall be repaid with interest on the same terms as provided in Article 9 with regard to the Lakes Development Loan, except that funds advanced under the Non-Gaming Land Acquisition Line of Credit shall at Great Lakes' request, prior to transfer of land into trust, be guaranteed by the Band Designee and secured by mortgages in favor of Great Lakes on any Non-Gaming Lands acquired by the Band or the Band Designee. The Non-Gaming Land Acquisition Line of Credit shall otherwise be Limited Recourse. All land and options acquired through the Non-Gaming Land Acquisition Line of Credit shall be acquired in the name of the Band or the Band Designee. 26 ARTICLE 9. PAYMENTS AND COMMITMENTS BY GREAT LAKES AFTER APPROVAL OF MANAGEMENT AGREEMENT Section 9.1. Scholarship Program Fee. Upon NIGC Approval and transfer of the Gaming Site into trust eligible for Gaming purposes, Great Lakes will pay the Band a non-refundable fee of $1,000,000 (the "Scholarship Program Fee") into an account established and controlled by the Band. The ultimate use and disbursement of these funds shall be at the sole discretion of the Band, and Great Lakes shall have no responsibility for such funds after payment to the Band. Section 9.2. Development and Equipment Loans. Great Lakes shall make available to the Band the Lakes Development Loan and, upon NIGC Approval and transfer of the Gaming Site into trust for the Band, shall assist the Band in obtaining the Bank Loan and the Equipment Loan; and, to the extent required under Section 9.2.4, shall provide the Lakes Facility Loan. Such Loans shall be in an aggregate amount sufficient to, and shall be used to, pay for all Development Expenditures for both the Initial Phase and the Final Scope of Work, provided that unless otherwise agreed to by the Band, (a) the aggregate amount of Development Expenditures for the Initial Phase shall not exceed $298,000,000, (b) the aggregate amount of additional Development Expenditures for the Final Scope of Work shall not exceed an additional $44,000,000, and (c) the Bank Loan and Equipment Loan to fund the Final Scope of Work need not be obtained at the same time as such Loans are obtained for the Initial Phase. The Loans shall be in the following amounts and on the following terms, unless otherwise agreed by the Band: 9.2.1. Lakes Development Loan. (a) Amount: $46,000,000 for the Initial Phase, comprised of (i) up to $11,000,000 for Gaming Site Acquisition Advances and (ii) the balance for Development Expenditures other than acquisition of the Gaming Site. Great Lakes shall not be required to provide additional funding or credit enhancements for the Initial Phase except as provided under Sections 5.8 and 9.2.4, and shall not be required to provide any funding for the Final Scope of Work. (i) All amounts paid by Great Lakes or Lakes under or in relation to any guarantees or credit enhancements provided by Great Lakes or Lakes at the request of the Band with respect to any Construction Documents ("Construction Guaranty Payments"), shall be deemed advances under the Lakes Development Loan and to the extent required the maximum cap of the Lakes Development Loan shall be increased by such amounts paid; provided that Great Lakes and Lakes agree that they shall not make any Construction Guarantee Payments unless (A) the obligee or beneficiary thereunder has demanded such payment, (B) Great Lakes or Lakes has provided the Band with written notice of such demand, and (C) the Band has not paid the amount demanded within thirty (30) 27 days after the Band's receipt of such notice. (ii) Great Lakes shall prior to the Commencement Date, at the request of the Band, provide guarantees, credit enhancements or interest subsidies for any Construction Documents and/or with respect to any Loans and, as to Loans, post cash collateral therefor, subject to the following terms (in addition to any other applicable terms set forth in this Agreement): (iii) Reserves ("Guaranty Reserves") shall, unless waived in writing by the Band and Great Lakes, be established under the Lakes Development Loan at the time that Great Lakes or Lakes provides such guarantees, credit enhancements or interest subsidies, which reserves shall be in an amount (the "Reserve Amount") equal to the lesser of (x) the principal amounts of the commitments under any Construction Documents or Loans, as applicable, for which Great Lakes or Lakes provided such guaranties, credit enhancements or interest subsidies, or (y) any contractual limitation or cap on Lakes or Great Lakes' liability under such guaranties or other credit enhancements, or the present value of any such interest subsidy as of the closing on the Bank Loan or the Equipment Loan, as applicable; PROVIDED HOWEVER, that (I) the amount of any Guaranty Reserve shall be reduced by the amount of cash collateral posted by Lakes or Great Lakes to secure any guaranty, credit enhancement or interest subsidy, the amount advanced by Lakes or Great Lakes for such cash collateral being an advance under the Lakes Development Loan, (II) the amount of any Guaranty Reserve and the amount of any Reserve Amount shall be reduced to the extent that the liability of Lakes or Great Lakes under the guaranty, credit enhancement or interest subsidy for which the Guaranty Reserve is established decreases and is not, under the terms of the guaranteed or benefited obligation, subject to increase, and shall be terminated when such guaranty, credit enhancement or interest subsidy is released or terminated; and (III) except with the prior written consent of Great Lakes or Lakes, as applicable, or as otherwise provided under Section 9.2.4, neither the amount of the guaranty, credit enhancement or interest subsidy nor the related Guaranty Reserve shall exceed the then Remaining Loan Availability Amount. The term "Remaining Loan Availability Amount" shall mean as of any date in question, the amount equal to $46,000,000, less all then outstanding advances on the Lakes Development Loan, and less the aggregate Reserve Amount as of such date for all previously granted guaranties, credit enhancements or interest subsidies (regardless of whether a Guaranty Reserve was in fact established therefor); and A. Except with the prior consent of Great Lakes, at no time shall Lakes or Great Lakes be obligated to make advances under the Lakes Development Loan to the extent that the same would cause the sum of outstanding advances under the Lakes 28 Development Loan plus the outstanding Reserve Amount as of the date of such advance for all guaranties, credit enhancements or interest subsidies previously granted by Lakes and Great Lakes (regardless of whether a Guaranty Reserve was in fact established therefor) to exceed $46,000,000 unless such advance will have the effect of reducing dollar for dollar the outstanding obligation of Lakes or Great Lakes under any applicable guaranty, credit enhancement or interest subsidy. B. Great Lakes, Lakes and the Band agree that no Guaranty Reserves have been established as of the date hereof and that no guaranty, credit enhancement or interest subsidy of Lakes or Great Lakes is currently outstanding (other than under the Road Service Agreement, which the parties intend to terminate and shall not require any Guaranty Reserve). C. Any funds advanced by Lakes or Great Lakes under the Lakes Development Loan or the Lakes Facility Loan to provide cash collateral for a guarantee, credit enhancement or interest subsidy of Lakes or Great Lakes shall, if released on or prior to the Commencement Date, be used to pay Development Expenditures and, if released after the Commencement Date, shall be used at the Band's option to pay Development Expenditures or to repay Loans. (b) Term: Seven (7) year term, plus the period of development and construction; provided that if the Term of the Management Agreement is reduced to five (5) years pursuant to Section 3.2 of the Management Agreement, the term of the Lakes Development Loan shall be five (5) years plus the period of development and construction. (c) Interest and amortization. (i) Interest at the Band Interest Rate shall accrue from date of advance until the Commencement Date; thereafter the Lakes Development Loan shall be payable as follows: monthly in arrears, beginning on the 15th day of the month after the month in which the Commencement Date occurs, in equal monthly payments of principal and interest for (a), if the term of the Lakes Development Loan is seven (7) years, the successive 84 months of the term; or (b) if the term of the Lakes Development Loan is five (5) years, in the successive 60 months of the term. (ii) If the Bank Closing does not occur, interest shall accrue on amounts advanced under the Lakes Development Loan at Wall Street Journal prime plus 1%, not to exceed 10%. (d) Repayment of the Lakes Development Loan shall be subordinated 29 to the Bank Loan, the Equipment Loan, as well as to any other third-party loans or equipment leases necessary for the construction and equipping of the Facility as contemplated by Articles Three and Four of this Agreement. Great Lakes agrees to execute and deliver subordination agreements evidencing such subordination in form reasonably acceptable to the Bank Lender, the Equipment Lender, or such other third-party lender or equipment lessor. (e) The Band shall be entitled to draw on the Lakes Development Loan prior to NIGC Approval as provided in Sections 4.10 and 8.4, and thereafter the balance of the Lakes Development Loan upon NIGC Approval. Advances under the Lakes Development Loan may be made through the Account or otherwise at the written request of the Band. (f) Principal may be prepaid at any time without penalty. (g) Each advance of funds to the Band by Great Lakes under the Lakes Development Loan shall be made under a promissory note in the form of Lakes Development Note, duly authorized and executed by the Band. (h) All disbursements under the Lakes Development Loan shall be made (i) through the Enterprise Account and the Disbursement Account or (ii) pursuant to the Band's written direction to Great Lakes, unless otherwise agreed by Great Lakes and the Band in writing, and shall be on account of Development Expenditures in accordance with the Approved Development Budget, unless otherwise approved by the Business Board. Great Lakes shall provide the Band with a monthly accounting of all such disbursements, which accounting shall include a certification by Great Lakes that the disbursements shown on the accounting were for Development Expenditures in accordance with the Approved Development Budget, were for Development Soft Costs, or were otherwise approved by an attached vote of the Business Board. (i) (intentionally omitted) (j) The obligations of the Band to Great Lakes under the Lakes Development Note, the Lakes Facility Note, the Lakes Working Capital Advance Note, the Minimum Payments Note (subject to the limitations set forth in Section 5.6.2 of the Management Agreement), the Non-Gaming Land Acquisition Line of Credit and the Transition Loan, and under any other Transaction Documents and, under the Management Agreement, for Management Fees, shall be secured by a security interest in (I) the Dominion Account pursuant to the Dominion Agreement, (II) pursuant to the Lakes Security Agreement, Furnishings and Equipment to the extent that the proceeds of the Lakes Facility Note or the Lakes Development Note are used to acquire Furnishings and Equipment (the "Lakes FF&E "); and (III) pursuant to the Lakes Security Agreement, Furnishings and Equipment (or the Band's leasehold interest therein) that is not financed by Great Lakes through the Lakes Facility Note (the "Other FF&E"). Great Lake's security interest in the Dominion Account and Furnishings and Equipment shall be subject 30 to the following terms and conditions: (iii) Great Lakes may block payment to the Band of Monthly Distribution Payments and may foreclose on its security interest on the Dominion Account and on its security interest in any Furnishings and Equipment only on the occurrence of a Band Event of Default under the Development Agreement or the Management Agreement, if such default is not cured within any applicable cure period and, if arbitration is timely demanded, after entry of an arbitrator's award finding a Band Event of Default has occurred. Great Lakes must comply with applicable law with regard to taking possession of, and foreclosure on, Furnishings and Equipment, including without limitation any legal requirements relating to the possession or sale of gaming equipment. (iv) Great Lake's security interest in the Dominion Account, the Lakes FF&E, the Other FF&E and any other collateral of Great Lakes at or related to the Facility shall be senior to all other liens thereon, except that it shall be subordinate to any security interests granted to the Bank Lender and the Equipment Lender, and, as to the Dominion Account, shall be further subject to payment of the claims and expenses described in Section 4.19.6 of the Management Agreement. Great Lakes shall promptly execute and deliver subordination agreements pertaining to the Dominion Agreement, the Lakes FF&E, the Other FF&E and any other collateral of Great Lakes at or related to the Facility with regard to any Bank Lender or Equipment Lender, which agreements shall contain provisions reasonably acceptable to Great Lakes and such lenders. (v) The Dominion Agreement and the Lakes Security Agreement shall be amended at the Band's request (i) to conform with requests of the Bank Lender and the Equipment Lender, to the extent needed to obtain the Bank Loan or the Equipment Loan, and (ii) to the extent reasonably necessary to provide for subordinate security interests for loans for the benefit of the Enterprise as provided in Section 9.2.5(b) below. (vi) The Dominion Agreement shall terminate as to Great Lakes, without prejudice to the Bank Lender, the Equipment Lender, or any other party that may have joined in, or be benefited by, those agreements, and Great Lake's security interest in the Dominion Account shall be discharged, and Great Lakes shall discharge and terminate its security interest in the Furnishings and Equipment, on termination of this Agreement pursuant to Sections 13.1, 13.2 (except as otherwise provided in Section 14.4 hereof), 13.4 (prior to the Commencement Date), 13.5, or 13.6 hereof, or of the Management Agreement pursuant to Sections 12.1, 12.2 (except as otherwise provided in Section 13.4 thereof), 12.4 (prior to the Commencement Date), 12.5, 12.6 (prior to the Commencement Date) or 12.7 thereof. On a termination under Sections 13.4 (after the Commencement Date) or 13.7 of the Development Agreement or Sections 12.4 (after the 31 Commencement Date), 12.6 or 12.8 of the Management Agreement after the Commencement Date, such security interest shall remain in effect until amounts due Great Lakes have been paid in accordance with the Agreements, and shall thereafter be promptly discharged; provided that (A) Great Lakes' right to payment and security interest in the Dominion Account after such termination under or pursuant to the Agreements shall continue to be subordinate to payment of claims and expenses described in Section 4.19.6 of the Management Agreement, and shall in addition be subordinate to (I) fees or other amounts due to any manager of the Enterprise, (II) any amounts due to lenders or lessors under loans for the benefit of the Enterprise, whether existing as of the termination or made thereafter, including without limitation the Bank Loan and the Equipment Loan, and (III) absent an Event of Default (as defined in the Transaction Documents, excluding the Development Agreement and the Management Agreement) under the obligations of the Band to Great Lakes (other than obligations under the Agreements which do not expressly survive their termination) which is not timely cured, Monthly Distribution Payments to the Band; (B) Great Lakes agrees to permit the prompt release and transfer of proceeds from the Dominion Account to or for the account of the Band to the extent necessary to pay such senior claims in accordance with their terms, and to pay such Monthly Distribution Payments, and Great Lakes agrees to cooperate with the Band and any replacement manager in that regard to maintain the going concern value of the Enterprise; and (C) the Band and any replacement manager may make deposits in, and withdrawals from, the Enterprise Accounts and Disbursement Accounts, after funds are transferred from the Dominion Account into such accounts, free of any interest of Great Lakes. Great Lakes shall promptly execute and deliver subordination agreements pertaining to the Dominion Agreement and the Lakes Security Agreement with regard to any such manager, lender or lessor, which agreements shall contain provisions reasonably acceptable to Great Lakes and the manager, lenders or lessors. (vii) Nothing in the Dominion Agreement or the Lakes Security Agreement shall alter the damages due Great Lakes (A) on a Band Event of Default, which shall continue to be controlled by Article 14 of this Agreement and Article 13 of the Management Agreement, and the amount which Great Lakes is entitled to obtain on foreclosure on the Dominion Account or the Lakes Security Agreement shall be controlled by those Articles; or (B) under any other provision of the Agreements or any related agreement. Upon payment in full of all amounts due Great Lakes under the Agreements, the Lakes Development Note, the Lakes Working Capital Advance Note, the Lakes Facility Note, the Non-Gaming Acquisition Line of Credit and the Transition Loan, Great Lakes shall promptly terminate the Dominion Agreement and the Lakes Security Agreement and release any related security interests. (viii) The Band shall execute and deliver the Lakes Security 32 Agreement on the date of this Agreement and the Dominion Account Agreement (together with any additional resolutions of the Band and/or the Pokagon Council as may be legally required to authorize the Band to execute, deliver and perform such Agreement) on or before the Commencement Date. 9.2.2. Bank Loan. (a) Amount: (i) For the Initial Phase, an amount of approximately $193,000,000 which amount may be increased or decreased by agreement of Great Lakes and the Band and which, when added to the Lakes Development Loan and the Equipment Loan, will finance all Development Expenditures for the Initial Phase, plus, at Great Lakes' discretion, such amount to refinance all or portions of the Lakes Development Loan as may be permitted under the definition of "Bank Loan Agreement;" (ii) For the expansion of the Facility to the Final Scope of Work, an additional amount of approximately $38,000,000, which amount may be increased or decreased by agreement of Great Lakes and the Band and which will, when added to the additional Equipment Loan for the Final Scope of Work, finance all Development Expenditures associated with such expansion. (b) Term: For the Initial Phase and Final Scope of Work: As to each not less than five (5) years, and amortized (including both principal payments and payments into a sinking fund) no more rapidly than in equal monthly installments of principal and interest; or, if the Band is unable to obtain the Bank Loan on such terms, with a term reasonably acceptable to the Band and Great Lakes. (c) Guaranty: Great Lakes shall not be required to provide its guarantee of the Bank Loan or any other credit enhancements, except as provided in Section 9.2.4 with regard to the Lakes Facility Loan. (d) Assignment: The loan commitment or undertaking shall not be assignable by either Great Lakes or the Band without the written consent of both parties. (e) (intentionally omitted) (f) Assistance: Great Lakes shall proceed promptly and with due diligence after NIGC Approval to assist the Band in obtaining a bank commitment or firm underwriting commitment for the Bank Loan as provided in Section 9.2.5(g), and in closing on the Bank Loan promptly after obtaining such commitment. 9.2.3. Equipment Loan. 33 (a) The Equipment Loan for the Initial Phase shall be in an amount of approximately $59,000,000, which amount may be increased or decreased by agreement of Great Lakes and the Band. The Equipment Loan for the expansion to the Final Scope of Work shall be an additional amount of approximately $6,000,000, necessary to equip the Facility to the Final Scope of Work, which amount may be increased or decreased by agreement of Great Lakes and the Band. Interest shall accrue on the amount advanced for the Initial Phase until the Commencement Date; thereafter such advance shall be repayable monthly in arrears, beginning on the 15th day of the month after the month in which the Commencement Date occurs, in equal monthly payments of principal and interest for the successive 48 months of the term. The amount advanced to equip the expansion to the Final Scope of Work shall be repaid in equal monthly payments of principal and interest for the successive 48 months after Completion Date of such expansion, beginning 15 days after such Completion Date; or on such other terms as the Band may reasonably approve. (b) Security: Purchase money security interest in Furnishings and Equipment purchased with the loan proceeds. (c) Guaranty: Great Lakes shall not be required to provide its guarantee or any other credit enhancement of the Equipment Loan, except as provided in Section 9.2.4 with regard to the Lakes Facility Loan. (d) Assignment: The loan commitment shall not be assignable by either Great Lakes or the Band without the written consent of both parties. (e) (intentionally omitted) (f) Lease: At the Band's option the Equipment Loan may be structured into an equivalent equipment lease. (g) Assistance: Great Lakes shall proceed promptly and with due diligence after NIGC Approval to assist the Band in obtaining a commitment for the Equipment Loan as provided in Section 9.2.5(f), and in closing on the Equipment Loan promptly after obtaining such commitment. 9.2.4. Lakes Facility Loan, (a) Loan Amount: (i) If the Band, with Great Lakes' assistance, is unable to obtain, no later than the earlier of (A) 90 days after the later of NIGC Approval or transfer of the Gaming Site into trust, or (B) after receiving NIGC Approval and transfer of the Gaming Site into trust, the date by which additional funding is needed to keep development and construction of the Initial Phase on schedule without slowdown or abatement (unless otherwise agreed by the Band), a bank commitment or firm underwriting 34 commitment to provide the Bank Loan and the Equipment Loan on the terms set forth in this Agreement at an interest rate equal to or less than 13% per annum in an aggregate amount of not less than $252,000,000 for the Initial Phase, Great Lakes agrees that it will, at its option but to the extent needed to fund the 252MM Shortfall, (I) loan the Band the difference between $252,000,000 and the aggregate amount of such commitments which the Band is able to obtain on such terms, but not more than $54,000,000, at a 13% interest rate and otherwise on the same terms and conditions as provided in this Agreement with regard to the Lakes Development Loan; (II) provide its guaranty or other credit enhancement to a third party providing such a loan on such terms; or (III) subsidize the interest payable by the Band on such a loan from a third party on such terms, to the extent it exceeds 13%. (ii) To the extent that Great Lakes is unable to obtain third party financing for the 252MM Shortfall on such terms through guarantees, credit enhancements or interest subsidies, it shall provide a direct loan to the Band on such terms. (iii) In no event shall the loan which Great Lakes is obligated to make, obtain or subsidize under this subsection exceed $54,000,000. (iv) If the Lakes Facility Loan is made by a third party lender through guarantees, credit enhancements or interest subsidies of Great Lakes, all references to Great Lakes in this Agreement relating to the Lakes Facility Loan and the Lakes Facility Note shall be deemed to include references to such third-party lender for the purposes of such loan and such note. (b) Term: The Lakes Facility Loan shall have the same term as the Lakes Development Loan. (c) Interest and amortization: Interest shall accrue at the rate of 13%. The amortization of the Lakes Facility Loan shall be the same as on the Lakes Development Loan. (d) Subordination: Repayment of the Lakes Facility Loan shall be subordinated to the same extent as the Lakes Development Loan. Great Lakes agrees to execute and deliver subordination agreements evidencing such subordination in form reasonably acceptable to Great Lakes and the Bank Lender, the Equipment Lender, or, as to other third-party lenders or equipment lessors, as required by this Agreement. (e) Advances: Advances under the Lakes Facility Loan may be made through the Account or otherwise at the written request of the Band. (f) Prepayment: Principal may be prepaid at any time without 35 penalty. (g) Promissory Note: Each advance of funds to the Band by Great Lakes under the Lakes Facility Loan shall be made under a promissory note in the form of Lakes Facility Note, duly authorized and executed by the Band. (h) Disbursements: All disbursements under the Lakes Facility Loan shall be made (A) through the Enterprise Account and the Disbursement Account or (B) pursuant to the Band's written direction to Great Lakes, unless otherwise agreed by Great Lakes and the Band in writing, and shall be on account of Development Expenditures in accordance with the Approved Development Budget, unless otherwise approved by the Business Board. (i) Security: The obligations of the Band to Great Lakes under the Lakes Facility Loan shall be secured to the extent provided in Section 9.2.l(j). 9.2.5. Terms Applicable to all Loans. (a) (intentionally omitted) (b) Limited Recourse: Loan repayments shall be solely out of revenues of the Enterprise and shall be a Limited Recourse obligation of the Band. The Band agrees not to encumber any of the assets of the Facility or the Enterprise without the written consent of Great Lakes and the holder of the Bank Loan, which consent will not be unreasonably withheld; except that the Band shall have the right without the consent of Great Lakes and such holder to grant subordinate security interests in Enterprise revenues, as well as first priority purchase money security interests in any Enterprise assets purchased with proceeds of such loan (other than Furnishings and Equipment purchased with the proceeds of the Equipment Loan, the Lakes Development Loan or the Lakes Facility Loan), but in each case only if such security interests are granted to secure loans made for the benefit of the Enterprise. The Band shall not lease the Facility or grant a leasehold mortgage on the Facility without Great Lakes' consent. (c) Limited Waiver. The Band shall enter into a limited, transactional waiver of sovereign immunity and consent to jurisdiction and arbitration as to the holder of the Bank Note and the Equipment Note as provided in Sections 14.1 and 14.2 as to Great Lakes. Governing law shall be Michigan law unless the Band otherwise agrees. (d) Other Terms. All other terms are subject to the Band's approval, which approval shall not be unreasonably withheld. (e) Selection of Lenders, etc. The selection of the lenders making the Bank Loan, the Equipment Loan and all other loans or leases relating to the Enterprise, and of all underwriters and professionals relating to any such 36 transaction, shall be subject to the Band's reasonable approval. (f) Loan Commitments - Equipment Loan. (i) Promptly and with due diligence after NIGC Approval and transfer of the Gaming Site into trust, but in no event later than 90 days after the later of NIGC Approval or transfer of the Gaming Site into trust (unless otherwise agreed by the Band), Great Lakes shall (A) deliver to the Band a proposed commitment from a lender with regard to the Equipment Loan for the Initial Phase, the terms of which shall be consistent with this Agreement and otherwise reasonably acceptable to the Band, and (B) increase the amount of the Escrow Account to $46,000,000 (less amounts previously advanced under the Lakes Development Loan). (ii) After the Commencement Date and at such time as will permit completion of the Final Scope of Work in accordance with this Agreement, Great Lakes shall deliver to the Band a proposed commitment from an Equipment Lender with regard to the Equipment Loan for the expansion of the Facility to the Final Scope of Work, the terms of which shall be consistent with this Agreement and otherwise reasonably acceptable to the Band. (g) Loan Commitments - Bank Loan. (i) Promptly and with due diligence after NIGC Approval and transfer of the Gaming Site into trust, but in no event later than 90 days after the later of NIGC Approval or transfer of the Gaming Site into trust (unless otherwise agreed by the Band), Great Lakes shall deliver to the Band a proposed commitment or other firm undertaking from a lender or underwriter with regard to the Bank Loan for the Initial Phase, the terms of which shall be consistent with this Agreement and otherwise reasonably acceptable to the Band. (ii) After the Commencement Date and at such time as will permit completion of the Final Scope of Work in accordance with this Agreement, Great Lakes shall deliver to the Band a proposed commitment from a Lender with regard to the Bank Loan for the expansion of the Facility to the Final Scope of Work, the terms of which shall be consistent with this Agreement and otherwise reasonably acceptable to the Band. (h) (intentionally omitted) (i) Refinancing - Band. The Band may seek to refinance any Loan. Great Lakes agrees to cooperate with that refinancing, provided that (i) all costs and expenses of the refinancing shall, to the extent that interest expense is reduced by the refinancing, be an Operating Expense of the Facility, and shall otherwise be either borne by the Band or funded through the refinancing; and (ii) Great 37 Lakes is not required to guarantee any new loan facilities. Interest on any new facility shall be an Operating Expense of the Facility. (j) Refinancing - Great Lakes. Great Lakes may, at or after the closing on the Bank Loan, seek to refinance the Lakes Development Loan and any other Loan that is made by a third party lender with a guarantee, other credit enhancement or interest subsidy provided by Lakes or Great Lakes; and may, after the closing on the Bank Loan, seek to refinance the Lakes Facility Loan. The Band agrees to cooperate with that refinancing, provided that (i) all costs and expenses of the refinancing (unless closed at the time of the Bank Loan) are borne by Great Lakes, (ii) the terms of the refinancing are in all respects no less favorable to the Band than provided in this Agreement or (to the extent more favorable than this Agreement) under the loan documentation of the obligation being refinanced (including, without limitation, interest rate, amortization, and recourse), without regard to any guaranty, other credit enhancement or interest subsidy provided by Great Lakes, and are otherwise reasonably acceptable to the Band; and (iii) the refinanced debt shall not be payable on termination of the Agreements with Great Lakes, provided that management of the Enterprise after such termination shall be reasonably acceptable to the lender. (k) Great Lakes Guarantees. The Band consents to the grant by Lakes and Great Lakes of other guarantees pari passu to third parties, provided that such other guarantees do not and shall not materially impair Lakes's or Great Lakes' ability to perform their respective obligations under the Guaranty or the Agreements, or under any instruments or agreements executed in connection therewith. (l) Increase Loan Amounts. The amount of Loans may be increased by agreement of Great Lakes and the Band to the extent that the Approved Development Budget exceeds the funds available under the Loans as provided above. (m) NIGC Approval: Tribal UCC. Great Lakes's obligation to advance funds under the Lakes Development Loan (except as provided in Sections 4.10 and 8.4) and the Lakes Facility Loan, and to procure and close on the Bank Loan and the Equipment Loan, are conditioned upon (i) NIGC Approval and (ii) the Band's adoption of a Tribal Uniform Commercial Code (the "Tribal UCC") that shall be substantially similar, as to secured transactions, to Articles 1, 2, 8 and 9 of the Uniform Commercial Code adopted by the State of Michigan (with the exclusion of any provisions that would otherwise make such Code inapplicable to secured transactions involving the Band or any of its affiliates); provided that the Tribal UCC may, at the Band's option, be limited in its application to the Loans, the transactions contemplated by the Transaction Documents and other transactions relating to the Enterprise. Nothing in this subsection affects or impairs Great Lakes's liability for damages in the event of NIGC Disapproval. (n) Subrogation. The Band recognizes that if Lakes or Great Lakes 38 guarantees the Bank Loan or the Equipment Loan and pays in full either loan pursuant to its guarantee, Lakes or Great Lakes shall be subrogated to the liens, rights and remedies of the lender of the loan so paid. ARTICLE 10. EXCLUSIVITY; NON-COMPETITION Section 10.1. Exclusivity Regarding Facility. During the term of this Agreement, Great Lakes shall have an exclusive relationship with the Band regarding the development of the Facility. Section 10.2. Exclusivity in Michigan. The Band shall deal exclusively with Great Lakes for gaming development on Indian lands in Michigan from the date of execution of this Agreement through the earlier of five years from the Commencement Date or termination or buyout of the Agreements. Section 10.3. Indiana Casino. Great Lakes and Lakes recognize that the Band intends to develop a casino in Indiana, and that the Band shall have no obligations to Great Lakes or Lakes in that regard; except that the Band agrees that, if it decides to engage an outside manager to develop or operate an Indiana casino, it shall discuss contracting with Great Lakes for such development or operation for 45 days before soliciting proposals from third parties as to management or development of that casino. No obligation to enter into an agreement with Great Lakes shall be implied from this undertaking, and the Band shall retain full and absolute discretion in that regard. Section 10.4. Non-Competition. Lakes and Great Lakes each agree that for five years after execution of the Agreements or the Term of the Agreements, whichever is greater, neither it nor any of their respective present or future Insiders will without the prior written approval of the Pokagon Council directly or indirectly in the Restricted Territory develop, operate, consult with regard to, or be in any way affiliated with any non-Indian gaming facility, any Class II or III Gaming facility or any other kind of gaming, or any hotels or other amenities related to such gaming or facility; except that Insiders shall not include (a) Kids Quest, Grand Casinos, Inc., or Innovative Gaming Corp. by reason of (i) the service of Lyle Berman as director or employee (without management responsibility) of such entities, or (ii) any stock ownership of Lakes or Great Lakes in such entities; or (b) any entity because of the investment banking services of Ron Kramer, a director of Lakes. References in this section shall include such entity's successor, whether by merger, acquisition or otherwise. Section 10.5. Assignment; Change of Control. (a) Great Lakes may not assign its rights under this Agreement without the Band's prior written consent, except that Great Lakes may assign its rights under such Agreement, but not its obligations, to a wholly owned subsidiary of Lakes. No such assignment shall affect or impair the obligations of Lakes under the Guaranty. (b) The Band may not assign its rights under this Agreement; except 39 that the Band may, without the consent of Great Lakes, but subject to approval by the Secretary of the Interior or the Chairman of the NIGC or his authorized representative, if required, assign this Agreement and the assets of the Enterprise to a Corporate Commission or other instrumentality of the Band organized to conduct the business of the Project and the Enterprise for the Band that assumes all obligations herein. No assignment authorized hereunder shall be effective until all necessary governmental approvals have been obtained. No such assignment shall relieve the Band of any obligation hereunder, unless otherwise agreed by Great Lakes or the holder of such obligation. (c) The Band shall be entitled to terminate the Agreements if Lakes or Great Lakes undergoes a Change of Control or if Great Lakes ceases to be a wholly-owned subsidiary of Lakes, in each case without the prior written consent of the Band. The Band shall not be required to prepay any amounts advanced by Lakes or Great Lakes or any third party in the event of such termination, and such obligations shall remain payable in accordance with their payment terms. Lakes and Great Lakes each agree to notify the Band in writing within 30 days after the occurrence of any event described in Clauses I or II in the definition of Change of Control, and within 30 days of Lakes's or Great Lakes' knowledge of any event described in Clauses III or IV of that definition. "Change of Control," for purposes of this provision, means (I) the merger, consolidation or other business combination of Lakes or Great Lakes with, or acquisition of all or substantially all of the assets of Lakes or Great Lakes by, any other entity, except that (A) Great Lakes may merge with any other entity wholly owned by Lakes if the surviving entity assumes the obligations of Great Lakes under the Agreements, and (B) Lakes Gaming and Resorts, LLC may merge with any other entity wholly owned by Lakes if the surviving entity assumes the obligations of Lakes Gaming and Resorts, LLC under the Guaranty, provided that in each case Lakes shall remain liable under the Guaranty; (II) Lyle Berman's ceasing to be either Chief Executive Officer or Chairman of the Board of Lakes (other than on account of death or disability, and except as provided at the end of this definition); (III) the acquisition by any person or affiliated group of persons not presently a shareholder of Lakes of beneficial ownership of 30% or more in interest of the outstanding voting stock of Lakes, as determined under 17 CFR Sections 240.13d-3 or 240.16a-l; or (IV) the acquisition by any person or affiliated group of persons not presently a shareholder of Lakes of beneficial ownership of 10% or more in interest of the outstanding voting stock of Lakes, as determined under 17 CFR Sections 240.13d-3 or 240.16a-l, if a majority of the Board of Directors of Lakes is replaced within two years after such acquisition by directors not nominated and approved by the Board of Directors. Section 10.6. Restrictions on Collateral Development. Lakes and Great Lakes each agree that for five years after execution of the Agreements or the Term of the Agreements, whichever is greater, neither Lakes, Great Lakes nor any of their present or future Insiders will directly or indirectly purchase any land or operate, manage, develop or have any direct or indirect interest in any commercial facilities or business venture located within 20 miles of the 40 Facility without the prior written consent of the Band. ARTICLE 11. REPRESENTATIONS, WARRANTIES, AND COVENANTS Section 11.1. Representations and Warranties of the Band. The Band represents and warrants to Great Lakes as follows: (a) The Band's execution, delivery and performance of this Agreement, the Lakes Development Note, the Transition Loan Note, the Lakes Working Capital Advance Note, the Minimum Payments Note, the Lakes Facility Note, the Non-Gaming Acquisition Line of Credit, the Control Agreement, the Lakes Security Agreement and all other instruments and agreements executed in connection with this Agreement have been properly authorized by the Band and do not require further Band approval. (b) This Agreement, the Lakes Development Note, the Transition Loan Note, the Lakes Facility Note, the Lakes Working Capital Advance Note, the Minimum Payments Note, the Non-Gaming Acquisition Line of Credit, the Control Agreement, the Lakes Security Agreement and all other instruments and agreements executed in connection with this Agreement have been properly executed, and once approved in accordance with Legal Requirements constitute the Band's legal, valid and binding obligations, enforceable against the Band in accordance with their terms. (c) There are no actions, suits or proceedings, pending or threatened, against or affecting the Band before any court or governmental agency that relate to the Project, the Enterprise or any transaction contemplated by the Transaction Documents, except as disclosed on Exhibit L. Section 11.2. Band Covenants. The Band covenants and agrees as follows: (a) Promptly after the execution of this Agreement it will take the steps necessary to adopt and will adopt the Gaming Ordinance. The Gaming Ordinance will meet the requirements of IGRA and the applicable regulations under IGRA and be consistent with the provisions of this Agreement and the Management Agreement, and not adversely affect the rights of Great Lakes hereunder and thereunder. After adoption of the Gaming Ordinance the Band will establish a governmental authority to regulate gaming at the Gaming Site ("the Gaming Regulatory Authority" or "GRA"). The Band agrees to consult with Great Lakes concerning the terms of the Gaming Ordinance and any regulations adopted thereunder, but the final decision on those matters is in the Band's sole discretion. (b) After NIGC Approval the Band shall enter into the Bank Loan Agreement and the Equipment Loan Agreement and execute the Bank Note and the Equipment Note and related closing documentation, all subject to the terms 41 provided in this Agreement and Great Lakes' performance of its obligations under this Agreement. (c) During the term of this Agreement and the Management Agreement, the Band shall enact no law impairing the obligations or contracts entered into in furtherance of the development, construction, operation and promotion of Gaming on the Gaming Site. Neither the Pokagon Council nor any committee, agency, board of any other official body, and no officer or official of the Band shall, by exercise of the police power or otherwise, act to modify, amend, or in any manner impair the obligations of contracts entered into by the Pokagon Council or the GRA or other parties in furtherance of the financing, development, construction, operation, or promotion of Gaming at the Gaming Site without the written consent of the non-tribal parties to such contracts. (d) The Band will waive sovereign immunity on the limited basis described in Article 14 with respect to the Loans, the Transition Loan and the Non-Gaming Land Acquisition Line of Credit. (e) This Agreement, the Management Agreement, the Lakes Development Note, the Transition Loan Note, the Lakes Facility Note, the Lakes Working Capital Advance Note, the Minimum Payments Note, the Non-Gaming Acquisition Line of Credit, the Control Agreement and the Security Agreement, and each other contract contemplated by this Agreement shall, once approved in accordance with Legal Requirements, be enforceable in accordance with their terms. (f) In its performance of this Agreement, the Band shall comply with all Legal Requirements. (g) The Band will not impose taxes on the revenues of the Facility or the management fee payable to Great Lakes, but reserves the right to otherwise impose usual and customary taxes and fees on transactions at or in connection with the Facility or on the Facility's employees, officers, directors, vendors and patrons. The Band shall be specifically permitted to impose (i) charges, assessments, fines or fees imposed by governmental entities of the Band which are reasonably related to the cost of Tribal governmental regulation of public health, safety or welfare, or the integrity of Tribal gaming operations, and (ii) other taxes, charges, assessments or fees imposed against the Enterprise or property of the Enterprise, or sales, use, excise, hotel occupancy and other similar taxes (excluding taxes, charges, assessments or fees against real or personal property of the Facility or on gaming revenues or earnings) of such types and percentage amounts not to exceed those imposed by any state or local government within the Restricted Territory. (h) The Band shall not act in any way whatsoever, directly or indirectly, to cause this Agreement to be amended, modified, canceled, or 42 terminated, except pursuant to its express terms or with the consent of Great Lakes. (i) Notwithstanding the foregoing, a breach of this subsection 11.2 shall not be a basis to overturn, negate or in any manner modify any Governmental Action through arbitration or other proceedings, and any remedy for such breach shall be subject to the Specific Performance Restriction. The preceding sentence does not prevent an arbitrator from determining that the taking of any Governmental Action or the failure to take any Governmental Action, which is not caused by a breach of Great Lakes or Lakes' obligations under the Agreements or the Guaranty, constitutes a breach of this Agreement by the Band, thereby resulting in liability on the part of the Band for damages in favor of the Manager as provided in this Agreement. Section 11.3. Representations and Warranties of Lakes and Great Lakes. Lakes and Great Lakes each represent and warrant to the Band as follows: (a) Lakes' and Great Lakes' execution, delivery and performance of this Agreement, the Guaranty, and all other instruments and agreements executed in connection with this Agreement and the Guaranty have been properly authorized by Lakes and Great Lakes, respectively, to the extent they are parties thereto, and do not require further approval. (b) Each of this Agreement and all other instruments and agreements executed in connection with this Agreement has been properly executed and constitutes Lakes' and Great Lakes' respective legal, valid and binding obligation, enforceable against Lakes and Great Lakes in accordance with their terms to the extent they are parties thereto. (c) There are no actions, suits or proceedings pending or threatened against or affecting Lakes or Great Lakes before any court or governmental agency that would in any material way affect Lakes' or Great Lakes' ability to perform this Agreement and the Guaranty, to the extent they are parties thereto, other than litigation disclosed in filings by Lakes with the Securities and Exchange Commission. Lakes and Great Lakes each warrant that no litigation so disclosed in any material way affects or will affect Lakes' or Great Lakes' ability to perform under the Agreements and the Guaranty. Section 11.4. Covenants of Lakes and Great Lakes. Lakes and Great Lakes each covenant and agree as follows: (a) Lakes and Great Lakes shall comply with all Legal Requirements in its performance of the Agreements and the Guaranty, to the extent they are parties thereto. (b) Great Lakes has and at all times during the Term shall have the financial capacity to pay to the Band all fees and payments and to make all 43 advances and loans described in this Agreement. (c) Lakes and Great Lakes shall not act in any way whatsoever, directly or indirectly, to cause this Agreement to be amended, modified, canceled, or terminated, except pursuant to its express terms or with the consent of the Band. (d) Lakes' and Great Lakes' Internal Expenses shall not be paid by the Enterprise from revenues of the Enterprise or the proceeds of any Loan, but may be paid by Lakes and Great Lakes from Management Fees and loan repayments after they are received by Great Lakes. No officer or employee of Lakes or Great Lakes shall receive a salary or other payment from the Enterprise. (e) CRC shall not during the Term of the Management Agreement (i) be directly or indirectly affiliated with Lakes, Great Lakes or the Facility, whether as joint venturer or otherwise, (ii) be employed by Lakes or Great Lakes or, to the knowledge of Lakes or Great Lakes, any entity having any contractual relationship with Lakes or Great Lakes, with regard to the Facility, or (iii) directly or indirectly receive any payment or anything of value from Lakes or Great Lakes from or out of the Management Fee or any other payment made to Lakes or Great Lakes by the Band or the Facility. Lakes and Great Lakes each agree to indemnify the Band and its members and hold them harmless against all loss, liability and expense relating to claims, of whatever kind or nature, of CRC against any one or more of them. The Band consents to the execution and delivery by Lakes of a certain Conditional Release and Termination Agreement between Lakes and CRC dated May 20, 1999, as amended by Amendment dated July, 1, 1999, true copies of which are attached as Exhibit M, provided that CRC executes and delivers to the Band and its members a general release in the form attached as Exhibit N. Lakes and Great Lakes each warrants that it has no agreements or understandings with CRC in any way related to the Band or the Enterprise other than as set forth in Exhibit M. The Band further agrees that Lakes may hold stock of CRC as collateral for a Lakes' guarantee of a loan to a third party, provided that on default it proceeds to liquidate such collateral in a reasonably prompt and orderly manner, and that Lyle Berman may continue to hold approximately 350,000 shares of CRC so long as he plays no role in the management of, and does not sit on, the board of directors of CRC. ARTICLE 12. EVENTS OF DEFAULT Section 12.1. Events of Default by the Band. Great Lakes shall not be obligated to pay any fees, provide the Bank Loan, the Lakes Facility Loan or the Equipment Loan, make any advance on the Lakes Development Loan or the Lakes Facility Loan, or otherwise perform its obligations under or pursuant to this Agreement if a Band Event of Default, as defined below, has occurred and is continuing on the date such fee payment, loan advance or performance would otherwise be made. In addition, Great Lakes shall not be obligated to make any loan advance to the Band pursuant to this Agreement unless and until Great Lakes receives the duly authorized 44 and executed Lakes Development Note and (to the extent applicable) the Lakes Facility Note. Each of the following shall be a "Band Event of Default": (a) The Band shall fail to pay when due the Lakes Development Note, the Transition Loan Note, the Non-Gaming Acquisition Line of Credit, the Lakes Facility Note, the Lakes Working Capital Advance Note, the Minimum Payments Note or any other indebtedness to Great Lakes, and such payment default has continued for thirty (30) days after Great Lakes gives the Band notice thereof. (b) The Band shall commit a Material Breach of any of the Band's obligations under this Agreement or any other Transaction Documents, subject to the rights to cure provided in this Agreement or in any such documents. (c) Any of the representations and warranties made by the Band in Section 11.1 of this Agreement or in any other Transaction Documents were not true in any material respect when made or would not be materially true if made on the date such performance would otherwise be due. (d) The Band violates the provisions of Article 10 of this Agreement. (e) The Band commits any Material Breach of the Management Agreement which is not cured within any applicable cure period. (f) The Band, through a vote of its Council at which a quorum is present prior to NIGC Approval, either expressly (i) repudiates the Management Agreement or the Development Agreement, or (ii) authorizes the Band, prior to terminating the Agreements in accordance with their terms or expiration of the Term, to enter into management or development agreements with a third party with regard to a Michigan casino. If any Band Event of Default occurs, Great Lakes may, upon written notice to Band, declare Great Lakes' commitment to make advances under this Agreement terminated and Great Lakes may exercise the rights and remedies available to Great Lakes provided in this Agreement; provided, however, that all such rights and remedies shall be Limited Recourse. Section 12.2. Events of Default by Lakes or Great Lakes. The Band shall not be obligated to perform its obligations under or pursuant to this Agreement if a Lakes Event of Default, as defined below, has occurred or if any of the representations and warranties made by Lakes or Great Lakes in this Agreement were not true when made or would not be true if made on the date such performance would otherwise be due. Each of the following shall be a "Lakes Event of Default": (a) Any Monthly Payment is not paid within ten (10) days after its due date. (b) Great Lakes shall fail to make any other payments (whether of 45 fees, advances or loans) required by this Agreement, and such failure shall continue for ten (10) days after the Band gives Lakes written notice thereof. (c) Lakes or Great Lakes shall commit any other Material Breach any of Lakes' or Great Lakes' obligations under this Agreement, the Guaranty or any other Transaction Documents, as applicable. (d) Any representation or warranty that Lakes or Great Lakes has made under this Agreement or in any other Transaction Document shall prove to have been untrue in any material respect when made or would not be materially true if made on the date such performance would otherwise be due. (e) Lakes or Great Lakes violates the provisions of Article 10 of this Agreement, subject to rights of notice and cure to the extent provided in that Article. (f) Lakes (to the extent applicable) or Great Lakes commits or causes any Material Breach of the Management Agreement which is not cured within any applicable cure period. (g) NIGC Disapproval occurs. If any Lakes Event of Default occurs, the Band may, upon written notice to Great Lakes, exercise the rights and remedies available to the Band provided in this Agreement. Section 12.3. Material Breach: Right to Cure. (a) Neither Great Lakes nor the Band may terminate this Agreement, recover damages, foreclose on security interests or exercise any other remedy on grounds of a potential Material Breach of this Agreement or any other Transaction Document unless it has provided written notice to the other party of the occurrence of such breach by such party under the Transaction Documents. During the 30 day period after the receipt of such notice (as to defaults which can be cured within 30 days) or the 90 day period after such receipt (as to defaults which cannot be cured within 30 days), whichever is applicable, the party receiving the notice may cure the alleged default and (without waiting for the expiration of such periods) any party may submit the matter to arbitration under the dispute resolution provisions of this Agreement set forth at Article 14. The discontinuance or correction of a Material Breach shall constitute a cure thereof. Nothing in this subsection shall affect or impair the obligation of any party to promptly comply with all Legal Requirements, or limit any sanctions that may be imposed for any violation thereof; nor shall this subsection prevent a party taking any other actions within such 30 or 90 day periods as may be permitted or required by this Agreement, the Gaming Ordinance or NIGC regulations. The provisions of this subsection and the parallel provisions of Section 11.3 of the Management Agreement shall control over any conflicting provisions in any other 46 Transaction Document. (b) Nothing in this subsection 12.3 shall apply to termination under Sections 13.1, 13.2, 13.6 or 13.7 of this Agreement. ARTICLE 13. TERMINATION Section 13.1. Voluntary Termination. This Agreement may be terminated by mutual written consent. Section 13.2. Termination if No NIGC Approval. The Band and Great Lakes may each unilaterally terminate the Agreements by written notice if NIGC Approval has not occurred on or before August 26,2007. Section 13.3. Great Lakes Right to Terminate on Band Event of Default. Great Lakes shall be entitled to terminate the Agreements (i) upon a Band Event of Default or (ii) as specifically provided in the Agreements. Section 13.4. Band Right to Terminate on Lakes Event of Default. The Band shall be entitled to terminate the Agreements (i) upon a Lakes Event of Default or (ii) as specifically provided in the Agreements. Section 13.5. Band Right to Terminate for Material Adverse Change. Prior to the Commencement Date, the Band shall be entitled to terminate the Agreements in the event of a Material Adverse Change; provided that the following procedures shall apply: (a) Great Lakes shall notify the Band promptly in the event of any Material Adverse Change, and in any event within 30 days after its occurrence. (b) Great Lakes shall cause Lakes to send to the Band copies of all filings by Lakes with the Securities and Exchange Commission under Forms 8K, 10Q and 1 OK; shall furnish the Band with copies of such other SEC filings that the Band may request; and shall furnish the Band with such other information concerning a Material Adverse Change as the Band may reasonably request. (c) If the Band believes that a Material Adverse Change has occurred, the Band shall so notify Lakes and Great Lakes in writing and shall request specified further assurances of their respective continued ability to perform under the Agreements, the Guaranty, and all related agreements and instruments. (d) Within thirty (30) days after that notification Great Lakes shall admit or deny, and shall cause Lakes, if applicable to admit or deny, the alleged Material Adverse Change, giving the specific basis for its response; shall state, and shall cause Lakes to state, whether they each agree to provide the requested further assurances; if they each agree to provide the requested further assurances, shall tender its performance in that regard; and, if it admits a Material Adverse Change but disputes the requested further assurances, shall tender such further 47 assurances by it and Lakes as it deems sufficient to ensure their respective continued ability to perform under the Agreements, the Guaranty, and all related agreements and instruments. (e) If Lakes or Great Lakes denies the Material Adverse Change or disputes that the requested further assurances are reasonably required to assure the Band of their respective continued ability to perform under the Agreements, the Guaranty, and all related agreements and instruments, those issues shall be submitted to arbitration. The arbitrator shall determine whether (i) a Material Adverse Change has occurred; (ii) the requested further assurances are reasonably required to assure the Band of their respective continued ability to perform under the Agreements, the Guaranty, and all related agreements and instruments; and (iii) if a Material Adverse Change has occurred but the requested further assurances are not reasonably required to so assure the Band, what further assurances must be provided by Lakes and Great Lakes to reasonably assure the Band of their continued ability to perform under the Agreements, the Guaranty, and all related agreements and instruments. Any further assurances required under the arbitrator's award must be furnished by Lakes and Great Lakes within thirty (30) days after entry of the award. (f) If Lakes or Great Lakes admits the Material Adverse Change but does not furnish further assurances, or if Great Lakes or Lakes does not timely provide further assurances pursuant to an arbitrator's award, the Band may terminate the Agreements by written notice to Great Lakes. (g) Lakes, Great Lakes and the Band agree that the continuing ability of Great Lakes and Lakes to make the payments and advances provided under this Agreement, the Guaranty, and all related agreements and instruments, and to ensure the Band can obtain the Loans to develop, construct, equip and operate the Facility provided in this Agreement, is an essential part of the consideration for which the Band bargained in entering into the Agreements. Section 13.6. Termination on Buyout. This Agreement shall terminate if the Band exercises its option to buy out the Management Agreement in accordance with its terms. Section 13.7. Involuntary Termination Due to Changes in Legal Requirements. It is the understanding and intention of the parties that the development, construction and operation of the Enterprise shall conform to and comply with all Legal Requirements. If during the term of this Agreement, the Enterprise or any material aspect of Gaming at the Gaming Site is determined by the Congress of the United States, Department of the Interior of the United States of America, the NIGC, or the judgment of a court of competent jurisdiction (after expiration of the time within which appeals must be filed or completion of appeals, if any) to be unlawful under federal law, the obligations of the parties hereto shall cease and the Agreements shall be of no further force and effect as of the date of such determination; subject, however, to the following provisions as to damages: (a) If the date of such determination is prior to the Commencement 48 Date, Great Lakes shall be entitled to damages to the same extent as provided in Section 14.4 with regard to failure to obtain NIGC Approval. (b) If the date of such determination is after the Commencement Date: (i) The Band shall retain all fees and Monthly Payments previously paid or advanced to it pursuant to this Agreement, as well as all Tribal Distributions and Non-Gaming Lands, the Gaming Site and any other property transferred into trust; (ii) Any money loaned to the Band by Lakes or Great Lakes, or other obligations owed to Lakes or Great Lakes under the Transaction Documents as of the date of such determination shall be repaid to Great Lakes or Lakes in accordance with the Limited Recourse terms of the Lakes Development Note, the Lakes Facility Note, the Lakes Working Capital Advance Note, the Minimum Payments Note, the Transition Loan Note, the Non-Gaming Acquisition Line of Credit, this Agreement or any other applicable Transaction Documents; and (iii) The Band shall retain its interest in the title (and any lease) to all Enterprise assets, including the Gaming Site and any fixtures, supplies and Furnishings and Equipment (except as provided in subsection (iv)), subject to the purchase money security interest in Furnishings and Equipment securing the Equipment Loan, Great Lakes' security interest in the Dominion Account and the Furnishings and Equipment, if any (until all obligations of the Band to Great Lakes secured by that account and the Furnishings and Equipment are paid in full), and any other liens granted in accordance with the Development Agreement; and (iv) If (A) the Band determines that it can legally continue to operate portions of the Enterprise after the change in Legal Requirements without subjecting any related Furnishings and Equipment to forfeiture or seizure by any applicable governmental authority, and (B) it is Economically Feasible for the Band to continue such portions of the Enterprise and it elects to do so by written notice to Great Lakes within ninety (90) days after the occurrence of the change in Legal Requirements, then the Band shall have the right to continue to operate such portions of the Enterprise (and retain any Furnishings and Equipment used in connection with such portions of the Enterprise) so long as the same (x) remain Economically Feasible to operate, (y) any related Furnishings and Equipment shall remain free from any such forfeiture or seizure, and (z) are promptly and continually thereafter operated and maintained in accordance with reasonable industry standards. The Band and Great Lakes agree that any Furnishings and Equipment (together with any casualty insurance proceeds applicable thereto) related to (1) portions of the Enterprise that are not Economically Feasible for the Band to continue to operate, (2) would otherwise be subject to forfeiture or seizure as 49 described above, or (3) with respect to any other portions of the Enterprise that the Band shall cease to continually operate (collectively, the "Surplus Equipment"), shall be promptly liquidated (subject to approvals as required under the Bank Loan Agreement and the Equipment Loan Agreement) in a commercially reasonable manner, and the Band shall pay the proceeds of such sale(s), to the extent permitted by any applicable subordination agreement, to Great Lakes on account of the Loans and other amounts owing to Great Lakes under the Transaction Documents. Section 13.8. Repair or Replacement. If the Facility is damaged, destroyed or condemned so that continued development, construction or operation of Gaming cannot be or can no longer be continued at the Facility, the Facility shall at the Band's option be reconstructed if the insurance or condemnation proceeds, together with any other funds available to the Band, are sufficient to restore or replace the Facility to a condition at least comparable to that before the casualty occurred or such other condition as Great Lakes and the Band may agree. If the insurance proceeds, together with other funds available to the Band, are not sufficient to so restore or replace the Facility or are not used to repair the Facility, the Band shall, with the assistance of Great Lakes, adjust and settle any and all claims for such insurance proceeds or condemnation awards, and such proceeds or award and any undistributed Net Revenues pursuant to Article 5 of the Management Agreement shall be applied first, as to proceeds or awards relating to Furnishings and Equipment securing the Equipment Loan, to the amounts due under the Equipment Loan; second, to the amounts due under the Minimum Payments Note; third, to the Lakes Working Capital Advances, including accrued interest; fourth, to the Band Working Capital Advances, including accrued interest; fifth, to the amounts due under the Bank Loan; sixth, to any remaining balance under the Equipment Loan and to any other third party liabilities of the Enterprise to which Great Lakes has subordinated in writing; seventh, to the Lakes Facility Loan; eighth, to the Lakes Development Loan; and ninth, to the Band; but subject, in each case, to any applicable subordination agreements. Any unpaid balance of the Lakes Development Loan, the Lakes Facility Loan and the Lakes Working Capital Loan, after application of such proceeds, shall be repaid as provided in Section 14.4 on failure to obtain NIGC Approval. Section 13.9. Recoupment and Setoff. Upon termination of this Agreement or the Management Agreement any claim of Lakes or Great Lakes against the Band, or of the Band against Lakes or Great Lakes, shall be subject to their respective rights of recoupment and setoff, if any. The Band may recoup and set off against Great Lakes any claims it may have against Lakes, and may recoup and set off against Lakes any claims it may have against Great Lakes. ARTICLE 14. DISPUTE RESOLUTION; LIQUIDATED DAMAGES Section 14.1. Band's Waiver of Sovereign Immunity and Consent to Suit. The Band expressly waives its sovereign immunity from suit for the purpose of permitting or compelling arbitration as provided in this Article 14 and consents to be sued in the United States District Court for the Western District of Michigan - Southern Division, the United States Court of Appeals for the Sixth Circuit, and the United States Supreme Court for the purpose of compelling arbitration or enforcing any arbitration award or judgment arising out of this Agreement, the Management Agreement, the Lakes Development Note, the Lakes Facility Note, 50 the Lakes Working Capital Advance Note, the Minimum Payments Note, the Transition Loan Note, the Non-Gaming Acquisition Line of Credit, the Control Agreement, the Security Agreement, any mortgages granted to Manager securing the Lakes Development Note or the Non-Gaming Land Acquisition Line of Credit, the Dominion Agreement, the Lakes Security Agreement, any other Transaction Document or other obligations between the parties. If the United States District Court lacks jurisdiction, the Band consents to be sued in the Michigan State Court system for the same limited purpose. The Band waives any requirement of exhaustion of tribal remedies. Without in any way limiting the generality of the foregoing, the Band expressly authorizes any governmental authorities who have the right and duty under applicable law to take any action authorized or ordered by any such court, and to take such action, including without limitation, repossessing or foreclosing on any real property not in trust and or on equipment subject to a security interest or on the Dominion Account, or otherwise giving effect to any judgment entered; provided, however, that liability of the Band under any judgment shall always be Limited Recourse, and in no instance shall any enforcement of any kind whatsoever be allowed by Lakes or Great Lakes against any assets of the Band other than the limited assets of the Band specified in Section 14.3(a) below. The Band appoints the Chairman of the Pokagon Council and the Secretary of the Pokagon Council as its agents for service of all process under or relating to the Agreements. The Band agrees that service in hand or by certified mail, return receipt requested, shall be effective for all purposes under or relating to the Agreements if served on such agents. Section 14.2. Arbitration. All disputes, controversies or claims arising out of or relating to this Agreement and the Lakes Development Note, the Lakes Facility Note, the Lakes Working Capital Advance Note, the Minimum Payments Note, the Transition Loan Note, the Non-Gaming Acquisition Line of Credit, the Control Agreement, the Lakes Security Agreement, any other Transaction Document or other obligations between Lakes or Great Lakes and the Band shall be settled by binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association in effect on the date demand for arbitration is made, and the Federal Arbitration Act. The parties agree that binding arbitration shall be the sole remedy as to all disputes arising out of this Agreement, except for disputes requiring injunctive or declaratory relief. Notwithstanding the foregoing, an arbitrator shall not have the power to compel, overturn, negate or in any manner modify any Governmental Action, and any arbitration award or related judicial decree or judgment shall be subject to the Specific Performance Restriction. The preceding sentence does not prevent an arbitrator from determining that the taking of any Governmental Action or the failure to take any Governmental Action, which is not caused by a breach of Great Lakes or Lakes' obligations under the Agreements or the Guaranty, constitutes a breach of this Agreement by the Band or the impairment of rights of Great Lakes under this Agreement, thereby resulting in liability on the part of the Band for damages in favor of the Manager as provided in this Agreement and enforcement of the obligations of the Band to Great Lakes, including any security agreements and collateral instruments, in accordance with their terms. (a) Choice of Law. In determining any matter the Arbitrator(s) shall apply the terms of this Agreement, without adding to, modifying or changing the terms in any respect, and in their interpretation and construction shall, to the extent not preempted by federal law, apply Michigan law. Use of Michigan law for the foregoing limited purpose of interpretation and construction is not 51 intended by the parties to and shall not otherwise (i) incorporate substantive Michigan laws or regulations, including but not limited to Michigan usury laws or any other present or future provision of the laws of Michigan that would restrict the rate of interest upon any loan contemplated hereunder; or (ii) grant any jurisdiction to the State or any political subdivision thereof over the Gaming Site or the Facility. (b) Place of Hearing. All arbitration hearings shall be held at a place designated by the arbitrator(s) in Kalamazoo, Michigan or at such other place agreed to by the parties. (c) Confidentiality. The parties and the arbitrator(s) shall maintain strict confidentiality with respect to the arbitration. Section 14.3. Limitation of Actions. The Band's waiver of immunity from suit is specifically limited to the following actions and judicial remedies: (a) Damages. The enforcement of an award of money and/or damages by arbitration; provided that the award of any arbitrator and/or court must be Limited Recourse, and no arbitrator or court shall have authority or jurisdiction to order execution against any assets or revenues of the Band except (i) undistributed or future Net Revenues of the Enterprise or Subsequent Gaming Facility Revenues; (ii) as to the Equipment Loan, the Furnishings and Equipment securing that Loan; (iii) if the Commencement Date does not occur, Subsequent Gaming Facility Revenues to the extent provided in this Agreement; (iv) as to the Lakes Development Note and the Non-Gaming Acquisition Line of Credit, mortgages on the Gaming Site and Non-Gaming Lands prior to their transfer into trust; (v) after the Commencement Date occurs, funds on deposit in the Dominion Account to the extent provided in Section 9.2.l(j) of this Agreement and the Dominion Agreement, or in any other dominion agreement executed by the Band; and (vi) as to the Lakes Development Note, the Lakes Facility Note, the Lakes Working Capital Advance Note, the Non-Gaming Land Acquisition Line of Credit and the Transition Loan, Furnishings and Fixtures to the extent provided in Section 9.2.l(j) of this Agreement. In no instance shall any enforcement of any kind whatsoever be allowed by Lakes or Great Lakes against any assets of the Band other than the limited assets of the Band specified in this subsection. (b) Consents and Approvals. The enforcement of a determination by an arbitrator that the Band's consent or approval has been unreasonably withheld contrary to the terms of this Agreement or any other Transaction Document, provided that such enforcement shall be subject to the Specific Performance Restriction. (c) Injunctive Relief and Specific Performance. The enforcement of a determination by an arbitrator that prohibits the Band from taking any action that would prevent Great Lakes from performing its obligations pursuant to the terms of this Agreement or any other Transaction Document, or that requires the Band 52 to specifically perform any obligation under this Agreement; provided, however, that any injunction against the Band shall be Limited Recourse; shall be subject to the Specific Performance Restriction; shall not mandate, preclude or affect payment of any funds of the Band other than undistributed or future Net Revenues of the Enterprise, funds in the Dominion Account or Subsequent Gaming Facility Revenues; and shall not relate to any asset of the Band other than the Enterprise. (d) Action to Compel Arbitration. An action to compel arbitration pursuant to this Article 14. Section 14.4. Damages on Termination for Failure to Obtain NIGC Approval. In the event of termination of this Agreement under Section 13.2 because NIGC Approval has not been obtained on or before August 26, 2007, (a) the Band shall be obligated to repay Great Lakes all amounts loaned to the Band by, or owed by the Band to, Lakes or Great Lakes under or pursuant to this Agreement or any other Transaction Document (excluding fees under the Management Agreement), but not fees or non-refundable payments designated as such under this Agreement or any Transaction Document; provided that such repayment shall be made only out of distributions to the Band from Subsequent Gaming Facility Revenues, and shall be paid in 60 equal monthly installments of principal and interest beginning one month after opening of such a facility; and (b) the Band shall promptly sell all Furnishings and Equipment in a commercially reasonable manner and shall pay the proceeds of such sale to Great Lakes on account of the obligations owing to Great Lakes described above in this Section 14.4. To secure the Band's obligation under subsection 14.4(a), Great Lakes shall retain its mortgages, if any, on property of the Band not transferred into trust, and may foreclose such mortgages (subject to the arbitration provisions of this Article 14) if the Band fails to perform as provided in that subsection; and to secure the Band's obligation under subsection 14.4(b), Great Lakes shall retain its security interest in Furnishings and Equipment. Great Lakes may foreclose such security interest (subject to such arbitration provisions, and without accelerating the Lakes Development Loan) if the Band fails to perform as provided in subsection (b), and shall apply the proceeds of such foreclosure to the obligations owing to Great Lakes under the Transaction Documents. Such payments and collateral shall be Great Lakes' sole remedy and recourse in the event of termination of this Agreement under Section 13.2. In no event shall Great Lakes have recourse in the event of such termination to (i) assets purchased by the Band with funds advanced by Lakes or Great Lakes, except as collateral to the extent provided in this subsection; (ii) assets of any other gaming facility owned or operated by the Band, other than Subsequent Gaming Facility Revenues; or (iii) any other asset of the Band. Section 14.5. Liquidated Damages and Limitations on Remedies. The following liquidated damages and limitations on remedies apply under this Agreement, in addition to those provided elsewhere in this Agreement as to claims and remedies against the Band: (a) Liquidated Damages Payable by Great Lakes. In the event of a Lakes Event of Default prior to the Commencement Date, after such notice and right to cure as may be provided in this Agreement, Great Lakes shall: (i) forfeit to the Band all amounts in the Account as of the default; (ii) pay the Band an amount equal to the sum of (x) the aggregate Monthly Payments payable under Section 8.1(c) over the balance of the 5-year Term, as if the Agreements had not been 53 terminated, and (y) the Accrued Expenses; (iii) release all claims against the Band, including without limitation all amounts owed by the Band to Lakes or Great Lakes under or related to the Agreements and all rights under the Agreements, and discharge all mortgage and security interests on assets of the Band; (iv) transfer to the Band, at the Band's discretion and without payment of any consideration, any and all options and interests in real property in Michigan held by Lakes or Great Lakes; and (v) deliver to the Band all documents and work product in the possession or control of Great Lakes, Lakes or their agents related to the proposed Facility, the Gaming Site and the Non-Gaming Lands. Lakes shall join in the release, transfer and delivery under subsections (iii), (iv) and (v), and Lakes and Great Lakes each agree to execute and deliver such release, discharges and transfer instruments, and to deliver such work product and documents, at the time of payment of liquidated damages. (b) Liquidated Damages Payable by the Band. Except as provided in Section 14.10 as to Governmental Actions, in the event of a Band Event of Default prior to the Commencement Date, after such notice and right to cure as may be provided in this Agreement, the Band shall if requested by Great Lakes: (i) pay Great Lakes all amounts loaned to the Band by, or owing by the Band to, Lakes or Great Lakes under this Agreement or any other Transaction Documents (excluding fees under the Management Agreement), but not fees or non-refundable payments designated as such under this Agreement or any other Transaction Document, less the Band's right of offset, if any; such damages to be payable only out of Subsequent Gaming Facility Revenues on the same terms and with the same limitations on recourse as are provided in Section 14.4 with regard to damages payable by the Band under that subsection; (ii) release any interest in the funds in the Account, which shall be released to Great Lakes; (iii) transfer to Great Lakes all options and land (other than land held in trust) acquired by the Band through funds advanced by Lakes (or, failing such transfer, Great Lakes may foreclose on any mortgages it holds on such options or land not held in trust); provided that the amount of any damages payable to Great Lakes shall be reduced by the amount paid for any options or land transferred by the Band to Great Lakes; and (iv) permit Great Lakes to foreclose on its security interest in Furnishings and Equipment (subject to the terms of any intercreditor agreement between Great Lakes and any Bank Lender or Equipment Lender). (c) Limitation on Great Lakes Remedies. If the Band Event of Default shall occur after the Commencement Date, Great Lakes rights with respect to foreclosing upon any Furnishings and Equipment shall be subject to the following rights of the Band: If (i) the Band determines that it can legally continue to operate all or any portions of the Enterprise after the occurrence of a Band Event of Default without subjecting any related Furnishings and Equipment to forfeiture or seizure by any applicable governmental authority, and (ii) it is Economically Feasible for the Band to continue such portions of the Enterprise and it elects to do so by written notice to Great Lakes within ninety (90) days after the occurrence of the Band Event of Default, then the Band shall have the right to continue to operate such portions of the Enterprise (and retain any Furnishings 54 and Equipment used in connection with such portions of the Enterprise) so long as the same (x) remain Economically Feasible to operate, (y) any related Furnishings and Equipment shall remain free from any such forfeiture or seizure, and (z) are promptly and continually thereafter operated and maintained in accordance with reasonable industry standards. The Band and Great Lakes agree that any Furnishings and Equipment (together with any casualty insurance proceeds applicable thereto) related to (1) portions of the Enterprise that are not Economically Feasible for the Band to continue to operate, (2) would otherwise be subject to forfeiture or seizure as described above, or (3) with respect to any other portions of the Enterprise that the Band shall cease to continually operate (collectively, the "Surplus Equipment"), shall be promptly liquidated (subject to approvals as required under the Bank Loan Agreement and the Equipment Loan Agreement) in a commercially reasonable manner, and the Band shall pay the proceeds of such sale(s) (to the extent permitted by any applicable subordination agreements) to Great Lakes on account of the Loans and other amounts owing to Great Lakes under the Transaction Documents. Section 14.6. Lakes' and Great Lakes' Continuing Obligations. Nothing in this Article shall affect or impair Lakes' and Great Lakes' continuing obligations under Sections 10.4 (noncompetition) and 15.13 (confidentiality) of this Agreement, which shall remain enforceable for the following terms, notwithstanding the termination of the Agreements and payment of liquidated or other damages: (i) as to Section 10.4, the greater of five years after execution of the Agreements or one year after termination; and (ii) as to Section 15.13, the greater of five years after execution of the Agreements or two years after termination. Section 14.7. Termination of Exclusivity. Section 10.2 (Exclusivity in Michigan) of this Agreement shall terminate upon any termination of the Agreements, notwithstanding any breach of the Agreements by the Band. Section 14.8. Remedies. In consideration of the agreement to liquidated damages to the extent provided above, the Band, Lakes and Great Lakes each waive the right to (i) actual and consequential damages (except as provided in Section 14.10) and (ii) exemplary or punitive damages, to the extent that liquidated damages are applicable to a default, but shall retain the right to injunctive relief (x) prior to termination of the Agreements, to enforce rights and remedies thereunder, subject to the Limited Recourse provisions of this Agreement as to the Band and the Band's limited waiver of sovereign immunity; and (y) after termination, to the extent that provisions of this Agreement specifically survive such termination, subject to such Limited Recourse provisions and limited waiver. The injured party shall, where liquidated damages are not applicable and damages or remedies are not otherwise specified, be entitled to such damages as it may be entitled to under applicable law, subject to such Limited Recourse provisions and limited waiver of the Band's sovereign immunity (which shall apply to all claims against the Band under or relating to the Agreements, in addition to all Loans). Section 14.9. Fees not Damages. In no event shall fees or other non-refundable payments or Tribal Distributions made by Lakes or Great Lakes to Band constitute damages to Lakes or Great Lakes or be repayable by the Band. 55 Section 14.10. Damages for Governmental Action. If the Band takes a Governmental Action or fails to take a Governmental Action, and such action or inaction is not caused by a breach of Great Lakes or Lakes' obligations under the Agreements or the Guaranty and constitutes a breach of this Agreement by the Band or the impairment of rights of Great Lakes under this Agreement or the other Transaction Documents, the Band shall be liable for any resulting actual and consequential damages incurred by Great Lakes (subject to the Limited Recourse provisions of this Agreement and the limited waiver of the Band's sovereign immunity). ARTICLE 15. GENERAL Section 15.1. Nature of Agreement. This Agreement is not intended as and shall not be construed as a "management agreement" within the meaning of the IGRA. Section 15.2. Great Lakes' Interest. Nothing contained herein grants or is intended (a) to grant Great Lakes a titled interest to the Facility, or (b) in any way to impair the Band's sole proprietary interest in the Facility. Section 15.3. Situs of the Agreement. This Agreement, the Lakes Development Note, the Lakes Facility Note, the Lakes Working Capital Advance Note, the Minimum Payments Note, the Transition Note and the Non-Gaming Land Acquisition Line of Credit shall be deemed entered into in Michigan. Section 15.4. Notice. Any notice required to be given pursuant to this Agreement shall be delivered to the appropriate party by Certified Mail Return Receipt Requested or by overnight mail or courier service, to the following addresses: If to the Band: Pokagon Band of Potawatomi Indians 58620 Sink Road Dowagiac, MI 49047 Attn: Chairman, Tribal Council With a copy to: Michael Phelan, General Counsel Pokagon Band of Potawatomi Indians P.O.Box 180 Dowagiac, MI 49047 And Daniel Amory, Esq. Drummond Woodsum & MacMahon P.O. Box 9781 Portland, ME 04104-5081 If to Manager or Lakes: Great Lakes Gaming of Michigan, LLC Lakes Entertainment, Inc. 130 Cheshire Lane Minnetonka, MN 55305 56 Attn: Timothy J. Cope With a copy to: Damon Schramm Lakes Entertainment, Inc. 130 Cheshire Lane Minnetonka, MN 55305 With a copy to: Kevin Quigley, Esq. Hamilton Quigley & Twait, PLC First National Bank Building Suite W1450 332 Minnesota Street Saint Paul, MN 55101-1314 and to: Daniel R. Tenenbaum Gray Plant Mooty 500 I.D.S. Center 80 So. 8th Street Minneapolis, MN 55402-3796 or to such other different address(es) as Lakes, Great Lakes or the Band may specify in writing. Any such notice shall be deemed given three days following deposit in the United States mail, one day following delivery to a courier service or upon actual delivery or upon actual delivery, whichever first occurs. Section 15.5. Relationship. Great Lakes, Lakes and the Band shall not be construed as joint venturers or partners of each other by reason of this Agreement and neither shall have the power to bind or obligate the other except as set forth in this Agreement. Section 15.6. Further Actions. The Band, Lakes and Great Lakes agree to execute or cause to be executed all contracts, agreements and documents and to take all actions reasonably necessary to comply with the provisions of this Agreement and the intent hereof. Section 15.7. Waivers. No failure or delay by Great Lakes, Lakes or the Band to insist upon the strict performance of any covenant, agreement, term or condition of this Agreement, or to exercise any right or remedy consequent upon the breach thereof, shall constitute a waiver of any such breach or any subsequent breach of such covenant, agreement, term of condition. No covenant, agreement, term or condition of this Agreement and no breach thereof shall be waived, altered or modified except by written instrument. No waiver of any breach shall affect or alter this Agreement, but each and every covenant, agreement, term and condition of this Agreement shall continue in full force and effect with respect to any other then existing or subsequent breach thereof. Section 15.8. Captions. The captions of each article, section and subsection contained in this Agreement are for ease of reference only and shall not affect the interpretational meaning of this Agreement. 57 Section 15.9. Third Party Beneficiary. This Agreement is exclusively for the benefit of the parties hereto and it may not be enforced by any party other than the parties to this Agreement and shall not give rise to liability to any third party other than the authorized successors and assigns of the parties hereto. Section 15.10. Survival of Covenants. Any covenant, term or provision of this Agreement which, in order to be effective, must survive the termination of this Agreement, shall survive any such termination. Section 15.11. Estoppel Certificate. Great Lakes and the Band agree to furnish to the other party, from time to time upon request, an estoppel certificate in such reasonable form as the requesting party may request stating whether there have been any defaults under this Agreement known to the party furnishing the estoppel certificate. Section 15.12. Periods of Time: Time of the Essence. Whenever any determination is to be made or action is to be taken on a date specified in this Agreement, if such date shall fall on a Saturday, Sunday or legal holiday under the laws of the Band or the State of Michigan, then in such event said date shall be extended to the next day which is not a Saturday, Sunday or legal holiday. Time is of the essence. Section 15.13. Confidential and Proprietary Information. Lakes, Great Lakes and the Band each agree that any information received concerning the other party during the performance of this Agreement, regarding the parties' organization, financial matters, marketing and development plans for the Enterprise, the Gaming Site, or other information of a proprietary nature (the "Confidential Information") will be treated by both parties in full confidence except for such public disclosure as may be required to allow Lakes, Great Lakes and the Band to perform their respective covenants and obligations hereunder, or in response to legal process, and will not be revealed to any other persons, firms or organizations. This provision shall survive the termination of this Agreement as provided in Section 14.6. The obligations not to use or disclose the Confidential Information shall not apply to Confidential Information (i) which has been made previously available to the public by the Band, Lakes or Great Lakes, or becomes generally available to the public, unless the Confidential Information being made available to the public results in a breach of this Agreement; (ii) which prior to disclosure to the Band, Lakes or Great Lakes was already rightfully in any such persons' possession; (iii) which is obtained by the Band, Lakes or Great Lakes from a third party who is lawfully in possession of such Information, and not in violation of any contractual, legal or fiduciary obligation to the Band, Lakes or Great Lakes, with respect to such Confidential Information and who does not require the Band, Lakes or Great Lakes to refrain from disclosing such Confidential Information to others; or (iv) by the Band, if such Information pertains to the Gaming Site or the Enterprise, in connection with the Band's development, construction and operation of a gaming facility after termination of the Agreements. Section 15.14. Savings Clauses. 15.14.1. Lakes, Great Lakes and the Band each agree to execute, deliver and, if necessary, record any and all additional instruments, certifications, amendments, modifications and other documents as may be required by the United States Department of the 58 Interior, Bureau of Indian Affairs, the office of the field Solicitor, the NIGC, or any applicable statute, rule or regulation in order to effectuate, complete, perfect, continue or preserve the respective rights, obligations, liens and interests of the parties hereto to the fullest extent permitted by law; provided, that any such additional instrument, certification, amendment, modification or other document shall not materially change the respective rights, remedies or obligations of the Band, Lakes or Great Lakes under this Agreement, the Guaranty, or any other agreement or document related hereto. 15.14.2. Any other provision of this Agreement to the contrary notwithstanding: (i) in no event shall the rate of interest payable in connection with any indebtedness incurred by the Band pursuant hereto or in connection herewith (including, without limitation, indebtedness evidenced by the Lakes Development Note, the Lakes Facility Note, the Lakes Working Capital Advance Note, the Minimum Payments Note, the Transition Loan Note or the Non-Gaming Land Acquisition Line of Credit) exceed the maximum rate permitted by law (the "Legal Rate"); (ii) if at any time the rate of interest on any such indebtedness computed as provided above (the "Computed Rate") exceeds the Legal Rate, then interest shall accrue thereafter on such indebtedness at the Legal Rate regardless of whether the Computed Rate is greater or less than the Legal Rate until the total amount of interest payable on such indebtedness equals the amount that would have been payable on such indebtedness without regard to this sentence, or until such indebtedness is paid in full, whichever occurs first; and (iii) if the holder receives any interest in excess of the maximum rate permitted by this sentence with respect to any such indebtedness, the excess shall be credited against the principal of such indebtedness or refunded, at the holder's option. Section 15.15. Successors and Assigns. The benefits and obligations of this Agreement shall inure to and be binding upon the parties hereto and their respective permitted successors and assigns. Section 15.16. Severability. If any provision, or any portion of any provision, of this Agreement is found to be invalid or unenforceable, such unenforceable provision, or unenforceable portion of such provision, shall be deemed severed from the remainder of this Agreement and shall not cause the invalidity or unenforceability of the remainder of this Agreement. If any provision, or any portion of any provision, of this Agreement is deemed invalid due to its scope or breadth, such provision shall be deemed valid to the extent of the scope or breadth permitted by law. Section 15.17. Entire Agreement. 15.17.1. This Agreement and the Transaction Documents (excluding the Management Agreement) are the entire agreement between Great Lakes, Lakes and the Band relating to development of the Project and supersedes all prior development agreements and understandings, whether written or oral, between or among the Band, Lakes and Great Lakes. The Management Agreement does not constitute a part of this Agreement 15.17.2. Collateral agreements between or among the Band, Lakes and Great Lakes consist of the following documents: 59 (a) Third Amended and Restated Lakes Development Note of near or even date; (b) Third Amended and Restated Transition Loan Note of near or even date; (c) Third Amended and Restated Non-Gaming Land Acquisition Line of Credit Agreement of near or even date; (d) Third Amended and Restated Account Control Agreement of near or even date; (e) Third Amended and Restated Pledge and Security Agreement of near or even date; (f) Second Amended and Restated Assignment and Assumption Agreement of near or even date; (g) Second Amended and Restated Unlimited Guaranty of near or even date; (h) First Amended and Restated Lakes Facility Note of near or even date; (i) First Amended and Restated Lakes Working Capital Advance Note of near or even date; (j) First Amended and Restated Lakes Minimum Payments Note of near or even date; (k) First Amended and Restated Security Agreement of near or even date; (l) Form of Dominion Account Agreement; (m) Third Amended and Restated Indemnity Agreement from the Band to Great Lakes (as assignee of Lakes) of near or even date; and (n) Reaffirmation of Guarantees and Mortgages dated as of December 22, 2004 and January 25, 2006, together with the Band Designee Guarantees and the Band Designee Mortgages referenced therein. All such collateral agreements supersede all other prior collateral agreements and understandings, written or oral between the parties. All prior and contemporaneous conversations, discussions, negotiations, possible and alleged agreements and representations, covenants and warranties with respect to the subject matter hereof, including without limitation the Term Sheet agreed to by Lakes and the Band dated June 18, 1999, are waived, merged herein and superseded hereby. Lakes, Great Lakes and the Band each affirmatively represents that no promises have been made to that party which are not contained in this Agreement, the Management Agreement, or any other 60 Transaction Documents and documents referred to herein and therein, and stipulates that no evidence of any promises not contained in this Agreement, the Management Agreement, or any other Transaction Documents shall be admitted into evidence on their behalf. This Agreement shall not be supplemented, amended or modified by any course of dealing, course of performance or uses of trade and may only be amended or modified by a written instrument duly executed by officers of all parties. Section 15.18. Consents. (a) Band. Where approval or consent or other action of the Band is required, such approval shall mean the written approval of the Pokagon Council evidenced by a resolution thereof, certified by a Band official as having been duly adopted, or such other person or entity designated by resolution of the Pokagon Council. Any such approval, consent or action shall not be unreasonably withheld or delayed; provided that the foregoing does not apply where a specific provision of this Agreement allows the Band an absolute or unilateral right to deny approval or consent or withhold action. (b) Manager. Where approval or consent or other action of Manager is required, such approval shall mean the written approval of the Managing Officer. Any such approval, consent or other action shall not be unreasonably withheld or delayed. (c) Business Board. Where approval or consent or other action of the Business Board is required, any such approval, consent or other action shall not be unreasonably delayed. Section 15.19. [intentionally omitted] Section 15.20. Limited Joinder. (a) Lakes Entertainment, Inc. and Lakes Gaming and Resorts, LLC each join in this Agreement for the limited purpose of agreeing to be bound by the provisions of this Agreement specifically applicable to them, as well as the provisions of Articles 13, 14 and 15 (as they pertain to such provisions of continuing applicability to them). In addition, Lakes Entertainment, Inc. shall have the benefit of any rights and remedies it had prior to the execution of the Assignment and Assumption Agreement under the following sections of this Agreement: 10.3, 11.2, 12.3, 13.5 and 14.8 (as to remedies for claims for breach of its retained rights under this subsection), 15.4, 15.5, 15.6, 15.9, 15.12, 15.13, 15.14, 15.15 and 15.17. (b) Sections 10(a) and 10(c) of the Assignment and Assumption Agreement are superseded by this Agreement and the Management Agreement and are no longer in effect. 61 IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. The Pokagon Band of Potawatomi Great Lakes Gaming of Michigan, LLC Indians By: /s/ John Miller By: /s/ Timothy Cope --------------------------------- ------------------------------------ Its Council Chairman Its: President/CFO By: /s/ Daniel F. Rapp Lakes Entertainment, Inc. --------------------------------- Its Secretary By: /s/ Timothy Cope ------------------------------------ Its: President/CFO Lakes Gaming and Resorts, LLC By: /s/ Timothy Cope ------------------------------------ Its: President/CFO 62 EX-10.172 6 c02716exv10w172.txt THIRD AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT EXHIBIT 10.172 EXECUTION VERSION THIRD AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT This Third Amended and Restated Pledge and Security Agreement ("Security Agreement") is made as of the 25th day of January, 2006, by and among Great Lakes Gaming of Michigan, LLC, a Minnesota limited liability company ("Great Lakes"), Lakes Entertainment, Inc., f/k/a Lakes Gaming, Inc., a Minnesota corporation ("Lakes"), and the Pokagon Band of Potawatomi Indians (the "Band"). WITNESSETH: WHEREAS, the Band and Lakes entered into a Development Agreement dated as of July 8, 1999 (the "1999 Development Agreement") and a Management Agreement dated as of July 8, 1999 (the "1999 Management Agreement"; collectively, with the 1999 Development Agreement, the " 1999 Agreements"), pursuant to which the Band engaged Lakes to, among other things, assist the Band in the design, development, construction and management of a gambling casino and certain related amenities (as defined in the 1999 Development Agreement, the "Facility"); and WHEREAS, pursuant to the 1999 Development Agreement, Lakes agreed to make certain payments and advances to the Band, including without limitation the Transition Loan, the Lakes Development Loan and the Non-Gaming Land Acquisition Line of Credit (collectively the "Lakes Loans"), and the Scholarship Program Fee, and has agreed to perform development services with regard to the Facility, all on the terms set out in the 1999 Development Agreement; and WHEREAS, pursuant to the 1999 Management Agreement Lakes agreed to manage the Facility on the terms set out in the 1999 Management Agreement; and WHEREAS, Lakes assigned its rights and obligations under the 1999 Agreements to Great Lakes pursuant to an Assignment and Assumption Agreement dated as of October 16, 2000 (said Assignment and Assumption Agreement as the same has been amended by a First Amendment dated as of December 22, 2004 and a Second Amended and Restated Assignment and Assumption Agreement dated as of January 25, 2006. the "Assignment Agreement"), subject to the terms and conditions set out in that Assignment Agreement; and WHEREAS, the 1999 Agreements were amended and restated by a First Amended and Restated Development Agreement dated as of October 16, 2000 and by a First Amended and Restated Management Agreement dated as of October 16, 2000 (the "First Amended and Restated Agreements") and by a Second Amended and Restated Development Agreement dated as of December 22, 2004 and a Second Amended and Restated Management Agreement dated as of December 22, 2004 (the "Second Amended and Restated Agreements"); and WHEREAS, the obligations of Lakes and Great Lakes to the Band under the First Amended and Restated Agreements were secured by a Pledge and Security Agreement between Lakes and the Band (the "Security Agreement") and by an Account Control Agreement among Lakes, the Band and Firstar Bank, N.A., each dated as of July 8, 1999 and as each was amended by first amendments dated as of October 16, 2000 and by second amendments dated as of December 22, 2004; and WHEREAS, Great Lakes, Lakes and the Band have entered into a Third Amended and Restated Development Agreement dated as of January 25, 2006 and a Third Amended and Restated Management Agreement dated as of January 25, 2006 (the "Third Amended and Restated Agreements"); and WHEREAS, the parties wish to amend and restate the Security Agreement to reflect the execution of the Third Amended and Restated Agreements, and to provide that the Security Agreement will secure the obligations of Lakes and Great Lakes to the Band under the Third Amended and Restated Agreements; NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Recitals True. The above recitals are true. 2. Defined Terms. a. Capitalized terms used but not otherwise defined herein and defined in the Third Amended and Restated Development Agreement shall have the same meaning herein as therein. b. "Secured Obligations" includes (i) the obligations of Great Lakes and Lakes to the Band under or relating to the Third Amended and Restated Agreements, and (ii) the obligations of Lakes and LG&R under their Guaranty to the Band dated October 16, 2000, as amended by First Amendment dated as of December 22, 2004 and a Second Amended and Restated Unlimited Guaranty dated as of January 25, 2006." c. "Control Agreement" means the Account Control Agreement among Lakes, the Band and Firstar Bank of Minnesota, N.A., n/k/a U.S. Bank, National Association, as assumed by Great Lakes under the Assignment and Assumption Agreement dated as of October 16, 2000, and as amended by First Amendment dated as of October 16, 2000 and by Second Amendment dated as of December 22, 2004 and by Third Amended and Restated Account Control Agreement dated as of January 25, 2006. d. "Pledgor" means, collectively, each of Lakes and Great Lakes. 3. Assignment of Account. Lakes represents to the Band that it has, pursuant to the Assignment Agreement, assigned and transferred to Great Lakes all rights of Lakes in and to the 2 Account and all cash, financial assets and investment property credited to the Account, subject to the first perfected security interest of the Band. 4. Acceptance of Assignment. Great Lakes accepts the assignment of the Account and all related cash, financial assets and investment property, and agrees to perform and discharge Lakes' obligations under the Security Agreement in accordance with the terms thereof as if Great Lakes had originally been a party thereto. The liabilities so assumed by Great Lakes include any obligations or liabilities of Lakes which have accrued under the Security Agreement as of the date hereof, as well as those subsequently accruing. Great Lakes recognizes and agrees that the Account and all cash, financial assets and investment property credited to the Account are and shall remain subject to the first perfected security interest of the Band in accordance with the Security Agreement and the Control Agreement. 5. Transfer of Pledged Collateral. a. The Pledgor hereby pledges and grants to the Secured Party a valid lien on and security interest in Pledgor's right, title and interest in and to the Account and all cash, securities, securities entitlements, financial assets and other property in the Account (which, with any additional securities or collateral pledged hereunder, any replacements, substitutions, extensions, stock dividends, renewals or additions to such collateral and any dividends, interest or other income thereon and the proceeds of all of the foregoing, are hereinafter referred to collectively as the "Pledged Collateral" or the "Collateral), as security for the Secured Obligations, all as the same may be amended from time to time, including any payments due pursuant to any amendments or modifications thereto, extensions and renewals thereof or substitutions therefor; and any and all other obligations or agreements of the Pledgor to the Secured Party outstanding from time to time, whether now existing or hereafter arising. b. Pledgor warrants that the security interest granted hereunder constitutes and shall remain a validly perfected first lien on the Pledged Collateral. 6. Agreement not to Sell, Pledge, Encumber, Etc. a. The Pledgor hereby covenants and agrees that it will not sell convey, transfer or otherwise dispose of any of the Pledged Collateral, nor create, incur or permit to exist any pledge, mortgage, lien, charge, encumbrance or any security interest whatsoever with respect to any of the Pledged Collateral or the proceeds thereof, other than the liens on and security interest in the Pledged Collateral created hereunder. b. In case any dividend shall be declared on any of the Pledged Collateral from time to time, or any share of stock or fraction thereof shall be issued pursuant to any stock split involving any of the Pledged Collateral, or any distribution of capital shall be made on any of the Pledged Collateral, the cash, shares or other property so distributed shall constitute Pledged Collateral hereunder and be delivered to the Secured Party to be held as collateral security for the Secured Obligations. 3 c. The Pledgor represents and warrants that there are no restrictions on the transferability of the Pledged Collateral to the Secured Party, that there are no restrictions as to or with respect to the foreclosure, transfer or disposition thereof by the Secured Party, and that any securities held in the account shall have been duly registered under applicable securities laws. 7. Additional Warranties, Representations, Covenants. Etc. a. Pledgor hereby covenants that the Pledged Collateral is duly and validly pledged to the Secured Party and warrants that it will defend the Secured Party's right, title and security interest in and to the Pledged Collateral against the claims and demands of all persons whomsoever. Pledgor represents and warrants to the Secured Party that the Pledgor has good title to all the Pledged Collateral, free and clear of all claims, mortgages, pledges, liens, security interests and other encumbrances of every nature. b. Pledgor agrees that a default by Pledgor under the Control Agreement shall be a default under all Secured Obligations, and that all collateral securing any Secured Obligation to Secured Party shall secure all other obligations of Pledgor to Secured Party. c. Pledgor hereby covenants that this Security Agreement and the Control Agreement are valid and binding on it, are enforceable in accordance with its terms, and create a validly perfected first lien and security interest in the Pledged Collateral. d. Pledgor covenants that it will execute and deliver to Secured Party such other instruments, certificates, stock powers and other documents as are necessary or convenient to enable Secured Party to exercise its rights under this Security Agreement and otherwise carry out the intent of this Security Agreement. Pledgor grants Secured Party an irrevocable power of attorney coupled with an interest to execute in its stead and on its behalf any such instruments, certificates, stock powers and other documents as are needed to exercise its rights as to the Pledged Collateral upon the occurrence of an Event of Default hereunder. e. Pledgor agrees that investments in the Account shall at all times be consistent with the provisions of Section 8.2 of the Third Amended and Restated Development Agreement. 8. Transfer of Pledged Collateral Upon Event of Default. In case there shall exist an Event of Default (as hereinafter defined), the Secured Party may cause all or any of the Pledged Collateral to be transferred into its name or into the name of its nominee or nominees in accordance with the Control Agreement, and Bank and any broker or other securities intermediary having custody or control of the Pledged Collateral shall honor any such request from Secured Party. 9. Events of Default: Remedies. a. If any one or more of the following events (herein called "Events of Default") shall occur: 4 i. A Manager Event of Default or Lakes Event of Default shall occur under the Secured Obligations; or ii. Bank terminates the Control Agreement without the appointment of a successor securities intermediary in accordance with Section 10 unless the Band has refused to consent to the successor, in which case all property in the Account shall be deposited with the Clerk of the United States District Court for the Western District of Michigan, Southern Division, subject to the lien and security interest of the Band, and shall be subject to interpleader in that Court. iii. Pledgor violates any provision of the Control Agreement; or iv. The Pledgor shall fail duly to perform, observe or comply with any provision of this Security Agreement which default is not cured within 30 days following written notice of default, or Pledgor breaches any material warranty or representation made hereunder; then, upon the occurrence of any such Event of Default, the Secured Party shall have all rights and remedies of a secured party under the Minnesota Uniform Commercial Code or other applicable law and shall in addition to such rights and remedies, have the right, in its absolute discretion, at any time or times thereafter to direct Bank or any other financial intermediary in accordance with the Control Agreement to sell or transfer any and all Pledged Collateral and deliver the proceeds thereof to Secured Party for application to the Secured Obligations. b. The Secured Party will give Pledgor at least five (5) days prior written notice by registered or certified mail at the address of the Pledgor as set forth above (or at such other address or addresses as the Pledgor shall specify in writing to the Secured Party from time to time) of (i) time and place of any public sale thereof, (ii) the time after which any private sale or any other intended disposition of Pledged Collateral is to be made, or (iii) the time after which Secured Party may. in accordance with the Control Agreement, deliver entitlement orders to Bank or any other Financial intermediary with regard to the Pledged Collateral. Any such notice shall be deemed to meet the requirements hereunder or under any applicable law (including without limitation the Minnesota Uniform Commercial Code) that reasonable notification be given of the time and place of any such sale or disposition. Such notice may be given without any demand of performance or any other demand, all such demands being expressly waived by the Pledgor. All such sales shall be at such commercially reasonable price or prices as Secured Party shall deem fit. and for cash or for credit or for future delivery (without Secured Party assuming any responsibility for any credit or risk). At any such sale or sales the Secured Party may purchase any or all of the Pledged Collateral to be sold thereat upon such terms as the Secured Party may deem appropriate. Upon any such sale or sales of the Pledged Collateral, said purchase shall be held by the purchaser absolutely free from any equity of redemption or any similar rights, all such equity of redemption or any similar rights being hereby expressly waived and released by the Pledgor. In the event any consent, approval or authorization of any 5 governmental agency will be necessary to effectuate any such sale or sales, the Pledgor shall execute all such applications or other instruments as may be required. c. The proceeds of any such sale or sales, together with any other additional collateral security at the time received and held hereunder, shall be received and applied: first, to the payment of all costs and expenses of such sale, including reasonable attorneys fees; second, to the payment of the Secured Obligations; and any surplus thereafter remaining shall be paid to the Pledgor or to whomever may be legally entitled thereto. d. The Secured Party shall be entitled at its option after an Event of Default to exercise the voting power with respect to the Pledged Collateral, if applicable; to receive and retain, as collateral security for the Secured Obligations, any and all dividends, distributions at any time and from time to time declared or made upon any of the Pledged Collateral and to exercise any and all rights of payment, conversion, exchange, subscription or any other rights, privileges or options pertaining to the Pledged Collateral as if the Secured Party were the absolute owner thereof, including without limitation the right to exchange, at its discretion, any and all Pledged Collateral upon the merger, consolidation, reorganization, recapitalization or other readjustment of any other issuer or maker of Pledged Collateral, or, upon the exercise of any such right, privilege or option pertaining to the Pledged Collateral, and, in connection therewith, to deposit and deliver any and all of the Pledged Collateral with any committee, depositary, agent, registrar or other designated agency upon such terms and conditions as the Secured Party shall determine, or without liability except to account for property actually received. e. After an Event of Default, any expenses incurred by the Secured Party in exercising any of the foregoing rights and remedies or in the enforcement or administration of this Security Agreement, the Control Agreement or the Third Amended and Restated Agreements, or for the protection of the Secured Party's security interest in the Pledged Collateral, or in connection with the priority thereof, including without limitation all taxes, charges, liens and assessments against the Pledged Collateral, and all reasonable attorney's fees, shall be payable by Pledgor, shall be deemed advances necessary to protect the security, shall be added to the Secured Obligations, and shall bear interest at the Band Interest Rate. 10. Rights and Remedies are Cumulative. No course of dealing between the Pledgor and the Secured Party nor any failure to exercise, nor any delay in exercising, on the part of the Secured Party, any right, power or privilege hereunder or under the Secured Obligations, shall operate as a waiver thereof, nor shall any single or partial exercise of any rights, power or privilege constitute or be deemed to constitute any such waiver. The rights and remedies herein provided and provided under the Secured Obligations and under the Control Agreement are cumulative and are in addition to, and not exclusive of any rights or remedies provided by law, including, without limitation, the rights and remedies of a secured party under the Minnesota Uniform Commercial Code. 6 11. Notices. Except as otherwise provided herein, notice to or demand upon the Pledgor or the Secured Party shall be deemed to have been sufficiently given or served for all purposes thereof if mailed by certified or registered mail, postage prepaid, to the following addresses: if to Secured Party: Pokagon Band of Potawatomi Indians 58620 Sink Road Dowagiac, MI 49047 Attn: Chairman, Tribal Council With a copy to: Michael Phelan, General Counsel Pokagon Band of Potawatomi Indians P.O. Box 180 Dowagiac, MI 49047 and Daniel Amory, Esq. Drummond Woodsum & MacMahon P.O. Box 9781 Portland, ME 04104-5081 If to Pledgor: Great Lakes Gaming of Michigan, LLC Lakes Entertainment, Inc. 130 Cheshire Lane Minnetonka, MN 55305 Attn: Timothy J. Cope With a copy to: Damon Schramm Lakes Entertainment, Inc. 130 Cheshire Lane Minnetonka, MN 55305 With a copy to: Kevin Quigley, Esq. Hamilton Quigley & Twait, PLC First National Bank Building Suite W 1450 332 Minnesota Street Saint Paul, MN 55101-1314 and to: Daniel R. Tenenbaum Gray Plant Mooty 500 I.D.S. Center 80 So. 8th Street Minneapolis, MN 55402-3796 7 or to such other address as the party to whom such notice is directed may have designated in writing to the other parties hereto. 12. Waiver of Presentment, Demand, Notice, Etc. The Pledgor hereby waives notice of acceptance of this Security Agreement as well as presentment, demand, payment, notice of dishonor or protest and all other notices of any kind in connection with the Secured Obligations except as expressly provided in this Security Agreement, the Control Agreement or the Third Amended and Restated Agreements. 13. Reinstatement. This Security Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any amount received by the Secured Party in payment of the Secured Obligations is rescinded or may otherwise be restored or returned upon the insolvency, receivership or bankruptcy of the Pledgor. It is the intention of the parties hereto that this Security Agreement shall remain in full force and effect until all of the Secured Obligations are fully and indefeasibly paid and satisfied. 14. Resignation of Bank under Control Agreement. If Bank gives notice that it will terminate the Control Agreement, Pledgor may designate a successor financial intermediary under the Control Agreement, which designation shall be subject to Secured Party's reasonable consent. Pledgor and Secured Party shall execute a replacement Control Agreement on substantially the same terms with the successor financial intermediary. 15. Termination Secured Party agrees to terminate the Control Agreement and this Security Agreement upon the earlier of (a) the Commencement Date, provided that a Manager Event of Default has not occurred and is not continuing under the Third Amended and Restated Agreements as of such date; (b) termination of the Third Amended and Restated Agreements in accordance with their terms, and payment to the Band of all amounts that may be due to it on such termination; or (c) entry of a Final Order directing such termination. 16. Warranties and Representations - Great Lakes and Lakes. Each of Great Lakes and Lakes warrants, represents and covenants to the Band that: a. The Control Agreement and this Security Agreement each constitute the legal, valid and binding obligation of Great Lakes and Lakes, and are fully enforceable in accordance with their terms; 8 b. Neither the execution or delivery of this Security Agreement nor fulfillment of or compliance with the terms and provisions hereof will conflict with, or result in a breach of the terms, conditions or provisions of, constitute a default under or result in the creation of any lien, charge or encumbrance upon any property or assets of Lakes or Great Lakes under any agreement or instrument to which they or either of them is now a party or by which they may be bound; and c. The Band has, and at all times until the termination of the Control Agreement in accordance with Section 8 thereof shall have, a first perfected security interest in the Account and all cash, financial assets and investment property credited to the Account. 17. Further Assurances. From time to time hereafter, Lakes, Great Lakes and the Band will execute and deliver, or will cause to be executed and delivered, such additional instruments, certificates or documents, and will take all such actions, as may reasonably be requested by the other party or parties, for the purpose of implementing or effectuating the provisions of this Agreement. 18. Governing Law. This Agreement shall be interpreted in accordance with the law of the internal law of Minnesota. 19. Amendments, Assignments, Etc. Any provision of this Security Agreement may be amended if, but only if, such amendment is in writing and is signed by each of the parties hereto. No modification shall be implied from course of conduct. Great Lakes may not further assign its rights in the Account and its obligations under the Control Agreement without the written consent of the Band. 20. Gender and Number; Counterparts. Whenever the context so requires the masculine gender shall include the feminine and/or neuter and the singular number shall include the plural, and conversely in each case. This Security Agreement may be executed in separate counterparts and said counterparts shall be deemed to constitute one binding document. 21. Notices to Great Lakes. Great Lakes agrees that any notice or demand upon it shall be deemed to be sufficiently given or served if it is in writing, and is personally served or in lieu of personal service is mailed by first class certified mail, postage prepaid, or be overnight mail or courier service, addressed to Great Lakes at the address of Lakes and with copies set forth in Section 12 of the Control Agreement. 22. Arbitration; Limited Waiver of Sovereign Immunity. Any disputes under this Security Agreement shall be subject to arbitration as provided in Section 14.2 of the Third Amended and Restated Development Agreement; provided that any demand for arbitration shall be made within 30 days after a notice of default, denominated as such, is given under this Security Agreement. The Band's limited waiver of sovereign immunity in Sections 14.1 and 14.3 of the Third Amended and Restated Development Agreement shall apply to this Security Agreement; provided that the liability of the Band under any judgment shall always be Limited Recourse, and in no instance shall any enforcement of any kind whatsoever be allowed against any assets of the 9 Band other than the limited assets of the Band specified in the definition of Limited Recourse and Section 14.3(a) of the Third Amended and Restated Development Agreement. 23. Remedies Cumulative. The rights and remedies conferred upon the parties hereto shall be cumulative, and the exercise or waiver of any such right or remedy shall not preclude or inhibit the exercise of any additional rights or remedies. The waiver of any right or remedy hereunder shall not preclude the subsequent exercise of such right or remedy. 24. Headings. The headings contained in this Security Agreement are for convenience of reference only and shall have no effect on the interpretation or operation hereof. 25. Severability. To the extent a provision of this Security Agreement is unenforceable, this Security Agreement will be construed as if the unenforceable provision were omitted. 26. Amendment and Restatement. This Third Amended and Restated Pledge and Security Agreement amends and restates in its entirety the Pledge and Security Agreement between Lakes and the Band dated as of July 8, 1999, as amended by a first amendment dated as of October 16, 2000 and by a second amendment dated as of December 22, 2004 (collectively, the "Prior Security Agreement")- Nothing herein shall be construed to impair or discharge the Prior Security Agreement. To the extent that the terms and provisions of the Prior Security Agreement may conflict with or be inconsistent with the terms and provisions of this Third Amended and Restated Pledge and Security Agreement, the latter shall control. IN WITNESS WHEREOF, the parties hereto have caused this Third Amended and Restated Pledge and Security Agreement to be executed as of the 25th day of January, 2006. GREAT LAKES GAMING OF MICHIGAN, LLC By /s/ Timothy J. Cope ------------------------------------- Timothy J. Cope Its President LAKES ENTERTAINMENT, INC., f/k/a LAKES GAMING, INC. By /s/ Timothy J. Cope ------------------------------------- Timothy J. Cope Its President 10 THE POKAGON BAND OF POTAWATOMI INDIANS By /s/ John Miller ------------------------------------- John Miller Its Council Chairman By /s/ DANIEL F. RAPP ------------------------------------- DANIEL F. RAPP SECRETARY Seen and consented to: LAKES GAMING AND RESORTS, LLC By /s/ Timothy J. Cope ------------------------------------- Timothy J. Cope Its President 11 EX-10.173 7 c02716exv10w173.txt THIRD AMENDED AND RESTATED ACCOUNT CONTROL AGREEMENT EXHIBIT 10.173 EXECUTION VERSION THIRD AMENDED AND RESTATED ACCOUNT CONTROL AGREEMENT This Third Amended and Restated Account Control Agreement ("Control Agreement") is made as of the 25th day of January, 2006, by and among Great Lakes Gaming of Michigan, LLC, a Minnesota limited liability company ("Great Lakes"), Lakes Entertainment, Inc., f/k/a Lakes Gaming, Inc., a Minnesota corporation ("Lakes"), the Pokagon Band of Potawatomi Indians (the "Band") and U.S. Bank National Association, f/k/a Firstar Bank, N.A. ("Firstar" or "Bank"). WITNESSETH: WHEREAS, the Band and Lakes entered into a Development Agreement dated as of July 8, 1999 (the "1999 Development Agreement") and a Management Agreement dated as of July 8, 1999 (the "1999 Management Agreement"; collectively, with the 1999 Development Agreement, the "1999 Agreements"), pursuant to which the Band engaged Lakes to, among other things, assist the Band in the design, development, construction and management of a gambling casino and certain related amenities (as defined in the 1999 Development Agreement, the "Facility"); and WHEREAS, pursuant to the 1999 Development Agreement, Lakes agreed to make certain payments and advances to the Band, including without limitation the Transition Loan, the Lakes Development Loan and the Non-Gaming Land Acquisition Line of Credit (collectively the "Lakes Loans"), and the Scholarship Program Fee, and has agreed to perform development services with regard to the Facility, all on the terms set out in the 1999 Development Agreement; and WHEREAS, pursuant to the 1999 Management Agreement Lakes agreed to manage the Facility on the terms set out in the 1999 Management Agreement; and WHEREAS, Lakes assigned its rights and obligations under the 1999 Agreements to Great Lakes pursuant to an Assignment and Assumption Agreement dated as of October 16, 2000, subject to the terms and conditions set out in that agreement (the Assignment and Assumption Agreement, as the same has been by a First Amendment dated as of December 22, 2004 and a Second Amended and Restated Assignment and Assumption Agreement dated as of January 25, 2006 and may be modified, restated, amended and substituted, is hereinafter called the "Assignment Agreement"); and WHEREAS, the 1999 Agreements were amended and restated by a First Amended and Restated Development Agreement dated as of October 16, 2000 and by a First Amended and Restated Management Agreement dated as of October 16, 2000 (collectively, the "First Amended and Restated Agreements") and by a Second Amended and Restated Development Agreement dated as of December 22, 2004 and a Second Amended and Restated Management Agreement dated as of December 22, 2004 (collectively, the "Second Amended and Restated Agreements"); and WHEREAS, Lakes and Great Lakes have granted Band a security interest pursuant to a Pledge and Security Agreement dated July 8, 1999, as amended by First Amendment dated as of October 16, 2000, a Second Amendment dated as of December 22, 2004 and a Third Amended and Restated Pledge and Security Agreement dated as of January 25, 2006 (collectively, the "Security Agreement"), in a securities account maintained by Bank for Great Lakes, and in all related property. Lakes entered into an Account Control Agreement among the Band and Firstar dated as of July 8,1999, and Great Lakes joined therein to perfect the Band's security interest in that account and those assets (the "Control Agreement"). WHEREAS, the Control Agreement was amended by first amendments dated as of October 16, 2000 and second amendments dated as of December 22, 2004; and WHEREAS, Great Lakes, Lakes and the Band have entered into a Third Amended and Restated Development Agreement dated as of January 25, 2006 and a Third Amended and Restated Management Agreement dated as of January 25, 2006 (collectively, the "Third Amended and Restated Agreements"); and WHEREAS, the parties wish to amend and restate the Control Agreement to reflect the execution of the Third Amended and Restated Agreements, and to provide that the Control Agreement will secure the obligations of Lakes and Great Lakes to the Band under the Third Amended and Restated Agreements; NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Assignment of Account. Lakes represents to Firstar that it has, pursuant to the Assignment Agreement, assigned and transferred to Great Lakes all rights of Lakes in and to the Account the date hereof, as well as those subsequently accruing. Great Lakes recognizes and agrees that the Account and all cash, financial assets and investment property credited to the Account are and shall remain subject to the first perfected security interest of the Band in accordance with the Security Agreement and this Account Control Agreement. 2. The Account. Bank represents and warrants to the Band that: a. Bank maintains account number 5522000 (the "Account") for Great Lakes under the name "Pokagon Collateral Account." b. Lakes has deposited $20,900,000 in the Account, subject to this Account Control Agreement. Bank represents that the value and composition of the assets in the Account as of January 25, 2006 are shown on the attached Schedule 1. 2 c. Great Lakes shall make such further deposits into the Account as may be required under the Agreements, including without limitation such amounts as are needed to maintain a $2,000,000 balance in the Account in accordance with Section 8.2 of the Third Amended and Restated Development Agreement. d. Bank does not know of any claim to or interest in the Account, except for claims and interests of the parties referred to in this Control Agreement 3. Definitions. a. The following terms shall have the indicated meanings: "AGREEMENTS" means the Third Amended and Restated Development Agreement and the Third Amended and Restated Management Agreement between Great Lakes and the Band dated as of January 25, 2006, as the same may be further amended, restated, substituted or modified. "AWARD" means the award of an arbitrator relating to the Account in an arbitration conducted in accordance with Article 14 of the Third Amended and Restated Development Agreement. "BAND ACCOUNT" means a bank account in the name of the Band on which Great Lakes does not have signatory authority, which account is designated by the Band pursuant to Section 13 (a) of this Control Agreement to receive transfers from the Account on account of the Transition Loan and the Non-Gaming Acquisition Line of Credit and $900,000 of the Signing Fee. "BAND NOTIFICATION OF EXCLUSIVE CONTROL" means a Band Notification of a Lakes Default or a Band Notification of Termination. "BAND NOTIFICATION OF LAKES DEFAULT" means notification by the Band to Bank that either of the following conditions has been satisfied: (A) A Manager Event of Default or a Lakes Event of Default has occurred under the Third Amended and Restated Agreements and is continuing; (b) either (i) the time for Lakes to demand arbitration under the Third Amended and Restated Agreements has expired, or (ii) Lakes timely demanded arbitration, and the arbitrator's award has found that a Manager Event of Default or a Lakes Event of Default has occurred; and (c) the Band is entitled to payment of the property in the Account to the extent specified therein; or (B) A Guaranty Event of Default, as defined in a Guaranty from Lakes and LG&R to the Band dated October 16, 2000, as amended by First Amendment dated as of December 22, 2004, and a Second Amended and Restated Unlimited Guaranty dated as of January 25, 2006 has occurred. 3 The Band Notification of Lakes Default shall be in the form attached hereto as Exhibit A. "BAND NOTIFICATION OF TERMINATION" means notification by the Band to Bank that (a) the Third Amended and Restated Agreements have been terminated; (b) either (i) the time for Great Lakes to demand arbitration under the Third Amended and Restated Agreements has expired, or (ii) Great Lakes timely demanded arbitration, and the arbitrator's award has confirmed that termination; and (c) the Band is entitled to payment from the property in the Account to the extent specified therein. The Band Notification of Termination shall be in the form attached hereto as Exhibit B. "BAND REPRESENTATIVES" means one or more persons designated by the Band in writing to give consents and receive notices on behalf of the Band under this Control Agreement. "COURT" means the United States District Court for the District in which the Gaming Site is located (or, if the Gaming Site has not been designated, for the Western District of Michigan-Southern Division), the United States Appeals for the Sixth Circuit, and the United States Supreme Court; or if Great Lakes or the Band delivers to the Bank the written opinion of their respective counsel that such federal courts lack jurisdiction, the courts of the State of Michigan. "THIRD AMENDED AND RESTATED DEVELOPMENT AGREEMENT" means the Development Agreement dated as of July 8, 1999 between Lakes and the Band, as assumed by Great Lakes under the Assignment and Assumption Agreement dated as of October 16, 2000, and as amended and restated by a First Amended and Restated Development Agreement dated as of October 16, 2000, by a Second Amended and Restated Development Agreement dated as of December 22, 2004 and by a Third Amended and Restated Development Agreement dated as of January 25, 2006, and as the same may be further amended, restated, substituted or modified. "ENTERPRISE ACCOUNT" means a bank account in the name of the Band on which Great Lakes has signatory authority as agent for the Band pursuant to the Third Amended and Restated Development Agreement, which account is designated by the Band and Great Lakes pursuant to Section 13 (b) of this Control Agreement to receive transfers from the Account on account of Development Expenditures with regard to the Facility or the Enterprise. "ENTITLEMENT ORDER" means a notification to Bank from Great Lakes or the Band directing the Bank to transfer or redeem any securities, property, cash or other property in the Account. "FINAL ORDER" means an order, judgment or decree of a Court entered after notice and hearing (a) enjoining transfer of property in the Account, or (b) mandating compliance with, or otherwise enforcing, an Award, provided that the time for appeal from any such Order has expired or, if the Band has taken an appeal from such order, that the appeal has been denied and the Order is now final. 4 "FIRSTAR" shall mean Firstar Bank N.A, n/k/a U.S. Bank National Association, and its successors in interest. "JOINT NOTICE" means notification by the Band and Great Lakes to Bank (a) that the Account shall be terminated and directing the Bank to liquidate the property in the Account and deliver the proceeds thereof as directed in the Joint Notice, or (b) that specified funds should be wired from the Account as indicated in the Joint Notice. The Joint Notice shall, as to termination of the Account, be in the form attached hereto as Exhibit C. Any other Joint Notice shall be sufficient if it is signed by both the Band and Great Lakes. "LAKES DRAW REQUEST" means notification by Great Lakes to the Bank, prior to receipt by Bank of a Band Notification to transfer funds from the Account, which notification shall be in the form of Exhibit D-l (as to transfers to the Band Account) or D-2 (as to transfers to the Enterprise Account). "ORDER" means an order, judgment or decree of a Court entered after notice and hearing (a) enjoining transfer of property in the Account, or (b) mandating compliance with, or otherwise enforcing, an Award. b. Capitalized terms used herein without definition shall have the meanings assigned to them in the Third Amended and Restated Development Agreement 4. Control by the Band. Bank will comply with Entitlements Orders as follows: a. Prior to receipt by Bank of a Band Notification of Exclusive Control. Prior to receipt by Bank of a Band Notification of Exclusive Control, Bank shall transfer funds from the Account in accordance with a Lakes Draw Request if the Band gives its prior written consent to such request. Such consent shall be in the form attached as Exhibit E. b. Joint Notice. After receipt by Bank of a Joint Notice, Bank shall liquidate the property in the Account and transfer the proceeds thereof, and all interest, dividends and other income thereon, in accordance with the directions in such Joint Notice. c. Band Notification of Exclusive Control. After receipt by Bank of a Band Notification of Exclusive Control, Bank shall: i. immediately cease complying with Entitlement Orders or other directions concerning the Account originated by Great Lakes, whether pursuant to a Lakes Draw Request or otherwise; ii. immediately cease purchasing or selling securities in the Account or making any distributions from the Account, except with the prior written consent of 5 Band; iii. immediately cease distributing to Great Lakes interest and dividends on property in the Account; and iv. not less than thirty (30) nor more than forty-five (45) days after receipt by Bank of a Band Notification of Exclusive Control, and unless otherwise enjoined by an Order, liquidate all property in the Account and transfer the proceeds thereof and all interest, dividends and other income thereon to the Band Account, or such other account as the Band may direct in writing. d. Award. Bank shall comply with any Award not less than thirty (30) nor more than forty-five (45) days after receipt by Bank of a copy of the Award, unless enjoined by an Order of Court. e. Order: Final Order. Bank shall comply with any Order or Final Order; provided that Bank shall not distribute property out of the Account without the Band's written consent except pursuant to a Final Order. 5. Lakes' Rights in Account. a. Until Bank receives a Band Notice of Exclusive Control, Bank may distribute to Great Lakes all interest and regular cash dividends on property in the Account. Bank shall not distribute any other property in the Account, including without limitation securities or the proceeds of the sale of any securities, to or at the direction of Great Lakes except to the extent provided in Section 4. b. Until Bank receives a Band Notice of Exclusive Control, Great Lakes may direct the investment of all property in the Account in accordance with Section 8.2 of the Third Amended and Restated Development Agreement, provided that (a) property the Account shall not include equities, swaps, derivatives or commodities; (b) no instruments, certificated securities or financial assets, as defined in the Minnesota Uniform Commercial Code, shall be held in the name of Great Lakes, and all such assets shall be held in the name of the Account; and (c) any cash balances shall be invested in money market or other financial assets, unless needed to make distributions in accordance with this Control Agreement. Subject to that limitation, Bank may rely conclusively on Great Lakes' direction as to investment of property in the Account unless and until Bank receives a Band Notice of Exclusive Control. c. Bank will not comply with any Entitlement Order originated by Lakes that would require Bank to violate this Control Agreement. 6. Priority of Bank's Security Interest: Bank's Fees and Expenses: No Third Party Entitlement Orders. 6 a. Bank subordinates in favor of Band any security interest, lien, or right of setoff it may have, now or in the future, against the Account or property in the Account, except that Bank will retain its prior lien on property in the Account to secure payment for property purchased for the Account, normal commissions and fees for the Account, and its reasonable fees (including attorneys fees) and expenses relating to the Account. Bank is authorized to deduct such commissions, fees and expenses from the Account. To the extent that the property in the Account is not sufficient to pay such commissions, fees and expenses, the Band and Great Lakes jointly and severally agree to pay such to Bank promptly on demand. b. Bank will not agree with any third party that Bank will comply with Entitlement Orders originated by the third party with regard to the Account or property in the Account. 7. Statements. Confirmations and Notices of Adverse Claims. a. Bank will send copies of all statements and confirmations for the Account simultaneously to Great Lakes and Band. Bank will use reasonable efforts promptly to notify Band and Great Lakes if any other person claims that it has a property interest in property in the Account and that it is a violation of that person's rights for anyone else to hold, transfer or deal with the property. Bank will also send the Band copies of all other communications sent by Bank to Great Lakes relating to the Account, and shall furnish the Band with such other information concerning the Escrow Account as Band may reasonably request. b. Great Lakes shall send Band a copy of all communications sent by Great Lakes to Bank, including without limitation all Lakes Draw Requests; shall inform the Band of the nature and terms of the financial instruments in which the escrowed funds are invested; and shall furnish the Band with such other information concerning the Account as Band may request. c. The Band shall send Great Lakes a copy of all communications sent by the Band to Bank relating to the Account. 8. Bank's Responsibility. a. Except for permitting a withdrawal, delivery or payment in violation of Sections 4 or 5, Bank will not be liable to Band for complying with Entitlement Orders from Great Lakes that are received by Bank before Bank receives a Band Notice of Exclusive Control. b. Bank will not be liable to Great Lakes for complying with a Band Notice of Exclusive Control or with Entitlement Orders originated by Band after receipt by the Bank of a Band Notice of Exclusive Control, even if Great Lakes notifies Bank that Band is not legally entitled to issue the Entitlement Order or the Band Notice of Exclusive 7 Control, unless Bank takes the action after it is served with an Award or Order enjoining or prohibiting compliance with an Entitlement Order of the Band, and had a reasonable opportunity to act on the Award or Order. c. Bank shall incur no liability hereunder except for its willful misconduct or gross negligence so long as it shall have acted in good faith. d. In the event that a dispute arises as to the Account, Bank may liquidate the property in the Account and deposit the property thereof with the Clerk of the United States District Court for the Western District of Michigan, Southern Division, and may interplead the parties hereto. Upon so depositing such documents and money and filing its complaint and interpleader, Bank shall be released from all liability under the terms hereof as to the money so deposited. e. Bank shall have no responsibility for the genuineness or validity of any notices, certificates, securities, documents or other things deposited with it and shall be fully protected in acting in accordance with any written instructions given to it hereunder and reasonably believed by it to have been signed by the proper person, party or parties. Bank can rely conclusively on the opinion of counsel to the Band, or the opinion of its own counsel, as to the expiration of the time for appeal, denial of appeal or finality of an Order, provided that nothing in this Agreement shall waive or impair any claim, if any, of Great Lakes against counsel issuing such opinion. f. Bank is expressly authorized to comply with and obey any and all Orders and Final Orders relating to the Account, provided that Bank does not distribute property from the Account without the Band's written consent except pursuant to a Final Order; and in case the Bank so obeys or complies with any such Order or Final Order it shall not be liable to any of the parties hereto or to any other person, firm or corporation by reason of such compliance. g. Without limiting the provisions of Section 8 (c) above, the Bank shall not incur any liability for not performing any act or fulfilling any duty, obligation or responsibility hereunder by reason of any occurrence beyond the control of the Bank (including but not limited to any act or provision of any present or future law or regulation or governmental authority, any act of God or war, or the unavailability of the Federal Reserve Bank wire or telex or other wire or communication facility). h. This Control Agreement does not create any obligation of Bank except for those expressly set forth in this Control Agreement. In particular, Bank need not investigate whether Band is entitled under Band's agreements with Great Lakes to give an Entitlement Order or a Band Notice of Exclusive Control. i. The Account shall be maintained in the name of "Pokagon Collateral Account" on the books of the Bank unless the Band otherwise consents in writing. 8 9. Termination: Survival. a. Band may terminate this Control Agreement by notice to Bank and Great Lakes. Bank may terminate this Control Agreement on 60 days' notice to Band and Great Lakes. b. If Band notifies Bank that Band's security interest in the Account has terminated, this Control Agreement will immediately terminate. c. Section 8, "Bank's Responsibility," will survive termination of this Control Agreement. 10. Financial Assets. All property credited to the Account will be treated as financial assets and investment property under Articles 8 and 9 of the Minnesota Uniform Commercial Code. 11. Successors and Assigns. A successor to or assignee of Band's rights and obligations under the Third Amended and Restated Development Agreement will succeed to Band's rights and obligations under this Control Agreement. 12. Notice. a. Except as provided in Section 12 (b), any notice required to be given pursuant to this Control Agreement shall be delivered to the appropriate party by Certified Mail Return Receipt Requested or by overnight mail or courier service, to the following addresses: If to the Band: Pokagon Band of Potawatomi Indians 58620 Sink Road Dowagiac, MI 49047 Attn: Chairman, Tribal Council Facsimile No.: (616) 782-9625 With a copy to: Michael Phelan, General Counsel Pokagon Band of Potawatomi Indians P.O. Box 180 Dowagiac, MI 49047 Facsimile No.: (269) 782-7988 and Daniel Amory, Esq. Drummond Woodsum & MacMahon 9 P.O. Box 9781 Portland, ME 04104-5081 Facsimile No.: (207) 772-3627 If to Manager Great Lakes Gaming of Michigan, LLC or Lakes: Lakes Entertainment, Inc. 130 Cheshire Lane Minnetonka, MN 55305 Attn: Timothy J. Cope Facsimile No.: (952) 449-7064 With a copy to: Damon Schramm Lakes Entertainment, Inc. 130 Cheshire Lane Minnetonka, MN 55305 Facsimile No.: (612) 632-4328 With a copy to: Kevin Quigley, Esq. Hamilton Quigley & Twait, PLC First National Bank Building Suite W1450 332 Minnesota Street Saint Paul, MN 55101-1314 Facsimile No.: (651) 602-9976 and to: Daniel R. Tenenbaum Gray Plant Mooty 500 I.D.S. Center 80 So. 8th Street Minneapolis, MN 55402-3796 Facsimile No.: (612) 632-4444 b. Any consent by the Band to a Lakes Draw Request may be sent either as provided in Section 12 (a) or by facsimile transmission addressed to the Bank and Lakes at the facsimile numbers set forth above. Copies of such consents need not be sent to counsel. c. Any party may change any address or telecopy number by written notice to all parties. d. Any notice shall be deemed given three days following deposit in the United States mail, one day following delivery to an overnight delivery service, on oral confirmation of receipt of a facsimile transmission, or upon actual delivery, whichever first occurs. 10 13. Designation of Accounts. a. Band Account. The Band shall designate the Band Account by written notice to Bank. b. Enterprise Account. The Band and Great Lakes shall designate the Enterprise Account by written notice to Bank. c. Change in Account Designations. The Band may change the designation of the Band Account by written notice to Bank and Great Lakes. The Band and Great Lakes may change the designation of the Enterprise Account by written notice to Bank. d. Funds Wire Transferred. All transfers from the Account to the Band Account shall be by wire transfer to the accounts designated in this Control Agreement in accordance with written wire transfer instructions from the Band, subject to change in accordance with Section 13 (c). 14. Action or Consents by Band. a. Any action to be taken by the Band may be taken by the Pokagon Council on behalf of the Band. b. Any consent or other notification to be given by the Band may be given by any Band Representative. Great Lakes and Bank shall be entitled to rely conclusively upon any written communication signed by a Band Representative. 15. Reservation of Rights. By entering into this Control Agreement, the Band does not waive or affect any rights against Great Lakes under the Security Agreement or the Prior Control Agreement (as hereinafter defined). 16. Warranties and Representations - Great Lakes and Lakes. Each of Great Lakes and Lakes warrants, represents and covenants to the Band that: a. This Control Agreement and the Security Agreement each constitute the legal, valid and binding obligation of Great Lakes and Lakes, and are fully enforceable in accordance with their terms; b. Neither the execution or delivery of this Control Agreement nor fulfillment of or compliance with the terms and provisions hereof will conflict with, or result in a breach of the terms, conditions or provisions of, constitute a default under or result in the creation of any lien, charge or encumbrance upon any property or assets of Lakes or Great Lakes under any agreement or instrument to which they or either of them is now a party or by which they may be bound; and 11 c. The Band has, and at all times until the termination of this Control Agreement in accordance with Section 9 thereof shall have, a first perfected security interest in the Account and all cash, financial assets and investment property credited to the Account. 17. Warranties and Representations - Bank. Bank represents to the Band that Bank's representations in Sections 2 (a) and 2 (d) of this Control Agreement are true and correct as of the date of this Control Agreement. 18. Further Assurances. From time to time hereafter, Lakes, Great Lakes, the Band and Firstar will execute and deliver, or will cause to be executed and delivered, such additional instruments, certificates or documents, and will take all such actions, as may reasonably be requested by the other party or parties, for the purpose of implementing or effectuating the provisions of this Control Agreement. 19. Governing Law. This Control Agreement shall be interpreted in accordance with the law of the internal law of Minnesota. 20. Amendments, Assignments. Etc. Any provision of this Control Agreement may be amended if, but only if, such amendment is in writing and is signed by each of the parties hereto. No modification shall be implied from course of conduct. Great Lakes may not further assign its rights in the Account and its obligations under this Control Agreement without the written consent of the Band. 21. Gender and Number; Counterparts. Whenever the context so requires the masculine gender shall include the feminine and/or neuter and the singular number shall include the plural, and conversely in each case. This Control Agreement may be executed in separate counterparts and said counterparts shall be deemed to constitute one binding document. 22. Notices to Great Lakes. Great Lakes agrees that any notice or demand upon it shall be deemed to be sufficiently given or served if it is in writing and is personally served or in lieu of personal service is mailed by first class certified mail, postage prepaid, or be overnight mail or courier service, addressed to Great Lakes at the address of Great Lakes and with copies set forth in Section 12 of this Control Agreement. 23. Arbitration; Limited Waiver of Sovereign Immunity. Any disputes under this Control Agreement shall be subject to arbitration as provided in Section 14.2 of the Third Amended and Restated Development Agreement; provided that any demand for arbitration shall be made within 30 days after a notice of default, denominated as such, is given under this Control Agreement. The Band's limited waiver of sovereign immunity in Sections 14.1 and 14.3 of the Third Amended and Restated Development Agreement shall apply to this Control Agreement; provided that the liability of the Band under any judgment shall always be Limited Recourse, and in no instance shall any enforcement of any kind whatsoever be allowed against any assets of the Band other than the limited 12 assets of the Band specified in the definition of Limited Recourse and Section 14.3 of the Third Amended and Restated Development Agreement. 24. Amendment and Restatement. This Third Amended and Restated Account Control Agreement amends and restates in its entirety a certain Account Control Agreement among Lakes, the Bank and Firstar dated as of July 8, 1999, as amended by a First Amendment to Account Control Agreement dated as of October 16, 2000 and a Second Amendment to Account Control Agreement dated as of December 22, 2004 (collectively, the "Prior Control Agreement"). Nothing herein shall be construed to impair or discharge the Prior Control Agreement. To the extent that the terms and provisions of the Prior Control Agreement may conflict with or be inconsistent with the terms and provisions of this Third Amended and Restated Account Control Agreement, the latter shall control. 25. Miscellaneous. a. This Control Agreement and the Account will be governed by the internal laws of the State of Minnesota. Bank and Great Lakes may not change the law governing the Account without Band's express written agreement b. This Control Agreement may be modified only by a written amendment signed by all the parties hereto, and no waiver of any provision hereof shall be effective unless expressed in a writing signed by the party to be charged. c. The rights and remedies conferred upon the parties hereto shall be cumulative, and the exercise or waiver of any such right or remedy shall not preclude or inhibit the exercise of any additional rights or remedies. The waiver of any right or remedy hereunder shall not preclude the subsequent exercise of such right or remedy. d. The headings contained in this Control Agreement are for convenience of reference only and shall have no effect on the interpretation or operation hereof. e. This Control Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute one and the same instrument. f. Great Lakes agrees to indemnify and hold the Band harmless against all costs, expenses and fees (i) charged by the Bank against the Account on or after a Manager Event of Default, or (ii) which the Band pays Bank under Section 6 (a) of this Control Agreement. g. All income on property in the Account shall be for the account of Great Lakes. Great Lakes certifies that its IRS identification number is 41-1973426, and agrees that income on the property in the Account shall be reported in its name. h. To the extent a provision of this Control Agreement is unenforceable, this Control 13 Agreement will be construed as if the unenforceable provision were omitted. i. The parties agree that Bank is a "securities intermediary" for purposes of Articles 8 and 9 of the Uniform Commercial Code, as adopted in Minnesota, and that Minnesota is the "securities intermediary's jurisdiction" for all purposes under those Articles with regard to this Control Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Third Amended and Restated Account Control Agreement to be executed as of the 25th day of January, 2006. GREAT LAKES GAMING OF MICHIGAN, LLC By: /s/ Timothy J. Cope ------------------------------------ Timothy J. Cope Its President LAKES ENTERTAINMENT, INC., f/k/a LAKES GAMING, INC. By: /s/ Timothy J. Cope ------------------------------------ Timothy J. Cope Its President THE POKAGON BAND OF POTAWATOMI INDIANS By: /s/ John Miller ------------------------------------ John Miller Its Council Chairman By: /s/ Daniel Rapp ------------------------------------ Daniel Rapp Its Secretary 14 U.S. BANK NATIONAL ASSOCIATION, f/k/a FIRSTAR BANK, N.A. By: /s/ James J. Kellogg ------------------------------------ Name: James J. Kellogg Its: Vice President LAKES GAMING AND RESORTS, LLC By: /s/ Timothy J. Cope ------------------------------------ Timothy J. Cope Its President 15 EXHIBIT A BAND NOTIFICATION OF LAKES DEFAULT TO: U.S. Bank National Association 101 East Fifth Street St. Paul, MN 55101 attn: Frank P. Leslie RE: DEFAULT UNDER CERTAIN AGREEMENTS BY AND BETWEEN THE POKAGON BAND OF POTAWATOMI INDIANS (THE "BAND") AND GREAT LAKES GAMING OF MICHIGAN, LLC ("GREAT LAKES") Dear Sir: (Note: Capitalized terms used herein without definition shall have the meanings assigned to them in a certain Account Control Agreement (the "Control Agreement") dated as of July 8, 1999 by and among the Band, Lakes and U.S. Bank National Association, f/k/a Firstar Bank ("Bank"), as amended and restated by the First Amendment dated as of October 16, 2000 and by the Second Amendment dated as of December 22, 2004 and by the Third Amended and Restated Account Control Agreement dated as of January 25, 2006). Notice is hereby given to you under the Control Agreement that either of the following conditions has been satisfied: (A) A Manager Event of Default or a Lakes Event of Default has occurred under the Third Amended and Restated Agreements and is continuing; (b) either (i) the time for Great Lakes to demand arbitration under the Third Amended and Restated Agreements has expired, or (ii) Great Lakes timely demanded arbitration, and the arbitrator's award has found that a Manager Event of Default or a Lakes Event of Default has occurred; and (c) the Band is entitled to payment of the property in the Account to the extent specified therein; or (B) A Guaranty Event of Default, as defined in a Guaranty from Lakes and LG&R to the Band dated October 16, 2000, as amended by First Amendment dated as of December 22, 2004 and Second Amended and Restated Unlimited Guaranty dated as of January 25, 2006, has occurred. You are hereby directed to: i. immediately cease complying with Entitlement Orders or other directions concerning the Account originated by Great Lakes, whether pursuant to a Lakes Draw Request or otherwise; i ii. immediately cease purchasing or selling securities in the Account or making any distributions from the Account, except with the prior written consent of Band; iii. immediately cease distributing to Great Lakes interest and dividends on property in the Account; and iv. not less than thirty (30) nor more than forty-five (45) days after your receipt hereof, and unless otherwise enjoined by an Order, liquidate all property in the Account and transfer the proceeds thereof and all interest, dividends and other income thereon to the following account by wire transfer: Amount: The entire proceeds of the Account (indicate which is applicable) or $______________________________ Wire to: _______________________________ Account Number: _______________________________ Bank: _______________________________ ABA Number: _______________________________ Reference: _______________________________ Dates: ____________, _____ THE POKAGON BAND OF POTAWATOMI INDIANS By ------------------------------------- It Council Chairman By ------------------------------------- Its Secretary ii EXHIBIT B BAND NOTIFICATION OF TERMINATION TO: Firstar Bank of Minnesota, NA 101 East Fifth Street St Paul, MN 55101 Attn: Frank P. Leslie Re: TERMINATION OF CERTAIN AGREEMENTS BY AND BETWEEN THE POKAGON BAND OF POTAWATOMI INDIANS (THE "BAND") AND GREAT LAKES GAMING OF MICHIGAN, LLC ("GREAT LAKES") Dear Sir: (Note: Capitalized terms used herein without definition shall have the meanings assigned to them in a certain Account Control Agreement (the "Control Agreement") dated as of July 8,1999 by and among the Band, Lakes and Firstar Bank of Minnesota, N.A. ("Bank") as amended and restated by the First Amendment dated as of October 16, 2000 and by the Second Amendment dated as of December 22, 2004 and by the Third Amended and Restated Account Control Agreement dated as of January 25, 2006). Notice is hereby given to you under the Control Agreement that: (a) the Third Amended and Restated Agreements have been terminated; (b) either i. the time for Great Lakes to demand arbitration under the Agreements has expired, or ii. Great Lakes timely demanded arbitration, and the arbitrator's award has confirmed that termination; and (c) the Band is entitled to payment of the property in the Account as provided herein. You are hereby directed to: i. immediately cease complying with Entitlement Orders or other directions concerning the Account originated by Great Lakes, whether pursuant to a Lakes Draw Request or otherwise; ii. immediately cease purchasing or selling securities in the Account or making any distributions from the Account, except with the prior written consent of Band; iii iii. immediately cease purchasing or selling securities in the Account or making any distributions from the Account, except with the prior written consent of Band; iv. immediately cease distributing to Great Lakes interest and dividends on property in the Account; and v. not less than thirty (30) nor more than forty-five (45) days after your receipt hereof and unless otherwise enjoined by an Order, liquidate all property in the Account and transfer the proceeds thereof and all interest, dividends and other income thereon to the following account by wire transfer: Amount: The entire proceeds of the Account (indicate which is applicable) or $_________________________________ Wire to: Account Number: __________________________________ Bank: __________________________________ ABA Number: __________________________________ Reference: __________________________________ Dated: _____________, ____ THE POKAGON BAND OF POTAWATOMI INDIANS By ------------------------------------- Its Council Chairman By ------------------------------------- Its Secretary iv EXHIBIT C JOINT NOTICE TO: Firstar Bank of Minnesota, NA 101 East Fifth Street St Paul, MN 55101 Attn: Frank P. Leslie Re: JOINT NOTICE OF TERMINATION OF CERTAIN AGREEMENTS BY AND BETWEEN THE POKAGON BAND OF POTAWATOMI INDIANS (THE "BAND") AND GREAT LAKES GAMING OF MICHIGAN, LLC ("GREAT LAKES") Dear Sir: (Note: Capitalized terms used herein without definition shall have the meanings assigned to them in a certain Account Control Agreement (the "Control Agreement") dated as of July 8, 1999 by and among the Band, Lakes and Firstar Bank of Minnesota, N. A. ("Bank") as amended and restated by the First Amendment dated as of October 16, 2000 and by the Second Amendment dated as of December 22, 2004 and by the Third Amended and Restated Account Control Agreement dated as of January 25, 2006). Notice is hereby given to you that the Third Amended and Restated Agreements have been terminated. You are hereby directed to liquidate all property in the Account and transfer the proceeds as follows: 1. $______________________ of said proceeds shall be transferred to the following account by wire transfer: Account Number: __________________________________________ Bank: __________________________________________ ABA Number: __________________________________________ Reference: __________________________________________ 2. $______________________ of said proceeds shall be transferred to the following account by wire transfer: Account Number: __________________________________________ Bank: __________________________________________ ABA Number: __________________________________________ Reference: __________________________________________ v Dated: _____________, ____ THE POKAGON BAND OF POTAWATOMI GREAT LAKES GAINING OF MICHIGAN, LLC INDIANS By By ---------------------------------- ------------------------------------- Its Council Chairman Its ------------------------------------ By ---------------------------------- Its Secretary vi EXHIBIT D-I LAKES DRAW REQUEST (TRANSFERS TO BAND ACCOUNT) TO: Firstar Bank of Minnesota, NA 101 East Fifth Street St Paul, MN 55101 Attn: Frank P. Leslie Re: DRAW BY GREAT LAKES GAMING OF MICHIGAN, LLC UNDER THE CONTROL AGREEMENT Dear Sir: (Note: Capitalized terms used herein without definition shall have the meanings assigned to them in a certain Account Control Agreement (the "Control Agreement") dated as of July 8, 1999 by and among the Band, Lakes and Firstar Bank of Minnesota, N.A. ("Bank") as amended and restated by the First Amendment dated as of October 16, 2000 and by the Second Amendment dated as of December 22, 2004 and by the Third Amended and Restated Account Control Agreement dated as of January 25, 2006). Pursuant to Section 4 (a) of the Control Agreement, you are hereby directed to wire transfer, as soon as is practicable after receipt of the Consent of the Band, but within not more than two business days after your receipt thereof, the following sum: $______________ from the Account to the Band Account as designated by the Band pursuant to Section 13 (a) of the Control Agreement. Dated: _____________, ____ GREAT LAKES GAMING OF MICHIGAN, LLC By ------------------------------------- Its ------------------------------------ vii EXHIBIT D-2 LAKES DRAW REQUEST (TRANSFERS TO ENTERPRISE ACCOUNT) TO: Firstar Bank of Minnesota, NA 101 East Fifth Street St Paul, MN 55101 Attn: Frank P. Leslie Re: DRAW BY GREAT LAKES GAMING OF MICHIGAN, LLC UNDER THE CONTROL AGREEMENT Dear Sir: (Note: Capitalized terms used herein without definition shall have the meanings assigned to them in a certain Account Control Agreement (the "Control Agreement") dated as of July 8, 1999 by and among the Band, Lakes and Firstar Bank of Minnesota, N.A. ("Bank") as amended and restated by the First Amendment dated as of October 16, 2000 and by the Second Amendment dated as of December 22, 2004 and by the Third Amended and Restated Account Control Agreement dated as of January 25, 2006). Pursuant to Section 4 (a) of the Control Agreement, you are hereby directed to wire transfer, as soon as is practicable after receipt of the Consent of the Band, but within not more than two business days after your receipt thereof, the following sum: $_____________ from the Account to the Enterprise Account as designated by the Band and Great Lakes pursuant to Section 13 (b) of the Control Agreement. Dated: _____________, ____ GREAT LAKES GAINING OF MICHIGAN, LLC By ------------------------------------- Its ------------------------------------ viii EXHIBIT E BAND CONSENT TO LAKES DRAW REQUEST TO: Firstar Bank of Minnesota, NA 101 East Fifth Street St PauL, MN 55101 Attn: Frank P. Leslie Re: BAND CONSENT TO DRAW BY GREAT LAKES GAINING OF MICHIGAN, LLC UNDER THE CONTROL AGREEMENT Dear Sir: (Note: Capitalized terms used herein without definition shall have the meanings assigned to them in a certain Account Control Agreement (the "Control Agreement") dated as of July 8, 1999 by and among the Band, Lakes and Firstar Bank of Minnesota, N.A. ("Bank") as amended and restated by the First Amendment dated as of October 16, 2000 and by the Second Amendment dated as of December 22, 2004 and by the Third Amended and Restated Account Control Agreement dated as of January 25, 2006). Pursuant to Section 4 (a) of the Control Agreement, you are hereby notified that the Band consents to the Draw by Great Lakes dated _____________, a copy of which is attached. Dated: _____________, ____ ---------------------------------------- ---------------------------------------- Print Name: Band Representative, duly authorized ix EX-10.174 8 c02716exv10w174.txt THIRD AMENDED AND RESTATED LAKES DEVELOPMENT NOTE EXHIBIT 10.174 EXECUTION VERSION THIRD AMENDED AND RESTATED LAKES DEVELOPMENT NOTE $46,000,000 January 25, 2006 Dowagiac, Michigan FOR VALUE RECEIVED, the Pokagon Band of Potawatomi Indians (the "Band") promises to pay to Great Lakes Gaming of Michigan, LLC, a Minnesota limited liability company ("Lakes"), such sums as may be advanced by Lakes to the Band in accordance with Sections 8.4 and 9.2.1 of a Development Agreement between the Band and Lakes Entertainment, Inc., f/k/a Lakes Gaming, Inc. dated as of July 8, 1999, (as assigned by Lakes Entertainment, Inc. to and assumed by Lakes pursuant to that certain Assignment and Assumption Agreement dated as of October 16, 2000 by and among the Band, Lakes Entertainment, Inc. and Lakes, and amended by a Second Amended and Restated Assignment and Assumption Agreement of even date hereof (the "Assignment Agreement")); and as amended and restated by a First Amended and Restated Development Agreement dated as of October 16, 2000, a Second Amended and Restated Development Agreement dated as of December 22, 2004, and a Third Amended and Restated Development Agreement of even date hereof (collectively, and as heretofore and hereafter further amended, substituted, restated and modified, the "Development Agreement"); provided that the principal amount due hereunder shall not exceed Forty-Six Million Dollars ($46,000,000.00) except as otherwise provided in Section 9.2.1(a) of the Development Agreement. 1. Advances; Funding. Advances under this Note shall be made (a) upon written request by the Band to Lakes in the form of Draw Request attached as Exhibit A, (b) through a Draw Request approved by the Band pursuant to the Control Agreement, (c) through other written requests by the Band to Lakes permitted by the Development Agreement or any applicable Transaction Document, or (d) through advances by Lakes to the Enterprise Bank Accounts to pay Development Expenditures in accordance with either (I) the Approved Development Budget or, prior to the adoption of the Approved Development Budget, the approval of the Business Board or the Band; and (II) the Development Agreement. Draw Requests submitted by the Band shall be sent in accordance with Section 15.4 of the Development Agreement. Advances under this Note may, at Lakes' option, be funded through transfer of funds from the Escrow Account; provided that interest shall only accrue under this Note on funds advanced through the Escrow Account after transfer from the Escrow Account to the Band Enterprise Account, and shall not begin to accrue on deposit by Lakes into the Escrow Account. All Draw Requests submitted by the Band shall be funded within ten (10) days of the date of the draw request. By making any advance to the Enterprise Bank Accounts or otherwise under the Development Agreement, Lakes shall certify that the amounts so advanced are necessary for, and shall be used to pay, Development Expenditures in accordance with either (a) the Approved Development Budget or, prior to the adoption of the Approved Development Budget, the approval of the Business Board or the Band; and (b) the Development Agreement. 2. Interest. Interest shall accrue on the outstanding balance under this Note as follows: (a) if the Bank Closing occurs, at a fixed rate equal to the lesser of (i) Base Rate as of the Bank Closing plus 1% or (ii) 10% (the "Band Interest Rate"); or (b) If the Bank Closing does not occur, at a variable rate equal to the lesser of (i) Base Rate plus 1% or (ii) 10% (the lesser of (i) and (ii) being referred to as the "Variable Interest Rate"). Lakes shall adjust the Variable Interest Rate on the then unpaid principal balance, by way of increase or decrease, in accordance with changes in the Base Rate. Such changes shall be effective as of the change in the Base Rate (the "Effective Date"). Upon the Bank Closing, interest accruing under this Note prior to the Bank Closing shall be adjusted retroactively to reflect the Band Interest Rate. "Base Rate" means the lowest Prime Rate as is published daily in The Wall Street Journal. In the event that the Wall Street Journal ceases to publish the Prime Rate, then the holder hereof may in its reasonable discretion select some other generally recognized comparable indicator of the national Prime Rate. 3. Repayment. I. If the Commencement Date occurs, the Band shall repay the amount of principal and accrued interest outstanding hereunder as of the Commencement Date monthly in arrears, beginning on the 15th day of the month after the month in which the Commencement Date occurs, in equal monthly payments of principal and interest in an amount sufficient to amortize such principal and accrued interest over (a), if pursuant to the Development Agreement the term of the Lakes Development Loan is seven (7) years, the successive eighty-four months of that term; or (b), if pursuant to the Development Agreement the term of the Lakes Development Loan is five (5) years, the successive 60 months of that term; and, if not sooner paid, in full at the end of the Term (except as provided in Section 13.7 of the Development Agreement). II. If the Commencement Date does not occur, principal and interest shall be repayable to the extent and in the manner provided in the Development Agreement; provided that payments shall in any event be due and made only from the sources specified in Sections 14.3 and 14.4 of the Development Agreement. If Gaming commences at a Subsequent Gaming Facility and payment is due under this Note in accordance with the Development Agreement, the Band shall, beginning on the 15th day of the month following such commencement date, make equal monthly payments to Lakes of principal and interest in an amount sufficient to amortize the principal amount outstanding as of such commencement date over a sixty 2 (60) month period at the Variable Interest Rate, and shall thereafter continue to make such payments on the 15th day of each succeeding month to and including the fifteenth day of the sixtieth month following such commencement date, when all remaining principal and interest shall be due and payable. As of the Effective Date of a change in the Base Rate, Lakes shall adjust the monthly installments of principal and interest as of the installment next following the Effective Date so that the then unpaid principal balance would be amortized in full at the revised Variable Interest Rate five years after such commencement of gaming. Lakes shall promptly notify the Band in writing of any changes in the Base Rate and in the installment payment due. 4. Prepayment. This Note may be prepaid at any time without penalty. This Note shall also be subject to prepayment as and when required under the terms of any Transaction Documents. 5. Subordination. Payment of amounts due hereunder shall be subordinated to the Bank Development Loan, the Equipment Loan and any other third-party loans or equipment leases to the Band relating to the Facility to the extent provided in the Development Agreement or, if the Commencement Date does not occur, or to any loans relating to any other Gaming facility in Michigan owned by the Band to the extent provided in the Development Agreement. The holder of this Note agrees to execute and deliver subordination agreements evidencing such subordination in form reasonably acceptable to the holder and the Bank Lender, the Equipment Lender, or any other third-party lender or equipment lessor. 6. Limited Recourse. The obligations of the Band under this Note and any related awards, judgments or decrees shall be payable solely out of undistributed or future Net Revenues of the Enterprise and shall be a Limited Recourse obligation of the Band, with no recourse to tribal assets other than the limited assets of the Band specified in the definition of Limited Recourse and Section 14.3(a) of the Development Agreement. 7. Default; Acceleration. All outstanding principal together with accrued interest shall become immediately due and payable in full, subject to the limitations on recourse provided above, upon default in the payment of principal or interest due under this Note if such default is not remedied within thirty (30) days after receipt by the Band of written notice thereof as provided in the Development Agreement. 8. Band's Waiver of Sovereign Immunity and Consent to Suit. The Band expressly waives its sovereign immunity from suit for the purpose of permitting or compelling arbitration to enforce this Note as provided in Article 14 of the Development Agreement and consents to be sued in the United States District Court for the Western District of Michigan - Southern Division, the United States Court of Appeals for the Sixth Circuit, and the United States Supreme Court for the purpose of compelling arbitration or enforcing any arbitration award or judgment arising 3 out of this Note. If the United States District Court lacks jurisdiction, the Band consents to be sued in the Michigan State Court system for the same limited purpose. The Band waives any requirement of exhaustion of tribal remedies. Without in any way limiting the generality of the foregoing, the Band expressly authorizes any governmental authorities who have the right and duty under applicable law to take any action authorized or ordered by any such court, and to take such action, including without limitation, repossessing or foreclosing on any real property not in trust, or otherwise giving effect to any judgment entered; provided, however, that liability of the Band under any judgment shall always be Limited Recourse, and in no instance shall any enforcement of any kind whatsoever be allowed against any assets of the Band other than the limited assets of the Band specified in the definition of Limited Recourse and Section 14.3(a) of the Development Agreement. The Band appoints the Chairman of the Pokagon Council and the Secretary of the Pokagon Council as its agents for service of all process under or relating to the Agreements. The Band agrees that service in hand or by certified mail, return receipt requested, shall be effective for all purposes under or relating to the Agreements if served on such agents. 9. Arbitration. All disputes, controversies or claims arising out of or relating to this Note shall be settled by binding arbitration as provided in Article 14 of the Development Agreement. 10. Business Purposes; Applicable Law. This Note evidences a loan for business and commercial purposes and not for personal, household, family or agricultural purposes. This Note shall be interpreted and construed in accordance with Michigan law, to the extent not preempted by federal law. Use of Michigan law for the foregoing limited purpose of interpretation and construction is not intended by the parties to and shall not otherwise (i) incorporate substantive Michigan laws or regulations, including but not limited to Michigan usury laws or any other present or future provision of the laws of Michigan that would restrict the rate of interest upon any loan contemplated hereunder; or (ii) grant any jurisdiction to the State or any political subdivision thereof over the Gaming Site or the Facility. 11. Notices. All notices under this Note shall be given in accordance with Section 15.4 of the Development Agreement; except that copies of draw requests need not be sent to attorneys. 12. Defined Terms. Capitalized terms used herein shall have the same meanings assigned to them in the Development Agreement, and, if not defined in the Development Agreement, in the Management Agreement between the Band and Lakes, as amended. 13. Miscellaneous. a. Time is of the essence. b. The benefits and obligations of this Note shall inure to and be binding upon the parties hereto and their respective successors and assigns, provided that any succession or assignment is permitted under the Development Agreement. 4 c. Waiver of any one default shall not cause or imply a waiver any subsequent default. d. This Note, together with the documents listed in Section 15.17 of the Development Agreement, as each has been amended to date, sets forth the entire agreement between the parties hereto with respect to the subject matter hereof. All agreements, covenants, representations, and warranties, express or implied, oral or written, of the parties with respect to the subject matter hereof are contained herein and therein. This Note shall not be supplemented, amended or modified by any course of dealing, course of performance or uses of trade and may only be amended or modified by a written instrument duly executed by officers of both parties. e. This Note has been executed and delivered as a complete amendment and restatement in its entirety of that certain Lakes Note dated as of July 8, 1999 made payable by the Band to Lakes Entertainment, Inc., f/k/a Lakes Gaming, Inc., in the original principal amount of $43,000,000, as assigned by Lakes Entertainment, Inc., f/k/a Lakes Gaming, Inc to Lakes pursuant to the Assignment Agreement and as amended and restated by a First Amended and Restated Lakes Development Note dated as of October 16, 2000 and a Second Amended and Restated Lakes Development Note dated as of December 22, 2004, but does not extinguish, satisfy, discharge or constitute a novation thereof, and the Band hereby reaffirms, subject to the provisions of this Note, the indebtedness evidenced thereby. Lakes agrees to return to the Band the original Lakes Note dated as of July 8, 1999, the original First Amended and Restated Development Note dated as of October 16, 2000 and the original Second Amended and Restated Development Note dated as of December 22, 2004. f. Any other provision of this Note to the contrary notwithstanding: (i) in no event shall the rate of interest payable under this Note exceed the maximum rate permitted by law (the "Legal Rate"); (ii) if at any time the rate of interest computed as provided above (the "Computed Rate") exceeds the Legal Rate, then interest shall accrue thereafter at the Legal Rate regardless of whether the Computed Rate is greater or less than the Legal Rate until the total amount of interest payable hereunder equals the amount that would have been payable without regard to this sentence, or until this Note is paid in full, whichever occurs first; and (iii) if the holder receives any interest in excess of the maximum rate permitted by this sentence, the excess shall be credited against the principal hereof or refunded, at the holder's option. 5 THE POKAGON BAND OF POTAWATOMI INDIANS By: /s/ John Miller ------------------------------------ Its Council Chairman By: /s/ Daniel Rapp ------------------------------------ Its Secretary 6 EXHIBIT A DRAW REQUEST The Pokagon Band of Potawatomi Indians (the "Band") requests that Great Lakes Gaming of Michigan, LLC ("Lakes") advance $_______________ under the Lakes Development Note. The Band certifies that the amounts drawn under this Request will be used for purposes set out in Section 8.4 of the Development Agreement or for Development Expenditures, as per the attached itemization. Advances should be made [pursuant to wire transfer instructions previously given to Lakes] [as follows: _________________________________________]. Dated: THE POKAGON BAND OF POTAWATOMI INDIANS ------------------------------ BY: ------------------------------------ Its Council Chairman By: ------------------------------------ Its Secretary [or other persons designated by the Band pursuant to the Development Agreement] 7 EX-10.175 9 c02716exv10w175.txt FIRST AMENDED AND RESTATED LAKES FACILITY NOTE EXHIBIT 10.175 EXECUTION VERSION FIRST AMENDED AND RESTATED LAKES FACILITY NOTE $54,000,000 January 25, 2006 Dowagiac, Michigan FOR VALUE RECEIVED, the Pokagon Band of Potawatomi Indians (the "Band") promises to pay to Great Lakes Gaming of Michigan, LLC, a Minnesota limited liability company ("Lakes"), such sums as may be advanced by Lakes to the Band in accordance with Section 9.2.4 of a Development Agreement between the Band and Lakes Entertainment, Inc., f/k/a Lakes Gaming, Inc. dated as of July 8, 1999, (as assigned by Lakes Entertainment, Inc. to and assumed by Lakes pursuant to that certain Assignment and Assumption Agreement dated as of October 16, 2000 by and among the Band, Lakes Entertainment, Inc. and Lakes, and amended by a Second Amended and Restated Assignment and Assumption Agreement of even date hereof (the "Assignment Agreement")); and as amended and restated by a First Amended and Restated Development Agreement dated as of October 16, 2000, a Second Amended and Restated Development Agreement dated as of December 22, 2004, and a Third Amended and Restated Development Agreement of even date hereof (collectively, and as heretofore and hereafter amended, substituted, restated and modified, the "Development Agreement"); provided that the principal amount due hereunder shall not exceed Fifty-Four Million Dollars ($54,000,000.00). 1. Advances; Funding. Advances under this Note shall be made (a) upon written request by the Band to Lakes in the form of Draw Request attached as Exhibit A, (b) through a Draw Request approved by the Band pursuant to the Control Agreement, (c) through other written requests by the Band to Lakes permitted by the Development Agreement or any applicable Transaction Document, or (d) through advances by Lakes to the Enterprise Bank Accounts to pay Development Expenditures in accordance with either (I) the Approved Development Budget or, prior to the adoption of the Approved Development Budget, the approval of the Business Board or the Band; and (II) the Development Agreement. Draw Requests submitted by the Band shall be sent in accordance with Section 15.4 of the Development Agreement. All Draw Requests submitted by the Band shall be funded within ten (10) days of the date of the draw request. By making any advance to the Enterprise Bank Accounts or otherwise under the Development Agreement, Lakes shall certify that the amounts so advanced are necessary for, and shall be used to pay, Development Expenditures in accordance with either (a) the Approved Development Budget or, prior to the adoption of the Approved Development Budget, the approval of the Business Board or the Band; and (b) the Development Agreement. 2. Interest. Interest shall accrue on the outstanding balance under this Note at thirteen percent (13%) per annum. 3. Repayment. I. If the Commencement Date occurs, the Band shall repay the amount of principal and accrued interest outstanding hereunder as of the Commencement Date monthly in arrears, beginning on the 15th day of the month after the month in which the Commencement Date occurs, in equal monthly payments of principal and interest for (a), if pursuant to the Development Agreement the term of the Lakes Development Loan is seven (7) years, the successive eighty-four months of that term; or (b), if pursuant to the Development Agreement the term of the Lakes Development Loan is five (5) years, the successive 60 months of that term; and, if not sooner paid, in full at the end of the Term (except as provided in Section 13.7 of the Development Agreement). II. If the Commencement Date does not occur, principal and interest shall be repayable to the extent and in the manner provided in the Development Agreement; provided that payments shall in any event be due and made only from the sources specified in Sections 14.3 and 14.4 of the Development Agreement. If Gaming commences at a Subsequent Gaming Facility and payment is due under this Note in accordance with the Development Agreement, the Band shall, beginning on the 15th day of the month following such commencement date, make equal monthly payments to Lakes of principal and interest in an amount sufficient to amortize the principal amount outstanding as of such commencement date over a sixty (60) month period at the Variable Interest Rate, and shall thereafter continue to make such payments on the 15th day of each succeeding month to and including the fifteenth day of the sixtieth month following such commencement date, when all remaining principal and interest shall be due and payable. As of the Effective Date of a change in the Base Rate, Lakes shall adjust the monthly installments of principal and interest as of the installment next following the Effective Date so that the then unpaid principal balance would be amortized in full at the revised Variable Interest Rate five years after such commencement of gaming. Lakes shall promptly notify the Band in writing of any changes in the Base Rate and in the installment payment due. 4. Prepayment. This Note may be prepaid at any time without penalty. This Note shall also be subject to prepayment as and when required under the terms of any Transaction Documents. 5. Subordination. Payment of amounts due hereunder shall be subordinated to the Bank Development Loan, the Equipment Loan and any other third-party loans or equipment leases to the Band relating to the Facility to the extent provided in the Development Agreement or, if the 2 Commencement Date does not occur, or to any loans relating to any other Gaming facility in Michigan owned by the Band to the extent provided in the Development Agreement. The holder of this Note agrees to execute and deliver subordination agreements evidencing such subordination in form reasonably acceptable to the holder and the Bank Lender, the Equipment Lender, or any other third-party lender or equipment lessor. 6. Limited Recourse. The obligations of the Band under this Note and any related awards, judgments or decrees shall be payable solely out of undistributed or future Net Revenues of the Enterprise and shall be a Limited Recourse obligation of the Band, with no recourse to tribal assets other than the limited assets of the Band specified in the definition of Limited Recourse and Section 14.3(a) of the Development Agreement. 7. Default; Acceleration. All outstanding principal together with accrued interest shall become immediately due and payable in full, subject to the limitations on recourse provided above, upon default in the payment of principal or interest due under this Note if such default is not remedied within thirty (30) days after receipt by the Band of written notice thereof as provided in the Development Agreement. 8. Band's Waiver of Sovereign Immunity and Consent to Suit. The Band expressly waives its sovereign immunity from suit for the purpose of permitting or compelling arbitration to enforce this Note as provided in Article 14 of the Development Agreement and consents to be sued in the United States District Court for the Western District of Michigan - Southern Division, the United States Court of Appeals for the Sixth Circuit, and the United States Supreme Court for the purpose of compelling arbitration or enforcing any arbitration award or judgment arising out of this Note. If the United States District Court lacks jurisdiction, the Band consents to be sued in the Michigan State Court system for the same limited purpose. The Band waives any requirement of exhaustion of tribal remedies. Without in any way limiting the generality of the foregoing, the Band expressly authorizes any governmental authorities who have the right and duty under applicable law to take any action authorized or ordered by any such court, and to take such action, including without limitation, repossessing or foreclosing on any real property not in trust, or otherwise giving effect to any judgment entered; provided, however, that liability of the Band under any judgment shall always be Limited Recourse, and in no instance shall any enforcement of any kind whatsoever be allowed against any assets of the Band other than the limited assets of the Band specified in the definition of Limited Recourse and Section 14.3(a) of the Development Agreement. The Band appoints the Chairman of the Pokagon Council and the Secretary of the Pokagon Council as its agents for service of all process under or relating to the Agreements. The Band agrees that service in hand or by certified mail, return receipt requested, shall be effective for all purposes under or relating to the Agreements if served on such agents. 9. Arbitration. All disputes, controversies or claims arising out of or relating to this Note shall be settled by binding arbitration as provided in Article 14 of the Development Agreement. 3 10. Business Purposes; Applicable Law. This Note evidences a loan for business and commercial purposes and not for personal, household, family or agricultural purposes. This Note shall be interpreted and construed in accordance with Michigan law, to the extent not preempted by federal law. Use of Michigan law for the foregoing limited purpose of interpretation and construction is not intended by the parties to and shall not otherwise (i) incorporate substantive Michigan laws or regulations, including but not limited to Michigan usury laws or any other present or future provision of the laws of Michigan that would restrict the rate of interest upon any loan contemplated hereunder; or (ii) grant any jurisdiction to the State or any political subdivision thereof over the Gaming Site or the Facility. 11. Notices. All notices under this Note shall be given in accordance with Section 15.4 of the Development Agreement; except that copies of draw requests need not be sent to attorneys. 12. Defined Terms. Capitalized terms used herein shall have the same meanings assigned to them in the Development Agreement, and, if not defined in the Development Agreement, in the Management Agreement between the Band and Lakes, as amended. 13. Miscellaneous. a. Time is of the essence. b. The benefits and obligations of this Note shall inure to and be binding upon the parties hereto and their respective successors and assigns, provided that any succession or assignment is permitted under the Development Agreement. c. Waiver of any one default shall not cause or imply a waiver any subsequent default. d. This Note, together with the documents listed in Section 15.17 of the Development Agreement, as each has been amended to date, sets forth the entire agreement between the parties hereto with respect to the subject matter hereof. All agreements, covenants, representations, and warranties, express or implied, oral or written, of the parties with respect to the subject matter hereof are contained herein and therein. This Note shall not be supplemented, amended or modified by any course of dealing, course of performance or uses of trade and may only be amended or modified by a written instrument duly executed by officers of both parties. e. This Note has been executed and delivered as a complete amendment and restatement in its entirety of that certain Lakes Facility Note dated as of December 22, 2004 made payable by the Band to Lakes in the original principal amount of $54,000,000, but does not extinguish, satisfy, discharge or constitute a novation thereof, and the Band hereby reaffirms, subject to the provisions of this Note, the 4 indebtedness evidenced thereby. Lakes agrees to return to the Band the original Lakes Facility Note dated as of December 22, 2004. f. Any other provision of this Note to the contrary notwithstanding: (i) in no event shall the rate of interest payable under this Note exceed the maximum rate permitted by law (the "Legal Rate"); (ii) if at anytime the rate of interest computed as provided above (the "Computed Rate") exceeds the Legal Rate, then interest shall accrue thereafter at the Legal Rate regardless of whether the Computed Rate is greater or less than the Legal Rate until the total amount of interest payable hereunder equals the amount that would have been payable without regard to this sentence, or until this Note is paid in full, whichever occurs first; and (iii) if the holder receives any interest in excess of the maximum rate permitted by this sentence, the excess shall be credited against the principal hereof or refunded, at the holder's option. THE POKAGON BAND OF POTAWATOMI INDIANS BY: /s/ John Miller ------------------------------------ Its Council Chairman By: /s/ Daniel Rapp ------------------------------------ Its Secretary 5 EXHIBIT A DRAW REQUEST The Pokagon Band of Potawatomi Indians (the "Band") requests that Great Lakes Gaming of Michigan, LLC ("Lakes") advance $_______________under the Lakes Facility Note. The Band certifies that the amounts drawn under this Request will be used for purposes set out in Section 9.2.4 of the Development Agreement or for Development Expenditures, as per the attached itemization. Advances should be made [pursuant to wire transfer instructions previously given to Lakes] [as follows:_________________________________________]. Dated: THE POKAGON BAND OF POTAWATOMI INDIANS -------------- By: ------------------------------------ Its: Council Chairman By: ------------------------------------ Its: Secretary [or other persons designated by the Band pursuant to the Development Agreement] 6 EX-10.176 10 c02716exv10w176.txt FIRST AMENDED AND RESTATED SECURITY AGREEMENT EXHIBIT 10.176 EXECUTION VERSION FIRST AMENDED AND RESTATED SECURITY AGREEMENT This First Amended and Restated Security Agreement is made and entered into as of the 25th day of January, 2006, between the POKAGON BAND OF POTAWATOMI INDIANS, a federally recognized Indian Tribe, with tribal offices located at 58620 Sink Road, Dowagiac, Michigan 49047 ("DEBTOR") and Great Lakes Gaming of Michigan, LLC, a Minnesota limited liability company whose business office is located 130 Cheshire Lane, Minnetonka, Minnesota 55305 ("SECURED PARTY"). RECITALS WHEREAS, the Debtor has the inherent power to conduct and regulate gaming on its lands, subject only to the restrictions imposed by the Indian Gaming Regulatory Act of 1988, Public Law 100-497 ("IGRA"); and WHEREAS, in accordance with IGRA, the Debtor has entered into a Tribal-State Compact for the Conduct of Class III Gaming within the State of Michigan; and WHEREAS, the Debtor intends to operate a gaming facility in New Buffalo, Michigan (the "Casino") on lands the U.S. Department of the Interior has taken or will take into trust; and WHEREAS, the Debtor and Lakes Entertainment, Inc., f/k/a Lakes Gaming, Inc. ("Lakes") previously entered into a Development Agreement dated as of July 8, 1999, (as assigned by Lakes to Great Lakes pursuant to that certain Assignment and Assumption Agreement dated October 16, 2000, by and among the Debtor, Great Lakes and Lakes,_and amended by a Second Amended and Restated Assignment and Assumption Agreement of even date hereof ("Assignment Agreement)); and as amended and restated by that certain First Amended and Restated Development Agreement dated October 16, 2000 by and between the Debtor and Great Lakes, and as amended and restated by that certain Second Amended and Restated Development Agreement dated as of December 22, 2004 by and between the Debtor and Great Lakes, and as further simultaneously amended and restated by that certain Third Amended and Restated Development Agreement of even or near date hereof by and between the Debtor and Great Lakes (collectively, and as heretofore amended and together with all further modifications, renewals, consolidations, restatements, amendments and extensions thereof, the "Development Agreement"), pursuant to which Great Lakes has agreed to, among other things, make certain loans to the Debtor in connection with the development, construction and equipping of the Casino and certain related amenities; and WHEREAS, the Debtor and Lakes previously entered into a Management Agreement dated as of July 8, 1999, as assigned by Lakes to Great Lakes pursuant to the Assignment Agreement, and as amended and restated by that certain First Amended and Restated Management Agreement dated October 16, 2000 by and between the Debtor and Great Lakes, and as amended and restated by that certain Second Amended and Restated Management Agreement dated as of December 22, 2004, by and between the Debtor and Great Lakes, and as further simultaneously amended and restated by that certain Third Amended and Restated Management Agreement of even or near date hereof by and between the Debtor and Great Lakes (collectively, and as heretofore amended and together with all further modifications, renewals, consolidations, restatements, amendments and extensions thereof, the "Management Agreement"), pursuant to which the Debtor and Great Lakes have agreed that Great Lakes shall manage the Casino and certain related amenities as more specifically set forth therein; and WHEREAS, pursuant to the Development Agreement and the Management Agreement, Secured Party will, among other things, advance funds to Debtor. WHEREAS, as a material inducement to Secured Party to enter into the Development Agreement and the Management Agreement, the Debtor has agreed to execute this Security Agreement in favor of Secured Party and to grant a security interest to Secured Party in all of its right, title and interest in the property described herein. AGREEMENT Now therefore, in consideration of the above recitals and the mutual covenants hereinafter set forth, the parties hereto agree as follows: 1. Defined Terms. Unless the context otherwise requires, capitalized terms not defined herein have the meaning ascribed to them in the Development Agreement or the Management Agreement, as applicable. 2. Creation of Security Interest. The Debtor hereby assigns, pledges and grants to Secured Party a security interest in the Debtor's right, title and interest in and to the collateral described in Section 3 below (the "COLLATERAL") in each case whether now owned or hereafter acquired by Debtor in order to secure the payment and performance of the obligations of Debtor to Secured Party described in Section 4 herein below. On the date of execution of this Agreement, Debtor shall cause to be authorized and delivered to Secured Party: (a) such financing statements and similar documents necessary to perfect the security interest granted to Secured Party pursuant to this Agreement (the "Financing Statements"), and (b) a legal opinion in form and substances reasonably acceptable to Secured Party, opining as to the due authorization, execution and delivery of this Agreement and the Financing Statements by Debtor, together with opinions as to Debtor's sovereign immunity waiver and non-contravention with laws and agreements. Secured Party agrees to subordinate its security interest in the Collateral and its rights hereunder as required under the terms of the Development Agreement. 3. Collateral. The Collateral under this Security Agreement includes all of the following assets (collectively all of the following property and similar or after-acquired property under this Section 3 being hereinafter referred to as "COLLATERAL"): 2 all goods, furniture, furnishings and equipment required for or related to the operation of the Enterprise, including, without limitation: (i) cashier, money sorting and money counting equipment, surveillance and communication equipment, and security equipment; (ii) slot machines, video games of chance, table games, keno equipment and other gaming equipment; (iii) office furnishings and equipment; (iv) specialized equipment necessary for the operation of any portion of the Enterprise for accessory purposes, including equipment for kitchens, laundries, dry cleaning, cocktail lounges, restaurants, public rooms, commercial and parking spaces, and recreational facilities; and (v) hotel equipment (to the extent a hotel is included in the Enterprise); (vi) all other furnishings and equipment hereafter located and installed in or about the Facility or the Gaming Site which are used in the operation of the Enterprise; each of the foregoing whether now owned or hereafter at any time acquired by Debtor and wherever located, and including all replacements, additions, parts, appurtenances, accessions, substitutions, repairs, and proceeds relating thereto or therefrom, and all documents, records, ledger sheets and files of Debtor relating thereto (provided that Debtor shall retain all originals, and Secured Party's rights as to this Collateral extend only to making copies); together further with all proceeds of any such Collateral, including, without limitation (i) whatever is now or hereafter receivable or received by Debtor upon the sale, exchange, collection or other disposition of any item of Collateral, whether voluntary or involuntary, whether such proceeds constitute equipment, intangibles, or other assets; (ii) any such items which are now or hereafter acquired by Debtor with any proceeds of Collateral hereunder; and (iii) any insurance proceeds or any payments under any indemnity, warranty or guaranty now or hereafter payable by reason of loss or damage or otherwise with respect to any item of Collateral or any proceeds thereof. 4. Secured Obligations of Debtor. The Collateral secures and shall hereafter secure: (i) all amounts owing by the Debtor to the Secured Party with respect to the Lakes Development Note, the Lakes Facility Note, the Non-Gaming Land Acquisition Line of Credit, the Transition Loan Note, the Minimum Payments Note, the Lakes Working Capital Advance Note and any other Transaction Documents (as each of such terms are defined in the Development Agreement) and the Management Fee (as such term is defined in the Management Agreement), together with any costs, expenses or other amounts hereafter owing by the Debtor to the Secured Party pursuant to the terms of this Agreement, the Development Agreement, the Management Agreement or any other Transaction Documents, each of the foregoing, whether now existing or hereafter incurred or arising, and, without limiting the generality of the 3 foregoing; (ii) any and all sums advanced by Secured Party in order to preserve the Collateral or preserve Secured Party's security interest in the Collateral (or the priority thereof) and (iii) after and during the continuance of an Event of Default, the expenses of retaking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on the Collateral, of any proceeding for the collection or enforcement of any indebtedness, obligations or liabilities of Debtor referred to above, or of any exercise by Secured Party of its rights hereunder, together with reasonable attorneys' fees and disbursements and court costs (collectively, the "SECURED OBLIGATIONS"); PROVIDED HOWEVER, Secured Party agrees to terminate this Security Agreement upon request if Debtor has satisfied the following conditions: (a) all Secured Obligations have been repaid in full to Secured Party and (b) the Transaction Documents have been terminated in accordance with their terms. 5. Debtor's Representations and Warranties. The Debtor represents and warrants that: (a) the Debtor is (or, to the extent that the Collateral is acquired after the date hereof, will be) the sole legal and beneficial owner of its respective Collateral and has exclusive possession and control thereof; there are no security interests in, liens, charges or encumbrances on, or adverse claims of title to, or any other interest whatsoever in, such Collateral or any portion thereof except such liens that are created by this Security Agreement or as permitted by Section 9.2 of the Development Agreement and Section 10.6 of the Management Agreement (collectively, "PERMITTED LIENS"); and that no financing statement, notice of lien, mortgage, deed of trust or instrument similar in effect covering the Collateral or any portion thereof or any proceeds thereof ("LIEN NOTICE") exists or is on file in any public office, except as relates to Permitted Liens and except as may have been filed in favor of Secured Party relating to this Security Agreement or related agreements, or for which duly executed termination statements have been delivered to Secured Party for filing; (b) the Debtor has full right, power and authority to execute, deliver and perform this Security Agreement and the same constitutes a legally valid and binding obligation of the Debtor, enforceable against the Debtor in accordance with its terms subject to any limitations set forth in the Resolution of Limited Waiver attached to the Management Agreement. Subject to the completion of the items identified in Section 4(c) below, the provisions of this Security Agreement are effective to create in favor of Secured Party a valid and enforceable perfected security interest in the Collateral; (c) except for the filing or recording of the financing statements and (prior to transfer of the Gaming Site into trust) fixture filings that are to be filed in connection with this Security Agreement and compliance with applicable Minnesota law as to creation and perfection of security interests, and after adoption by Borrower of a commercial code governing secured transactions, compliance with the applicable filing and other provisions of such code, no authorization, approval or other action by, no notice to or registration or filing with, any person or entity, including without limitation, any creditor of Debtor or any governmental authority or regulatory body is required, except as may be agreed to by Debtor and Secured Party: (i) for the grant by the Debtor of the security interest in the Collateral pursuant to this Security Agreement or for the execution, delivery or performance of this Security Agreement by the Debtor, (ii) for the perfection or maintenance of such security interest created hereby, or the exercise by Secured 4 Party of the rights and remedies provided for in this Security Agreement (other than any required governmental consent or filing with respect to any patents, trademarks, copyrights, governmental claims, tax refunds, licenses or permits, compliance with the Johnson Act, 15U.S.C. Sections 1171 et seq. and other laws applicable to the possession, transportation, use and sale of gaming equipment, and the exercise of remedies requiring prior court approval), or (iii) for the enforceability of such security interest against third parties, including, without limitation, judgment lien creditors; (d) Debtor does not do business, and for the previous five years has not done business, under any fictitious business names or trade names; (e) the Collateral has not been and will not be used or bought by Debtor for personal, family or household purposes; (f) the Debtor's chief executive office is located at the address referenced as the first page of this Agreement, Debtor has no places of business other than such address and the Collateral is now and will at all times hereafter be located at Debtor's places of business or as Debtor may otherwise notify Secured Party in writing; (g) Intentionally omitted; (h) Debtor has not purchased any Collateral, other than for cash, within twenty-one (21) days prior to the date hereof; (i) Intentionally omitted; and (j) none of the execution, delivery and performance of this Security Agreement by Debtor, the consummation of the transactions herein contemplated, the fulfillment of the terms hereof or the exercise by Secured Party of any rights or remedies hereunder will constitute or result in a breach of any of the terms or provisions of, or constitute a default under, or constitute an event which with notice or lapse of time or both will result in a breach of or constitute a default under, any agreement, indenture, mortgage, deed of trust, equipment lease, instrument or other document to which Debtor is a party, conflict with or require approval, authorization, notice or consent under any law, order, rule, regulation, license or permit applicable to Debtor of any court or any federal or state government, regulatory body or administrative agency, other than compliance with the Johnson Act, 15 U.S.C. Sections 1171 et seq. and other laws applicable to the possession, transportation, use and sale of gaming equipment, or any other governmental body having jurisdiction over Debtor or its properties, or require notice, consent, approval or authorization by or registration or filing with any person or entity (including, without limitation, any stockholder or creditor of Debtor) other than any notices to Debtor from Secured Party required hereunder except as may be agreed to by Debtor and Secured Party. Except for the Permitted Liens, none of the Collateral is subject to any agreement, indenture, mortgage, deed of trust, equipment lease, instrument or other document to which Debtor is a party which may restrict or inhibit Secured Party's rights or ability to sell or dispose of the Collateral or any part thereof after the occurrence of an Event of Default (as defined herein). 5 6. Covenants of Debtor. The Debtor covenants and agrees as follows (provided that, so long as the Management Agreement remains in effect, no violation of any covenant caused by the failure of Secured Party to perform its express or implied obligations under the Management Agreement shall be an Event of Default hereunder): (a) Debtor will not move or permit to be moved the Collateral or any portion thereof to any location other than that set forth in Section 5(f) hereof, the Gaming Site or locations established in compliance with Section 6(b) hereof without the prior written consent of the Secured Party and the prior filing of a financing statement with the proper office and in the proper form to perfect or continue the perfection (without loss of priority) of the security interests created herein, which filing shall be satisfactory in form, substance and location to Secured Party prior to such filing; (b) Debtor will not voluntarily or involuntarily change its name, identity, corporate structure, or location of its chief executive office or any of its other places of business, unless in any such case: (i) Debtor shall have first received the prior written consent of Secured Party, (ii) Debtor shall have executed and caused to be filed financing statements with the proper offices and in the proper form to perfect or continue the perfection (without loss of priority) of the security interests created herein, which filing shall be satisfactory in form, substance and location to Secured Party prior to such filing, and (iii) Debtor shall have delivered to Secured Party any other documents required by Secured Party in a form and substance satisfactory to Secured Party; (c) Intentionally Omitted; (d) Debtor will promptly, and in no event later than 21 days after a request by Secured Party, procure or execute and deliver all further instruments and documents (including, without limitation, notices, financing statements, mortgagee waivers, landlord disclaimers and subordination agreements), that are consistent with the terms of the Management Agreement and the Development Agreement and any applicable subordination agreements and that are reasonably necessary or appropriate to and take any other actions which are reasonably necessary to perfect or to continue the perfection, priority and enforceability of Secured Party's security interests in the Collateral, to enable Secured Party to exercise and enforce its rights and remedies hereunder with respect to any Collateral, to protect the Collateral against the rights, claims or interests of third persons, or to effect or to assure further the purposes' and provisions of this Security Agreement, and will after and during the continuance of an Event of Default pay all reasonable costs incurred in connection therewith. Without limiting the generality of the foregoing, Debtor will: (i) mark conspicuously each item of chattel paper and each other contract included in the Collateral with a legend, in form and substance satisfactory to Secured Party, indicating that such chattel paper and other contracts are subject to the security interests granted hereby; (ii) execute and file such financing or continuation statements, or amendments thereto, and such other instruments or notices as may be necessary or desirable, which Secured Party may reasonably request in order to perfect and preserve the perfection and priority of the security interests granted or purported to be granted hereby; (iii) if any Collateral shall be evidenced by a promissory note or other instrument or chattel paper (other than checks received by any Debtor in the ordinary course of business), deliver and pledge to Secured Party such note or instrument or chattel paper duly endorsed and accompanied by duly executed instruments of transfer or 6 assignment, all in form and substance reasonably satisfactory to Secured Party; (iv) if any Collateral is at any time in the possession or control of any warehouseman, bailee, consignee or any of Debtor's agents or processors, Debtor shall notify such warehouseman, bailee, consignee, agent or processor of the security interests created or purported to be created hereby, shall cause such warehouseman, bailee, consignee, agent or processor to execute any financing statements or other documents which Secured Party may reasonably request to perfect Secured Party's security interest in such collateral, and, upon the request of Secured Party after the occurrence and during the continuation of an Event of Default, shall instruct such person to hold all such Collateral for Secured Party's account subject to Secured Party's instructions; (v) deliver and pledge to Secured Party all securities and instruments (other than checks received by Debtor in the ordinary course of business) constituting Collateral duly endorsed and accompanied by duly executed instruments of transfer or assignments, all in form and substance satisfactory to Secured Party; and (vi) at the request of Secured Party, deliver to Secured Party any and all certificates of title, applications for title or similar evidence of ownership of all Collateral and shall cause Secured Party to be named as lienholder on any such certificate of title or other evidence of ownership; (e) without the prior written consent of Secured Party, Debtor will not in any way encumber, or hypothecate, or create or permit to exist, any lien, security interest, charge or encumbrance or adverse claim upon or other interest in the Collateral, except for Permitted Liens, and the Debtor will defend the Collateral against all claims and demands of all persons at any time claiming the same or any interest therein, except as expressly provided herein. Debtor will not permit any Lien Notices to exist or be on file in any public office with respect to all or any portion of the Collateral except, in each case, for Lien Notices of holders of Permitted Liens or encumbrances permitted by the Development Agreement and Management Agreement or except as may have been filed by or for the benefit of Secured Party relating to this Security Agreement or related agreements. Debtor shall promptly notify Secured Party of any attachment or other legal process levied against any of the Collateral; (f) without the prior written consent of Secured Party or as otherwise permitted by the Development Agreement or the Management Agreement, Debtor will not sell, transfer, assign (by operation of law or otherwise), exchange or otherwise dispose of all or any portion of the Collateral or any interest therein, except that the Debtor may sell worn-out or obsolete equipment provided that the proceeds thereof are applied to the Secured Obligations or used to purchase new collateral of equal or greater value and the Secured Party shall be granted a security interest therein of equal priority to the Collateral which it replaced. If the proceeds of any such prohibited sale are notes, instruments, documents of title, letters of credit or chattel paper, such proceeds shall be promptly delivered to Secured Party to be held as Collateral hereunder (with all necessary or appropriate endorsements). If the Collateral, or any part thereof or interest therein, is sold, transferred, assigned, exchanged, or otherwise disposed of in violation of these provisions, the security interest of Secured Party shall continue in such Collateral or part thereof notwithstanding such sale, transfer, assignment, exchange or other disposition, and Debtor will hold the proceeds thereof in a separate account for Secured Party's benefit. Debtor will, at Secured Party's request, transfer such proceeds to Secured Party in kind; (g) Secured Party is hereby authorized to file one or more financing statements or fixture filings, and continuations thereof and amendments thereto, relative to all or any part of the Collateral, without the signature of Debtor where permitted by law; 7 (h) Except as expressly permitted by the Development Agreement and Management Agreement, Debtor will not enter into any indenture, mortgage, deed of trust, contract, undertaking, document, instrument or other agreement, except for the Development Agreement and Management Agreement and any documents, instruments or agreements related thereto or issue any securities which may materially restrict or inhibit Secured Party's rights or ability to sell or otherwise dispose of the Collateral or any part thereof after the occurrence of an Event of Default; (i) The Debtor shall cause to be maintained, insurance with respect to the Enterprise and Collateral as required by the Development Agreement and Management Agreement and naming Secured Party as an additional insured, loss payee and mortgagee, if applicable. Upon request, the Debtor shall provide to the Secured Party certificates of insurance or copies of insurance policies evidencing that such insurance satisfying the requirements of such Development Agreement and Management Agreement is in effect at all times; (j) Except as expressly permitted by the Development Agreement and Management Agreement, the Debtor will pay and discharge all taxes, assessments and governmental charges or levies against the Collateral prior to delinquency thereof and will keep the Collateral free of all unpaid claims and charges (including claims for labor, materials and supplies) whatsoever; (k) Debtor will keep and maintain the Collateral in good condition, working order and repair and from time to time will make or cause to be made all repairs, replacements and other improvements in connection therewith that are necessary or desirable toward such end. Debtor will not misuse or abuse the Collateral, or waste or allow it to deteriorate except for the ordinary wear and tear of its normal and expected use in Debtor's business in accordance with Debtor's policies as then in effect (provided that no changes are made to Debtor's policies as in effect on the date hereof that would be materially adverse to the interests of the Secured Party), and will comply with all laws, statutes and regulations pertaining to the use or ownership of the Collateral. Debtor will promptly notify Secured Party regarding any material loss or damage to any material Collateral or portion thereof; (l) The Debtor will take all actions consistent with reasonable business judgment or, upon the occurrence of an Event of Default, directed by Secured Party in Secured Party's reasonable discretion, to create, preserve and enforce any liens or guaranties available to secure or guaranty payments due Debtor under any contracts or other agreements with third parties, will not voluntarily permit any such payments to become more than thirty (30) days delinquent and will in a timely manner record and assign to Secured Party, to the extent and at the earliest time permitted by law, any such liens and rights to under such guaranties; (m) Intentionally omitted; (n) Intentionally omitted; (o) Secured Party shall have during normal business hours, with reasonable notice, the right to enter into and upon any premises where any of the Collateral or records with respect thereto are located for the purpose of inspecting the same, performing any 8 audit, making copies of records, observing the use of any part of the Collateral, or otherwise protecting its security interest in the Collateral; (p) Secured Party shall have the right at any time, but shall not be obligated, to make any payments and do any other acts Secured Party may reasonably deem necessary or desirable to protect its security interest in the Collateral, including, without limitation, that after and during the continuance of an Event of Default, the right to pay, purchase, contest or compromise any encumbrance, charge or lien (excluding any Permitted Liens) applicable or purported to be applicable to any Collateral hereunder, and whether prior to or after the occurrence of any Event of Default, appear in and defend any action or proceeding purporting to affect its security interest in and/or the value of any Collateral, and in exercising any such powers or authority, the right to pay all expenses incurred in connection therewith, including attorneys' fees. Debtor hereby agrees that it shall be bound by any such payment made or incurred or act taken by Secured Party hereunder after and during the continuance of an Event of Default, and shall reimburse Secured Party for all reasonable payments made and expenses incurred under this Security Agreement after and during the continuance of an Event of Default, which amounts shall be secured under this Security Agreement. Secured Party shall have no obligation to make any of the foregoing payments or perform any of the foregoing acts; (q) if any Debtor shall become entitled to receive or shall receive any certificate, instrument, option or rights, whether as an addition to, in substitution of, or in exchange for any or all of the Collateral or any part thereof, or otherwise, Debtor shall accept any such instruments as Secured Party's agent, shall hold them in trust for Secured Party, and shall deliver them forthwith to Secured Party in the exact form received, with Debtor's endorsement when necessary or appropriate, or accompanied by duly executed instruments of transfer or assignment in blank or, if requested by Secured Party, an additional pledge agreement or security agreement executed and delivered by Debtor, all in form and substance reasonably satisfactory to Secured Party, to be held by Secured Party, subject to the terms hereof, as additional Collateral to secure the obligations hereunder; (r) Secured Party is hereby authorized to pay all reasonable costs and expenses incurred in the exercise or enforcement of its rights hereunder, including attorneys' fees, and after an Event of Default to apply any Collateral or proceeds thereof against such amounts, and then to credit or use any further proceeds of the Collateral in accordance herewith; provided however that if the Debtor is the prevailing party in any action or proceeding seeking enforcement of this Agreement, then the Debtor shall not be and Secured Party shall be responsible for such related costs and expenses, and Debtor shall not be responsible for costs, fees and expenses of Secured Party prior to or after a cure of an Event of Default; and (s) Secured Party may take any actions permitted hereunder or in connection with the Collateral by or through agents or employees and shall be entitled to retain counsel and to act in reliance upon the advice of counsel concerning all such matters. 7. Defaults and Remedies 7.1 Events of Default. Each of the following occurrences shall constitute an Event of Default: 9 (a) Except as provided in Section 6, any material representation or warranty made by or on behalf of the Debtor herein or in any report, certificate or other document furnished by or on behalf of the Debtor pursuant to this Agreement shall prove to be false or misleading in any material respect when made. (b) Except as provided in Section 6, the Debtor shall default in the due observance or performance of any of its material obligations hereunder and such default shall continue for thirty (30) days (unless a shorter or longer cure period is provided under the terms of this Agreement) after written notice thereof has been sent to the Debtor by Secured Party; provided, however, that if the nature of such default (but specifically excluding defaults curable by the payment of money) is such that it is not possible to cure such breach within thirty (30) days, such 30-day period shall be extended for so long as the Debtor shall be using diligent efforts to effect a cure thereof. (c) A Material Breach shall occur. 7.2 Remedies. Upon the occurrence and continuation of an Event of Default hereunder, the Debtor expressly covenants and agrees that Secured Party may, at its option, in addition to other rights and remedies provided herein or otherwise available to it, without notice to or demand upon Debtor (except as otherwise required herein), but subject in all cases to the provisions of, and except as otherwise provided in, the Development Agreement and the Management Agreement, exercise any one or more of the rights as set forth as follows: (a) declare all advances made by Secured Party to Debtor hereunder, all other indebtedness owed by Debtor to Secured Party and all Secured Obligations to be immediately due and payable, whereupon all unpaid principal and interest on said advances and other indebtedness and Secured Obligations shall become and be immediately due and payable; (b) subject to any limitations set forth in the Development Agreement, Secured Party may immediately take possession of any of the Collateral wherever it may be found or require the Debtor to assemble the Collateral or any part thereof and make it available at one or more places as Secured Party may designate, and to deliver possession of the Collateral or any part thereof to Secured Party, who shall have full right to enter upon any or all of Debtor's places of business, premises and property to exercise Secured Party's rights hereunder; and without notice (except as specified below), sell the Collateral or any part thereof in one or more parcels at one or more public or private sales, at any of Secured Party's offices or elsewhere, at such time or times, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as shall be commercially reasonable and in accordance with applicable law. The Debtor acknowledges and agrees that, to the extent notice of sale shall be required by law, at least ten (10) days' written notice to Debtor of the time and place of any public sale or of the date on or after which any private sale is to be made shall constitute reasonable notification. Any public sale shall be held at such time or times during ordinary business hours and at such place or places as Secured Party may fix in the notice of such sale. Notwithstanding the foregoing, Secured Party shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. Secured Party may, without notice or publication, adjourn any public or private sale, or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale or, with respect to a private sale, after which such sale may take place, 10 and any such sale may, without further notice, be made at the time and place to which it was so adjourned or, with respect to a private sale, after which such sale may take place. Each purchaser at any such sale shall hold the property sold free from any claim or right on the part of Debtor, and the Debtor hereby waives, to the full extent permitted by law, all rights of stay and/or appraisal which Debtor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. The Debtor also hereby waives any claims against Secured Party arising by reason of the fact that the price at which any Collateral may have been sold at a private sale was less than the price which might have been obtained at a public sale, even if Secured Party accepts the first offer received and does not offer such Collateral to more than one offeree. The parties hereto agree that the notice provisions, method, manner and terms of any sale, transfer or disposition of any Collateral in compliance with the terms set forth herein or any other provision of this Security Agreement are commercially reasonable; (c) subject to any limitations provided in the Development Agreement, exercise any or all of the rights and remedies provided for by the Minnesota Uniform Commercial Code, the Tribal Commercial Code (after its adoption) or other applicable law, specifically including, without limitation, the right to recover attorneys' fees and other expenses incurred by Secured Party after and during the continuance of an Event of Default in the enforcement of this Security Agreement or in connection with the Debtor's redemption of the Collateral. Secured Party may exercise its rights under this Security Agreement independently of any other collateral or guaranty that Debtor may have granted or provided to Secured Party in order to secure payment and performance of the Secured Obligations, and Secured Party shall be under no obligation or duty to foreclose or levy upon any other collateral given by Debtor to secure any Secured Obligation or to proceed against any guarantor before enforcing its rights under this Security Agreement. The Debtor shall reimburse Secured Party upon demand for, or Secured Party may apply any proceeds of Collateral to, the reasonable costs and expenses (including attorneys' fees, transfer taxes and any other charges) incurred by Secured Party after and during the continuance of an Event of Default in connection with any sale, disposition, repair, replacement, alteration, addition, improvement or retention of any Collateral hereunder or the enforcement of this Agreement. 8. Miscellaneous Provisions. (a) Notices. All notices, requests, approvals, consents and other communications required or permitted to be made hereunder shall, except as otherwise provided, be in writing and may be delivered personally or sent by telegram, telecopy, facsimile, telex, first class mail or overnight courier, postage prepaid, to the parties addressed as follows: To Debtor: Pokagon Band of Potawatomi Indians 58620 Sink Road Dowagiac, Michigan 49047 Attention: Chairman, Tribal Council With a Copy To: Michael Phelan, General Counsel Pokagon Band of Potawatomi Indians P.O. Box 180 Dowagiac, MI 49047 11 and Daniel Amory, Esq. Drummond Woodsum & MacMahon P.O. Box 9781 245 Commercial Street Portland, Maine 04104-5081 If to Secured Party: Great Lakes Gaming of Michigan, LLC 130 Cheshire Lane Minnetonka, MN 55305 Attention: Timothy J. Cope With a copy to: Daniel R. Tenenbaum Gray Plant Mooty 500 I.D.S. Center 80 So. 8th Street Minneapolis, MN 55402-3796 Such notices, requests and other communications sent as provided hereinabove shall be effective when received by the addressee thereof, unless sent by registered or certified mail, postage prepaid, in which case they shall be effective exactly three (3) business days after being deposited in the United States mail. The parties hereto may change their addresses by giving notice thereof to the other parties hereto in conformity with this section. (b) Headings. The various headings in this Security Agreement are inserted for convenience only and shall not affect the meaning or interpretation of this Security Agreement or any provision hereof. (c) Amendments. This Security Agreement or any provision hereof may be changed, waived, or terminated only by a statement in writing signed by the party against which such change, waiver or termination is sought to be enforced, and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. (d) No Waiver. No failure on the part of Secured Party to exercise, and no delay in exercising, and no course of dealing with respect to, any power, privilege or right under this Security Agreement or any related agreement shall operate as a waiver thereof nor shall any single or partial exercise by Secured Party of any power, privilege or right under this Security Agreement or any related agreement preclude any other or further exercise thereof or the exercise of any other power, privilege or right. The powers, privileges and rights in this Security Agreement are cumulative and are not exclusive of any other remedies provided by law. No waiver by Secured Party of any default hereunder shall be effective unless in writing, nor shall any waiver operate as a waiver of any other default or of the same default on a future occasion. (e) Binding Agreement. All rights of Secured Party hereunder shall 12 inure to the benefit of its successors and assigns. Subject to the terms of the Development Agreement and Management Agreement, Debtor shall not assign any of its interest under this Security Agreement without the prior written consent of Secured Party. Any purported assignment inconsistent with this provision shall, at the option of Secured Party, be null and void. (f) Entire Agreement. This Security Agreement, together with any other agreement executed in connection herewith and the documents listed in Section 15.17 of the Development Agreement, as each has been amended to date, is intended by the parties as a final expression of their agreement and is intended as a complete and exclusive statement of the terms and conditions thereof. Acceptance of or acquiescence in a course of performance rendered under this Security Agreement shall not be relevant to determine the meaning of this Security Agreement even though the accepting or acquiescing party had knowledge of the nature of the performance and opportunity for objection. (g) Severability. If any provision or obligation of this Security Agreement should be found to be invalid, illegal, or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions and obligations or any other agreement executed in connection herewith, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby and shall nonetheless remain in full force and effect to the maximum extent permitted by law. (h) Survival of Provisions. All representations, warranties and covenants of Debtor contained herein shall survive the execution and delivery of this Security Agreement, and shall terminate only upon the termination of this Security Agreement pursuant to Subsection 8(k) hereof. (i) Power of Attorney. The Debtor hereby irrevocably appoints Secured Party its attorney-in-fact, which appointment is coupled with an interest, with full authority in the place and stead of Debtor and in the name of Debtor, Secured Party or otherwise, from time to time in Secured Party's discretion (a) to execute and file financing and continuation statements (and amendments thereto and modifications thereof) on behalf and in the name of the Debtor with respect to the security interests granted or purported to be granted hereby, (b) to take any action and to execute any instrument which Secured Party may deem necessary or advisable to exercise its rights under Section 6(r) hereunder, and (c) upon the occurrence and during the continuance of an Event of Default, to take any action and to execute any instrument which Secured Party may deem necessary or advisable to accomplish the purposes of this Security Agreement, including, without limitation: (i) to obtain and adjust insurance required to be paid to Secured Party pursuant hereto; (ii) to ask, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral; (iii) to receive, endorse and collect any drafts or other 13 instruments, documents and chattel paper, in connection with clauses (i) and (ii) above; (iv) to sell, convey or otherwise transfer any item of Collateral to any purchaser thereof in accordance with Sections 7.2(b) and (c); and (v) to file any claims or take any action or institute any proceedings which Secured Party may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of Secured Party with respect to any of the Collateral. (j) Counterparts. This Security Agreement and any amendments, waivers, consents or supplements may be executed in any number of counterparts and by facsimile, each of which when so executed and delivered shall be deemed an original, but all of which shall together constitute one and the same agreement. (k) Termination of Agreement. Upon termination of this Security Agreement in accordance with Section 4 hereof, Secured Party shall reassign and redeliver to Debtor all of the Collateral hereunder which has not been sold, disposed of, retained or applied by Secured Party in accordance with the terms hereof, and execute and deliver to Debtor such documents as Debtor may reasonably request to evidence such termination. Such reassignment and redelivery shall be without warranty by or recourse to Secured Party, and shall (if an Event of Default has occurred and is continuing) be at the expense of Debtor; provided, however, that this Security Agreement (including all representations, warranties and covenants contained herein) shall continue to be effective or be reinstated, as the case may be, if at any time any amount received by Secured Party in respect of the indebtedness and obligations secured hereunder is rescinded or must otherwise be restored or returned by Secured Party upon or in connection with the insolvency, bankruptcy, dissolution, liquidation or reorganization of Debtor or any other person or upon or in connection with the appointment of any intervenor or conservator of, or trustee or similar official for, Debtor or any other person or any substantial part of its assets, or otherwise, all as though such payments had not been made. (l) Sovereign Immunity Waiver; Arbitration; Submission to Jurisdiction; Limitation on Damages. This Agreement constitutes the Security Agreement as defined and referred to in the Development Agreement and the Management Agreement. As such and without limiting the scope of such agreements, the provisions of Article XIV of the Development Agreement and Article XIII of the Management Agreement apply to this Agreement and are hereby incorporated by reference, including, without limitation, the limited sovereign immunity waiver, limitations on recourse and arbitration provisions contained therein; except that the definition of "Limited Recourse" in the Development Agreement (and not in the Management Agreement) shall apply to this Agreement. This Agreement will be governed by the internal laws of the State of Minnesota (including the Minnesota Uniform Commercial Code as in effect from time to time, which Code shall apply without regard to any provision therein that would otherwise provide that such Code is inapplicable to the Band, whether based upon the fact that the Band is deemed to be a governmental body or otherwise) without giving effect to its conflict of laws principles except that, to the extent that Minnesota law shall not recognize the creation, perfection or fist priority of any security interest of the Secured Party on Collateral that is recognized under a commercial code adopted by Debtor as tribal law in accordance with Section 14 9.2.5(m) of the Development Agreement (the "Tribal UCC"), then such Tribal UCC shall apply. The parties hereto may not change the law governing this Agreement without express written consent of the Debtor and Secured Party. (m) Agreements Control. In the event of inconsistency between the Development Agreement or the Management Agreement and this Agreement, the Development Agreement or the Management Agreement shall control. (n) Amendment and Restatement. This First Amended and Restated Security Agreement amends and restates in its entirety a certain Security Agreement from Debtor to Secured Party dated December 22, 2004 (the "Prior Security Agreement"). The lien, assignment and security interest of the Prior Security Agreement is hereby reaffirmed, extended and carried forward by this Amended and Restated Security Agreement in full force and effect, to secure payment of the Secured Obligations. Nothing herein shall be construed to impair or discharge the Prior Security Agreement. To the extent of any conflict or inconsistency between the terms and provisions of (A) the Prior Security Agreement, on the one hand, and (B) this Amended and Restated Security Agreement, on the other hand, the latter shall control. IN WITNESS WHEREOF, the parties hereto have caused this First Amended and Restated Security Agreement to be duly executed and delivered under seal by their respective undersigned duly authorized officers as of the date first above written. DEBTOR: POKAGON BAND OF POTAWATOMI INDIANS By: /s/ John Miller ------------------------------------ Name: John Miller Title: Tribal Chairman ATTEST: By: /s/ Daniel F. Rapp ------------------------------------ Name: DANIEL F. RAPP Its: Secretary SECURED PARTY: GREAT LAKES GAMING OF MICHIGAN, LLC By: /s/ Timothy Cope ------------------------------------ Name: Timothy Cope Title: President 15 EX-10.177 11 c02716exv10w177.txt FIRST AMENDED AND RESTATED LAKES WORKING CAPITAL ADVANCE NOTE EXHIBIT 10.177 EXECUTION VERSION FIRST AMENDED AND RESTATED LAKES WORKING CAPITAL ADVANCE NOTE $2,000,000 January 25, 2006 Dowagiac, Michigan FOR VALUE RECEIVED, the Pokagon Band of Potawatomi Indians (the "Band") promises to pay to Great Lakes Gaming of Michigan, LLC, a Minnesota limited liability company ("Lakes"), such sums as may be advanced by Lakes to the Band as Lakes Working Capital Advances in accordance with Section 5.3 of a Management Agreement between the Band and Lakes Entertainment, Inc. dated as of July 8, 1999, (as assigned by Lakes Entertainment, Inc. to and assumed by Lakes pursuant to that certain Assignment and Assumption Agreement dated as of October 16, 2000 by and among the Band, Lakes Entertainment, Inc. and Lakes, and amended by a Second Amended and Restated Assignment and Assumption Agreement of even date hereof (the "Assignment Agreement")); and as amended and restated by a First Amended and Restated Management Agreement dated as of October 16, 2000, a Second Amended and Restated Management Agreement dated as of December 22, 2004, and a Third Amended and Restated Management Agreement of even date hereof (collectively, and as heretofore and hereafter further amended, substituted, restated and modified, the "Management Agreement"); provided that the principal amount due hereunder shall not exceed Two Million Dollars ($2,000,000.00). 1. Advances: Funding. Lakes shall notify the Band in writing by overnight courier service of the amounts of any operating cash shortfalls in the first six months after the Commencement Date, and shall furnish a written accounting showing the derivation of such amount (the "Lakes Cash Shortfall Notice"). Advances under this Note shall be made by Lakes (a) upon written request by the Band to Lakes in the form of Draw Request attached as Exhibit A or (b), in the event of an emergency cash shortfall which threatens the immediate cessation or curtailment of operations of the Enterprise, by advances in the amount needed to avoid such immediate cessation or curtailment. Notices given by Lakes and Draw Requests submitted by the Band under this Note shall be sent via overnight courier service to the addresses set out in Section 17.2 of the Management Agreement. Advances under this Note shall be funded by Lakes through wire transfer of funds to one or more Enterprise Accounts in an aggregate amount equal to the greater of the Draw Request or the amount needed to avoid immediate cessation or curtailment of operations at the Enterprise, but not to exceed $2,000,000 in principal advances outstanding at any one time. All Draw Requests submitted by the Band shall be funded within two (2) business days of the date that the draw request is received by Lakes. By submitting a Draw Request, the Band does not waive the right to assert that an additional amount, beyond the amount shown in the Lakes Cash Shortfall Notice or the Draw Request, should be advanced by Lakes to cover operating cash shortfalls in accordance with Section 5.3 of the Management Agreement. 2. Interest. Interest shall accrue on the outstanding balance under this Note at the Band Interest Rate. 3. Repayment. Amounts advanced hereunder shall be repaid from Net Revenues with the priority provided in Section 5.5 of the Management Agreement, subject to the terms of any applicable subordination agreements. 4. Prepayment. This Note may be prepaid at any time without penalty. This Note shall also be subject to prepayment as and when required under the terms of any Transaction Documents. 5. Limited Recourse. The obligations of the Band under this Note and any related awards, judgments or decrees shall be payable solely out of undistributed or future Net Revenues of the Enterprise and shall be a Limited Recourse obligation of the Band, with no recourse to tribal assets other than the limited assets of the Band specified in the definition of Limited Recourse and Section 14.3(a) of the Development Agreement 6. Band's Waiver of Sovereign Immunity and Consent to Suit. The Band expressly waives its sovereign immunity from suit for the purpose of permitting or compelling arbitration to enforce this Note as provided in Article 14 of the Development Agreement and consents to be sued in the United States District Court for the Western District of Michigan - Southern Division, the United States Court of Appeals for the Sixth Circuit, and the United States Supreme Court for the purpose of compelling arbitration or enforcing any arbitration award or judgment arising out of this Note. If the United States District Court lacks jurisdiction, the Band consents to be sued in the Michigan State Court system for the same limited purpose. The Band waives any requirement of exhaustion of tribal remedies. Without in any way limiting the generality of the foregoing, the Band expressly authorizes any governmental authorities who have the right and duty under applicable law to take any action authorized or ordered by any such court, and to take such action, including without limitation, repossessing or foreclosing on any real property not in trust, or otherwise giving effect to any judgment entered; provided, however, that liability of the Band under any judgment shall always be Limited Recourse, and in no instance shall any enforcement of any kind whatsoever be allowed against any assets of the Band other than the limited assets of the Band specified in the definition of Limited Recourse and Section 14.3(a) of the Development Agreement. The Band appoints the Chairman of the Pokagon Council and the Secretary of the Pokagon Council as its agents for service of all process under or relating to the Agreements. The Band agrees that service in hand or by certified mail, return receipt requested, shall be effective for all purposes under or relating to the Agreements if served on such agents. 7. Default; Acceleration. All outstanding principal together with accrued interest shall become immediately due and payable in full, subject to the limitations on recourse provided above, upon default in the payment of principal or interest due under this Note if such default is 2 not remedied within thirty (30) days after receipt by the Band of written notice thereof as provided in the Management Agreement. 8. Arbitration. All disputes, controversies or claims arising out of or relating to this Note shall be settled by binding arbitration as provided in Article 13 of the Management Agreement. 9. Business Purposes; Applicable Law. This Note evidences a loan for business and commercial purposes and not for personal, household, family or agricultural purposes. This Note shall be interpreted and construed in accordance with Michigan law, to the extent not preempted by federal law. Use of Michigan law for the foregoing limited purpose of interpretation and construction is not intended by the parties to and shall not otherwise (i) incorporate substantive Michigan laws or regulations, including but not limited to Michigan usury laws or any other present or future provision of the laws of Michigan that would restrict the rate of interest upon any loan contemplated hereunder; or (ii) grant any jurisdiction to the State or any political subdivision thereof over the Gaming Site or the Facility. 10. Notices. All notices under this Note shall be given in accordance with Section 15.4 of the Development Agreement; except that copies of draw requests need not be sent to attorneys. 11. Defined Terms. Capitalized terms used herein shall have the same meanings assigned to them in the Management Agreement, and, if not defined in the Management Agreement, in the Development Agreement between the Band and Lakes, as amended. 12. Miscellaneous. a. Time is of the essence. b. The benefits and obligations of this Note shall inure to and be binding upon the parties hereto and their respective successors and assigns, provided that any succession or assignment is permitted under the Management Agreement. c. Waiver of any one default shall not cause or imply a waiver any subsequent default. d. This Note, together with the documents listed in Section 15.17 of the Development Agreement, as each has been amended to date, sets forth the entire agreement between the parties hereto with respect to the subject matter hereof. All agreements, covenants, representations, and warranties, express or implied, oral or written, of the parties with respect to the subject matter hereof are contained herein and therein. This Note shall not be supplemented, amended or modified by any course of dealing, course of performance or uses of trade and may only be amended or modified by a written instrument duly executed by officers of both parties. 3 e. This Note has been executed and delivered as a complete amendment and restatement in its entirety of that certain Lakes Working Capital Advance Note dated as of December 22, 2004 made payable by the Band to Lakes, but does not extinguish, satisfy, discharge or constitute a novation thereof, and the Band hereby reaffirms, subject to the provisions of this Note, the indebtedness evidenced thereby. Lakes agrees to return to the Band the original Lakes Working Capital Advance Note dated as of December 22,2004. f. Any other provision of this Note to the contrary notwithstanding: (i) in no event shall the rate of interest payable under this Note exceed the maximum rate permitted by law (the "Legal Rate"); (ii) if at any time the rate of interest computed as provided above (the "Computed Rate") exceeds the Legal Rate, then interest shall accrue thereafter at the Legal Rate regardless of whether the Computed Rate is greater or less than the Legal Rate until the total amount of interest payable hereunder equals the amount that would have been payable without regard to this sentence, or until this Note is paid in full, whichever occurs first; and (iii) if the holder receives any interest in excess of the maximum rate permitted by this sentence, the excess shall be credited against the principal hereof or refunded, at the holder's option. THE POKAGON BAND OF POTAWATOMI INDIANS By: /s/ John Miller ------------------------------------ Its Council Chairman By: /s/ Daniel Rapp ------------------------------------ Its Secretary 4 EXHIBIT A DRAW REQUEST The Pokagon Band of Potawatomi Indians (the "Band") requests that Great Lakes Gaming of Michigan, LLC ("Lakes") advance $______________ under the Lakes Working Capital Advance Note. The Band certifies that the amounts drawn under this Request will be used to fund operating cash shortfalls in accordance with Section 5.3 of the Management Agreement. Advances should be made by wire transfer of such funds to one or more Enterprise Bank Accounts. Dated: THE POKAGON BAND OF POTAWATOMI INDIANS -------------------- By: ------------------------------------ Its: Council Chairman By: ------------------------------------ Its: Secretary [or other persons designated by the Band pursuant to the Management Agreement] 5 EX-10.178 12 c02716exv10w178.txt FIRST AMENDED AND RESTATED LAKES MINIMUM PAYMENTS NOTE EXHIBIT 10.178 EXECUTION VERSION FIRST AMENDED AND RESTATED LAKES MINIMUM PAYMENTS NOTE January 25, 2006 Dowagiac, Michigan FOR VALUE RECEIVED, the Pokagon Band of Potawatomi Indians (the "Band") promises to pay to Great Lakes Gaming of Michigan, LLC, a Minnesota limited liability company ("Lakes"), such sums as may be advanced by Lakes to the Band as Minimum Guaranteed Payment Advances in accordance with Section 5.6.1 of a Management Agreement between the Band and Lakes Entertainment, Inc., f/k/a Lakes Gaming, Inc. dated as of July 8, 1999, (as assigned by Lakes Entertainment, Inc. to and assumed by Lakes pursuant to that certain Assignment and Assumption Agreement dated as of October 16, 2000 by and among the Band, Lakes Entertainment, Inc. and Lakes (the "Assignment Agreement")), and as amended and restated by a First Amended and Restated Management Agreement dated as of October 16, 2000, a Second Amended and Restated Management Agreement dated as of December 22, 2004, and a Third Amended and Restated Management Agreement of even date (collectively, and as heretofore and hereafter further amended, substituted, restated and modified, the "Management Agreement"). 1. Advances; Funding. Advances under this Note shall be funded through deposits by Lakes into the Enterprise Disbursement Account for the benefit of the Band, which funds shall be used solely to make Minimum Guaranteed Payment Advances to the Band. Lakes shall notify the Band in writing of any advances hereunder when made. 2. Interest. Interest shall not accrue on amounts outstanding under this Note. 3. Repayment. As provided in Section 5.6.2 of the Management Agreement, after making one or more Minimum Guaranteed Payment Advances in a Calculation Year Lakes may recoup such advance from the Band's Monthly Distribution Payments in succeeding months of the same Calculation Year; provided that in no event shall such recoupment result in the Band=s receiving less than its Minimum Guaranteed Monthly Payment in any month. Manager shall not otherwise be entitled to reimbursement from the Enterprise or the Band for amounts outstanding under this Note. 4. Prepayment. This Note may be prepaid at any time without penalty. 5. [intentionally deleted] 6. Limited Recourse. The obligations of the Band under this Note and any related awards, judgments or decrees shall be payable solely through recoupment from certain Net Revenues that would otherwise be distributed to the Band as Monthly Distribution Payments, as provided in and subject to the limitations of Section 3. Lakes shall have no recourse to any tribal assets other than such undistributed Net Revenues for payment under this Note. 7. Band's Waiver of Sovereign Immunity and Consent to Suit. The Band expressly waives its sovereign immunity from suit for the purpose of permitting or compelling arbitration to enforce this Note as provided in Article 14 of the Development Agreement and consents to be sued in the United States District Court for the Western District of Michigan - Southern Division, the United States Court of Appeals for the Sixth Circuit, and the United States Supreme Court for the purpose of compelling arbitration or enforcing any arbitration award or judgment arising out of this Note. If the United States District Court lacks jurisdiction, the Band consents to be sued in the Michigan State Court system for the same limited purpose. The Band waives any requirement of exhaustion of tribal remedies. Without in any way limiting the generality of the foregoing, the Band expressly authorizes any governmental authorities who have the right and duty under applicable law to take any action authorized or ordered by any such court, and to take such action, including without limitation, repossessing or foreclosing on any real property not in trust, or otherwise giving effect to any judgment entered; provided, however, that liability of the Band under any judgment shall always be limited as provided in Sections 3 and 6. The Band appoints the Chairman of the Pokagon Council and the Secretary of the Pokagon Council as its agents for service of all process under or relating to the Agreements. The Band agrees that service in hand or by certified mail, return receipt requested, shall be effective for all purposes under or relating to the Agreements if served on such agents. 8. Arbitration. All disputes, controversies or claims arising out of or relating to this Note shall be settled by binding arbitration as provided in Article 13 of the Management Agreement. 9. Business Purposes; Applicable Law. This Note evidences a loan for business and commercial purposes and not for personal, household, family or agricultural purposes. This Note shall be interpreted and construed in accordance with Michigan law, to the extent not preempted by federal law. Use of Michigan law for the foregoing limited purpose of interpretation and construction is not intended by the parties to and shall not otherwise (i) incorporate substantive Michigan laws or regulations, including but not limited to Michigan usury laws or any other present or future provision of the laws of Michigan that would restrict the rate of interest upon any loan contemplated hereunder; or (ii) grant any jurisdiction to the State or any political subdivision thereof over the Gaming Site or the Facility. 10. Notices. All notices under this Note shall be given in accordance with 15.4 of the Development Agreement; except that copies of draw requests need not be sent to attorneys. 11. Defined Terms. Capitalized terms used herein shall have the same meanings assigned to them in the Management Agreement, and, if not defined in the Management Agreement, in the Development Agreement between the Band and Lakes, as amended. 12. Miscellaneous. a. Time is of the essence. 2 b. The benefits and obligations of this Note shall inure to and be binding upon the parties hereto and their respective successors and assigns, provided that any succession or assignment is permitted under the Management Agreement. c. Waiver of any one default shall not cause or imply a waiver any subsequent default. d. This Note, together with the documents listed in Section 15.17 of the Development Agreement, as each has been amended to date, sets forth the entire agreement between the parties hereto with respect to the subject matter hereof. All agreements, covenants, representations, and warranties, express or implied, oral or written, of the parties with respect to the subject matter hereof are contained herein and therein. This Note shall not be supplemented, amended or modified by any course of dealing, course of performance or uses of trade and may only be amended or modified by a written instrument duly executed by officers of both parties. e. This Note has been executed and delivered as a complete amendment and restatement in its entirety of that certain Lakes Minimum Payments Note dated as of December 22, 2004 made payable by the Band to Lakes, but does not extinguish, satisfy, discharge or constitute a novation thereof, and the Band hereby reaffirms, subject to the provisions of this Note, the indebtedness evidenced thereby. Lakes agrees to return to the Band the original Lakes Minimum Payments Note dated as of December 22, 2004. f. Any other provision of this Note to the contrary notwithstanding: (i) in no event shall the rate of interest payable under this Note exceed the maximum rate permitted by law (the "Legal Rate"); (ii) if at any time the rate of interest computed as provided above (the "Computed Rate") exceeds the Legal Rate, then interest shall accrue thereafter at the Legal Rate regardless of whether the Computed Rate is greater or less than the Legal Rate until the total amount of interest payable hereunder equals the amount that would have been payable without regard to this sentence, or until this Note is paid in full, whichever occurs first; and (iii) if the holder receives any interest in excess of the maximum rate permitted by this sentence, the excess shall be credited against the principal hereof or refunded, at the holder's option. THE POKAGON BAND OF POTAWATOMI INDIANS By: /s/ John Miller ------------------------------------ Its Council Chairman By: /s/ Daniel Rapp ------------------------------------ Its Secretary 3 EX-10.179 13 c02716exv10w179.txt THIRD AMENDED AND RESTATED NON-GAMING LAND ACQUISITION LINE OF CREDIT AGREEMENT EXHIBIT 10.179 EXECUTION VERSION THIRD AMENDED AND RESTATED NON-GAMING LAND ACQUISITION LINE OF CREDIT AGREEMENT THIS THIRD AMENDED AND RESTATED NON-GAMING LAND ACQUISITION LINE OF CREDIT AGREEMENT is dated as of the 25th day of January, 2006, by and between THE POKAGON BAND OF THE POTAWATOMI INDIANS (the "Band") and GREAT LAKES GAMING OF MICHIGAN, LLC, a Minnesota limited liability company ("Lakes"): In consideration of the mutual covenants and promises hereinafter set forth, and in accordance with the terms of a certain Development Agreement by and between the Band and Lakes Entertainment, Inc., f/k/a Lakes Gaming, Inc. dated as of July 8, 1999, (as assigned by Lakes Entertainment, Inc. to and assumed by Lakes pursuant to that certain Assignment and Assumption Agreement dated as of October 16, 2000 by and among the Band, Lakes Entertainment, Inc. and Lakes, and amended by a Second Amended and Restated Assignment and Assumption Agreement of even date hereof (the "Assignment Agreement")); and as amended and restated by a First Amended and Restated Development Agreement dated as of October 16, 2000, a Second Amended and Restated Development Agreement dated as of December 22, 2004 and a Third Amended and Restated Development Agreement of even date hereof, (collectively, and as heretofore and hereafter further amended, substituted, restated and modified, the "Development Agreement"), the Band and Lakes agree as follows: 1. Establishment of Credit. Subject to the terms of this Agreement and the Development Agreement, Lakes agrees to make advances to the Band in an amount not to exceed Fifteen Million Dollars ($15,000,000). 2. Draw Requests; Funding. All draws under this Line of Credit shall be made upon written request by the Band to Lakes in the form of Draw Request attached as Exhibit A. All Draw Requests shall be sent in accordance with Section 15.4 of the Development Agreement and may, at Lakes' option, be funded through transfer of funds in the Escrow Account; provided that interest shall only accrue under this Line of Credit on funds advanced through the Escrow Account after disbursement from the Escrow Account, and shall not begin to accrue on deposit by Lakes into the Escrow Account. All Draw Requests shall be funded within ten (10) days of the date of the draw request through wire transfer to an account directed by the Band, or as otherwise specified by the Band. 3. Use of Advances. Advances hereunder shall be used by the Band to option or acquire Non-Gaming Lands, and to pay all related option fees, purchase prices, fees, real estate commissions, transfer taxes, costs and expenses. 4. Expiration. The commitment of Lakes to make advances hereunder shall expire on the Commencement Date. 5. Interest Rate. Interest shall accrue on the outstanding balance under this Line of Credit as follows: (a) if the Bank Closing occurs, at a fixed rate equal to the lesser of (i) Base Rate as of the Bank Closing plus 1% or (ii) 10% (the "Band Interest Rate"); or (b) If the Bank Closing does not occur, at a variable rate equal to the lesser of (i) Base Rate plus 1% or (ii) 10% (the lesser of (i) and (ii) being referred to as the "Variable Interest Rate"). Lakes shall adjust the Variable Interest Rate on the then unpaid principal balance, by way of increase or decrease, in accordance with changes in the Base Rate. Such changes shall be effective as of the change in the Base Rate (the "Effective Date"). Upon the Bank Closing, interest accruing under this Line of Credit prior to the Bank Closing shall be adjusted retroactively to reflect the Band Interest Rate. "Base Rate" means the lowest Prime Rate as is published daily in The Wall Street Journal. In the event that the Wall Street Journal ceases to publish the Prime Rate, then the holder hereof may in its reasonable discretion select some other generally recognized comparable indicator of the national Prime Rate. 6. Repayment. (I) If the Commencement Date occurs, the Band shall, beginning on the 15th day of the month following such Commencement Date, repay the amount of principal and accrued interest outstanding hereunder as of such Commencement Date in equal monthly payments of principal and interest in an amount sufficient to amortize such principal and accrued interest over a sixty (60) month period at the Band Interest Rate, and shall thereafter continue to make payments in such amount on the 15th day of each succeeding month to and including the fifteenth day of the sixtieth month following such Commencement Date; provided that all remaining principal and interest shall in any event be due and payable on the fifteenth day of the sixtieth month following such Commencement Date. (II) If the Commencement Date does not occur, principal and interest shall be repayable to the extent and in the manner provided in the Development Agreement; provided that payments shall in any event be due and made only from the sources specified in Sections 14.3 and 14.4 of the Development Agreement. If Gaming commences at a Subsequent Gaming Facility and payment is due under this Agreement in accordance with the Development Agreement, the Band shall, beginning on the 15th day of the month following such commencement date, make equal monthly payments to Lakes of principal and interest in an amount sufficient to amortize the principal amount outstanding as of such commencement date over a sixty (60) month period at the Variable Interest Rate, and shall thereafter continue to make such payments on the 15th day of each succeeding month to and including the fifteenth day of the sixtieth month following such commencement date, when all remaining principal and interest shall be due and payable. As of the Effective Date of a change in the Base Rate, Lakes shall adjust the monthly installments of principal and interest as of 2 the installment next following the Effective Date so that the then unpaid principal balance would be amortized in full at the revised Variable Interest Rate five years after such commencement of gaming. Lakes shall promptly notify the Band in writing of any changes in the Base Rate and in the installment payment due. 7. Prepayment. This Line of Credit may be prepaid at any time without penalty. This Note shall also be subject to prepayment as and when required under the terms of any Transaction Documents. 8. [intentionally omitted] 9. Limited Recourse. The obligations of the Band under this Line of Credit and any related awards, judgments or decrees shall be payable solely out of undistributed or future Net Revenues of the Enterprise and shall be a Limited Recourse obligation of the Band, with no recourse to tribal assets other than the limited assets of the Band specified in the definition of Limited Recourse and Section 14.3(a) of the Development Agreement 10. Default; Acceleration. All outstanding principal together with accrued interest shall become immediately due and payable in full, subject to the limitations on recourse provided above, upon default in the payment of principal or interest due under this Line of Credit if such default is not remedied within thirty (30) days after receipt by the Band of written notice thereof as provided in the Development Agreement. 11. Band's Waiver of Sovereign Immunity and Consent to Suit. The Band expressly waives its sovereign immunity from suit for the purpose of permitting or compelling arbitration to enforce this Line of Credit as provided in Article 14 of the Development Agreement and consents to be sued in the United States District Court for the Western District of Michigan - Southern Division, the United States Court of Appeals for the Sixth Circuit and the United States Supreme Court for the purpose of compelling arbitration or enforcing any arbitration award or judgment arising out of this Line of Credit. If the United States District Court lacks jurisdiction, the Band consents to be sued in the Michigan State Court system for the same limited purpose. The Band waives any requirement of exhaustion of tribal remedies. Without in any way limiting the generality of the foregoing, the Band expressly authorizes any governmental authorities who have the right and duty under applicable law to take any action authorized or ordered by any such court, and to take such action, including without limitation, repossessing or foreclosing on any real property not in trust, or otherwise giving effect to any judgment entered; provided, however, that liability of the Band under any judgment shall always be Limited Recourse, and in no instance shall any enforcement of any kind whatsoever be allowed against any assets of the Band other than the limited assets of the Band specified in the definition of Limited Recourse and Section 14.3(a) of the Development Agreement. The Band appoints the Chairman of the Pokagon Council and the Secretary of the Pokagon Council as its agents for service of all process under or relating to the Agreements. The Band agrees that service in hand or by certified mail, return receipt requested, shall be effective for all purposes under or relating to the Agreements if served on such agents. 3 12. Arbitration. All disputes, controversies or claims arising out of or relating to this Line of Credit shall be settled by binding arbitration as provided in Article 14 of the Development Agreement. 13. Business Purposes; Applicable Law. This Line of Credit evidences a loan for business and commercial purposes and not for personal, household, family or agricultural purposes. This Line of Credit shall be interpreted and construed in accordance with Michigan law, to the extent not preempted by federal law. Use of Michigan law for the foregoing limited purpose of interpretation and construction is not intended by the parties to and shall not otherwise (i) incorporate substantive Michigan laws or regulations, including but not limited to Michigan usury laws or any other present or future provision of the laws of Michigan that would restrict the rate of interest upon any loan contemplated hereunder; or (ii) grant any jurisdiction to the State or any political subdivision thereof over the Gaming Site or the Facility. 14. Notices. All notices under this Line of Credit shall be given in accordance with Section 15.4 of the Development Agreement; except that copies of draw requests need not be sent to attorneys. 15. Defined Terms. Capitalized terms used herein shall have the same meanings assigned to them in the Development Agreement, and, if not defined in the Development Agreement, in the Management Agreement between the Band and Lakes, as amended. 16. Miscellaneous. a. Time is of the essence. b. The benefits and obligations of this Note shall inure to and be binding upon the parties hereto and their respective successors and assigns, provided that any succession or assignment is permitted under the Development Agreement. c. Waiver of any one default shall not cause or imply a waiver any subsequent default. d. This Agreement, together with documents listed in Section 15.17 of the Development Agreement, as each has been amended to date, sets forth the entire agreement between the parties hereto with respect to the subject matter hereof. All agreements, covenants, representations, and warranties, express or implied, oral or written, of the parties with respect to the subject matter hereof are contained herein and therein. This Agreement shall not be supplemented, amended or modified by any course of dealing, course of performance or uses of trade and may only be amended or modified by a written instrument duly executed by officers of both parties. e. This Agreement has been executed and delivered as a complete amendment and restatement in its entirety of that certain Non-Gaming Land Acquisition Line of Credit dated as of July 8, 1999 by and between the Band and Lakes Gaming, 4 Inc., as assigned by Lakes Gaming, Inc. to and assumed by Lakes pursuant to the Assignment Agreement, as amended and restated by a First Amended and Restated Non-Gaming Land Acquisition Line of Credit Agreement dated as of October 16, 2000 and a Second Amended and Restated Non-Gaming Land Acquisition Line of Credit Agreement dated as of December 22, 2004, but does not extinguish, satisfy, discharge or constitute a novation thereof, and the Band hereby reaffirms, subject to the provisions of this Line of Credit Agreement, the indebtedness evidenced thereby. Lakes agrees to return to the Band the original Non-Gaming Land Acquisition Line of Credit Agreement dated as of July 8, 1999, the original First Amended and Restated Line of Credit Agreement dated as of October 16, 2000 and the original Second Amended and Restated Line of Credit Agreement dated as of December 22, 2004. f. Any other provision of this Line of Credit to the contrary notwithstanding: (i) in no event shall the rate of interest payable under this Line of Credit exceed the maximum rate permitted by law (the "Legal Rate"); (ii) if at any time the rate of interest computed as provided above (the "Computed Rate") exceeds the Legal Rate, then interest shall accrue thereafter at the Legal Rate regardless of whether the Computed Rate is greater or less than the Legal Rate until the total amount of interest payable hereunder equals the amount that would have been payable without regard to this sentence, or until this Line of Credit is paid in full, whichever occurs first; and (iii) if the holder receives any interest in excess of the maximum rate permitted by this sentence, the excess shall be credited against the principal hereof or refunded, at the holder's option. THE POKAGON BAND OF POTAWATOMI INDIANS By: /s/ John Miller ------------------------------------ Its Council Chairman By: /s/ Daniel Rapp ------------------------------------ Its Secretary GREAT LAKES GAMING OF MICHIGAN, LLC By: /s/ Timothy J. Cope ------------------------------------ Timothy J. Cope Its President 5 EXHIBIT A DRAW REQUEST The Pokagon Band of Potawatomi Indians (the "Band") requests that Great Lakes Gaming of Michigan, LLC. ("Lakes") advance $______________ under the Non- Gaming Acquisition Line of Credit Agreement (the "Line of Credit"). The Band certifies that the amounts drawn under this Request will be used in accordance with Section 3 of the Line of Credit Agreement and Section 8.5 of the Development Agreement, as per the attached itemization. Advances should be made [pursuant to wire transfer instructions previously given to Lakes] [as follows: ________________________________________]. Dated: THE POKAGON BAND OF POTAWATOMI INDIANS ------------------------------ By: ------------------------------------ Its: Council Chairman By: ------------------------------------ Its: Secretary 6 EX-10.180 14 c02716exv10w180.txt THIRD AMENDED AND RESTATED TRANSITION LOAN NOTE EXHIBIT 10.180 EXECUTION VERSION THIRD AMENDED AND RESTATED TRANSITION LOAN NOTE $12,000,000 January 25, 2006 Dowagiac, Michigan FOR VALUE RECEIVED, The Pokagon Band of Potawatomi Indians (the "Band") promises to pay to Great Lakes Gaming of Michigan, LLC, a Minnesota limited liability company ("Lakes"), such sums as may be advanced by Lakes to the Band under Section 8.3 of a Development Agreement between the Band and Lakes Entertainment, Inc., f/k/a Lakes Gaming, Inc. dated as of July 8, 1999 (the "Development Agreement"), (as assigned by Lakes Entertainment, Inc. to and assumed by Lakes pursuant to that certain Assignment and Assumption Agreement dated as of October 16, 2000 by and among the Band, Lakes Entertainment, Inc. and Lakes, and amended by a Second Amended and Restated Assignment and Assumption Agreement of even date hereof (the "Assignment Agreement")), and as amended and restated by a First Amended and Restated Development dated as of October 16, 2000, a Second Amended and Restated Development dated as of December 22, 2004, and a Third Amended and Restated Development Agreement of even date hereof, as the same may be further amended, substituted and modified (collectively, and as heretofore and hereafter further amended, substituted, restated and modified, the "Development Agreement"); provided that the principal amount due hereunder shall not exceed Twelve Million Dollars ($12,000,000.00). 1. Advances. Advances under this Note may, at Lakes'option, be funded through transfer of funds from the Escrow Account; provided that interest shall only accrue under this Note on funds advanced through the Escrow Account after disbursement from the Escrow Account, and shall not begin to accrue on deposit by Lakes into the Escrow Account. 2. Interest. No interest shall accrue on amounts outstanding hereunder until two years after the date hereof. Beginning on the second annual anniversary of the date hereof, interest shall begin accruing on the outstanding balance as follows: (a) if the Bank Closing occurs, at a fixed rate equal to the lesser of (i) Base Rate as of the Bank Closing plus 1% or (ii) 10% (the "Band Interest Rate"); or (b) if the Bank Closing does not occur, at a variable rate equal to the lesser of (i) Base Rate plus 1% or (ii) 10% (the lesser of (i) and (ii) being referred to as the "Variable Interest Rate"). Lakes shall adjust the Variable Interest Rate on the then unpaid principal balance, by way of increase or decrease, in accordance with changes in the Base Rate. Such changes shall be effective as of the change in the Base Rate (the "Effective Date"). If the Bank Closing occurs after the second annual anniversary of the date hereof, interest accruing under this Note prior to the Bank Closing shall be adjusted retroactively to reflect the Band Interest Rate. "Base Rate" means the lowest Prime Rate as is published daily in The Wall Street Journal. n the event that the Wall Street Journal ceases to publish the Prime Rate, then the holder hereof may in its reasonable discretion select some other generally recognized comparable indicator of the national Prime Rate. 3. Repayment. If the Commencement Date occurs, the Band shall, beginning on the 15th day of the month following the Commencement Date, make equal monthly payments to Lakes of principal and interest in an amount sufficient to amortize the principal amount outstanding as of the Commencement Date over a sixty (60) month period at the Band Interest Rate, and shall thereafter continue to make payments in such amount on the 15th day of each succeeding month to and including the fifteenth day of the sixtieth month following the Commencement Date, when all remaining principal and interest shall be due and payable. If the Commencement Date does not occur, principal and interest shall be repayable to the extent and in the manner provided in the Development Agreement; provided that payments shall in any event be due and made only from Subsequent Gaming Facility Revenues, in accordance with the Development Agreement. If Gaming commences at such a facility and payment is due under this Note in accordance with the Development Agreement, the Band shall, beginning on the 15th day of the month following such commencement date, make equal monthly payments to Lakes of principal and interest in an amount sufficient to amortize the principal amount outstanding as of such commencement date over a sixty (60) month period at the Variable Interest Rate, and shall thereafter continue to make such payments on the 15th day of each succeeding month to and including the fifteenth day of the sixtieth month following such commencement date, when all remaining principal and interest shall be due and payable. As of the Effective Date of a change in the Base Rate, Lakes shall adjust the monthly installments of principal and interest as of the installment next following the Effective Date so mat the then unpaid principal balance would be amortized in full at the revised Variable Interest Rate five years after such commencement of gaming. Lakes shall promptly notify the Band in writing of any changes in the Base Rate and in the installment payment due. 4. Prepayment. This Note may be prepaid at any time without penalty. This Note shall also be subject to prepayment as and when required under the terms of any Transaction Documents. 5. Limited Recourse. The obligations of the Band under this Note and any related awards, judgments or decrees shall be payable solely out of undistributed or future Net Revenues of the Enterprise and shall be a Limited Recourse obligation of the Band, with no recourse to tribal assets other than the limited assets of the Band specified in the definition of Limited Recourse and Section 14.3(a) of the Development Agreement. 2 6. Subordination. Payment of amounts due hereunder shall be subordinated to the Bank Development Loan, the Equipment Loan and any other third-party loans or equipment leases to the Band relating to the Facility to the extent provided in the Development Agreement or, if the Commencement Date does not occur, or to any loans relating to any other Gaming facility in Michigan owned by the Band. The holder of this Note agrees to execute and deliver subordination agreements evidencing such subordination in form reasonably acceptable to holder and the Bank Lender, the Equipment Lender, or any other third-party lender or equipment lessor. 7. Default; Acceleration. All outstanding principal together with accrued interest shall become immediately due and payable in full, subject to the limitations on recourse provided above, upon default in the payment of principal or interest due under this Note if such default is not remedied within thirty (30) days after receipt by the Band of written notice thereof as provided in the Development Agreement. 8. Sovereign Immunity. The Band expressly waives its sovereign immunity from suit for the purpose of permitting or compelling arbitration to enforce this Note as provided in Article 14 of the Development Agreement and consents to be sued in the United States District Court for the Western District of Michigan - - Southern Division, the United States Court of Appeals for the Sixth Circuit, and the United States Supreme Court for the purpose of compelling arbitration or enforcing any arbitration award or judgment arising out of this Note. If the United States District Court lacks jurisdiction, the Band consents to be sued in the Michigan State Court system for the same limited purpose. The Band waives any requirement of exhaustion of tribal remedies. Without in any way limiting the generality of the foregoing, the Band expressly authorizes any governmental authorities who have the right and duty under applicable law to take any action authorized or ordered by any such court, and to take such action, including without limitation, repossessing or foreclosing on any real property not in trust, or otherwise giving effect to any judgment entered; provided, however, that liability of the Band under any judgment shall always be Limited Recourse, and in no instance shall any enforcement of any kind whatsoever be allowed against any assets of the Band other than the limited assets of the Band specified in the definition of Limited Recourse and Section 14.3(a) of the Development Agreement. The Band appoints the Chairman of the Pokagon Council and the Secretary of the Pokagon Council as its agents for service of all process under or relating to the Agreements, and (v) Furnishings and Fixtures to the extent provided in Section 9.2.10 of the Development Agreement. The Band agrees that service in hand or by certified mail, return receipt requested, shall be effective for all purposes under or relating to the Agreements if served on such agents. 9. Arbitration. All disputes, controversies or claims arising out of or relating to this Note shall be settled by binding arbitration as provided in Article 14 of the Development Agreement. 10. Business Purposes; Applicable Law. This Note evidences a loan for business and commercial purposes and not for personal, household, family or agricultural purposes. This Note shall be interpreted and construed in accordance with Michigan law, to the extent not preempted by federal law. Use of Michigan law for the foregoing limited purpose of interpretation and 3 construction is not intended by the parties to and shall not otherwise (i) incorporate substantive Michigan laws or regulations, including but not limited to Michigan usury laws or any other present or future provision of the laws of Michigan that would restrict the rate of interest upon any loan contemplated hereunder; or (ii) grant any jurisdiction to the State or any political subdivision thereof over the Gaming Site or the Facility. 11. Defined Terms. Capitalized terms used herein shall have the same meanings assigned to them in the Development Agreement, and, if not defined in the Development Agreement, in the Management Agreement between the Band and Lakes of even date. 12. Miscellaneous. a. Time is of the essence. b. The benefits and obligations of this Note shall inure to and be binding upon the parties hereto and their respective successors and assigns, provided that any succession or assignment is permitted under the Development Agreement. c. Waiver of any one default shall not cause or imply a waiver any subsequent default. d. This Note, together with the documents listed in Section 15.17 of the Development Agreement, sets forth the entire agreement between the parties hereto with respect to the subject matter hereof. All agreements, covenants, representations, and warranties, express or implied, oral or written, of the parties with respect to the subject matter hereof are contained herein and therein. This Note shall not be supplemented, amended or modified by any course of dealing, course of performance or uses of trade and may only be amended or modified by a written instrument duly executed by officers of both parties. e. This Note has been executed and delivered as a complete amendment and restatement in its entirety of that certain Transition Loan Note dated as of July 8, 1999 made payable by the Band to Lakes Entertainment, Inc. in the original principal amount of $7,500,000, as assigned by Lakes Entertainment, Inc. to Lakes pursuant to the Assignment Agreement and as amended and restated by a First Amended and Restated Transition Loan Note dated as of October 16, 2000 and a Second Amended and Restated Transition Loan Note dated as of December 22, 2004, but does not extinguish, satisfy, discharge or constitute a novation thereof, and the Band hereby reaffirms, subject to the provisions of this Note, the indebtedness evidenced thereby. Lakes agrees to deliver to the Band the original of such Note dated as of July 8, 1999, the First Amended and Restated Note dated as of October 16, 2000 and the original Second Amended and Restated Note dated as of December 22, 2004. 4 f. Any other provision of this Note to the contrary notwithstanding: (i) in no event shall the rate of interest payable under this Note exceed the maximum rate permitted by law (the "Legal Rate"); (ii) if at any time the rate of interest computed as provided above (the "Computed Rate") exceeds the Legal Rate, then interest shall accrue thereafter at the Legal Rate regardless of whether the Computed Rate is greater or less than the Legal Rate until the total amount of interest payable hereunder equals the amount that would have been payable without regard to this sentence, or until this Note is paid in full, whichever occurs first; and (iii) if the holder receives any interest in excess of the maximum rate permitted by this sentence, the excess shall be credited against the principal hereof or refunded, at the holder's option. THE POKAGON BAND OF POTAWATOMI INDIANS By: /s/ John Miller ------------------------------------ Its Council Chairman By: /s/ Daniel Rapp ------------------------------------ Its Secretary 5 EX-10.181 15 c02716exv10w181.txt THIRD AMENDED AND RESTATED INDEMNITY AGREEMENT EXHIBIT 10.181 EXECUTION AGREEMENT THIRD AMENDED AND RESTATED INDEMNITY AGREEMENT This Indemnity Agreement ("Indemnity Agreement") is dated as of the 25th day of January, 2006, by and between the Pokagon Band of the Potawatomi Indians (the "Band") and Great Lakes Gaming of Michigan, LLC, a Minnesota limited liability company ("Lakes"): WITNESSETH: WHEREAS, the Band and Lakes Entertainment, Inc., f/k/a Lakes Gaming, Inc. ("Lakes Entertainment") previously entered into Development Agreement dated as of July 8, 1999, (as assigned by Lakes Entertainment to Lakes pursuant to that certain Assignment and Assumption Agreement dated October 16, 2000, by and among the Band, Lakes Entertainment and Lakes, and amended by a First Amendment dated as of December 22, 2004 and a Second Amended and Restated Assignment and Assumption Agreement dated as of January 25, 2006 ("Assignment Agreement")), and as amended and restated by that certain First Amended and Restated Development Agreement dated October 16, 2000 by and between the Band and Lakes, and as amended and restated by that certain Second Amended and Restated Development Agreement dated as of December 22, 2004, by and between the Band and Lakes and as amended and restated by that certain Third Amended and Restated Development Agreement dated of even or recent date (collectively, and as heretofore and hereafter further amended, substituted, restated or modified, the "Third Amended and Restated Development Agreement"), pursuant to which the Band has engaged Lakes to, among other things, assist the Band in the design, development, construction and management of the Facility; and WHEREAS, Article 2 of the Third Amended and Restated Development Agreement provides, among other things, that Lakes shall finance the acquisition of all parcels of land comprising the Gaming Site and the Non-Gaming Lands through the making of advances (a) under the Lakes Note for the acquisition of each parcel of land constituting the Gaming Site (all such advances, whether heretofore or hereafter made, shall be collectively referred to as the "Gaming Site Advances"), and (b) under the Non-Gaming Land Acquisition Line of Credit for each parcel of land constituting the Non-Gaming Lands (all such advances, whether heretofore or hereafter made, shall be collectively referred to as the "Non-Gaming Land Advances" and together with all Gaming Site Advances shall be collectively referred to as the "Advances"); and WHEREAS, as further provided in Article 2 of the Third Amended and Restated Development Agreement, all of the Gaming Site Advances and the Non-Gaming Land Advances are to be secured by mortgages in favor of Lakes on the related parcels of land constituting the Gaming Site and the Non-Gaming Lands; and WHEREAS, the Band, with the consent of Lakes, has formed and may hereafter form certain related entities known as "Band Designees", including but not limited to Pokagon Properties, LLC, a Delaware limited liability company ("PPLLC") and Filbert Land Development, LLC, an Indiana limited liability company ("Filbert"), for the purpose of, at Band's option, acquiring title to all or a portion of the Gaming Site and all or a portion of the Non-Gaming Lands; and WHEREAS, each of the Advances (to the extent made in connection with any Band Designee's acquisition of Gaming Site or Non-Gaming Land parcels) will be made available by the Band to the Band Designee for the purpose of paying all costs associated with the acquisition of the parcels of land constituting the Gaming Site and the Non-Gaming Lands; and WHEREAS, Lakes has required and will be requiring each Band Designee to execute and deliver certain Band Designee Guaranties and Band Designee Mortgages (as each of such terms are defined in the Third Amended and Restated Development Agreement) and amendments thereto from time to time in connection with each acquisition of parcels of land related to the Gaming Site and the Non-Gaming Lands and has required the Band to execute and deliver that certain Indemnity Agreement dated October 16, 2000 by and between the Band and Lakes, as amended and restated by that certain First Amended and Restated Indemnity Agreement dated February 28, 2001 and by that certain Second Amended and Restated Indemnity dated December 22, 2004 (collectively, the "Original Indemnity Agreement") to Lakes, all as a condition precedent to the making of such Advances; and WHEREAS, in connection with the execution of the Third Amended and Restated Development Agreement, the Band and Lakes desire to amend and restate the Original Indemnity Agreement as set forth herein. NOW, THEREFORE, for valuable consideration, the receipt of which is hereby acknowledged, and as an inducement to the Lakes to make the Advances to the Band, the Band agrees as follows: 1. Recitals True. The above recitals are true and this Third Amended and Restated Indemnity Agreement shall amend and restate the Original Indemnity Agreement in its entirety. 2 Definitions. Capitalized terms used but not otherwise defined herein and defined in the Third Amended and Restated Development Agreement shall have the same meaning herein as therein. 3. Indemnity - General. The Band agrees to indemnify and to hold Lakes (the "Indemnitee") harmless from any and all claims, causes of action, damages, penalties, fees and costs (to the extent such fees and costs are payable under the respective Band Designee Mortgages) which may be asserted against, or incurred by, Indemnitee resulting from or due to any Band Designee's failure to pay and perform each of its obligations under any Band Designee Guaranty and the respective Band Designee Mortgages (excluding obligations under Section 25 of any Band Designee Mortgage) as and when required thereunder (collectively, the "Indemnified Obligation"); provided that such indemnity shall only be due and owing after an Event of Default has occurred under the applicable Band Designee Guaranty or respective Band Designee Mortgage and all applicable notices have been given and all rights of cure have expired, and either (a) the time within which arbitration may be demanded has expired, or (b) if arbitration has been timely demanded, as and to the extent allowed in an arbitration award. The Band's duty to indemnify and hold harmless includes, but is not limited to, proceedings or actions commenced by any person (including, but not limited to, any federal, state, or local governmental agency or entity) before any court or administrative agency asserting a claim for which Band must indemnify Indemnitee under this section. The Band further agrees that 2 pursuant to its duty to indemnify under this section, the Band shall indemnify the Indemnitee against all Indemnified Obligations incurred by it as they become due and not waiting for the ultimate outcome of such litigation or administrative proceeding. 4. Indemnity - Hazardous Waste. The Band agrees to indemnify and to hold Lakes and each of its officers, directors, shareholders, employees, agents, attorneys and other representatives (individually and collectively, the "Hazardous Waste Indemnitees") harmless from any and all claims, causes of action, damages, penalties, fees and costs (to the extent such fees and costs are payable under the respective Band Designee Mortgages) which may be asserted against, or incurred by, any of the Hazardous Waste Indemnitees resulting from or due to any Band Designee's failure to pay and perform its obligations under Section 25 of any Band Designee Mortgage as and when required thereunder (collectively, the "Hazardous Waste Indemnity Obligation"); provided that such indemnity shall only be due and owing after an Event of Default has occurred under the applicable Band Designee Guaranty or respective Band Designee Mortgage and all applicable notices have been given and all rights of cure have expired, and either (a) the time within which arbitration may be demanded has expired, or (b) if arbitration has been timely demanded, as and to the extent allowed in an arbitration award. The Band's duty to indemnify and hold harmless includes, but is not limited to, loss or liability asserted in proceedings or actions commenced by any person (including, but not limited to, any federal, state, or local governmental agency or entity) before any court or administrative agency asserting a claim for which Band must indemnify Hazardous Waste Indemnitees under this section. The Band further agrees that pursuant to its duty to indemnify under this section, the Band shall indemnify the Hazardous Waste Indemnitees against all Hazardous Waste Indemnity Obligations incurred by them as they become due and not waiting for the ultimate outcome of such litigation or administrative proceeding. The Band's obligations to indemnify and hold the Hazardous Waste Indemnitees harmless hereunder shall survive repayment, satisfaction and/or foreclosure of the applicable Band Designee Guaranty, the respective Band Designee Mortgages and all other obligations now or hereafter owed by the Band to Lakes or its permitted assigns under the Third Amended and Restated Development Agreement, the Third Amended and Restated Management Agreement (as defined in the Third Amended and Restated Development Agreement) and any other instruments, documents or agreements related thereto, but shall remain subject to the provisions of Sections 6, 7, 8, 9 and 10 of this Indemnity Agreement, which shall also survive such repayment, satisfaction or foreclosure. 5. Advances under Loan Agreements. Notwithstanding the foregoing and without limiting the rights of Lakes under each Band Designee Guaranty and the respective Band Designee Mortgages, prior to the occurrence of the Commencement Date for the Facility, all Indemnified Obligations and Hazardous Waste Indemnity Obligations (collectively, the "Indemnity Obligations") accruing prior thereto and not paid by the Band on demand by any of the Indemnitees, shall be deemed to be an Advance made by Lakes to the Band under the terms of the Lakes Development Note or the Non-Gaming Lands Acquisition Line of Credit, as applicable, and shall accrue interest from the date incurred and be repayable in accordance with the terms set forth therein; subject to timely demand for arbitration under Section 6 and, if so demanded, the arbitration award. Thereafter, to the extent any Indemnity Obligations are not paid on demand, the same shall constitute "Operating Expenses" (as defined in the Third Amended and Restated Management Agreement) paid by Lakes and Lakes shall be entitled to reimbursement of the same under the Third Amended and Restated Management Agreement 3 without any further consent or approval of the Band; subject to timely demand for arbitration under Section 6 and, if so demanded, the arbitration award. 6. Arbitration; Limited Waiver of Sovereign Immunity. Any disputes under this Indemnity Agreement shall be subject to arbitration as provided in Section 14.2 of the Third Amended and Restated Development Agreement and be resolved in the venues provided in Section 14.1 of the Development Agreement. The Band's limited waiver of sovereign immunity in Section 14.1 of the Third Amended and Restated Development Agreement shall apply to this Indemnity Agreement. 7. Limited Recourse. The liability of the Band under or relating to this Indemnity Agreement shall always be Limited Recourse, and in no instance shall any enforcement of any kind whatsoever be allowed against any assets of the Band other than the limited assets of the Band specified in the definition of Limited Recourse and Section 14.3(a) of the Third Amended and Restated Development Agreement. 8. Governing Law. This Indemnity Agreement shall be interpreted in accordance with the law of Michigan. 9. Amendments. Assignments, Etc. Any provision of this Indemnity Agreement may be amended if, but only if, such amendment is in writing and is signed by each of the parties hereto. No modification shall be implied from course of conduct. Lakes may not assign its rights and obligations hereunder except to an assignee permitted under Section 10.5(a) of the Third Amended and Restated Development Agreement. This Indemnity Agreement may be executed in separate counterparts and such counterparts shall be deemed to constitute one binding document. 10. Notices. The Band agrees that any notice or demand upon it shall be deemed to be sufficiently given or served if it is in writing and is personally served or in lieu of personal service is mailed by first class certified mail, postage prepaid, or be overnight mail or courier service, addressed to the Band at the address of the Band and with copies set forth in Section 15.4 of the Third Amended and Restated Development Agreement. Any notice or demand so mailed shall be deemed received on the date of actual receipt, on the third business day following mailing as herein set forth or one day following delivery to a courier service, whichever first occurs. 11. Termination. This Indemnity Agreement shall terminate (except as provided in Section 4) upon the discharge of all Band Designee Mortgages. 12. Amendment and Restatement. This Third Amended and Restated Indemnity Agreement amends and restates in its entirety the Original Indemnity Agreement. Nothing herein shall be construed to impair or discharge the Original Indemnity. To the extent that the terms and provisions of the Original Indemnity may conflict with or be inconsistent with the terms and provisions of this Third Amended and Restated Indemnity Agreement, the latter shall control. 4 IN WITNESS WHEREOF, the parties hereto have caused this Third Amended and Restated Indemnity Agreement to be executed as of the 25th day of January, 2006. THE POKAGON BAND OF POTAWATOMI INDIANS /s/ John Miller ---------------------------------------- By: John Miller Its: Council Chairman /s/ Daniel Rapp ---------------------------------------- By: Daniel Rapp Its: Secetary GREAT LAKES GAMING OF MICHIGAN, LLC /s/ Timothy J. Cope ---------------------------------------- By: Timothy J. Cope Its: President 5 EX-10.182 16 c02716exv10w182.txt SECOND AMENDED AND RESTATED UNLIMITED GUARANTY EXHIBIT 10.182 EXECUTION VERSION SECOND AMENDED AND RESTATED UNLIMITED GUARANTY This Second Amended and Restated Unlimited Guaranty ("Guaranty Agreement") is made as of the 25th day of January, 2006, by and among Lakes Entertainment, Inc., f/k/a Lakes Gaming, Inc., a Minnesota corporation ("Lakes") and Lakes Gaming and Resorts, LLC, a Minnesota limited liability company ("LG & R"; collectively with Lakes, and each of Lakes and LG&R individually, the "Guarantor"), and the Pokagon Band of Potawatomi Indians (the "Band"). WITNESSETH: WHEREAS, the Band and Lakes entered into a Development Agreement dated as of July 8, 1999 (the "1999 Development Agreement") and a Management Agreement dated as of July 8, 1999 (the "1999 Management Agreement"; collectively, with the 1999 Development Agreement, the "1999 Agreements"), pursuant to which the Band engaged Lakes to, among other things, assist the Band in the design, development, construction and management of a gambling casino and certain related amenities (as defined in the 1999 Development Agreement, the "Facility"); and WHEREAS, pursuant to the 1999 Development Agreement, Lakes agreed to make certain payments and advances to the Band, including without limitation the Transition Loan, the Lakes Development Loan and the Non-Gaming Land Acquisition Line of Credit (collectively the "Lakes Loans"), and the Scholarship Program Fee, and has agreed to perform development services with regard to the Facility, all on the terms set out in that Agreement; and WHEREAS, pursuant to the 1999 Management Agreement, Lakes agreed to manage the Facility on the terms set out in that Agreement; and WHEREAS, Lakes assigned its rights and obligations under the 1999 Agreements to Great Lakes Gaming of Michigan, LLC ("Great Lakes"), pursuant to an Assignment and Assumption Agreement dated as of October 16, 2000, as the same has been amended by a First Amendment dated as of December 22, 2004 (the "Assignment Agreement"), subject to the terms and conditions set out in the Assignment Agreement; and WHEREAS, the 1999 Agreements were amended and restated by a First Amended and Restated Development Agreement dated as of October 16, 2000 and by a First Amended and Restated Management Agreement dated as of October 16, 2000 (collectively, the "First Amended and Restated Agreements"); and WHEREAS, Guarantor unconditionally guaranteed the obligations of Great Lakes to the Band under the First Amended and Restated Agreements pursuant to an Unlimited Guaranty dated as of October 16, 2000 (the " 2000 Guaranty"); and WHEREAS, the First Amended and Restated Agreements were amended and restated by a Second Amended and Restated Development Agreement dated as of December 22, 2004 and by a Second Amended and Restated Management Agreement dated as of December 22, 2004 (collectively, the "Second Amended and Restated Agreements"); and WHEREAS, the 2000 Guaranty was amended by a First Amendment to Unlimited Guaranty dated as of December 22, 2004 (as so amended and as may be further amended, the "Guaranty") in order to reflect the execution of the Second Amended and Restated Agreements; and WHEREAS, Great Lakes, Lakes and the Band have entered into a Third Amended and Restated Development Agreement dated as of January 25, 2006 and a Third Amended and Restated Management Agreement dated as of January 25, 2006 (collectively, the "Third Amended and Restated Agreements"); WHEREAS, Great Lakes, Lakes and the Band have entered into a Second Amended and Restated Assignment and Assumption Agreement of even date hereof amending the Assignment Agreement; and WHEREAS, the parties wish to further amend and restate the Guaranty to reflect the execution of the Third Amended and Restated Agreements, and to provide that pursuant to the Guaranty each Guarantor shall unconditionally guarantee the obligations of Great Lakes to the Band under the Third Amended and Restated Agreements and all related documents and instruments; NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Recitals True. The above recitals are true. 2. Defined Terms. a. Capitalized terms used but not otherwise defined herein and defined in the Third Amended and Restated Agreements shall have the same meaning herein as therein. b. All references to the term "Development Agreement" herein shall mean the Development Agreement dated as of July 8, 1999 between Lakes and the Band, as assumed by Great Lakes under the Assignment and Assumption Agreement dated as of October 16, 2000, and the Second Amended and Restated Assignment and Assumption Agreement of even date hereof, as the same has been and may be amended, and as amended and restated by a First Amended and Restated Development Agreement dated as of October 16, 2000, a Second Amended and Restated Development Agreement dated as of December 22, 2004, and a Third Amended and Restated Development Agreement dated as of January 25, 2006, and as the same may be further amended, substituted, restated or modified. c. All references to the term "Management Agreement" herein shall mean the Management Agreement dated as of July 8, 1999 between Lakes and the Band, as assumed by Great Lakes under the Assignment and Assumption Agreement dated as of October 16, 2000, and the Second Amended and Restated Assignment and Assumption Agreement of even 2 date hereof, as the same has been and may be amended, and as amended and restated by a First Amended and Restated Management Agreement dated as of October 16, 2000, a Second Amended and Restated Management Agreement dated as of December 22, 2004, and a Third Amended and Restated Management Agreement dated as of January 25, 2006, and as the same may be further amended, substituted, restated or modified. d. All references to the term "Lakes Loans" shall mean the Transition Loan, the Lakes Development Loan, the Non-Gaming Land Acquisition Line of Credit and the Lakes Facility Loan. e. All references to the term "Obligations" shall mean any and all obligations of Great Lakes to the Band under or relating to the following documents and instruments: i. Development Agreement; ii. Management Agreement; iii. Third Amended and Restated Non-Gaming Land Acquisition Line of Credit Agreement dated as of January 25, 2006, and any subsequent amendments, restatements, substitutions and modifications thereto; iv. Third Amended and Restated Control Agreement dated as of January 25, 2006, and any subsequent amendments, restatements, substitutions and modifications thereto; v. Third Amended and Restated Pledge and Security Agreement dated as of January 25, 2006, and any subsequent amendments, restatements, substitutions and modifications thereto; vi. Second Amended and Restated Assignment and Assumption Agreement dated as of January 25, 2006, and any subsequent amendments, restatements, substitutions and modifications thereto. 3. Consent. Each Guarantor consents to the Third Amended and Restated Agreements and to all documents executed in connection therewith or related thereto. 4. Guarantied Obligations. The undersigned Guarantor(s), jointly and severally, hereby irrevocably and unconditionally guarantee the full and punctual payment and performance by Great Lakes of all covenants, obligations and representations of Great Lakes under or relating to the Obligations, including without limitation the due and punctual payment by Great Lakes of all advances due under the Lakes Loans and the Scholarship Program Fee, as such Obligations may be amended, modified, restated or renewed, as well as all substitutions therefor and renewals, extensions and rearrangements thereof, together with any and all costs incurred by Band (including, without limitation, reasonable attorneys' fees and disbursements) in enforcing this Guaranty or any security therefore (individually, a "Guarantied Obligation" and collectively, the "Guarantied Obligations"). 3 5. Demand by the Band: Performance by Guarantor. In the event of a Guaranty Event of Default, the Band may make demand upon the Guarantor(s), or any one of them, for the payment or performance of the Guarantied Obligation, and each Guarantor binds and obliges it to make such payment or performance and to pay any related damages forthwith upon such demand. Each Guarantor further covenants and agrees that Band may upon a Guaranty Event of Default proceed first and directly against the Guarantor, without any action, proceeding or suit, whether against Great Lakes or against any security for the Guarantied Obligations (hereby intending, among other matters, to waive any defense to this Guaranty based on impairment of collateral), or any other party liable for the Guarantied Obligations. This Guaranty Agreement is not conditioned upon the genuineness, validity, or enforceability of the Third Amended and Restated Agreements, the Lakes Notes and all documents related thereto, arising thereunder or executed in connection therewith (collectively, the "Transaction Documents") or any other instruments relating to the creation or performance of the Guarantied Obligations, or the pursuit by the Band of any remedies which the Band has now or may hereafter have with respect thereto under the Transaction Documents. "Guaranty Event of Default" means (a) either (i) a Lakes Event of Default under the Development Agreement, (ii) a Manager Event of Default under the Management Agreement, or (iii) any other default or breach by Great Lakes under the Guaranteed Obligations; in each case after all cure periods have expired and either the time within which arbitration may be demanded has expired or, if arbitration has been timely demanded, the arbitrator has issued his award and the award determines that Great Lakes is in default or breach under a Guaranteed Obligation; or (b) the receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of, or any similar proceeding affecting Great Lakes or any Guarantor or any of its or their assets. 6. Waiver of Demands. Notices, Diligence, etc. Each Guarantor hereby assents to all the terms and conditions of the Guarantied Obligations and the related Transaction Documents and waives (a) demand for the payment or performance of any Guarantied Obligation (other than a demand under Section 5 hereof); (b) notice of the occurrence of a default or an Event of Default under the Transaction Documents; (c) notice of acceptance of any guaranty herein provided for or of the terms and provisions thereof or hereof by the Band; (d) notice of any indulgences or extensions granted to Great Lakes or any successor to Great Lakes or any person or party which shall have assumed the obligations of Great Lakes or any other obligor in respect of any Guarantied Obligation; (e) any requirement of diligence or promptness on the part of the Band in the enforcement of any of its rights under the provisions of any Guarantied Obligation or the Transaction Documents; (f) any enforcement of any Guarantied Obligation against any other party liable therefor; (g) any right which the Guarantor might have to require the Band to proceed against any other guarantor of the Guarantied Obligations or to realize on any collateral security therefor; (h) any and all notices of every kind and description which may be required to be given by any statute or rule of law in any jurisdiction (other than notices required hereunder), to the maximum extent permitted by applicable law; (i) any and all claims, defenses or objections based upon the failure of the Band to make demand upon the Guarantor for the payment or performance of any of the Guarantied Obligations (other than the demand provided for in Section 5 hereof) under applicable law; and (j) any right to exoneration or marshaling, and, to the maximum extent permitted by applicable law, any defense based upon or arising from the Statute of Limitations, and other laws relating to stays of action or moratorium. Each Guarantor further 4 hereby waives (solely as against Band) any right to contribution from co guarantors as well as any right to exoneration, subrogation or reimbursement until all Guarantied Obligations are fully and indefeasibly paid or performed and until the expiration of any applicable preference periods. The Band and Great Lakes (or any other party to a Guaranteed Obligation) may modify, renew, waive or extend any Guaranteed Obligation or any provision thereof and may modify, waive or release any collateral therefor without the consent of any Guarantor and without altering or releasing the obligations of Guarantor hereunder. 7. Obligations of Guarantor Unconditional, etc. a. This Guaranty Agreement is a guaranty of payment not collection. This is a continuing Guaranty, which shall apply to the Guarantied Obligations which now exist or as the same may change over time, and to any successive transactions continuing, compromising, extending, increasing, modifying, releasing or renewing any Guaranteed Obligation, whether or not notice of any after arising Guarantied Obligation or change to the Guarantied Obligation is given to Guarantor, and whether or not any and all prior Guarantied Obligations have been fully paid, performed or observed before a new Guarantied Obligation arose, and shall apply notwithstanding the dissolution of Great Lakes or dissolution of any other guarantor of any Guarantied Obligation. The obligations of the Guarantor upon a Guaranty Event of Default are and shall be unconditional, irrespective of the validity, regularity or enforceability of any Guarantied Obligation or any of the Transaction Documents or of any claim or defense of any party relating thereto. This Guaranty Agreement shall not be affected by any action taken under or in respect of any Guarantied Obligation, in the exercise of any right or remedy therein or thereby conferred, or by any failure or omission on the part of the Band to enforce any right given thereunder or hereunder, or any remedy conferred thereby or hereby; or by any lack of diligence on the part of Band to enforce, assert or exercise any right, power or remedy granted hereunder, under the Third Amended and Restated Agreements or any other Guarantied Obligation, or any documents relating thereto (including without limitation any failure to perfect a security interest in or lien on any security for any Guarantied Obligation); or by any release or surrender of any security or any other guaranty at any time existing for the benefit of Band or in respect of any Guarantied Obligation or any modification to any of the foregoing; or by any sale, lease or transfer by Great Lakes to any person of any and all of its properties; or by any action of the Band granting indulgence or extension or accommodations to, or waiving or acquiescing in any default by, Great Lakes or any successor to Great Lakes, or any person or party which shall have assumed its or their obligations or any other party liable for any Guarantied Obligation; or any compromise, settlement or other arrangement with Great Lakes or any other party liable for any Guarantied Obligation; or by the release or discharge by operation of law of Great Lakes from the performance or observance of any obligation, covenant or agreement contained in the Third Amended and Restated Agreements or the Transaction Documents or any document relating to any Guaranteed Obligation or by reason of the dissolution of Guarantor or Great Lakes or any other defense of Great Lakes or any successor to Great Lakes; or by any modification or alteration of any Guarantied Obligation or by any circumstance whatsoever (with or without notice to or knowledge of the Guarantor) which could vary the risk of the Guarantor hereunder; it being the purpose, intent and agreement of the Guarantor that the 5 obligations of the Guarantor hereunder are and shall upon a Guaranty Event of Default be absolute and unconditional under any and all circumstances and shall not be discharged except by payment or performance as herein provided, and then only to the extent of such payment or performance, subject, however, to renewal, extension or reinstatement pursuant to the provisions of Section 10 hereof. b. Any claim against Great Lakes to which the Guarantor may be or become entitled (including, without limitation, claims by subrogation, reimbursement, contribution, indemnity, or otherwise) by reason of any payment or performance by the Guarantor in satisfaction and discharge, in whole or in part, of its obligations under this Guaranty Agreement and any other rights against Great Lakes shall be and hereby are made subject and subordinate to the prior payment or performance in full of the Guaranteed Obligations and until such time Guarantor shall not be entitled to and shall not claim any subrogation to any claim of Band, nor any right of set off or counterclaim against Great Lakes. c. The Band shall have the right to seek recourse against Guarantor to the fullest extent provided for herein and no election by the Band to proceed against any party, or on any obligation, shall constitute a waiver of the Band's right to proceed against any Guarantor on obligations other than those set out herein, or against other parties, unless the Band has expressly waived such right in writing. Specifically, but without limiting the generality of the foregoing, no action or proceeding by the Band under any document or instrument evidencing the Guarantied Obligations shall serve to diminish the liability of Guarantor under this Guaranty Agreement except to the extent that the Band finally and unconditionally shall have realized indefeasible payment by such action or proceeding. All rights and remedies of the Band shall be cumulative. d. Guarantor represents and warrants that any and all information delivered to Band by Guarantor and Great Lakes is true, accurate and complete as of the date hereof and covenants and agrees to provide Band with such further information as is required under Section 13.5(b) of the Development Agreement and, after a default hereunder, such further information as to Guarantor's financial condition and affairs as the Band may require. 8. Direct Obligation. This Guaranty Agreement is a primary and original obligation of Guarantor, is not merely the creation of a surety relationship, and is an absolute, unconditional, and continuing guaranty of payment and performance which shall remain in full force and effect without respect to future changes in conditions. Each Guarantor agrees that it is directly, jointly and severally with any other guarantor of the Guarantied Obligations, liable to the Band, that the obligations of Guarantor hereunder are independent of the obligations of Great Lakes or any other Guarantor, and that a separate action or proceeding may be brought against Guarantor, whether such action is brought against Great Lakes or any other guarantor or whether Great Lakes or any other guarantor is joined in such action or proceeding. Guarantor agrees that upon the occurrence of a Guaranty Event of Default its liability hereunder shall be immediate and shall not be contingent upon the exercise or enforcement by the Band of whatever remedies it may have against Great Lakes or any other guarantor, or the enforcement of any lien or realization upon any security the Band may at any time possess. Guarantor agrees that any release which 6 may be given by the Band to Great Lakes or any other obligor or any other guarantor shall not release Guarantor. Guarantor consents and agrees that the Band shall be under no obligation to marshal any property or assets of Great Lakes or any other guarantor in favor of Guarantor, or against or in payment of any or all of the Guarantied Obligations. The Band shall upon a Guaranty Event of Default have the right to proceed first and directly against each Guarantor under this Guaranty. Guarantor acknowledges that there are no conditions precedent to the effectiveness of this Guaranty Agreement and that this Guaranty Agreement is in full force and effect and is binding on Guarantor upon execution and delivery to the Band. 9. Subordination. Guarantor hereby agrees that any and all present and future indebtedness of Great Lakes owing to Guarantor is subordinated to payment, in full, in cash, of the Guarantied Obligations. In this regard, no payment of any kind whatsoever shall be made with respect to such indebtedness after the occurrence and during the continuance of a Guaranty Event of Default until the Guarantied Obligations have been indefeasibly paid and performed in full. 10. Reinstatement. a. It is the intention of the parties hereto that this Guaranty Agreement shall remain in full force and effect until all of the Guarantied Obligations have been fully and indefeasibly paid, performed and satisfied; until Great Lakes is no longer obligated to the Band under or in respect of the Guarantied Obligations or any documents relating thereto; and until the expiration of any applicable preference periods. This Guaranty Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any amount received by the Band in payment of the Guarantied Obligations is rescinded or must otherwise be restored or returned upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of any Guarantor or Great Lakes or upon the appointment of any intervenor or conservator of, or trustee or similar official for any Guarantor or Great Lakes or any substantial part of either of their respective properties, or if any payment made in respect of any Guarantied Obligation is subsequently invalidated, declared to be fraudulent or preferential, or otherwise returned for any reason, all as though such payments had not been made. b. The Guaranteed Obligations shall not be considered indefeasibly paid for purposes of this Guaranty Agreement unless and until all payments to the Band are no longer subject to any right on the part of any person, including Great Lakes, Great Lakes as debtor in possession, or any trustee (whether appointed under the Bankruptcy Code or otherwise) of Great Lakes' assets to invalidate or set aside such payments or to seek to recoup the amount of such payments or any portion thereof, or the declare the same to be fraudulent or preferential. Until such full and final performance and indefeasible payment of the Guaranteed Obligations whether by Guarantor or Great Lakes, the Band shall have no obligation whatsoever to transfer or assign its interest in the Transaction Documents to Guarantor. In the event that, for any reason, any portion of such payments to Band is set aside or restored, whether voluntarily or involuntarily, after the making thereof, then the obligation intended to be satisfied thereby shall be revived and continued in full force and effect as if said payment or payments had not been made, and Guarantor shall be liable for the full amount the Band is required to repay plus any and all costs and expenses (including attorneys' fees) paid by the Band in connection therewith. 7 11. Notices, etc. All notices, requests and other communications to any Guarantor hereunder shall be in writing and shall be sent to the address of Lakes and with the copies set forth in Section 15.4 of the Development Agreement. Any notice or demand so mailed shall be deemed received on the date of actual receipt, on the third business day following mailing as herein set forth or one day following delivery to a courier service, whichever first occurs. 12. Multiple Debtors or Guarantors. If more than one Guarantor signs this Guaranty Agreement, or if there are multiple guarantors, as to any such circumstances, this Guaranty shall take effect as a separate guarantee on the same terms from each Guarantor to Band with respect to the Guarantied Obligations of each debtor, except as otherwise expressly provided in this section; and each such Guarantor identified on the signature page hereto is jointly and severally liable for the Guarantied Obligations. Each Guarantor's obligation under this Guaranty may be modified or released only by written agreement signed by the Band and such Guarantor, without the consent or agreement of any other Guarantor. No Guarantor's obligations under this Guarantee shall be impaired, reduced or otherwise affected by any such modification or release nor by the invalidity or unenforceability of the obligations of any other Guarantor. This Guaranty shall bind all signatories to this Guaranty, notwithstanding a failure by any party or entity named in this Guaranty Agreement as Guarantor to sign this or any Guaranty Agreement. All Guarantors of the Guarantied Obligations shall be and are jointly and severally liable under this Guaranty Agreement or their guaranties, as applicable, and default by any one guarantor shall constitute a default for all guarantors. A default by any one debtor of the Band or any Guarantor shall constitute default by all Guarantors with respect to all the Guarantied Obligations of all debtors of the Band. Suit may be brought against the Guarantors, jointly and severally, and against any one or more of them, or less than all of them, without impairing the rights of Band, its successors or assigns, against the other of the Guarantors; and Band may agree with any one or more of the Guarantors that such Guarantor or Guarantors shall be liable for such sum or sums as Band may see fit and may release any of such Guarantors from all further liability to Band for the Guaranteed Obligations guaranteed hereunder without impairing the right of Band to demand and collect the balance of the Guaranteed Obligations from the other Guarantors not so released. 13. Survival of Guaranty, etc. This Guaranty Agreement shall inure to the benefit of and be binding upon each Guarantor and the Band and their respective successors and assigns, including any subsequent assignees of any of the Guarantied Obligations permitted under Section 10.5(b) of the Development Agreement. This Guaranty Agreement is intended to take effect as a sealed instrument. This Guaranty Agreement is for the benefit of Band and in the event this Guaranty Agreement or any Guarantied Obligation are transferred or assigned in accordance with the Development Agreement, said transferee or assignee shall be entitled to the benefits hereof and to enforce the performance and observance of the terms and provisions hereof to the same extent as if said transferee or assignee was a party or signatory hereto and any such transferee shall be recognized as the Band hereunder. 14. Reservation of Rights. By entering into this Guaranty Agreement, the Band does not waive or affect any rights against any Guarantor. 8 15. Warranties and Representations - Great Lakes and Lakes. Each of the Guarantors warrants, represents and covenants to the Band that: a. This Guaranty Agreement constitutes the legal, valid and binding obligation of each of the Guarantors, and is fully enforceable in accordance with its terms; and b. Neither the execution or delivery of this Guaranty Agreement nor fulfillment of or compliance with the terms and provisions hereof, will conflict with, or result in a breach of the terms, conditions or provisions of, constitute a default under or result in the creation of any lien, charge or encumbrance upon any property or assets of any Guarantor under any agreement or instrument to which they or either of them is now a party or by which they may be bound. 16. Further Assurances. From time to time hereafter, each Guarantor and the Band will execute and deliver, or will cause to be executed and delivered, such additional instruments, certificates or documents, and will take all such actions, as may reasonably be requested by the other party or parties, for the purpose of implementing or effectuating the provisions of this Guaranty Agreement. 17. Governing Law. This Guaranty Agreement shall be interpreted in accordance with the law of the internal law of Minnesota. 18. Amendments, Assignments, Etc. Any provision of this Guaranty Agreement may be amended if, but only if, such amendment is in writing and is signed by each of the parties hereto. No modification shall be implied from course of conduct. 19. Gender and Number; Counterparts. Whenever the context so requires the masculine gender shall include the feminine and/or neuter and the singular number shall include the plural, and conversely in each case. This Guaranty Agreement may be executed in separate counterparts and said counterparts shall be deemed to constitute one binding document. 20. Severability. If any obligation or portion of this Guaranty Agreement is determined to be invalid or unenforceable under law, it shall not affect the validity or enforceability of any remaining obligations or portions hereof. 21. Additional Payment. All payments, advances, charges, costs and expenses, including reasonable attorneys' fees, made or incurred by Band in connection with the enforcement of this Guaranty Agreement shall be paid by Guarantor immediately without demand, together with interest at a rate per annum equal to the interest rate in effect for advances under the Lakes Loans, if (a) the Band makes demand on Guarantor under Section 5 above and Guarantor fails to timely demand arbitration under this Guaranty Agreement, or (b) Guarantor makes a timely demand for arbitration or the Band or Great Lakes demand arbitration, and the arbitration award in either case finds in the Band's favor on any issue being arbitrated. 22. Arbitration; Limited Waiver of Sovereign Immunity. Any disputes under this Guaranty Agreement shall be subject to arbitration as provided in Section 14.2 of the Development Agreement and be resolved in the venues provided in Section 14.1 of the Development 9 Agreement. The Band's limited waiver of sovereign immunity in Section 14.1 of the Development Agreement shall apply to this Guaranty Agreement. 23. Amendment and Restatement. This Second Amended and Restated Unlimited Guaranty amends and restates in its entirety a certain Unlimited Guaranty from Guarantor to the Band, as amended by a First Amendment to Unlimited Guaranty dated as of December 22, 2004 (collectively, the "Prior Guaranty"). Nothing herein shall be construed to impair or discharge the Prior Guaranty. To the extent that the terms and provisions of the Prior Guaranty may conflict with or be inconsistent with the terms and provisions of this Second Amended and Restated Unlimited Guaranty, the latter shall control. IN WITNESS WHEREOF, the parties hereto have caused this Guaranty Agreement to be executed as of the 25th day of January, 2006. LAKES ENTERTAINMENT, INC., f/k/a LAKES GAMING, INC. By: /s/ Timothy J. Cope ------------------------------------ Timothy J. Cope Its President LAKES GAMING AND RESORTS, LLC By: /s/ Timothy J. Cope ------------------------------------ Timothy J. Cope Its President THE POKAGON BAND OF POTAWATOMI INDIANS By: /s/ John Miller ------------------------------------ John Miller Its Council Chairman By: /s/ Daniel Rapp ------------------------------------ Daniel Rapp Its Secretary 10 EX-10.183 17 c02716exv10w183.txt SECOND AMENDED AND RESTATED ASSIGNMENT AND ASSUMPTION AGREEMENT EXHIBIT 10.183 EXECUTION VERSION SECOND AMENDED AND RESTATED ASSIGNMENT AND ASSUMPTION AGREEMENT This Agreement ("Assignment Agreement") is made the 25th day of January, 2006, by and among Great Lakes Gaming of Michigan, LLC, a Minnesota limited liability company ("Great Lakes"), Lakes Entertainment, Inc., f/k/a Lakes Gaming, Inc., a Minnesota corporation ("Lakes"), and the Pokagon Band of Potawatomi Indians (the "Band"). WITNESSETH: WHEREAS, the Band and Lakes entered into a Development Agreement dated as of July 8, 1999 (the "1999 Development Agreement") and a Management Agreement dated as of July 8, 1999 (the "1999 Management Agreement"; collectively, with the 1999 Development Agreement, the "1999 Agreements"), pursuant to which the Band engaged Lakes to, among other things, assist the Band in the design, development, construction and management of a gambling casino and certain related amenities (as defined in the 1999 Development Agreement, the "Facility"); and WHEREAS, pursuant to the 1999 Development Agreement, Lakes agreed to make certain payments and advances to the Band, including without limitation the Transition Loan, the Lakes Development Loan and the Non-Gaming Land Acquisition Line of Credit (collectively the "Lakes Loans"), and the Scholarship Program Fee, and has agreed to perform development services with regard to the Facility, all on the terms set out in the 1999 Development Agreement; and WHEREAS, pursuant to the 1999 Management Agreement, Lakes agreed to manage the Facility on the terms set out in the 1999 Management Agreement; and WHEREAS, Lakes assigned its rights and obligations under the 1999 Agreements to Great Lakes pursuant to an Assignment and Assumption Agreement dated as of October 16, 2000 (the "Assignment and Assumption Agreement"), subject to the terms and conditions set out in the Assignment and Assumption Agreement; and WHEREAS, the 1999 Agreements were amended and restated by a First Amended and Restated Development Agreement dated as of October 16, 2000 and by a First Amended and Restated Management Agreement dated as of October 16, 2000; and WHEREAS, Great Lakes, Lakes and the Band entered into a Second Amended and Restated Development Agreement dated as of December 22, 2004 (the "Second Amended and Restated Development Agreement") and a Second Amended and Restated Management Agreement dated as of December 22, 2004 (the "Second Amended and Restated Management Agreement"; collectively, the "Second Amended and Restated Agreements"); and WHEREAS, in connection and simultaneously with the execution of the Second Amended and Restated Agreements, the parties amended the Assignment and Assumption Agreement by virtue of a First Amendment to Assignment and Assumption Agreement dated as of December 22, 2004; and WHEREAS, Great Lakes, Lakes and the Band have entered into a Third Amended and Restated Development Agreement dated as of January 25, 2006 (the "Third Amended and Restated Development Agreement") and a Third Amended and Restated Management Agreement dated as of January 25, 2006 (the "Third Amended and Restated Management Agreement", collectively with the Third Amended and Restated Management Agreement and as such may be further amended, restated, substituted or modified, the "Third Amended and Restated Agreements"); and WHEREAS, the parties wish to amend and restate the Assignment and Assumption Agreement to reflect the execution of the Third Amended and Restated Agreements as provided below; NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Recitals True. The above recitals are true. 2. Defined Terms. Capitalized terms used but not otherwise defined herein and defined in the Third Amended and Restated Development Agreement or the Third Amended and Restated Management Agreement shall have the same meaning herein as therein. 3. Assignment of Lakes' Rights Under the Obligations. Lakes grants, bargains, sells, conveys, assigns and transfers to Great Lakes, without recourse, all of Lakes' right, title and interest, legal and equitable, in, to and under the Third Amended and Restated Agreements, the Lakes Loans and all related documentation, including, without limitation, the documents listed on the attached Schedule A (the "Related Documents," collectively, with the Third Amended and Restated Agreements and the Lakes Loans, the "Obligations"). 4. Transfer of Lakes Notes. Lakes agrees to endorse the Lakes Notes in favor of Great Lakes. Great Lakes agrees that it is the assignee of the Lakes Notes, but not 2 a holder in due course. 5. Assignment of Account. Lakes hereby assigns and transfers to Great Lakes all rights of Lakes in and to the Account and all cash, financial assets and investment property in the Account, subject to the Band's first perfected security interest, and agrees that the Account shall secure all obligations of Great Lakes and Lakes to the Band in accordance with the terms of the Pledge and Security Agreement and the Control Agreement. 6. Assumption of Obligations. Great Lakes accepts the assignment of Lakes' rights and obligations under the Obligations. Great Lakes assumes and agrees to perform and discharge all of the obligations and liabilities of Lakes arising under or relating to the Obligations in accordance with the terms thereof, as if Great Lakes had originally been a party thereto. The liabilities so assumed by Great Lakes include any obligations or liabilities of Lakes which have accrued under the Obligations as of the date hereof, as well as those subsequently accruing. All references to Lakes in the Obligations shall, except as set out in a certain Amendment of Account Control Agreement dated as of October 16, 2002 and as further amended by Second Amendment dated as of December 22, 2004, and a Third Amended and Restated Account Control Agreement dated as of January 25, 2006, or in an Amendment to Pledge and Security Agreement dated as of October 16, 2000 and as further amended by Second Amendment dated as of December 22, 2004 and a Third Amended and Restated Pledge and Security Agreement dated as of January 25, 2006, be deemed to refer to Great Lakes; except that references in the Third Amended and Restated Agreements or in any related documents dated on or about January 25, 2006, to Great Lakes and Lakes, respectively, shall refer to the respective entity so named. 7. Band Consent. The Band consents to the assignments and assumptions made under this Assignment Agreement, recognizes Great Lakes as a substituted party under the Obligations (except to the extent provided in Section 15.20 of the Third Amended and Restated Development Agreement and Section 18.23 of the Third Amended and Restated Management Agreement), and agrees that Great Lakes shall be a party to such Obligations to the same extent as if Great Lakes had originally been a party thereto; without prejudice, however, to Lakes' continued obligations to the Band under the Obligations as provided in the Third Amended and Restated Agreements, its Guaranty, the Control Agreement, as the same has been and may be amended, the Pledge and Security Agreement, as the same has been and may be amended, and this Assignment Agreement. 8. Release of Lakes. The Band releases and forever discharges Lakes of any and all liabilities or obligations under the Obligations except as specifically set out in 3 Section 15.20 of the Third Amended and Restated Development Agreement and Section 18.23 of the Third Amended and Restated Management Agreement, and, except as provided in such sections, agrees to look solely to Great Lakes for performance of all obligations of Lakes under the Obligations; conditioned on, however, the execution by Lakes and LG&R of the unlimited guarantee attached hereto as Exhibit B (the "Guarantee"), as amended, and without prejudice to the Band's rights under such Guarantee, under the Third Amended and Restated Agreements, under the Control Agreement, as the same has been and may be amended, the Pledge and Security Agreement, as the same has been and may be amended, or under this Assignment Agreement. 9. Release of the Band. Lakes agrees that, given the assignment of its rights under the Obligations to Great Lakes, Lakes has and shall have no claims against the Band under or relating to such Obligations; reserving, however, any rights or remedies, if any, which (a) Lakes may now have or may in the future acquire under the Indemnity Agreement, (b) Lakes may in the future acquire under the specific provisions of the Obligations, or (c) Lakes or LG&R may have under this Assignment Agreement or the Guarantee. 10. Lakes Continuing Obligations. Notwithstanding any other provision of this Agreement, Lakes shall continue to be a Hazardous Waste Indemnitee under Section 4 of the Third Amended and Restated Indemnity Agreement between the Band and Lakes dated as of January 25, 2006 and shall have the benefit of, and be bound by, Sections 4, 6, 7, 8, 9 and 10 of that Indemnity Agreement. 11. Sovereign Immunity. Lakes agrees that all claims and causes of action it may in the future have against the Band, whether at law, in tort or otherwise, shall be subject to the Band's sovereign immunity, unless specifically waived by the Band in writing after the date of this Assignment Agreement or, as to disputes under this Assignment Agreement or under the Third Amended and Restated Agreements, as provided in such agreements. Lakes shall, upon the execution of this Assignment Agreement, no longer have the benefit of any limited waiver of sovereign immunity provided in the Obligations except, as to the Third Amended and Restated Agreements, the Control Agreement, as amended, and the Pledge and Security Agreement, as amended, as provided in such agreements. Nothing in this Assignment Agreement waives or prejudices any rights Lakes or LG&R may have under the terms of their Guaranty, or affects any limited waiver of sovereign immunity in such Guaranty. 12. Covenants and Representations of Lakes and Great Lakes a. This Assignment Agreement constitutes the legal, valid and binding 4 obligation of Great Lakes and Lakes, and is fully enforceable in accordance with its terms. b. The Obligations constitute the legal, valid and binding obligation of Great Lakes, and are fully enforceable in accordance with their terms. c. The Guaranty constitutes the legal, valid and binding obligation of Lakes and LG&R, and is fully enforceable in accordance with their terms d. Neither the execution or delivery of this Assignment Agreement nor fulfillment of or compliance with the terms and provisions hereof, will conflict with, or result in a breach of the terms, conditions or provisions of, constitute a default under or result in the creation of any lien, charge or encumbrance upon any property or assets of Lakes or Great Lakes under any agreement or instrument to which either of them is now a party or by which either of them is or may in the future be bound. e. The fulfillment of and compliance with the terms and provisions of the Obligations will not conflict with, result in a breach of the terms, conditions or provisions of, constitute a default under, or result in the creation of any lien, charge or encumbrance upon any property or assets of Great Lakes under any agreement or instrument to which it is now a party or by which it is or may in the future be bound. f. The Band has, and shall have until the termination of the Pledge and Security Agreement in accordance with Section 15 thereof, a first perfected security interest in the Account. 13. Covenants and Representations of the Band a. This Assignment Agreement constitutes the legal, valid and binding obligation of the Band, and is fully enforceable in accordance with its terms. b. Neither the execution or delivery of this Assignment Agreement nor fulfillment of or compliance with the terms and provisions hereof, will conflict with, or result in a breach of the terms, conditions or provisions of, constitute a default under or result in the creation of any lien, charge or encumbrance upon any property or assets of the Band under any agreement or instrument to which it is now a party or may in the future be bound. 14. Further Assurances. From time to time hereafter, Lakes, Great Lakes and/or the 5 Band will execute and deliver, or will cause to be executed and delivered, such additional instruments, certificates or documents, and will take all such actions, as may reasonably be requested by the other party or parties, for the purpose of implementing or effectuating the provisions of this Assignment Agreement. 15. Governing Law; Severability. This Assignment Agreement shall be interpreted in accordance with the law of Michigan. Wherever possible each provision of this Assignment Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provisions of this Assignment Agreement shall be prohibited by, unenforceable or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition, unenforceability or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Assignment Agreement. 16. Amendments, Assignments, Etc. Any provision of this Assignment Agreement may be amended if, but only if, such amendment is in writing and is signed by each of the parties hereto. No modification shall be implied from course of conduct. Great Lakes may not further assign its rights and obligations hereunder and under the Obligations without the written consent of the Band. 17. Gender and Number; Counterparts. Whenever the context so requires the masculine gender shall include the feminine and/or neuter and the singular number shall include the plural, and conversely in each case. This Assignment Agreement may be executed in separate counterparts and said counterparts shall be deemed to constitute one binding document. 18. Notices. Great Lakes agrees that any notice or demand upon it shall be deemed to be sufficiently given or served if it is in writing and is personally served or in lieu of personal service is mailed by first class certified mail, postage prepaid, or be overnight mail or courier service, addressed to Great Lakes at the address of Lakes and with copies as set forth in Section 15.4 of the Third Amended and Restated Development Agreement. Notice to the Band shall be given as provided in Section 15.4 of the Third Amended and Restated Development Agreement. Any notice or demand so mailed shall be deemed received on the date of actual receipt, on the third business day following mailing as herein set forth or one day following delivery to a courier service, whichever first occurs. 19. Arbitration; Limited Waiver of Sovereign Immunity. Any disputes under this Agreement shall be subject to arbitration as provided in Section 14.2 of the Third Amended and Restated Development Agreement; provided that any demand for arbitration shall be made within 30 days after a notice of default, denominated as such, is given under this Agreement. The Band's limited waiver of sovereign 6 immunity in Sections 14.1 and 14.3 of the Third Amended and Restated Development Agreement shall apply to this Agreement; provided that the liability of the Band under any judgment shall always be Limited Recourse, and in no instance shall any enforcement of any kind whatsoever be allowed against any assets of the Band other than the limited assets of the Band specified in Section 14.3(h) of the Third Amended and Restated Development Agreement. 20. Ratification. Great Lakes, the Band, and Lakes each ratify and confirm the Obligations. 21. Amendment and Restatement. This Second Amended and Restated Assignment and Assumption Agreement amends and restates in its entirety the Assignment and Assumption Agreement between Great Lakes, Lakes and the Band dated as of October 16, 2000 and by a first amendment dated as of December 22, 2004 (collectively, the "Prior Assignment Agreement"). Nothing herein shall be construed to impair or discharge the Prior Assignment Agreement. To the extent that the terms and provisions of the Prior Assignment Agreement may conflict with or be inconsistent with the terms and provisions of this Second Amended and Restated Assignment and Assumption Agreement, the latter shall control. IN WITNESS WHEREOF, the parties hereto have caused this Second Amended and Restated Assignment and Assumption Agreement to be executed as of the day first above written. GREAT LAKES GAMING OF MICHIGAN, LLC By: /s/ Timothy J. Cope ------------------------------------ Timothy J. Cope Its President LAKES ENTERTAINMENT, INC., f/k/a Lakes Gaming, Inc. By: /s/ Timothy J. Cope ------------------------------------ Timothy J. Cope Its President 7 THE POKAGON BAND OF POTAWATOMI INDIANS By: /s/ John Miller ------------------------------------ Its Council Chairman By: /s/ Daniel Rapp ------------------------------------ Its Secretary Seen and agreed: LAKES GAMING AND RESORTS, LLC By: /s/ Timothy J. Cope ------------------------------------ Timothy J. Cope Its President 8 SCHEDULE A TO ASSIGNMENT AND ASSUMPTION AGREEMENT 1. Third Amended and Restated Development Agreement 2. Third Amended and Restated Management Agreement 3. Third Amended and Restated Lakes Development Note dated as of January 25, 2006 4. Third Amended and Restated Transition Loan Note dated as of January 25, 2006 5. Third Amended and Restated Non-Gaming Land Acquisition Line of Credit Agreement dated as of January 25, 2006 6. Third Amended and Restated Account Control Agreement dated as of January 25, 2006 7. Third Amended and Restated Pledge and Security Agreement dated as of January 25, 2006 8. Guaranty by Pokagon Properties, LLC ("Pokagon Properties") in favor of Lakes dated March 9, 2000 9. Mortgage covering properties in Berrien County, Michigan dated March 9, 2000 executed by Pokagon Properties in favor of Lakes, as amended 10. Mortgage covering properties in VanBuren County, Michigan dated March 9, 2000 executed by Pokagon Properties in favor of Lakes, as amended 11. Mortgage covering properties in Cass County, Michigan dated September 25, 2000 executed by Pokagon Properties in favor of Lakes, as amended 9 EX-10.184 18 c02716exv10w184.txt REAFFIRMATION OF GUARANTIES AND MORTGAGES EXHIBIT 10.184 EXECUTION VERSION REAFFIRMATION OF GUARANTIES AND MORTGAGES This Reaffirmation is dated as of the 25th day of January 2006, by and among the Pokagon Properties, LLC, a Delaware limited liability company ("PPLLC") and Filbert Land Development, LLC, an Indiana limited liability company ("Filbert" and together with PPLLC, collectively the "Band Designees") and Great Lakes Gaming of Michigan, LLC, a Minnesota limited liability company ("Lakes"): WITNESSETH: WHEREAS, the Band and Lakes Entertainment, Inc., f/k/a Lakes Gaming, Inc. ("Lakes Entertainment") previously entered into a Development Agreement dated as of July 8, 1999, (as assigned by Lakes Entertainment to Lakes pursuant to that certain Assignment and Assumption Agreement dated October 16, 2000, as the same has been or may be amended, by and among the Band, Lakes Entertainment and Lakes, and amended by a Second Amended and Restated Assignment and Assumption Agreement of even date hereof ("Assignment Agreement")); and as amended and restated by that certain First Amended and Restated Development Agreement dated October 16, 2000 by and between the Band and Lakes, by that certain Second Amended and Restated Development Agreement dated as of December 22,2004 by and between the Band and Lakes, and by that certain Third Amended and Restated Development Agreement dated of even or near date hereof by and between the Band and Lakes (collectively and as heretofore and hereafter further amended, substituted, restated or modified, the "Development Agreement"), pursuant to which the Band has engaged Lakes to, among other things, assist the Band in the design, development, construction and management of the Facility; and WHEREAS, Article 2 of the Development Agreement provides, among other things, that Lakes shall finance the acquisition of all parcels of land comprising the Gaming Site and the Non-Gaming Lands through the making of advances (a) under the Lakes Note for the acquisition of each parcel of land constituting the Gaming Site (all such advances, whether heretofore or hereafter made, shall be collectively referred to as the "Gaming Site Advances"), and (b) under the Non-Gaming Land Acquisition Line of Credit for each parcel of land constituting the Non-Gaming Lands (all such advances, whether heretofore or hereafter made, shall be collectively referred to as the "Non-Gaming Land Advances" and together with all Gaming Site Advances shall be collectively referred to as the "Advances"); and WHEREAS, as further provided in Article 2 of the Development Agreement, all of the Gaming Site Advances and the Non-Gaming Land Advances are to be secured by mortgages in favor of Lakes on the related parcels of land constituting the Gaming Site and the Non-Gaming Lands; and WHEREAS, the Band, with the consent of Lakes, has formed and may hereafter form certain related entities known as "Band Designees", including but not limited to PPLLC and Filbert, for the purpose of, at Band's option, acquiring title to all or a portion of the Gaming Site and all or a portion of the Non-Gaming Lands; and WHEREAS, each of the Advances (to the extent made in connection with any Band Designee's acquisition of Gaming Site or Non-Gaming Land parcels) will be made available by the Band to the Band Designee for the purpose of paying all costs associated with the acquisition of the parcels of land constituting the Gaming Site and the Non-Gaming Lands; and WHEREAS, Lakes has required and will be requiring each Band Designee to execute and deliver to Lakes certain Band Designee Guaranties and Band Designee Mortgages (as each of such terms are defined in the Development Agreement) and amendments thereto from time to time, including without limitation the Band Designee Guaranties and Band Designee Mortgages described on Exhibit A attached hereto, in connection with each acquisition of parcels of land related to the Gaming Site and the Non-Gaming Lands, all as a condition precedent to the making of such Advances; and WHEREAS, in connection with the execution of the Third Amended and Restated Development Agreement, Lakes requires each of the Band Designees to reaffirm the Band Designee Guaranties and Band Designee Mortgages and the Band Designees desire to reaffirm each of the Band Designee Guaranties and Band Designee Mortgages pursuant to the terms hereof. NOW, THEREFORE, for valuable consideration, the receipt of which is hereby acknowledged, and as an inducement to the Lakes to make the Advances to the Band and to execute the Third Amended and Restated Development Agreement, each of the Band Designees agrees as follows: 1. Recitals True. The above recitals are true. 2. Definitions. Capitalized terms used but not otherwise defined herein and defined in the Development Agreement, the Band Designee Guaranties or the Band Designee Mortgages, as applicable, shall have the same meaning herein as therein. 3. Consent and Reaffirmation. Each Band Designee hereby (i) acknowledges receipt of a copy, and consents to the execution and delivery by the Band, of the Third Amended and Restated Development Agreement and each of the other Transaction Documents (as defined in the such Third Amended and Restated Development Agreement and including, without limitation, each of the documents and agreements referenced in Section 15.17 thereof), and further consents to each of the terms and provisions set forth therein, and (ii) represents, warrants and confirms that each of the Band Designee Guaranties and Band Designee Mortgages executed by it remains in full force and effect in accordance with its original terms. [The remainder of this page has been intentionally left blank.] 2 Dated as of January 25, 2006 POKAGON PROPERTIES, LLC, A DELAWARE LIMITED LIABILITY COMPANY By: Pokagon Band of Potawatomi Indians Its: Member By: /s/ John Miller ------------------------------------ John Miller Its: Chairman And By: /s/ Daniel Rapp ------------------------------------ Daniel Rapp Its: Secretary FILBERT LAND DEVELOPMENT, LLC, AN INDIANA LIMITED LIABILITY COMPANY By: Pokagon Band of Potawatomi Indians Its: Member By: /s/ John Miller ------------------------------------ John Miller Its: Chairman And By: /s/ Daniel Rapp ------------------------------------ Daniel Rapp Its: Secretary 3 EXHIBIT A SCHEDULE OF BAND DESIGNEE MORTGAGES AND GUARANTIES I. SCHEDULE OF MORTGAGES A. BERRIEN COUNTY, MICHIGAN MORTGAGES: 1. Pokagon Properties, LLC executed and delivered to Lakes Gaming, Inc. that certain Mortgage dated March 9, 2000 which Mortgage was recorded on March 24, 2000 in Liber 2040, Page 1032, Berrien County Register of Deeds ("Berrien Mortgage"). 2. The Berrien Mortgage was amended by that certain Amendment to Mortgage dated April 20, 2000 which Amendment was recorded on April 28, 2000 in Liber 2047, Page 1205, Berrien County Register of Deeds. 3. The Berrien Mortgage was further amended by that certain Second Amendment to Mortgage dated May 9, 2000 which Second Amendment was recorded on May 18, 2000 in Liber 2052, Page 959, Berrien County Register of Deeds. 4. The Berrien Mortgage was further amended by that certain Third Amendment to Mortgage dated June 8, 2000 which Third Amendment was recorded on July 11, 2000 in Liber 2063, Page 1512 and Page 1520, Berrien County Register of Deeds. B. VAN BUREN COUNTY, MICHIGAN MORTGAGES: 1. Pokagon Properties, LLC executed and delivered to Lakes Gaming, Inc. that certain Mortgage dated March 9, 2000 which Mortgage was recorded on March 28, 2000 in Liber 1287, Page 0547, Van Buren County Register of Deeds ("Van Buren Mortgage"). 2. The Van Buren Mortgage was amended by that certain Amendment to Mortgage dated July 17, 2000 which Amendment was recorded on September 14,2000 in Liber 1314, Page 0854, Van Buren County Register of Deeds. 3. The Van Buren Mortgage was further amended by that certain Second Amendment to Mortgage dated November 14, 2000 by Pokagon Properties, LLC and Great Lakes Gaming of Michigan, LLC which Amendment was recorded on May 1, 2001 in Book 1330 at Page 960, Van Buren County Register of Deeds. C. CASS COUNTY, MICHIGAN MORTGAGES: 1. Pokagon Properties, LLC executed and delivered to Lakes Gaming, Inc. that certain Mortgage dated September 25, 2000 which Mortgage was recorded on October 18, 2000 in Liber 00747, Page 0159, Cass County Register of Deeds ("Cass Mortgage"). 2. The Cass Mortgage was amended by that certain Amendment to Mortgage by Pokagon Properties, LLC and Great Lakes Gaming of Michigan, LLC dated November 14, 2000 which Amendment was recorded on January 8, 2001 in Liber 00754, Page 0511, Cass County Register of Deeds. 3. The Cass Mortgage was further amended by that certain Second Amendment to Mortgage by Pokagon Properties, LLC and Great Lakes Gaming of Michigan, LLC dated December 14, 2000 which Amendment was recorded on April 30, 2001 in Liber 00766, Page 1137, Cass County Register of Deeds. 4. The Cass Mortgage was further amended by that certain Third Amendment to Mortgage by Pokagon Properties, LLC and Great Lakes Gaming of Michigan, LLC dated February 7, 2001 which Amendment was recorded on April 30, 2001 in Liber 00766, Page 1172, Cass County Register of Deeds. 5. The Cass Mortgage was further amended by that certain Fourth Amendment to Mortgage by Pokagon Properties, LLC and Great Lakes Gaming of Michigan, LLC dated April 30, 2001 which Amendment was recorded on June 8, 2001 in Liber 00772, Page 1074, Cass County Register of Deeds. 6. A Partial Discharge of the Cass Mortgage, dated October 7, 2003, was executed by Great Lakes Gaming of Michigan, LLC, which Partial Discharge of Mortgage was recorded on December 29, 2003, in Liber 00974, pp. 0907 and 0908, Cass County Register of Deeds. II. BAND DESIGNEE GUARANTIES A. FILBERT LAND DEVELOPMENT, LLC ("FILBERT") 1. Filbert executed and delivered to Great Lakes Gaming of Michigan, LLC that certain Guaranty dated February 28, 2001. B. POKAGON PROPERTIES, LLC ("POKAGON") 1. Pokagon executed and delivered to Lakes Gaming, Inc. that certain Guaranty dated March 9, 2000 ("Pokagon Guaranty"). 2. Lakes Gaming, Inc.'s rights and obligations under the Pokagon Guaranty were assigned to Great Lakes of Michigan, LLC pursuant to that certain Assignment and Assumption Agreement dated October 16, 2000 by and among Great Lakes of Michigan, LLC, Lakes Gaming, Inc. and the Pokagon Band of Potawatomi Indians, as amended by a First Amendment to Assignment and Assumption Agreement dated as of December 22, 2004 and a Second Amended and Restated Assignment and Assumption Agreement dated as of January 25, 2006. ** Lakes Gaming, Inc. assigned its right, title and interest in these Mortgages to Great Lakes of Michigan, LLC by Assignment of Mortgage ("Assignment") dated October 16, 2000 which Assignment was recorded January 17, 2001 in Book 1324, Page 529, Van Buren County Register of Deeds and recorded February 1, 2001 in Liber 2106, Page 21, Berrien County Register of Deeds and recorded January 5, 2001 in Liber 00754, Page 0186, Cass County Register of Deeds. On November 27, 2000, Great Lakes of Michigan, LLC changed its name to Great Lakes Gaming of Michigan, LLC. EX-21 19 c02716exv21.txt SUBSIDIARIES EXHIBIT 21 LAKES ENTERTAINMENT, INC. LIST OF SUBSIDIARIES 1. Grand Casinos Nevada I, Inc. 2. Mille Lacs Gaming, LLC 3. Grand Casinos of Louisiana, LLC -- Tunica-Biloxi 4. Grand Casinos of Louisiana, LLC -- Coushatta 5. Grand Casinos Pechanga, Inc. 6. Grand Casinos Washington, Inc. 7. Grand Media & Electronics Distributing, Inc. 8. Grand Casinos & Resorts of Canada, Inc. 9. Great Lakes Gaming of Michigan, LLC 10. Mille Lacs Gaming, LLP 11. Lakes Jamul, Inc. 12. Lakes Kean Argovitz Resorts -- California, LLC 13. Lakes Shingle Springs, Inc. 14. Lakes KAR -- Shingle Springs, LLC 15. Lakes Gaming & Resorts, LLC 16. RFC Acquisition Co. 17. Lakes Game Development, LLC 18. Lakes Nipmuc, LLC 19. Metroplex -- Lakes, LLC 20. Lakes California Land Development, Inc. 21. 2022 Ranch, LLC 22. Lakes Cloverdale, LLC 23. Pacific Coast Gaming -- Santa Rosa, LLC 24. Borders Land Company, LLC 25. Lakes Poker Tour, LLC 26. WPT Enterprises, Inc. 27. Lakes Kickapoo Consulting, LLC 28. Lakes Kickapoo Management, LLC 29. Lakes Iowa Consulting, LLC 30. Lakes Iowa Management, LLC 31. Lakes Pawnee Consulting, LLC 32. Lakes Pawnee Management, LLC 33. Lakes Gaming Mississippi, LLC EX-23.1 20 c02716exv23w1.txt CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM EXHIBIT 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors Lakes Entertainment, Inc. Minnetonka, Minnesota We consent to the incorporation by reference in the registration statements of Lakes Entertainment, Inc. on Forms S-8 (File Nos. 333-77247, 333-77249, 333-77591 and 333-116674) of our reports dated February 17, 2006, included in this Annual Report on Form 10-K, on the consolidated financial statements of Lakes Entertainment, Inc. and Subsidiaries as of and for the year ended, and on management's assessment of and on the effectiveness of internal control over financial reporting as of, January 1, 2006. /s/ Piercy Bowler Taylor & Kern Piercy, Bowler, Taylor & Kern, Certified Public Accountants and Business Advisors a Professional Corporation Las Vegas, Nevada March 3, 2006 EX-23.2 21 c02716exv23w2.txt CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM EXHIBIT 23.2 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in Registration Statement File Nos. 333-77247, 333-77249, 333-77591 on Form S-8 of our report dated November 30, 2005 relating to the consolidated financial statements of Lakes Entertainment, Inc. as of January 2, 2005 and for each of the two years in the period then ended, appearing in this Annual Report on Form 10-K of Lakes Entertainment, Inc. for the year ended January 1, 2006. Minneapolis, Minnesota March 3, 2006 EX-31.1 22 c02716exv31w1.htm CERTIFICATION OF CEO UNDER SECTION 302 exv31w1


(Mark One)
þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the fiscal year ended January 1, 2006

or

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the transition period from to


Minnesota		41-1913991
(State or other jurisdiction of incorporation or organization)		(I.R.S., Employer Identification No.)


Title of Each Class		Name of Each Exchange on Which Registered

Common Stock, $0.01 par value		None


	•	Lakes has contracts to develop and manage The Foothill Oaks Casino to be built on the Rancheria of the Shingle Springs Band of Miwok Indians (“Shingle Springs Tribe”) in El Dorado County, California, adjacent to U.S. Highway 50, approximately 30 miles east of Sacramento, California (the “Shingle Springs Casino”).

	•	Lakes has contracts to develop and manage the Four Winds Casino resort to be built on land placed into trust for the Pokagon Band of Potawatomi Indians (“Pokagon Band”) in New Buffalo Township, Michigan near State Highway 94. The casino location will be near the first Interstate 94 exit in southwestern Michigan and approximately 75 miles east of Chicago (the “Pokagon Casino”).

	•	Lakes has contracts to develop and manage a casino to be built on the Rancheria of the Jamul Indian Village (“Jamul Tribe”) located on Interstate 94, approximately 20 miles east of San Diego, California (the “Jamul Casino”).

	•	Lakes has consulting agreements and management contracts with three wholly-owned subsidiaries of the Pawnee Tribal Development Corporation (“Pawnee TDC” referred to collectively as the “Pawnee Nation”) in connection with assisting the Pawnee Nation in developing, equipping and managing a new casino and the Pawnee Nation’s existing Trading Post casino operation and the proposed casino operation at the Travel Plaza.

	•	Lakes has consulting agreements and management contracts with the Iowa Tribe of Oklahoma (the “Iowa Tribe”) in connection with developing, equipping and managing a new casino and the Iowa Tribe’s existing Cimarron casino.

	•	Lakes has also explored, and is continuing to explore, numerous other development projects with Indian tribes.


	•	Gaming Operations

	•	Construction & Development

	•	Finance/ Accounting

	•	Legal/ Regulatory

	•	Security

	•	Systems/ IT

	•	Food & Beverage

	•	Retail

	•	Marketing

	•	Human Resources


	*The “World Poker Tour” Tournaments, Television Series and Brand*


	WPT Studios generates revenue through the domestic and international licensing of telecast rights, as well as host fees from casinos and cardrooms that host the televised World Poker Tour events. The majority of WPTE’s historical revenue has resulted from WPT Studios, which has represented approximately 76% of WPTE’s total revenues.


	WPT Consumer Products generates revenue through the licensing of WPTE’s brand to companies seeking to use the World Poker Tour brand and logo in the retail sales of their consumer products and through WPTE’s direct sale of company-produced merchandise featuring WPTE’s World Poker Tour brand.

	WPT Corporate Alliances generates revenue through sales of corporate sponsorships that include elements of on-air visibility, online visibility, corporate live event sponsorship, promotional sponsorships and corporate hospitality events.

	WPT Online Gaming generates revenue through WPTE’s agreement with WagerWorks, Inc., or WagerWorks, a subsidiary of International Game Technology, pursuant to which WPTE granted to WagerWorks a license to utilize the WPT brand to create a WPT-branded online gaming website, WPTonline.com, which features an online poker room and an online casino with a broad selection of slots and table games. In exchange for the license to WagerWorks of WPTE’s brand, WagerWorks shares with WPTE a percentage of all net revenue it collects from the operation of the online poker room and online casino. Although any internet user can access WPTonline.com via the World Wide Web, the website does not permit bets to be made from players in the U.S. and other restricted jurisdictions.


	*Our common stock was delisted from the Nasdaq National Market effective August 10, 2005 and there is no assurance that our common stock will be re-listed.*


	The completion of our planned Indian and non-Indian casino development projects may be significantly delayed or prevented due to a variety of factors, many of which are beyond our control.


	*Any significant delay in, or non-completion of, our planned Indian and non-Indian casino development projects could have a material adverse effect on our profitability.*


	*The termination of our management contracts and consulting agreements with Indian tribes may have a material adverse effect on our results of operations and financial condition.*


	If our current casino development projects are not completed or fail to successfully compete once completed, we may lack the funds to compete for and develop future gaming or other business opportunities which may have a material adverse effect on our results of operations.


	We could be prevented from completing our current casino development projects or pursuing future development projects due to changes in the laws, regulations and ordinances (including tribal or local laws) that apply to gaming facilities or the inability of us or our key personnel, significant shareholders or joint venture partners to obtain or retain gaming regulatory licenses.


	If the NIGC elects to modify the terms of our management contracts with Indian tribes or void such contracts altogether, our revenues from management contracts may be reduced or eliminated.


ITEM 1.	*BUSINESS*


	*Indian Casino Business*


	*WPTE’s Business Segments*


	*Gaming Regulation*


	*If Indian tribes default on their repayment obligations or wrongfully terminate their management contracts with us, we may be unable to collect the amounts due.*


	A deterioration of our relationship with an Indian tribe could cause delays in the completion of a casino development project with that Indian tribe or even force us to abandon a casino development project altogether and prevent or significantly impede recovery of our investment therein.


	If funds from our operations are insufficient to support our cash requirements and we are unable to obtain additional financing in order to satisfy these requirements we may be forced to delay, scale back or eliminate some of our expansion and development goals, or cease our operations entirely.


	If one or more of our Indian casino projects fail to open, the recorded assets related to those projects will be impaired and there will be a material adverse impact on our financial results.


	During September 2005, legislation was proposed to amend the Gambling Devices Act of 1962 which could negatively affect projected management/consulting fees from the Shingle Springs and Jamul Casino projects.


	*Our entry into new businesses may result in future losses.*


	*We cannot guarantee the financial results of the expansion of the World Poker Tour business, which may negatively impact our financial results.*


	We are dependent on the ongoing services of our Chairman and Chief Executive Officer, Lyle Berman, and the loss of his services could have a detrimental effect on the pursuit of our business objectives, profitability and the price of our common stock.


	*Our Articles of Incorporation and Bylaws may discourage lawsuits and other claims against our directors.*


	*Our Articles of Incorporation contain provisions that could discourage or prevent a potential takeover, even if the transaction would be beneficial to our shareholders.*


	*The price of our common stock may be adversely affected by significant price fluctuations due to a number of factors, many of which are beyond our control.*


	•	obtaining all necessary regulatory approvals for our casino development projects;

	•	litigation surrounding one or more of our casino developments;

	•	changes in requirements or demands for our services or WPTE’s products;

	•	the announcement of new products or product enhancements by us or our competitors;

	•	technological innovations by us or our competitors;

	•	quarterly variations in our or our competitors’ operating results;

	•	changes in prices of our or our competitors’ products and services;

	•	changes in our revenue and revenue growth rates;

	•	changes in earnings or (loss) per share estimates by market analysts or speculation in the press or analyst community; and

	•	general market conditions or market conditions specific to particular industries.


	*We have issued numerous options and warrants to acquire our common stock that could have a dilutive effect on our common stock.*


	*The market price of our common stock may be reduced by future sales of our common stock in the public market.*


ITEM 4.	*SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS*


ITEM 5.	*MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES*


		First		Second		Third		Fourth
		Quarter		Quarter		Quarter		Quarter

Year Ended January 1, 2006:
	High	$	19.50	$	17.75	$	18.99	$	10.32
	Low		13.48		11.96		10.05		6.21
Year Ended January 2, 2005:
	High	$	15.05	$	17.05	$	11.43	$	16.75
	Low		7.65		8.82		8.58		10.10


		Fiscal Years Ended or as of:

		Jan. 1,			Jan. 2,			Dec. 28,			Dec. 29,			Dec. 30,
		2006			2005			2003			2002			2001

		(In millions, except per share amounts)
Results of Operations:
	Total revenue	$	18		$	18		$	4		$	2		$	35
	Total operating loss		(16	)		(13	)		(3	)		(16	)		(1	)
	Net loss		(12	)		(4	)		(2	)		(11	)		(2	)
	Net loss per share — basic and diluted		(0.53	)		(0.18	)		(0.08	)		(0.51	)		(0.09	)
Balance Sheet:
	Cash and cash equivalents — unrestricted	$	10		$	29		$	25		$	14		$	43
	Total assets		231			209			174			178			195
	Total debt		10			—			—			—			7
	Shareholders’ equity		178			183			162			163			174


ITEM 7.	*MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS*


		Payment Due by Period

				Less Than						More Than
Contractual Obligations		Total		1 Year		1-3 Years		3-5 Years		5 Years

Remaining Casino Development Commitment(1)(3)
	Jamul Tribe	$	6.5	$	6.5	$	—	$	—	$	—
	Shingle Springs Tribe		3.3		3.3		—		—		—
	Pokagon Band(2)		26.6		25.5		1.1		—		—
	Pawnee Nation — Travel Plaza		0.4		0.4		—		—		—
	Pawnee Nation — Trading Post		0.7		0.7		—		—		—
Employee obligations(5)			2.6		0.9		1.7		—		—
Operating leases(4)			1.7		0.7		1.0		—		—
Prentice financing facility(6)			25.0		—		—		25.0		—
WPTE operating leases(7)			2.7		0.5		1.0		1.0		0.2
WPTE purchase obligations(8)			0.3		0.1		0.2		—		—
WPTE employee obligations(9)			0.6		0.6		—		—		—

		$	70.4	$	39.2	$	5.0	$	26.0	$	0.2