10-K

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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             ---------------------

                                   FORM 10-K

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

           FOR THE FISCAL YEAR ENDED DECEMBER 29, 2002

                                  OR


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

           FOR THE TRANSITION PERIOD FROM           TO



                          COMMISSION FILE NO. 0-24993
                           LAKES ENTERTAINMENT, INC.
             (Exact name of registrant as specified in its charter)

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



           130 CHESHIRE LANE, SUITE 101, MINNETONKA, MINNESOTA 55305
                    (Address of principal executive offices)

                                 (952) 449-9092
              (Registrant's telephone number, including area code)

          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
                                     NONE.

          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:



             TITLE OF EACH CLASS                 NAME OF EACH EXCHANGE ON WHICH REGISTERED
             -------------------                 -----------------------------------------
                                            
        Common Stock, $0.01 par value                      NASDAQ National Market


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

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

    Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).  Yes [ ]    No [X]

    As of March 19, 2003, 10,638,320 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 June 28, 2002 (the last business day of our
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
$55,016,855. For purposes of these computations, affiliates of the Registrant
are deemed only to be the Registrant's executive officers and directors.

                      DOCUMENTS INCORPORATED BY REFERENCE

    Part III. Portions of the Registrant's definitive Proxy Statement in
connection with the Annual Meeting of Shareholders to be held on June 2, 2003
are incorporated by reference into Items 10 through 13, inclusive.
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                                     PART I

ITEM 1. BUSINESS

     The following discussion contains trend information and other
forward-looking statements that involve a number of risks and uncertainties. The
actual results of Lakes Entertainment, Inc., a Minnesota corporation, could
differ materially from the Company's historical results of operations and those
discussed in the forward-looking statements. Factors that could cause actual
results to differ materially include, but are not limited to, those identified
in "Risk Factors."

GENERAL

     Lakes Entertainment, Inc., a Minnesota corporation ("Lakes" or the
"Company") develops, constructs and manages casinos and related hotel and
entertainment facilities in emerging and established gaming jurisdictions. Lakes
is the successor to the Indian gaming business of Grand Casinos, Inc. (Grand
Casinos"). Lakes has entered into the following contracts for the development,
management and/or financing of new casino operations, all of which are subject
to various regulatory approvals before construction can begin:

     - Lakes has a contract to be the exclusive developer and manager of an
       Indian-owned gaming resort near New Buffalo, Michigan with the Pokagon
       Band of Potawatomi Indians.

     - Lakes holds contracts through its subsidiaries to develop and manage two
       casinos to be owned by Indian tribes in California, one near San Diego
       with the Jamul Indian Village, and the other near Sacramento with the
       Shingle Spring Band of Miwok Indians.

     - Lakes and another company have formed a partnership with a contract to
       finance the construction of an Indian-owned casino 60 miles north of San
       Francisco, California for the Cloverdale Rancheria of Pomo Indians. The
       Cloverdale Rancheria has notified the partnership that it wishes to
       terminate the relationship with the two parties. The partnership has
       advised the Rancheria that the partnership believes the contract is
       enforceable. The Rancheria acknowledges that the partnership has loaned
       the Rancheria money and that the Rancheria will endeavor to repay the
       money in a timely manner.

     - Lakes has also signed contracts with the Nipmuc Nation of Massachusetts
       for development and management of a potential future gaming resort in the
       eastern United States; however, this tribe has received a negative
       finding regarding federal recognition from the Bureau of Indian Affairs
       (BIA). The tribe has submitted additional information for
       reconsideration.

     Lakes owns options to purchase various new table games and is actively
marketing these new games to the casino industry in an attempt to have a casino
accept the games for use in their operations.

     In addition, Lakes has formed a joint venture with another company to
develop approximately 2000 acres owned by the joint venture in Eastern San Diego
County. It is possible the land will be sold in lieu of development by the joint
venture.

     Lakes has also formed a joint venture with a producer to launch the World
Poker Tour and establish poker as the next significant televised mainstream
sport. The joint venture recently signed an agreement with the Travel Channel
for broadcast of the World Poker Tour. Lakes also currently intends to buy or
create other new long-term business opportunities to complement its Indian
casino management business.

HISTORY

     Lakes was established as a public corporation on December 31, 1998, via a
distribution (the "Distribution") of its common stock, par value $.01 per share
(the "Common Stock") to the shareholders of Grand Casinos. Pursuant to the terms
of a Distribution Agreement entered into between Grand Casinos and Lakes and
dated as of December 31, 1998 (the "Distribution Agreement"), Grand Casinos
shareholders received 0.25 of one share of Lakes Common Stock for each share
held in Grand Casinos.

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     Immediately following the Distribution, Grand Casinos merged with a
subsidiary of Park Place Entertainment Corporation, a Delaware corporation
("Park Place"), pursuant to which Grand Casinos became a wholly owned subsidiary
of Park Place (the "Merger"), Grand Casinos shareholders received one share of
Park Place common stock in the Merger for each share they held in Grand Casinos.
The merger and distribution received all necessary shareholder and regulatory
approvals and was completed on December 31, 1998. Grand Casinos obtained a
ruling from the Internal Revenue Service (IRS) that the Distribution qualified
as a tax-free transaction, solely with respect to Grand Casinos shareholders
except to the extent that Grand Casinos shareholders received cash in lieu of
fractional shares.

     Lakes operates the Indian casino management business and holds other assets
previously owned by Grand Casinos. Before the spin-off, Grand Casinos had
management contracts for Grand Casino Hinckley and Grand Casino Mille Lacs, both
Indian-owned casinos located in Minnesota. These management contracts both
expired in 1998. After Lakes' inception, Lakes managed two Indian-owned casinos
in Louisiana previously managed by Grand Casinos. Lakes' historical revenues
since its inception have been derived almost exclusively from management fees
for these casinos. Lakes managed the largest casino resort in Louisiana, Grand
Casino Coushatta, until the management contract expired on January 16, 2002. For
a portion of fiscal 2000 and prior, Lakes also had a management contract for
Grand Casino Avoyelles, which was terminated through an early buyout of the
contract effective March 31, 2000.

     Lakes also held several parcels of commercial property in Las Vegas at the
time of the spin-off from Grand Casinos. In December 2001, Lakes entered into a
contract for sale for a large portion of this property.

BUSINESS STRATEGY

     Lakes' vision is to create a company with predictable long-term profitable
growth that will be highly valued by its investors. The Company is implementing
three business strategies to accomplish its vision. The first of the three
strategies is to grow the Company's assets. The more assets the Company has, the
greater its potential for diversification and growth. The Company plans to
increase its asset base through the growth of its Indian Casino management
business. As the successor to Grand Casinos' Indian gaming business, Lakes
enjoys a reputation as a successful casino management company for Native
American owned casinos with available capital and experienced management.

     Lakes develops, constructs and manages Indian-owned casino properties that
offer the opportunity for long-term development of related entertainment
facilities, including hotels, theaters, recreational vehicle parks and other
complementary amenities designed to enhance the customers' total entertainment
experience and to differentiate facilities managed by Lakes from its
competitors. Lakes provides experienced corporate and casino management and
develops and implements a wide scale of marketing programs. In conjunction with
this part of Lakes' business strategy, Lakes has entered into development,
management and/or financing agreements relating to one casino project in
Michigan, three casino projects in California, and one casino project on the
east coast, with development of each subject to regulatory approvals. Lakes has
also explored, and will continue to explore, numerous other possible development
projects. See "Casino Projects and Agreements" below.

     Consistent with its past experience in managing the Louisiana casinos,
Lakes is dedicated to developing superior facilities and providing guest service
that exceeds expectations. Facilities managed by Lakes will be staffed with
well-trained local casino employees and will offer a casual environment designed
to appeal to the family-oriented, middle income customer. Lakes strives to offer
its casino customers creative gaming selections in a pleasant, festive, smoke
and climate-controlled setting. Lakes' managed casinos also will offer
reasonably priced, high-quality food.

     The second business strategy has been to remove a number of uncertainties
surrounding Lakes since the spin-off in 1998. Consistent with this part of the
Lakes strategy, in 2000 Lakes entered into settlement agreements regarding
several significant shareholder litigation matters, for which Lakes is required
to indemnify Grand Casinos. Lakes paid a total of $18 million into escrow in
2000, and this amount was distributed to the shareholder groups during 2001.
Lakes' indemnification obligations continue with respect to certain other
litigation matters, however, the Company believes the indemnification
obligations will not have a

                                        2


material effect on its future results of operations, and $7.5 million paid into
an escrow account for the benefit of Grand Casinos is included as restricted
cash on the accompanying balance sheet as of December 29, 2002. See Item
7 -- "Management's Discussion and Analysis of Financial Condition and Results of
Operations".

     Lakes has also addressed uncertainties relating to a portion of the land
owned or controlled by the Company in Las Vegas. On December 28, 2001, the
Company entered into a contract for sale for a portion of this site and certain
property rights to two partnerships which are not affiliated with Lakes. The
total initial sale price was approximately $30.9 million, including a $1.0
million down payment received in January 2002 and two promissory notes for the
balance. A $0.5 million payment on the notes receivable was received during
2002. That transaction was closed subject to certain administrative post-closing
conditions which were satisfied as of September 27, 2002. Due to deteriorating
economic conditions, the terms of the transaction were restructured, including a
reduction in the combined purchase price. As a result, during 2002 Lakes
recorded a $3.0 million impairment charge for these properties. During March of
2003, Lakes and Metroflag agreed to additional revisions to the terms of the
Polo Plaza and Travelodge property transactions. Upon repayment of the
promissory notes, this transaction will provide resources that are currently
planned to be used in Lakes' primary business, which is Indian gaming. See Item
2 -- "Properties".

     Lakes continues to own the Shark Club property, which is an approximate 3.5
acre undeveloped site adjacent to the Polo Plaza shopping center and Travelodge
sites. During August 2002, Lakes formed the Chateaux, LLC, a joint venture with
Diamond Resorts, LLC, a Nevada limited liability company and time-share
developer for the purpose of developing the Shark Club parcel as an upscale
time-share project. Lakes owns a 49% voting interest in the Chateaux, LLC. The
terms of this joint venture agreement require that Diamond and Lakes each make a
working capital contribution of $250,000.

     Subject to Diamond obtaining a financing commitment for a construction loan
sufficient to fund at least the first phase of the building improvements
contemplated by the time-share project, the joint venture agreement will require
Lakes to contribute the relevant portion of the Shark Club parcel, which was
originally valued at $16 million. During December of 2002, the Shark Club parcel
was adjusted to its revised estimated market value of $15 million, resulting in
an impairment charge of approximately $1.0 million, which is reflected in
impairment losses in the accompanying consolidated statement of loss. Diamond
has agreed to perform sales, marketing, administrative and managerial services
for the project. The terms of the joint venture agreement provide for the
repayment to Lakes of its contribution of property in cash based on the joint
venture's cash flow and time-share unit sales. It is contemplated that Lakes
will be required to make no other material contributions of cash or property to
the project. It is possible that Lakes may sell the Shark Club property or its
interest in the joint venture prior to or during construction in order to
monetize this investment.

     The other uncertainty facing Lakes relates to the proposed casino
developments. At one of the California locations, the tribe needs to resolve
land issues related to its casino site. At the second California location,
access to the proposed casino site is subject to certain regulatory approvals
which have been obtained. However, there is currently a pending legal challenge
to these approvals. At a third California location, the agreement with the tribe
is currently in dispute. The tribe has notified Lakes through the partnership
that holds the agreement with the tribe that the tribe wishes to terminate the
agreement. The partnership has advised the tribe that the partnership believes
the contract is enforceable. The tribe acknowledges that the partnership has
loaned the tribe money and that the tribe will endeavor to repay the money in a
timely manner. At the Michigan location, the Secretary of the Interior has
accepted the land into trust, however, during the 30-day public comment period,
a group called "Taxpayers of Michigan Against Casinos" filed a complaint to stop
the U.S. Department of Interior from placing it into trust. The Department of
Justice is defending this lawsuit on behalf of the Secretary of Interior. At the
east coast location, the tribe is attempting to obtain federal recognition, but
there is no assurance that federal recognition will be obtained. Additionally,
the National Indian Gaming Commission ("NIGC") needs to approve Lakes'
management contracts for each location. Lakes is actively working with the
tribes to bring these issues to a successful conclusion.

     Diversification is important to Lakes' long-term success and is the third
of the business strategies. Lakes currently intends to buy or create new
long-term business opportunities through the use of cash, stock or debt

                                        3


to complement its Indian casino management business. Substantial long-term
growth and low multiple values to generate high returns are just a few of the
attributes in companies or start-ups that Lakes is looking for in new
opportunities to help enhance shareholder value. As part of the Company's effort
to diversify, in March of 2002, Lakes formed a joint venture with an experienced
producer of televised poker tournaments. The purpose of the joint venture is to
launch the World Poker Tour and establish poker as the next significant
televised mainstream sport. See "World Poker Tour Joint Venture" below.

CASINO PROJECTS AND AGREEMENTS

     Development and Management of Michigan Casino.  On June 22, 1999, the
Company announced that it had been selected by the Pokagon Band of Potawatomi
Indians (the "Band") to serve as the exclusive developer and manager of a
proposed casino gaming resort facility to be owned by the Band in the state of
Michigan. In connection with its selection, Lakes and the Band have executed a
development and management agreement governing their relationship during the
development, construction and management of the casino. Various regulatory
approvals are needed prior to commencement of development activities. The United
States Department of the Interior issued a Finding of No Significant Impact
(FONSI) in January 2001 and filed a legal notice of its intent to place into
trust 675 acres near New Buffalo, Michigan on behalf of the Pokagon Band. Under
Federal law, a 30-day waiting period was required for public comments to be made
before the land in trust process could be finalized. During the 30-day period, a
lawsuit was filed against the federal government in the District Court in the
District of Columbia by a Michigan-based group called "Taxpayers of Michigan
Against Casinos", to stop the U.S. Department of Interior from placing into
trust the land for the casino site. The Department of Justice is defending the
suit on behalf of the Secretary of Interior. While the outcome of the suit
cannot be predicted at this time, Lakes' management believes that this hurdle
will be successfully overcome and the casino development will be approved.
Casino construction is not planned to start until land is accepted into trust
status by the Secretary of the Interior and the agreements are approved by the
Chairman of NIGC.

     Contract to Develop and Manage Casino Near San Diego, California.  In
February 2000, a subsidiary of Lakes formed a joint venture with Kean Argovitz
Resorts -- Jamul, LLC ("KAR -- Jamul") that holds a contract to develop and
manage a casino resort facility with the Jamul Indian Village on land owned by
the tribe near San Diego, California. The contract is subject to approval by
NIGC and placement of the land where the gaming facility is to be located into
trust with the BIA. 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 will begin once
various regulatory approvals are received.

     On January 30, 2003, the Lakes subsidiary purchased KAR -- Jamul's interest
in the joint venture for nominal consideration, at which time the joint venture
entity became an indirect wholly owned subsidiary of Lakes. At the same time,
subsidiaries of Lakes entered into separate agreements with Kevin M. Kean and
Jerry A. Argovitz, the individual owners of KAR -- Jamul. See "Agreements With
Owners of KAR Entities" below.

     Contract to Develop and Manage Casino Near Sacramento, California.  In June
1999, a subsidiary of Lakes formed a joint venture with Kean Argovitz
Resorts -- Shingle Springs, LLC ("KAR -- Shingle Springs") that holds a contract
to develop and manage a casino resort facility with the Shingle Springs Band of
Miwok Indians on land owned by the tribe near Sacramento, California. The
contract is subject to approval by NIGC. 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
will begin once various regulatory approvals are received. Regulatory approval
of the new interchange construction for access to tribal land of the Shingle
Springs Band of Miwok Indians was received during 2002. The neighboring county
and another group have commenced litigation against the California regulatory
agencies, attempting to block the approval of the interchange.

     On January 30, 2003, the Lakes subsidiary purchased KAR -- Shingle Springs'
interest in the joint venture for nominal consideration, at which time the joint
venture entity became an indirect wholly owned subsidiary of Lakes. At the same
time, subsidiaries of Lakes entered into separate agreements with Kevin M.

                                        4


Kean and Jerry A. Argovitz, the individual owners of KAR -- Shingle Springs. See
"Agreements With Owners of KAR Entities" below.

     Agreements With Owners of KAR Entities.  The joint venture entities that
hold the management contracts for the San Diego and Sacramento area casino
resorts were previously jointly owned with KAR -- Jamul and KAR -- Shingle
Springs (together, the "KAR Entities"). On January 30, 2003, subsidiaries of
Lakes purchased the respective joint venture interests of the KAR Entities for
nominal consideration, at which time the joint venture entities became indirect
wholly owned subsidiaries of Lakes. At the time of the purchase, Lakes or its
subsidiaries had notes receivable from the KAR Entities and a long-term
receivable from Kevin M. Kean that, as of December 29, 2002, were in the amounts
of $1.8 million and $1.9 million, respectively. In connection with the purchase
transactions, Lakes and certain of its subsidiaries entered into separate
agreements with Kevin M. Kean and Jerry A. Argovitz, the two individual owners
of the KAR Entities. Under these agreements, Lakes and its subsidiaries have
forgiven 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.

     Under the agreements with Kevin M. Kean, Mr. Kean may elect to serve as a
consultant to Lakes' subsidiaries during the term of each subsidiary's 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 from the San Diego area
casino operations and 15% of the management fees from the Sacramento area 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 San Diego and
Sacramento area casino projects during the term of the respective casino
management contracts (but not during any renewal term of such management
contracts). Regardless of whether Mr. Kean serves as a consultant, a Lakes
subsidiary has agreed to loan up to $1.25 million to Mr. Kean, $1 million of
which must be used to fund certain obligations of Mr. Kean related to a separate
joint venture formed to acquire land in the San Diego area. Mr. Kean has agreed
that 50% of the consulting fees or other payments payable to him under the
agreements with Lakes and its subsidiaries shall be applied toward repayment of
his indebtedness to Lakes. In the event of a default under the agreements, 100%
of the fees and payments will be applied toward repayment of his indebtedness to
Lakes.

     Under the agreements with Jerry A. Argovitz, if Mr. Argovitz is found
suitable by relevant gaming regulatory authorities, he will be entitled to
purchase for nominal consideration a 20% equity interest in the Lakes subsidiary
holding a management contract with the San Diego area casino and a 15% equity
interest in the Lakes subsidiary holding a management contract with the
Sacramento area casino. Upon such purchase, Mr. Argovitz will become obligated
to repay 50% of the notes receivable from the KAR Entities. 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 San Diego and Sacramento area 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).

     Joint Venture for Further California Casinos, Including Financing of
Cloverdale, California Casino.  On August 10, 2000, the Company announced that
it had agreed to form a joint venture for the purpose of developing gaming
facilities on Indian owned land in California. Under the agreement, Lakes formed
a joint venture limited liability company with MRD Gaming, a limited liability
company. The partnership between Lakes and MRD holds the contract to finance
casino facilities with the Cloverdale Rancheria of Pomo Indians. The planned
site for the potential new casino development is located on Highway 101 in
Cloverdale, California, approximately 60 miles north of San Francisco. The
Cloverdale Rancheria has notified the partnership that the Rancheria wishes to
terminate the relationship between the two parties. The partnership has advised
the Rancheria that the partnership believes the contract is enforceable. The
Rancheria acknowledges that the partnership has loaned the Rancheria money and
that the Rancheria will endeavor to repay the money in a timely manner.

                                        5


     Agreement for Possible Casino Development with Massachusetts Tribe.  On
July 9, 2001, the Company announced that it had signed development and
management agreements with the Nipmuc Nation of Massachusetts for a potential
future casino resort in the eastern United States. The Nipmuc Nation's petition
for federal recognition received a proposed positive finding from the BIA in
January 2001. However, in September 2001, that proposed positive finding was
reversed by the BIA when it issued a negative finding relating to the Nipmuc
Nation's request for federal recognition. The Nipmuc Nation has submitted
additional information for reconsideration. In addition, community groups will
have an opportunity to submit comments and documentation. If approval is
received, the Nipmuc Nation would need to put land in trust and enter into a
gaming agreement with the state where the land is located before proceeding with
any such enterprise.

MARKETING

     Lakes' marketing strategy at its managed operations is to attract and
retain the repeat customer. Management believes that Lakes' emphasis on
providing superior guest service along with first-class facilities, coupled with
targeted marketing programs, contributes to attracting the repeat customer.

     Lakes' operations strategy seeks to combine retail, gaming and
entertainment marketing techniques. Lakes profiles the casino customers
utilizing available demographic data, regularly conducted customer surveys and
other sources. Based upon this data, Lakes uses a variety of initial special
promotions to attract the first-time customer and, thereafter, seeks to leverage
initial customer satisfaction through a mix of marketing programs dedicated to
developing a repeat customer. A variety of other events, facilities and
entertainment options provide the patron with a total entertainment experience.
Lakes markets these programs through a variety of direct and media marketing
techniques utilizing a significant customer database at each location. Lakes
emphasizes guest service as part of its operating strategy. High standards are
set for well-trained and friendly employees so that customers can enjoy
themselves in a fun-filled and entertaining atmosphere.

COMPETITION

     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, dog racing, and jai-alai;
sports bookmaking; and card rooms. The casinos managed and to be managed 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.

WORLD POKER TOUR JOINT VENTURE

     In March 2002, Lakes formed World Poker Tour, LLC, ("WPT"), a joint venture
with Steven Lipscomb, an experienced producer of televised poker tournaments.
Lakes owns approximately a 78% equity interest in WPT. WPT has established a
global series of thirteen poker tournaments in locations in various countries,
to be filmed and broadcast on television. In March 2003, WPT announced that it
has signed an agreement with the Travel Channel, L.L.C. (TRV), granting TRV the
right to broadcast the first season of the World Poker Tour series. Under the
agreement, TRV has the exclusive right, license, and privilege to exhibit,
market, distribute, transmit, perform and otherwise exploit each of the first
thirteen two-hour programs produced by WPT for an unlimited number of times over
the next three years within the United States. WPT will receive a series of
fixed license payments from TRV, subject in each case to satisfaction of
production milestones and other conditions.

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REGULATION

  GAMING REGULATION

     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
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. 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 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, 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 political and regulatory environment for gaming is dynamic and rapidly
changing. The laws, regulations, and procedures pertaining to gaming are subject
to the interpretation of the Regulatory Authorities and may be amended. Any
changes in such laws, regulations, or their interpretations could have a
material adverse effect on Lakes.

     Certain specific provisions to which Lakes is currently subject are
described below.

  INDIAN GAMING

     The terms and conditions of management contracts for the operation of
Indian-owned casinos, and of all gaming on Indian land in the United States, are
subject to the Indian Gaming Regulatory Act ("IGRA"), which is administered by
NIGC, and also are subject to the provisions of statutes relating to contracts
with Indian tribes, which are administered by the Secretary of the Interior (the
"Secretary") and the BIA. The regulations and guidelines under which NIGC will
administer IGRA are evolving. The IGRA and those regulations and guidelines are
subject to interpretation by the Secretary and NIGC and may be subject to
judicial and legislative clarification or amendment.

     Lakes may need to provide the BIA or NIGC with background information on
each of its directors and each shareholder who holds five percent or more of
Lakes' stock ("5% Shareholders"), including a complete financial statement, a
description of such person's gaming experience, and a list of jurisdictions in
which such person holds gaming licenses. Background investigations of key
employees also may be required. Lakes'

                                        7


Articles of Incorporation contain provisions requiring directors and 5%
Shareholders to provide such information.

     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 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.

     In addition, the NIGC will not approve a management contract if the
management company or any of its agents have attempted to unduly influence any
decision or process of tribal government relating to gaming, or if the
management company has materially breached the terms of the management contract
or the tribe's gaming ordinance, or a trustee, exercising due diligence, would
not approve such management contract.

     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 and a management fee not to exceed 40% of
profits if NIGC is satisfied that the capital investment required, and the
income projections for the particular gaming activity justify the larger profit
allocation and longer term.

     IGRA established three separate classes of tribal gaming -- Class I, Class
II, and Class III. Class I includes all traditional or social games played by a
tribe in connection with celebrations or ceremonies. Class II gaming includes
games such as bingo, pulltabs, punch boards, instant bingo and card games that
are not played against the house. Class III gaming includes casino-style gaming
and includes table games such as blackjack, craps and roulette, as well as
gaming machines such as slots, video poker, lotteries, and pari-mutuel wagering.

     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"). 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 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.

     Because Indian tribes are currently unable to compel states to negotiate
tribal-state compacts, Lakes may not be able to develop and manage casinos in
states that refuse to enter into, or renew, tribal-state compacts.

     In addition to IGRA, tribal-owned gaming facilities on Indian land are
subject to a number of other federal statutes. The operation of gaming on Indian
land is dependent upon whether the law of the state in which the casino is
located permits gaming by non-Indian entities, which may change over time. Any
such changes in state law may have a material adverse effect on the casinos
managed by Lakes.

     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

                                        8


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 ITLA to
Indian gaming management contracts is unclear. Lakes believes that ITLA is not
applicable to its management contracts, under which Lakes provides services
rather than goods to Indian tribes. Lakes further believes that ITLA has been
superseded by 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
IGRA.

  NON-GAMING REGULATIONS

     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.

EMPLOYEES

     At March 19, 2003, Lakes had approximately 30 employees. Lakes believes its
relations with employees are positive.

                                  RISK FACTORS

     In addition to factors discussed elsewhere in this Annual Report on Form
10-K, the following are important factors that could cause actual results or
events to differ materially from those contained in any forward-looking
statement made by or on behalf of the Company.

THE CONSTRUCTION, OPERATION AND MANAGEMENT OF INDIAN CASINOS AND RESORTS REQUIRE
THE SATISFACTION OF VARIOUS CONDITIONS, MANY OF WHICH ARE BEYOND LAKES' CONTROL
AND THE FAILURE OF WHICH TO BE SATISFIED MAY SIGNIFICANTLY DELAY THE COMPLETION
OF LAKES' CURRENT INDIAN CASINO DEVELOPMENT PROJECTS OR PREVENT THE COMPLETION
OF SUCH PROJECTS ALTOGETHER.

     Although Lakes and certain members of its management team have experience
developing, operating, and managing casinos owned by Indian tribes and located
on Indian land, neither the Company nor any of these individuals has developed
or operated a casino in either the State of California, the State of Michigan,
or on the east coast. In addition, the gaming industry in each of the locations
where Lakes plans to develop and

                                        9


operate casinos has a limited operating history and faces several legal and
procedural challenges that will need to be resolved prior to the commencement of
Lakes' development activities and the opening and operation of the respective
casinos.

     The opening of each of the proposed Lakes' facilities in the State of
California, the State of Michigan, and on the east coast, 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.

     No assurances can be given that once a schedule for such construction and
development activities is established, such development activities will begin or
will be completed on time, or any other time, or that the budget for these
projects will not be exceeded.

     In addition, the regulatory approvals necessary for the construction and
operation of casinos are often challenged in litigation brought by government
entities, citizens groups and other organizations and individuals. Such
litigation can significantly delay the construction and opening of casinos.
Several of the Company's casino projects are the subject of litigation, and
there is no assurance that the litigation can be successfully defended or that
the Company's casino projects will not be delayed significantly.

     Major construction projects entail significant risks, including shortages
of materials or skilled labor, unforeseen engineering, environmental and/or
geological problems, work stoppages, weather interference, unanticipated cost
increases and non-availability of construction equipment. Construction,
equipment or delays or difficulties in obtaining any of the requisite licenses,
permits, allocations and authorizations from regulatory authorities could
increase the total cost, delay or prevent the construction or opening of any of
these planned casino developments or otherwise affect their design. In addition,
once developed, no assurances can be given that the Company 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.

     Although Lakes generally provides only preliminary construction financing
for its managed casinos, with each project Lakes is subject to the risk that its
investment may be lost if the project cannot obtain adequate financing to
complete development and open the casino successfully. In some cases, Lakes may
be forced to provide more financing than it originally planned in order to
complete development, increasing the risk to Lakes in the event of a default by
the casino.

BECAUSE LAKES CURRENTLY GENERATES NO REVENUE FROM CASINO MANAGEMENT CONTRACTS
WITH WHICH TO OFFSET THE INVESTMENT COSTS ASSOCIATED WITH ITS CASINO DEVELOPMENT
PROJECTS, DELAYS IN THE COMPLETION OF THESE DEVELOPMENT PROJECTS OR THE
NON-COMPLETION OF ANY SUCH PROJECT COULD MATERIALLY AND ADVERSELY AFFECT LAKES'
POTENTIAL FOR PROFITABILITY.

     Since the expiration of its management contract for Grand Casino Coushatta
(the last remaining Lakes' managed Indian-owned casino) on January 16, 2002,
Lakes has generated no revenue from its casino management activities. Given the
absence of current casino management-related operating revenue with which to
offset the potentially significant investment costs associated with its current
or future casino development projects, delays in the completion of Lakes'
current development projects, or the failure of such projects to be completed at
all, may cause Lakes' operating results to fluctuate significantly and may
adversely affect Lakes' profitability. In addition, because Lakes' future growth
in revenues and its ability to generate profits will depend to a large extent on
Lakes' ability to increase the number of its managed casinos or develop new
business opportunities, the delays in the completion or the non-completion of
Lakes' current development projects may adversely affect Lakes' ability to
realize future growth in revenues and future profits.

                                        10


PURSUANT TO THEIR TERMS, LAKES' CONTRACTS TO MANAGE CASINOS BEING DEVELOPED BY
LAKES ON INDIAN LAND CAN BE TERMINATED BY THE TRIBES UNDER CERTAIN
CIRCUMSTANCES, WHICH TERMINATION MAY HAVE A MATERIAL ADVERSE EFFECT ON THE
RESULTS OF LAKES' OPERATIONS.

     The terms of Lakes' current management contracts provide that such
contracts may be terminated under circumstances, including without limitation,
upon the failure to obtain NIGC approval for the project, the loss of requisite
gaming licenses, or an exercise by a tribe of its buy-out option. Without the
realization of new business opportunities or new management contracts,
management contract terminations could have a material adverse effect on Lakes'
results of operations and financial conditions.

IF LAKES IS REQUIRED TO MAKE SIGNIFICANT ADDITIONAL PAYMENTS IN SATISFACTION OF
THE INDEMNIFICATION OBLIGATIONS LAKES INHERITED FROM GRAND CASINOS UPON LAKES'
FORMATION, THOSE PAYMENTS MAY HAVE A MATERIAL ADVERSE EFFECT ON LAKES' ASSET
POSITION.

     Under the documents relating to Lakes' spin-off from Grand Casinos and
Grand Casinos' acquisition by Park Place, Lakes agreed to indemnify Grand
Casinos and affiliates of Grand Casinos for (i) liabilities of Grand Casinos
retained by Lakes in the spin-off, (ii) Grand Casinos' ongoing indemnification
obligations to current and former directors and officers of Grand Casinos and
(iii) contingent liabilities related to Stratosphere Corporation
("Stratosphere"). Lakes has previously entered into a settlement agreement
dispensing with both the Stratosphere shareholders' litigation and the Grand
Casinos, Inc. shareholders' litigation, pursuant to which Lakes paid a total of
$18.0 million to the Grand Casinos, Inc. shareholders and the Stratosphere
shareholders for full and final settlement of all federal and state related
actions. As described under Item 3 ("Legal Proceedings"), there are currently a
number of other litigation matters for which Lakes has indemnification
obligations to Grand Casinos. Until Lakes has reached a final resolution with
respect to these matters, there can be no assurance that Lakes' indemnification
obligations will not have a material adverse effect on Lakes.

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 THE RESULTS OF LAKES' OPERATIONS MAY
SUFFER ACCORDINGLY.

     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 lotteries and video poker in restaurants, bars and
hotels; pari-mutuel betting on horse racing, dog racing and jai alai; sports
bookmaking; and card rooms. The Indian-owned casinos managed by Lakes compete,
and will in the future compete, with all 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 and established gaming jurisdictions and
for the opportunity to manage casinos on Indian land. Many of Lakes' competitors
have more personnel and most have greater financial and other resources than
Lakes. Such competition in the gaming industry could adversely affect Lakes'
ability to attract customers and thus, adversely affect its operating results.
In addition, further expansion of gaming into new jurisdictions could also
adversely affect Lakes' business by diverting customers from its managed casinos
to competitors in such jurisdictions.

CHANGES IN THE LAWS, REGULATIONS, AND ORDINANCES (INCLUDING TRIBAL AND/OR LOCAL
LAWS) TO WHICH THE GAMING INDUSTRY IS SUBJECT, OR THE INABILITY OF LAKES, ITS
KEY PERSONNEL, SIGNIFICANT SHAREHOLDERS, OR JOINT VENTURE PARTNERS TO OBTAIN OR
RETAIN REQUIRED GAMING REGULATORY LICENSES, COULD PREVENT THE COMPLETION OF
LAKES' CURRENT CASINO DEVELOPMENT PROJECTS OR PREVENT LAKES FROM PURSUING FUTURE
DEVELOPMENT PROJECTS.

     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

                                        11


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 Lakes to accurately predict the effects that an adoption
of or changes in the gaming laws, regulations and ordinances will have on Lakes.
However, the failure of Lakes, or any of Lakes' key personnel, significant
shareholders or joint venture partners, to obtain or retain required gaming
regulatory licenses could prevent Lakes from expanding into new markets,
prohibit Lakes from generating revenues in certain jurisdictions, and subject
Lakes to sanctions and fines.

     The political and regulatory environment in which Lakes is and will be
operating, including with respect to gaming activities on Indian land, is
discussed in greater detail in this Form 10-K under the caption "Regulation".

IF THE NIGC ELECTS TO MODIFY THE TERMS OF LAKES' MANAGEMENT CONTRACTS WITH
INDIAN TRIBES OR VOID SUCH CONTRACTS ALTOGETHER, LAKES' REVENUES FROM MANAGEMENT
CONTRACTS MAY BE REDUCED OR DISCONTINUED.

     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. 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 Lakes. Currently, the
management contracts (i) have not been reviewed or approved by NIGC and (ii)
NIGC could call them for review at any time, in which case NIGC may not approve
the contracts at all or may require modification prior to granting approval.

IF INDIAN TRIBES TO WHICH LAKES HAS LOANED MONEY DEFAULT ON THEIR REPAYMENT
OBLIGATIONS OR WRONGFULLY TERMINATE THEIR MANAGEMENT CONTRACTS WITH LAKES, LAKES
WILL BE FORCED TO RELY ON REVENUES, IF ANY, FROM CASINO OPERATIONS AS RECOURSE
FOR COLLECTION OF INDEBTEDNESS OR MONEY DAMAGES AND, THEREFORE, LAKES MAY BE
UNABLE TO COLLECT THE AMOUNTS DUE.

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

A DETERIORATION OF THE COMPANY'S RELATIONSHIP WITH AN INDIAN TRIBE COULD CAUSE
DELAYS IN THE COMPLETION OF A CASINO DEVELOPMENT PROJECT WITH THAT TRIBE OR EVEN
FORCE THE COMPANY TO ABANDON A CASINO DEVELOPMENT PROJECT ALTOGETHER.

     Good personal and professional relationships with Indian tribes and their
officials are critical to Lakes' proposed and future Indian-related gaming
operations and activities, including Lakes' 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 a tribe may be replaced by appointment or election or become
subject to policy changes. Replacements of tribe officials or administrations,
or changes in policies to which a tribe is subject, may deteriorate the
Company's relationship with a tribe and lead to delays in the completion of a
development project with that tribe or prevent the project's completion
altogether, either of which will have an adverse effect on the results of the
Company's operations.

                                        12


IF FUNDS FROM LAKES' OPERATIONS ARE INSUFFICIENT TO SUPPORT ITS CASH
REQUIREMENTS AND LAKES IS UNABLE TO OBTAIN ADDITIONAL FINANCING IN ORDER TO
SATISFY THESE REQUIREMENTS, EITHER ON TERMS ACCEPTABLE TO LAKES OR AT ALL, LAKES
MAY BE FORCED TO DELAY, SCALE BACK OR ELIMINATE SOME OF ITS EXPANSION AND
DEVELOPMENT GOALS, OR CEASE ITS OPERATIONS ENTIRELY. THE CONSTRUCTION OF ITS
CASINO PROJECTS MAY ALSO DEPEND ON THE ABILITY OF VARIOUS INDIAN TRIBES TO RAISE
CAPITAL.

     Lakes anticipates that its reserves of cash, interest expected to be earned
on those reserves, and its anticipated revenues will be sufficient to finance
its operations. However, it is likely additional financing for Lakes will be
required to complete one or more of its casino projects as soon as regulatory
approvals are received and construction can begin. There can be no assurance
that Lakes will not seek or require additional capital at some point in the
future through either public or private financings. 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, or might require Lakes to
cease its operations entirely. Lakes' 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 Lakes -- Capital Resources,
Capital Spending and Liquidity").

     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. In order to assist the tribes, Lakes may be required to
guarantee the tribes' debt financing or otherwise provide support for the
tribes' obligations. Any guarantees by Lakes or similar off-balance sheet
liabilities will increase Lakes' potential exposure in the event of a default by
any of these tribes.

A LARGE PORTION OF LAKES' ASSETS ARE REPRESENTED BY NOTES RECEIVABLE FROM INDIAN
TRIBES AND OTHER PARTIES WITH VARYING DEGREES OF COLLECTION RISK, AND WITH
REPAYMENT OFTEN DEPENDENT ON THE OPERATING PERFORMANCE OF EACH GAMING PROPERTY.
IMPAIRMENT OF ONE OR MORE OF THESE LOANS COULD HAVE A SIGNIFICANT ADVERSE IMPACT
ON LAKES' FINANCIAL RESULTS.

     At December 29, 2002, Lakes had $71.0 million in notes receivable, which
represented approximately 40% of its total assets. See Note 3 to the
Consolidated Financial Statements included in Item 8. Most of the notes
receivable are advances made to Indian tribes for financing related to gaming
properties being developed, managed or financed by Lakes. Other notes receivable
relate to other business ventures in which Lakes has participated. All of the
notes are subject to varying degrees of collection risk and there is no
established market for any of the notes. For the notes representing indebtedness
of Indian tribes, the repayment terms are specific to each tribe and are largely
dependent upon the operating performance of each gaming property. Repayments of
such notes receivable 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 Lakes of the notes receivable and the
manager's fees under Lakes' management contracts are subordinated to certain
other financial obligations of the respective tribes.

     It is possible that one or more of the loans to Indian tribes will not be
collectible, in whole or in part. Management periodically evaluates the
recoverability of its notes receivable based on the current and projected
operating results of the underlying facility or entity and historical collection
experience. No impairment losses on such notes receivable have been recognized
through December 29, 2002. If there are significant losses in the future
relating to impairment of value of the notes, this could have a material adverse
effect on Lakes' results of operations and financial condition. As Lakes' casino
projects begin construction or Lakes enters into new business arrangements,
Lakes expects to make additional advances to Indian tribes and other parties in
the future, which will be subject to the risks described above.

                                        13


ENTRY INTO NEW BUSINESSES MAY RESULT IN FUTURE LOSSES.

     Lakes has announced that part of its strategy involves diversifying into
other businesses. Such businesses involve business risks separate from the risks
involved in casino development and these investments may result in future losses
to Lakes. 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 Lakes' future revenues and
income.

LAKES IS HEAVILY DEPENDENT ON THE ONGOING SERVICES OF ITS CHAIRMAN AND CHIEF
EXECUTIVE OFFICER, LYLE BERMAN, THE LOSS OF WHOM WOULD HAVE A DETRIMENTAL EFFECT
ON THE PURSUIT OF LAKES' BUSINESS OBJECTIVE AND, CONSEQUENTLY, ITS PROFITABILITY
AND THE PRICE OF ITS STOCK.

     Lakes' success will depend largely on the efforts and abilities of its
senior corporate management, particularly Lyle Berman, its Chairman and Chief
Executive Officer. The loss of the services of Mr. Berman or other members of
senior corporate management could have a material adverse effect on Lakes. Lakes
does not have an employment agreement with Mr. Berman.

UNTIL LAKES HAS SATISFIED ITS INDEMNIFICATION OBLIGATIONS RELATED TO GRAND
CASINOS, LAKES IS PROHIBITED FROM DECLARING DIVIDENDS ON ITS COMMON STOCK AND,
CONSEQUENTLY, THE ONLY RETURN ON INVESTMENT FOR LAKES' SHAREHOLDERS, IF ANY,
WILL OCCUR UPON THE SALE OF LAKES' STOCK.

     So long as Lakes is required to indemnify Grand Casinos for certain
specified liabilities, including (i) contingent liabilities assumed by Lakes
under the Distribution Agreement, (ii) ongoing director and officer
indemnification obligations and (iii) contingent liabilities related to
Stratosphere, Lakes has agreed that it will not declare or pay any dividends,
make any distribution on account of Lakes' equity interests, or otherwise
purchase, redeem, defease or retire for value any equity interest in Lakes,
without the written consent of Park Place, which consent can be given or
withheld at Park Place's sole and absolute discretion. Lakes believes it has
satisfied all potential obligations beyond the amounts provided for in the
Company's financial statements. Lakes is seeking release of the restricted cash
that was deposited into trust.

ITEM 2. PROPERTIES

CORPORATE OFFICE FACILITY

     Pursuant to the terms of the Distribution Agreement, Grand Casinos assigned
to Lakes, and Lakes assumed a lease agreement dated February 1, 1996 covering
corporate office space of approximately 65,000 square feet in Minnetonka,
Minnesota, with a lease term of fifteen years. The lease commenced on October
14, 1996 and the annual base rent was $768,300 plus building operating costs.
During 2001, also pursuant to the terms of the Distribution Agreement, Lakes
entered into a capital lease arrangement for the corporate office space.
Accordingly, Lakes recorded a capital leased asset and liability in the amount
of approximately $5.8 million. These amounts are included on the accompanying
consolidated balance sheet as of December 30, 2001. On January 2, 2002, as per
the terms of the agreement with Grand Casinos, Lakes purchased the building for
$6.4 million which is included as part of property and equipment on the
accompanying consolidated balance sheet as of December 29, 2002. Lakes occupies
approximately 22,000 square feet of the building and has leased the remaining
space to outside tenants.

LAS VEGAS LAND

     The Company owned, or held purchase options for, approximately sixteen
acres of land surrounding the corner of Harmon Avenue and Las Vegas Boulevard in
Las Vegas, Nevada. On December 28, 2001, the Company entered into a contract for
sale of the Polo Plaza shopping center property to Metroflag Polo, LLC. In
conjunction with this transaction, Lakes also entered into a contract for sale
to Metroflag BP, LLC, of the rights to the adjacent Travelodge property
consisting of a long-term land lease and a motel operation. This transaction was
accounted for under the deposit method of accounting under the requirements of
Statement of

                                        14


Financial Accounting Standards No. 66, Accounting for Sales of Real Estate,
rather than as a sale. The price for this combined transaction, which closed on
December 28, 2001, was approximately $30.9 million. Terms of the transaction
include a $1.0 million down payment, which was received in January 2002, a
contractual commitment to pay Lakes $23.3 million payable by December 29, 2002,
and a second contractual commitment to pay Lakes $7.5 million on June 30, 2004.
A $0.5 million payment on the notes receivable was received during 2002.

     During 2002, Lakes and Metroflag restructured the terms of the Polo Plaza
and Travelodge property transactions due to deteriorating economic conditions.
The parties reduced the purchase price for the Polo Plaza property from $23.8
million to $21.8 million. On the payment date, which was scheduled to be no
later than January 31, 2003, $16.8 million of the purchase price was to be
payable to Lakes in cash and $4.0 million was to be payable through the issuance
to Lakes of a preferred membership interest in Metroflag. Effective June 30,
2002, Lakes recorded a $3.0 million impairment charge for these properties
relating to the adjustment in the purchase price and a negotiated potential
discount on the return of Lakes' preferred interest. This real estate is
reported at its adjusted carrying value in Land Held Under Contract for Sale.
Lakes' collateral is the property and lease rights described above which would
revert back to Lakes in the event of default by Metroflag.

     During March of 2003, Lakes and Metroflag agreed to additional revisions to
the terms of the Polo Plaza and Travelodge property transactions. The parties
have increased the price of the Polo Plaza property from $21.8 million to $25.8
million. On the payment date, which the parties have agreed in principle shall
be extended to no later than May 15, 2003, $16.8 million of the purchase price
is payable to Lakes in cash, $4.0 million is payable through the issuance to
Lakes of a preferred membership interest in Metroflag and $4.0 million is
payable through the issuance to Lakes of a subordinated membership interest in
Metroflag. On or before April 30, 2004, Metroflag Polo may elect to distribute
to Lakes $3.0 million plus interest in cash as full return of Lakes' preferred
interest. If paid after April 30, 2004, and in no event later than December 24,
2006, the entire $4.0 million plus interest will be payable. The subordinated
interest must be repurchased for $4.0 million at the time of repayment of an
outstanding $3.5 million contractual commitment in connection with the
Travelodge property, which is scheduled on or before December 28, 2004. If the
Travelodge commitment is not repaid by December 28, 2004, ownership of the
Travelodge lease rights would revert back to Lakes. If at any time the Polo
Plaza property is sold and the Travelodge commitment has not been repaid,
Metroflag is required to repurchase the subordinated interest for the lesser of
$4.0 million or any portion of the net cash proceeds from such sale or
refinancing that exceeds $60.0 million.

     The parties have decreased the sale price of the Travelodge property from
$7.5 million to $3.5 million. The contractual commitment to pay Lakes has also
been decreased from $7.5 million to $3.5 million and is now payable no later
than December 28, 2004.

     Lakes continues to own the Shark Club property, which is an approximate 3.5
acre undeveloped site adjacent to the Polo Plaza shopping center and Travelodge
sites. During August 2002, Lakes formed the Chateaux, LLC, a joint venture with
Diamond Resorts, LLC, a Nevada limited liability company and time-share
developer for the purpose of developing the Shark Club parcel as an upscale
time-share project. Lakes owns a 49% voting interest in the Chateaux, LLC. The
terms of this joint venture agreement require that Diamond and Lakes each make a
working capital contribution of $250,000.

     Subject to Diamond obtaining a financing commitment for a construction loan
sufficient to fund at least the first phase of the building improvements
contemplated by the time-share project, the joint venture agreement will require
Lakes to contribute the relevant portion of the Shark Club parcel, which was
originally valued at $16 million. During December of 2002, the Shark Club parcel
was adjusted to its revised estimated market value of $15 million, resulting in
an impairment charge of approximately $1.0 million, which is reflected in
impairment losses in the accompanying consolidated statement of loss. Diamond
has agreed to perform sales, marketing, administrative and managerial services
for the project. The terms of the joint venture agreement provide for the
repayment to Lakes of its contribution of property in cash based on the joint
venture's cash flow and time-share unit sales. It is contemplated that Lakes
will be required to make no other

                                        15


material contributions of cash or property to the project. It is possible that
Lakes may sell the Shark Club property or its interest in the joint venture
prior to or during construction in order to monetize this investment.

ITEM 3. LEGAL PROCEEDINGS

     The following summaries describe certain known legal proceedings to which
Grand Casinos is a party which Lakes has assumed, or with respect to which Lakes
may have agreed to indemnify Grand Casinos, in connection with the Distribution.

SLOT MACHINE LITIGATION

     In April 1994, William H. Poulos brought an action in the U.S. District
Court for the Middle District of Florida, Orlando Division -- William H. Poulos,
et al v. Caesars World, Inc. et al -- Case No. 39-478-CIV-ORL-22 -- in which
various parties (including Grand Casinos) alleged to operate casinos or be slot
machine manufacturers were named as defendants. The plaintiff sought to have the
action certified as a class action.

     A subsequently filed Action -- William Ahearn, et al v. Caesars World, Inc.
et al -- Case No. 94-532-CIV-ORL-22 -- made similar allegations and was
consolidated with the Poulos action.

     Both actions included claims under the federal Racketeering-Influenced and
Corrupt Organizations Act and under state law, and sought compensatory and
punitive damages. The plaintiffs claimed that the defendants are involved in a
scheme to induce people to play electronic video poker and slot machines based
on false beliefs regarding how such machines operate and the extent to which a
player is likely to win on any given play.

     In December 1994, the consolidated actions were transferred to the U.S.
District Court for the District of Nevada.

     In September 1995, Larry Schreier brought an action in the U.S. District
Court for the District of Nevada -- Larry Schreier, et al v. Caesars World, Inc.
et al -- Case No. CV-95-00923-DWH(RJJ). The plaintiffs' allegations in the
Schreier action were similar to those made by the plaintiffs in the Poulos and
Ahearn actions, except that Schreier claimed to represent a more precisely
defined class of plaintiffs than Poulos or Ahearn.

     In December 1996, the court ordered the Poulos, Ahearn and Schreier actions
consolidated under the title William H. Poulos, et al v. Caesars World, Inc., et
al -- Case No. CV-S-94-11236-DAE(RJJ) -- (Base File), and required the
plaintiffs to file a consolidated and amended complaint. In February 1997, the
plaintiffs filed a consolidated and amended complaint.

     In March 1997, various defendants (including Grand Casinos) filed motions
to dismiss or stay the consolidated action until the plaintiffs submitted their
claims to gaming authorities and those authorities considered the claims
submitted by the plaintiffs.

     In December 1997, the court denied all of the motions submitted by the
defendants, and ordered the plaintiffs to file a new consolidated and amended
complaint. That complaint has been filed. Grand Casinos has filed its answer to
the new complaint.

     The plaintiffs have filed a motion seeking an order certifying the action
as a class action. Grand Casinos and certain of the defendants have opposed the
motion. The Court has not ruled on the motion.

STANDBY EQUITY COMMITMENT LITIGATION

     In 1997, the trustee under an indenture pursuant to which Stratosphere
Corporation issued certain first mortgage notes filed a complaint in the U.S.
District Court for the District of Nevada -- IBJ Schroeder Bank & Trust Company,
Inc. v. Grand Casinos, Inc. -- File No. CV-S-97-01252-DWH (RJJ) -- naming Grand
as defendant. The complaint alleged that Grand Casinos failed to perform under
the Standby Equity Commitment entered into between Stratosphere and Grand
Casinos in connection with Stratosphere's issuance of such first mortgage notes
in March 1995. The complaint sought an order compelling specific

                                        16


performance of what the Trustee claimed were Grand Casinos' obligations under
the Standby Equity Commitment. An LLC was subsequently substituted for the
trustee in the proceeding. Following trial, on April 4, 2001, the Court entered
judgment in favor of Grand Casinos and issued its findings of fact and
conclusions of law. The plaintiff filed an appeal with the Ninth Circuit Court
of Appeals on May 4, 2001, Case No. 01-15947. On August 13, 2002, the Ninth
Circuit affirmed the prior ruling in favor of Grand. In November 2002, the
Company announced that the appeal period for this litigation had expired.

STRATOSPHERE PREFERENCE ACTION

     In April 1998, Stratosphere served on Grand Casinos and Grand Media &
Electronics Distributing, Inc., a wholly owned subsidiary of Grand Casinos
("Grand Media"), a complaint in the Stratosphere bankruptcy case seeking
recovery of certain amounts paid by Stratosphere to (i) Grand Media for
electronic equipment purchased by Stratosphere from Grand Media, and (ii) Grand
as management fees and for costs and expenses under a management agreement
between Stratosphere and Grand.

     Stratosphere claimed in its complaint that such amounts are recoverable by
Stratosphere as preferential payments under bankruptcy law. In May 1998, Grand
Casinos responded to Stratosphere's complaint denying that Stratosphere is
entitled to recover the amounts described in the complaint. Discovery was
completed on December 31, 2001 and the case proceeded to trial before the United
States Bankruptcy Court for the District of Nevada on June 20, 2002.

     On December 31, 2002, the Bankruptcy Court issued its final judgment
holding that: (i) payments to Grand Media for electronic equipment totaling
approximately $3.3 million are not recoverable by Stratosphere as avoidable
preferences, and (ii) payment to Grand for management services in the
approximate amount of $2.3 million is recoverable by Stratosphere and an
avoidable preference. Under this judgment, Lakes would be obligated to indemnify
Grand for the $2.3 million recovery. As of December 29, 2002 and December 30,
2001, $7.5 million related to security to support Lakes' indemnification
obligations to Grand is included as restricted cash in the accompanying
condensed consolidated balance sheets.

     All post-trial issues have been resolved, and the parties will have an
opportunity to appeal for a period of ten days following entry of final
judgment.

OTHER LITIGATION

     The Company has recorded a reserve assessment related to various of the
above items. The reserve is reflected as a litigation and claims accrual on the
accompanying consolidated balance sheets.

     Grand Casinos and Lakes are involved in various other inquiries,
administrative proceedings, and litigation relating to contracts and other
matters arising in the normal course of business. While any proceeding or
litigation has an element of uncertainty, management currently believes that the
final outcome of these matters is not likely to have a material adverse effect
upon the Company's consolidated financial position or results of operations.
Consequently, the Company has not recorded any reserve assessments related to
these matters.

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

     None.

                                    PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     Lakes became a publicly held company effective December 31, 1998. The
Common Stock began trading on the Nasdaq National Market under the symbol LACO
on January 4, 1999.

                                        17


     The high and low sales prices per share of the Company's Common Stock for
each full quarterly period within the two most recent fiscal years are indicated
below, as reported on the Nasdaq National Market:



                                                      FIRST    SECOND     THIRD    FOURTH
                                                     QUARTER   QUARTER   QUARTER   QUARTER
                                                     -------   -------   -------   -------
                                                                       
Year Ended December 30, 2001:
  High.............................................  $10.63    $10.25     $8.49     $7.00
  Low..............................................    8.25      5.00      4.95      5.08
Year Ended December 29, 2002:
  High.............................................  $ 7.52    $ 8.42     $7.14     $6.50
  Low..............................................    6.00      6.16      5.45      3.96


     On March 19, 2003, the last reported sale price for the Common Stock was
$5.58 per share. As of March 19, 2003, the Company had approximately 989
shareholders of record.

     The Company has never paid any cash dividends with respect to its Common
Stock and the current policy of the Board of Directors is to retain any earnings
to provide for the growth of the Company. So long as Lakes is required to
indemnify Grand, as a subsidiary of Park Place, for certain specified
liabilities, Lakes has agreed that it will not declare or pay any dividends,
make any distribution on account of Lakes' equity interests or otherwise
purchase, redeem, defease or retire for value any equity interest in Lakes
without the written consent of Park Place which consent can be given or withheld
in Park Place's sole and absolute discretion. Subject to the foregoing dividend
restrictions, the payment of cash dividends in the future, if any, will be at
the discretion of the Board of Directors and will depend upon such factors as
earnings levels, capital requirements, the Company's overall financial condition
and any other factors deemed relevant by the Board of Directors. See "Risk
Factors -- Operating Covenants -- Dividend Restrictions."

ITEM 6. SELECTED FINANCIAL DATA

     The Selected Financial Data presented below should be read in conjunction
with the Financial Statements and notes thereto included elsewhere in this Form
10-K, and in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this Form 10-K.



                                                         FISCAL YEARS ENDED OR AS OF:
                                     --------------------------------------------------------------------
                                     DECEMBER 29,   DECEMBER 30,   DECEMBER 31,   JANUARY 2,   JANUARY 3,
                                         2002           2001           2000          2000         1999
                                     ------------   ------------   ------------   ----------   ----------
                                                   (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
                                                                                
LAKES HISTORICAL RESULTS OF
  OPERATIONS:
Total revenue(1)...................     $    2         $   35         $  59         $  55        $  92
Total operating income (loss)......        (17)(2)         (1)           47            45           76
Net Earnings (loss)................        (12)(2)         (3)(3)        14(4)         29           61
Net Earnings (loss) per
  share -- basic...................      (1.08)(2)      (0.27)(3)      1.36(4)       2.72         5.80
Net Earnings (loss) per
  share -- diluted.................      (1.08)(2)      (0.27)(3)      1.36(4)       2.67         5.71
Other Operating Data:
EBITDA(5)..........................         --             22            50            47           78
BALANCE SHEET:
Cash and cash equivalents --
  unrestricted.....................     $   14         $   43         $  10         $  24        $  57
Total assets.......................        176            193           212           184          161
Total debt.........................         --              7             2             2            1
Shareholders' equity...............        161            172           175           160          132


                                        18


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

(1) 2002 includes $1.5 million in revenues from the management contract for
    Grand Casino Coushatta that concluded on January 16, 2002. 2001 includes
    $34.6 million in revenues from the management contract for Grand Casino
    Coushatta that concluded January 16, 2002. 2000 includes $19.8 million in
    revenues from the management contract for Grand Casino Avoyelles that
    concluded during 2000, including $16.0 million relating to the early buyout
    of the agreement. 1998 results include $36.8 million in revenues from the
    management contracts for Grand Casino Mille Lacs and Grand Casino Hinckley
    that concluded during 1998.

(2) Includes non-recurring, non-cash charges totaling $4 million related to the
    impairment of certain land held under contract for sale and held for
    development in Las Vegas, Nevada. Also includes a non-recurring, non-cash
    charge of $4 million relating to the impairment of a note receivable from
    Living Benefits Financial Services.

(3) Includes non-recurring, non-cash charges totaling $29.2 million related to
    the impairment and write-down of certain land held for development in Las
    Vegas, Nevada.

(4) Includes a non-recurring, non-cash $18.0 million provision for the Grand
    Casinos/Stratosphere litigation settlement and a $5.5 million charge for the
    write-off of unconsolidated affiliates.

(5) EBITDA is earnings before interest, taxes, depreciation and amortization,
    which can be computed by adding depreciation and amortization to operating
    income. For 2002, this amount is a loss, therefore, EBITDA is not shown for
    2002. EBITDA excludes the $29.2 million charge related to the impairment and
    write-down of certain land held for development in Las Vegas, Nevada in 2001
    and the $18.0 million provision for the Grand Casinos/Stratosphere
    litigation settlement and the $5.5 million write-off of unconsolidated
    affiliates in 2000. EBITDA is presented supplementally because management
    believes it allows for a more complete analysis of results of operations.
    This information should not be considered as an alternative to any measure
    of performance as promulgated under accounting principles generally accepted
    in the United States (such as operating income or income from continuing
    operations) nor should it be considered as an indicator of the overall
    financial performance of Lakes. The calculations of EBITDA may be different
    from the calculations used by other companies and, therefore, comparability
    may be limited. Historical depreciation and amortization for Lakes for the
    fiscal years ended December 29, 2002, December 30, 2001, December 31, 2000,
    January 2, 2000, and January 3, 1999 totaled $0.5 million, $1.0 million,
    $3.0 million, $2.0 million, and $2.0 million, respectively.

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

OVERVIEW

     Lakes Entertainment, Inc., a Minnesota corporation ("Lakes" or the
"Company") was established as a public corporation on December 31, 1998, via a
distribution (the "Distribution") of its Common Stock, to the shareholders of
Grand Casinos, Inc. ("Grand Casinos").

     As a result of the Distribution, Lakes operates the Indian casino
management business and holds various other assets previously owned by Grand
Casinos. Lakes' main business is the development, construction and management of
casinos and related hotel and entertainment facilities in emerging and
established gaming jurisdictions. Lakes has entered into the following contracts
for the development, management and/or financing of new casino operations, all
of which are subject to various regulatory approvals before construction can
begin: (1) Lakes has a contract to be the exclusive developer and manager of an
Indian-owned gaming resort near New Buffalo, Michigan. (2) Lakes has entered
into contracts to develop and manage two casinos to be owned by Indian tribes in
California, one near San Diego with the Jamul Indian Village and the other near
Sacramento with the Shingle Springs Band of Miwok Indians. (3) Lakes and another
company have formed a partnership with a contract to finance the construction of
an Indian-owned casino 60 miles north of San Francisco, California. The
Cloverdale Rancheria has notified the partnership that the Rancheria wishes to
terminate the relationship between the two parties. The partnership has advised
the Rancheria that the partnership believes the contract is enforceable. The
Rancheria acknowledges that the partnership has loaned the Rancheria money and
that the Rancheria will endeavor to repay the money in a timely manner. (4)
Lakes has also signed contracts with a Massachusetts Indian tribe for
development and management of a potential

                                        19


future gaming resort in the eastern United States; however, this tribe has
received a negative finding regarding federal recognition from the Bureau of
Indian Affairs (BIA). The tribe has submitted additional information for
reconsideration.

     In addition, Lakes owns options to purchase various new casino games and is
actively marketing these new games to the casino industry in an attempt to have
a casino accept the games for use in their operations. Lakes has also formed a
joint venture with another company to develop approximately 2,000 acres owned by
the joint venture in eastern San Diego County in California. It is possible the
land will be sold in lieu of a development by the joint venture. Lakes has also
formed a joint venture with a producer to launch the World Poker Tour and
establish poker as the next significant televised mainstream sport. The joint
venture recently signed a three-year agreement with the Travel Channel for
broadcast of the World Poker Tour series. See Item 1 -- "Business".

     Lakes' historical revenues have been derived almost exclusively from
management fees. Through January 16, 2002, Lakes managed a land-based,
Indian-owned casino, Grand Casino Coushatta, in Kinder, Louisiana ("Grand Casino
Coushatta"). Pursuant to the Coushatta management contract, Lakes received a fee
based on the net distributable profits (as defined in the contracts) generated
by Grand Casino Coushatta. The management contract expired January 16, 2002, and
was not renewed. This non-renewal has resulted in the loss of revenues to the
Company derived from such contract, which has had a material adverse effect on
the Company's results of operations.

     The Company also managed a second land-based, Indian-owned casino in
Marksville, Louisiana ("Grand Casino Avoyelles"). On March 31, 2000, the Company
reached an agreement with the tribe for the early buyout of the management
contract for Grand Casino Avoyelles, which was scheduled to expire on June 3,
2001. The early buyout of the contract was provided for in the original
seven-year management agreement and, under the agreement, Lakes was compensated
for the management fees the company would have received had it managed Grand
Casino Avoyelles through the original contract expiration date of June 3, 2001,
discounted to their present value. Lakes was also repaid all amounts owing to it
under its loan agreements with the Tribe.

     Lakes' limited operating history may not be indicative of Lakes' future
performance. In addition, a comparison of results from year to year may not be
meaningful due to the opening of new facilities during each year and the buy-out
and/or cessation of other casino management contracts. Lakes' growth strategy
contemplates the expansion of existing operations, the pursuit of opportunities
to develop and manage additional gaming facilities and the pursuit of new
business opportunities. The successful implementation of this growth strategy is
contingent upon the satisfaction of various conditions, including obtaining
governmental approvals, the impact of increased competition, and the occurrence
of certain events, many of which are beyond the control of Lakes.

SIGNIFICANT ACCOUNTING POLICIES

     The significant accounting policies, which Lakes believes are the most
critical to aid in fully understanding and evaluating its reported financial
results, include the following: revenue recognition and realizability of notes
receivable.

     Revenue recognition:  Revenue from the management of Indian-owned casino
gaming facilities is recognized when earned according to the terms of the
management contracts. Currently all of the Indian-owned casino projects that
Lakes is involved with are in development stages and are not yet open.
Therefore, until a project is opened and operating, Lakes will not recognize
revenue related to Indian casino management. Interest income on notes receivable
for Indian tribes related to casino development projects is deferred because
realizability of the interest is contingent upon the completion and generation
of cash flow from the operation of the casino. Interest deferred during the
development period is recognized over the remaining life of the note using the
effective interest method.

     Impairment of long-term assets:  The Company's notes receivable from Indian
Tribes are generally for the development of gaming properties to be managed by
the Company. The repayment terms are specific to

                                        20


each tribe and are largely dependent upon the operating performance of each
gaming property. Repayments of the notes receivable 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 of the notes
receivable and the manager's fees under the management contracts are
subordinated to certain other financial obligations of the respective tribes.
Through December 29, 2002, no amounts have been withheld under these provisions.
Management periodically evaluates the recoverability of such notes receivable
based on the current and projected operating results of the underlying facility
and historical collection experience. The Company currently holds land held for
development and land held under contract for sale. The Company periodically
evaluates whether events and circumstances have occurred that may affect the
recoverability of the net book value of these assets. If such events or
circumstances indicate that the carrying amount of an asset may not be
recoverable, the Company estimates the future cash flows expected to result from
the use of the asset. If the sum of the expected future undiscounted cash flows
does not exceed the carrying value of the asset, the Company will recognize an
impairment loss. During 2002, the Company recognized an impairment loss of $3.0
million on land held under contract for sale and an impairment loss of $1.0
million on land held for development.

     The following discussion and analysis should be read in conjunction with
the Consolidated Financial Statements and notes thereto for the years ended
December 29, 2002, December 30, 2001, and December 31, 2000.

RESULTS OF OPERATIONS

     Revenues are calculated in accordance with accounting principles generally
accepted in the United States of America and are presented in a manner
consistent with industry practice. Net distributable profits are computed by the
Indian casinos using a modified cash basis of accounting in accordance with the
management contracts to calculate management fees. Under this modified cash
basis of accounting prescribed by the management contracts, the write-off of
capital equipment and leased assets for the casino operations is accelerated,
which thereby impacts the timing of net distributable profits.

  FISCAL YEAR ENDED DECEMBER 29, 2002 COMPARED TO FISCAL YEAR ENDED DECEMBER 30,
  2001

     Revenues.  Total revenues were $1.5 million for the fiscal year ended
December 29, 2002, compared to $34.9 million for the same period in the prior
year. Revenues for the current year were derived from fees related to the
management of Grand Casino Coushatta. Revenues for the year decreased by $33.4
million from 2001, principally because 2001 revenues included management fees
for the management of Grand Casino Coushatta for the entire year. Since this
management contract expired on January 16, 2002, current year revenues include
management fees for only 17 days. Due to the expiration of this management
agreement with the Coushatta Tribe of Louisiana, the Company's revenues and
earnings have not included contributions from the Coushatta operation since
January 16, 2002, which has had a material adverse effect on the Company's
results of operations. The Company currently has no other management contracts
from which it will derive revenues in 2003.

     Costs and Expenses.  Total costs and expenses decreased $17.6 million, to
$18.4 million for the year ended December 29, 2002, from $36.0 million for the
prior year. There was a decrease of $17.4 million in impairment losses from 2002
compared to 2001. The year ended December 30, 2001 included $25.4 million of
such charges including the $22.0 million write-down of the Polo Plaza and
Travelodge properties in Las Vegas and the $3.4 million write-down of the Shark
Club property in Las Vegas. The year ended December 29, 2002 included $8.0
million of such charges including the write-down of the $4.0 million note
receivable from Living Benefits Financial Services, the $3.0 million write-down
of the Polo Plaza and Travelodge properties in Las Vegas and the $1.0 million
write-down of the Shark Club property. The use of the Shark Club property is
discussed below under "Financial Condition". Selling, general and administrative
expenses increased from $9.2 million for 2001 to $9.9 million for 2002,
principally due to an increase in costs associated with planned casino
developments. Depreciation and amortization expenses decreased $0.8 million, to
$0.5 million for the year ending December 29, 2002 from $1.3 million for the
prior year, due to the conclusion of the Coushatta management contract in
January of 2002.

                                        21


     Taxes.  Benefit for income taxes was $4.5 million for the year ended
December 29, 2002, compared to $2.0 million for the prior year. The effective
tax rates for 2002 and 2001 were 27.9% and 41.0%, respectively. The decrease in
the effective rate was due to the provision of additional valuation allowances
for tax benefits associated with the impairment of capital assets.

     Other.  Loss on land held for development was $3.7 million for the year
ended December 30, 2001. This amount includes losses relating to the lapsed
option on the Cable property adjacent to the Polo Plaza property in Las Vegas,
Nevada.

     The Company has $71.0 million in notes receivable at December 29, 2002,
principally from Indian tribes related to casino development projects. Interest
income is deferred during development of the casinos because realizability of
the interest is contingent upon the completion and positive cash flow from
operation of the casino. In each of fiscal 2002 and 2001, $4.0 million in
interest on such notes was deferred.

     In June 2001, Lakes entered into an agreement with New Horizon Kids Quest
(NHKQ), pursuant to which NHKQ would acquire Lakes' interest in NHKQ. As a
result, Lakes incurred a one-time write-down charge, included as write-down of
unconsolidated affiliates, of $0.7 million before tax, during 2001. Interest
income decreased $0.6 million to $1.4 million for the fiscal year ended December
29, 2002 from $2.0 million for the prior year, primarily due to the payoff of
notes receivable related to Grand Casino Coushatta in January 2002, as well as,
a decline in cash balances and in market interest rates. Equity in loss of
unconsolidated affiliates was $0.5 million for the years ended December 29, 2002
and December 30, 2001.

     Earnings (Loss) per Common Share and Net Earnings (Loss).  For the fiscal
year ended December 29, 2002 basic and diluted losses per common share were
$1.08. This compares to basic and diluted losses per common share of $0.27 for
the fiscal year ended December 30, 2001. Losses increased from $2.9 million for
the fiscal year ended December 30, 2001, to $11.5 million for the fiscal year
ended December 29, 2002.

     Outlook.  It is currently contemplated that there will be no operating
revenues for 2003 from existing casino development projects. Revenue from the
World Poker Tour is expected, however, this revenue is not expected to exceed
production costs during 2003. Although none of the existing casino development
projects are expected to produce revenue in 2003, Lakes continues to evaluate
potential new revenue-generating business opportunities. Lakes continues to
closely monitor its operating expenses. The Company's cash position coupled with
payments to be received on the sale of the Polo Plaza property, are considered
adequate to cover expected 2003 operating expenses.

  FISCAL YEAR ENDED DECEMBER 30, 2001 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
  2000

     Revenues.  Total revenues were $34.9 million for the fiscal year ended
December 30, 2001, compared to $59.0 million for the same period in the prior
year. Revenues for the current year were less than the same period last year
primarily due to the early buyout of the Company's management contract for Grand
Casino Avoyelles by the Tunica-Biloxi Tribe of Louisiana at the end of the first
quarter 2000, pursuant to the terms of the contract.

     Revenues from Grand Casino Avoyelles contributed $19.8 million for the
twelve months ended December 31, 2000, including approximately $16.0 million in
management fee income recognized due to the buyout of the management contract.
The decrease in revenues relates also to a decline in management fees of $4.2
million from Grand Casino Coushatta due to construction interruption on the main
roads leading to the casino, along with intensive marketing campaigns
implemented by casinos in the competitive Lake Charles market and adverse
weather conditions in the area.

     The management contract for Grand Casino Coushatta expired January 16, 2002
and will not be renewed. This expiration will result in the loss of revenues to
the Company derived from such contract, which will have a material adverse
effect on the Company's results of operations. As of this filing, no revenues
are being derived from casinos.

     Costs and Expenses.  Total costs and expenses increased $24.1 million, to
$36.0 million for the year ended December 30, 2001, from $11.9 million for the
prior year. Impairment losses were $25.4 million for the

                                        22


year ended December 30, 2001. There were no impairment losses in the prior year.
The increase primarily reflects the $22.0 million write-down of the Polo Plaza
and Travelodge properties in Las Vegas and the $3.4 million write-down of the
Shark Club property in Las Vegas to $16.0 million during 2001. The use of the
Shark Club property is discussed below under "Capital Resources, Capital
Spending and Liquidity". Selling, general and administrative expenses increased
from $9.0 million for the year ended December 31, 2000 to $9.2 million for the
year ended December 30, 2001. This increase is primarily due to an increase in
costs associated with planned casino developments. Depreciation and amortization
expenses decreased $1.6 million, to $1.3 million for the year ending December
30, 2001 from $2.9 million for the prior year, due to the early buyout of the
Avoyelles management contract in 2000.

     Taxes.  Benefit for income taxes was $2.0 million for the year ended
December 30, 2001, compared to a provision for income taxes of $12.1 million for
the prior year. The effective tax rates for 2001 and 2000 were 41.0% and 45.0%,
respectively.

     Other.  Loss on land held for development was $3.7 million for the year
ended December 30, 2001. This amount includes losses relating to the lapsed
option on the Cable property adjacent to the Polo Plaza property in Las Vegas,
Nevada. In the year ended December 31, 2000, there was a provision for
litigation loss of $18.0 million. This amount relates to a settlement agreement
reached in June 2000 regarding both the Stratosphere shareholders' litigation
and the Grand Casinos, Inc. shareholders' litigation. The settlement agreement
required Lakes to pay a total of $18.0 million, which has been reflected as a
non-operating expense. This amount was paid into escrow and related accounts in
July 2000 for full and final settlement for all federal and state related
actions. Such amounts were included as restricted cash on the accompanying
consolidated balance sheet as of December 31, 2000. The settlement agreement
received final approval by the respective courts, and distributions have been
made in accordance with the settlement agreement.

     In June 2001, Lakes entered into an agreement with New Horizon Kids Quest
(NHKQ), pursuant to which NHKQ would acquire Lakes' interest in NHKQ. As a
result, Lakes incurred a one-time write-down charge, included as write-down of
unconsolidated affiliates, of $0.7 million before tax, during 2001. For the 2000
year, the $5.5 million charge for the write-down of unconsolidated affiliates
reflects the carrying value at December 31, 2000 for certain assets held as
investments including securities in Fanball.com, Inc., Interactive Learning
Group, Inc. and Trak 21 Development, LLC. Interest income decreased $3.9 million
to $2.0 million for the fiscal year ended December 30, 2001 from $5.9 million
for the prior year, primarily due to the payoff of notes receivable related to
Grand Casino Avoyelles in 2000, as well as, a decline in market interest rates.
Equity in loss of unconsolidated affiliates was $0.5 million and $2.9 million
for the years ended December 30, 2001 and December 31, 2000, respectively, the
current year decrease is the result of the write-off of investments in
Fanball.com, Interactive Learning Group and Trak 21 at the end of 2000.

     Earnings (Loss) per Common Share and Net Earnings (Loss).  For the fiscal
year ended December 30, 2001 basic and diluted losses per common share were
$0.27. This compares to basic and diluted earnings per common share of $1.36 for
the fiscal year ended December 31, 2000. Earnings decreased from $14.5 million
for the fiscal year ended December 31, 2000 to a loss of $2.9 million for the
fiscal year ended December 30, 2001.

FINANCIAL CONDITION

     At December 29, 2002 Lakes had $8.3 million in restricted cash and $14.1
million in unrestricted cash and cash equivalents. For the years ended December
29, 2002, December 30, 2001 and December 31, 2000, net cash provided by
operating activities totaled $1.2 million, $30.7 million and $35.0 million,
respectively. For the same periods, net cash provided by (used in) investing
activities totaled ($22.7) million, $2.0 million and ($49.0) million,
respectively. Included in these investing activities for the years ended
December 29, 2002, December 30, 2001 and December 31, 2000 are proceeds
primarily from repayment of notes receivable from Indian-owned casinos of $0.1
million, $16.7 million and $18.0 million, respectively. Advances on notes
receivable were $18.7 million, $21.8 million and $33.6 million for the years
ended December 29, 2002, December 30, 2001 and December 31, 2000, respectively.
Also, during these periods, payments for land held for development amounted to
$4.0 million, $22.5 million and $7.6 million, respectively.

                                        23


     Lakes plans to use its cash for continuing operations, loans to current
joint venture and tribal partners to develop existing and anticipated Indian
casino operations, the pursuit of additional business opportunities, and
settlement of pending litigation matters. The amount and timing of Lakes' cash
outlays for casino development loans will depend on the timing of the regulatory
approval process and the availability of external financing. When approvals are
received, additional financing will be needed to complete the projects. It is
currently planned that this third-party financing will be obtained by each
individual tribe. However, there can be no assurance that if third-party
financing is not available, Lakes will not be required to finance these projects
directly. If Lakes must provide this financing, Lakes expects to obtain debt or
equity financing which it would loan to the respective tribes as necessary. In
the alternative, Lakes may be required to guarantee the tribes' debt financing
or otherwise provide support for the tribes' obligations. Any guarantees by
Lakes or similar off-balance sheet liabilities will increase Lakes' potential
exposure in the event of a default by any of these tribes.

     At December 29, 2002, Lakes had approximately $71.0 million in notes
receivable from Indian tribes and other parties. Most of these amounts are
advances made to the tribes for the development of gaming properties managed by
Lakes. See Note 3 to the Consolidated Financial Statements included in Item 8.
Notes receivable from the Coushatta Tribe of Louisiana were $0.1 million at
December 30, 2001. The outstanding balance was repaid at the conclusion of the
management agreement on January 16, 2002. In addition, Lakes was previously the
guarantor of a loan agreement entered into by the Coushatta Tribe in the amount
of $25.0 million, with a balance of $6.8 million outstanding at December 30,
2001. Lakes was released from the guaranty agreement on January 16, 2002.

     The joint venture entities that hold the management contracts for the San
Diego and Sacramento area casino resorts were previously jointly owned with two
LLC's owned by Kevin M. Kean and Jerry A. Argovitz, (the "KAR Entities"). On
January 30, 2003, subsidiaries of Lakes purchased the respective joint venture
interests of the KAR Entities for nominal consideration, at which time the joint
venture entities became indirect wholly owned subsidiaries of Lakes. At the time
of the purchase, Lakes or its subsidiaries had notes receivable from the KAR
Entities and a long-term receivable from Kevin M. Kean that, as of December 29,
2002, were in the amounts of $1.8 million and $1.9 million, respectively. In
connection with the purchase transactions, Lakes and certain of its subsidiaries
entered into separate agreements with Kevin M. Kean and Jerry A. Argovitz, the
two individual owners of the KAR Entities. Under these agreements, Lakes and its
subsidiaries have forgiven 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.

     Under the agreements with Kevin M. Kean, Mr. Kean may elect to serve as a
consultant to Lakes' subsidiaries during the term of each subsidiary's 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 from the San Diego area
casino operations and 15% of the management fees from the Sacramento area 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 San Diego and
Sacramento area casino projects during the term of the respective casino
management contracts (but not during any renewal term of such management
contracts). Regardless of whether Mr. Kean serves as a consultant, a Lakes
subsidiary has agreed to loan up to $1.25 million to Mr. Kean, $1 million of
which must be used to fund certain obligations of Mr. Kean related to a separate
joint venture formed to acquire land in the San Diego area. Mr. Kean's personal
indebtedness to Lakes remained outstanding. Mr. Kean has agreed that 50% of the
consulting fees or other payments payable to him under the agreements with Lakes
and its subsidiaries shall be applied toward repayment of his indebtedness to
Lakes. In the event of a default under the agreements, 100% of the fees and
payments will be applied toward repayment of his indebtedness to Lakes.

     Under the agreements with Jerry A. Argovitz, if Mr. Argovitz is found
suitable by relevant gaming regulatory authorities, he will be entitled to
purchase for nominal consideration a 20% equity interest in the Lakes subsidiary
holding a management contract with the San Diego area casino and a 15% equity
interest in

                                        24


the Lakes subsidiary holding a management contract with the Sacramento area
casino. Upon such purchase, Mr. Argovitz will become obligated to repay 50% of
the notes receivable from the KAR Entities. 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 San Diego
and Sacramento area 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).

     As part of a joint venture which will televise poker tournaments, the
Company invested $0.1 million for an approximately 78% ownership position in the
joint venture during 2002. The Company is also required to loan up to $3.2
million to the joint venture as needed. As of December 29, 2002, the Company had
made net loans totaling $1.9 million to the joint venture.

     On December 28, 2001, the Company transferred title and ownership
obligations of the Polo Plaza shopping center property to Metroflag Polo, LLC.
In conjunction with this transaction, Lakes transferred to Metroflag BP, LLC,
rights to and obligations of the adjacent Travelodge property consisting of a
long-term land lease and a motel operation. This transaction was accounted for
under the deposit method of accounting under the requirements of Statement of
Financial Accounting Standards No. 66, Accounting for Sales of Real Estate
rather than as a sale. Therefore, the fair value of the property is included as
land held under contract for sale on the accompanying balance sheet as of
December 29, 2002 and December 30, 2001. The total price for this combined
transaction was approximately $30.9 million. Terms of the transaction include a
$1.0 million down payment, which was received in January 2002, a contractual
commitment to pay to Lakes $23.3 million and a second contractual commitment to
pay Lakes $7.5 million. During 2002, Lakes and Metroflag restructured the terms
of the Polo Plaza and Travelodge property transactions due to deteriorating
economic conditions. The parties reduced the purchase price for the Polo Plaza
property from $23.8 million to $21.8 million. On the payment date, which was
scheduled to be no later than January 31, 2003, $16.8 million of the purchase
price was to be payable to Lakes in cash and $4.0 million was to be payable
through the issuance to Lakes of a preferred membership interest in Metroflag.
During 2002, Lakes recorded a $3.0 million impairment charge for these
properties relating to the adjustment in the purchase price and a negotiated
potential discount on the return of Lakes' preferred interest. Lakes' collateral
for the two contractual commitments is the property and lease rights described
above which would revert back to Lakes in the event of default by Metroflag.

     During March of 2003, Lakes and Metroflag agreed to additional revisions to
the terms of the Polo Plaza and Travelodge property transactions. The parties
have increased the price of the Polo Plaza property from $21.8 million to $25.8
million. On the payment date, which the parties have agreed in principle shall
be extended to no later than May 15, 2003, $16.8 million of the purchase price
is payable to Lakes in cash, $4.0 million is payable through the issuance to
Lakes of a preferred membership interest in Metroflag and $4.0 million is
payable through the issuance to Lakes of a subordinated membership interest in
Metroflag. On or before April 30, 2004, Metroflag Polo may elect to distribute
to Lakes $3.0 million plus interest in cash as full return of Lakes' preferred
interest. If paid after April 30, 2004 and in no event later than December 24,
2006, the entire $4.0 million plus interest will be payable. The subordinated
interest must be repurchased for $4.0 million at the time of repayment of an
outstanding $3.5 million contractual commitment in connection with the
Travelodge property, which is scheduled on or before December 28, 2004. If the
Travelodge commitment is not repaid by December 28, 2004, ownership of the
Travelodge lease rights would revert back to Lakes. If at any time the Polo
Plaza property is sold and the Travelodge commitment has not been repaid,
Metroflag is required to repurchase the subordinated interest for the lesser of
$4.0 million or any portion of the net cash proceeds from such sale or
refinancing that exceeds $60.0 million.

     The parties have decreased the sale price of the Travelodge property from
$7.5 million to $3.5 million. The contractual commitment to pay Lakes has also
been decreased from $7.5 million to $3.5 million and is now payable no later
than December 28, 2004.

     Lakes continues to own the Shark Club property, which is an approximate 3.5
acre undeveloped site adjacent to the Polo Plaza shopping center and Travelodge
sites. During August 2002, Lakes formed a joint venture with Diamond Resorts,
LLC, a Nevada limited liability company and time-share developer for the

                                        25


purpose of developing the Shark Club parcel as an upscale time-share project.
The terms of this joint venture agreement require that Diamond and Lakes each
make a working capital contribution of $250,000. Subject to Diamond obtaining a
financing commitment for a construction loan sufficient to fund at least the
first phase of the building improvements contemplated by the time-share project,
the joint venture agreement will require Lakes to contribute the relevant
portion of the Shark Club parcel, which was originally valued at $16.0 million.
During December of 2002, the Shark Club parcel was adjusted to its revised
estimated market value of $15.0 million resulting in an impairment charge of
approximately $1.0 million, which is reflected in impairment losses in the
accompanying consolidated statement of loss. Diamond has agreed to perform
sales, marketing, administrative and managerial services for the project. The
terms of the joint venture agreement provide for the repayment to Lakes of its
contribution of property in cash based on the joint venture's cash flow and
time-share unit sales. It is contemplated that Lakes will be required to make no
other material contributions of cash or property to the project. It is possible
that Lakes may sell the Shark Club property or its interest in the joint venture
prior to or during construction in order to monetize this investment.

     On October 2, 2002, Lakes loaned $1.0 million to the joint venture.
Interest accrues at a rate of 10% per annum. The loan is due and payable from
first available cash flow of the joint venture (excluding any required capital
contribution from a member) and no later than October 1, 2004.

     Pursuant to the terms of the Distribution Agreement, Grand Casinos assigned
to Lakes, and Lakes assumed, a lease agreement dated February 1, 1996 covering
Lakes' current corporate office space of approximately 65,000 square feet with a
lease term of fifteen years. The lease commenced on October 14, 1996. During
2001, also pursuant to the terms of the Distribution Agreement, Lakes entered
into a capital lease arrangement for the corporate office space at which time
the operating lease was cancelled. Accordingly, Lakes recorded a capital leased
asset and liability in the amount of approximately $5.8 million. These amounts
are included on the accompanying consolidated balance sheet as of December 30,
2001. On January 2, 2002, as per the agreement with Grand Casinos, Lakes
purchased the building for $6.4 million, including transaction expenses. This
transaction resulted in the extinguishment of the Company's capital lease
obligation related to the building.

     The Company had two notes payable with third parties, which were repaid
during 2002. The first was collateralized by certificates of deposit, with $1.0
million outstanding at December 30, 2001. The second was collateralized by
property with $0.4 million outstanding at December 30, 2001.

     As a part of the agreements resulting from Lakes' spin-off from Grand
Casinos and related transactions, Lakes has agreed to indemnify Grand Casinos
against all costs, expenses and liabilities incurred in connection with or
arising out of certain pending and threatened claims and legal proceedings to
which Grand Casinos and certain of its subsidiaries are likely to be parties.
The Company's indemnification obligations include the obligation to provide the
defense of all claims made in proceedings against Grand Casinos and to pay all
related settlements and judgments. See Item 3. Legal Proceedings. As security to
support Lakes' indemnification obligations to Grand Casinos, Lakes agreed to
deposit, in trust for the benefit of Grand Casinos, as a wholly owned subsidiary
of Park Place, an aggregate of $30 million, consisting of four annual
installments of $7.5 million, on each annual anniversary of the spin-off. Lakes'
ability to satisfy this funding obligation is materially dependent upon the
continued success of its operations and the general risks inherent in its
business. In the event Lakes is unable to satisfy its funding obligation, it
would be in breach of its agreement with Grand Casinos, possibly subjecting
itself to additional liability for contract damages, which could have a material
adverse effect on Lakes' business and results of operations. The Company made
the first deposit of $7.5 million on December 31, 1999. In 2000, Lakes deposited
$18.0 million into an escrow account on behalf of the recipients in the
Stratosphere shareholders' litigation and the Grand Casinos, Inc. shareholders'
litigation. As the $18.0 million was paid out during 2001, the remaining deposit
of $7.5 million is included as restricted cash on the accompanying balance sheet
as of December 29, 2002. In January 2001, Lakes also purchased the Shark Club
property in Las Vegas for $10.1 million in settlement of another obligation that
was subject to the indemnification obligations. Lakes believes it has satisfied
all potential obligations beyond the amounts provided for in the Company's
financial statements. Lakes is seeking release of the restricted cash that was
deposited into trust.

                                        26


SEASONALITY

     The Company believes that the operations of all casinos to be managed by
the Company will be affected by seasonal factors, including holidays, weather
and travel conditions.

REGULATION AND TAXES

     The Company is subject to extensive regulation by state gaming authorities.
The Company will also be subject to regulation, which may or may not be similar
to current state regulations, by the appropriate authorities in any jurisdiction
where it may conduct gaming activities in the future. Changes in applicable laws
or regulations could have an adverse effect on the Company.

     The gaming industry represents a significant source of tax revenues. From
time to time, various federal legislators and officials have proposed changes in
tax law, or in the administration of such law, affecting the gaming industry. It
is not possible to determine the likelihood of possible changes in tax law or in
the administration of such law. Such changes, if adopted, could have a material
adverse effect on the Company's results of operations and financial results.

RECENT ACCOUNTING PRONOUNCEMENTS

     The FASB issued Interpretation No. 45, "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" in November 2002. This interpretation elaborates on the
disclosures to be made by a guarantor in its financial statements about its
obligations under certain guarantees that it has issued. It also clarifies that
a guarantor is required to recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee.

     The initial recognition and initial measurement provisions of this
interpretation are applicable to all guarantees and modification to guarantees
made after December 31, 2002. The Company's disclosure of the indemnification
and guarantee agreements of the Company is in compliance with the
interpretation. The disclosure requirements in this interpretation are effective
for financial statements of interim or annual periods ended after December 15,
2002. The Company does not believe the adoption of the interpretation will have
a material impact on its results of operations, financial position and cash
flows. The Company does have an indemnification agreement with Grand Casinos
which is fully described in the Financial Condition section of this Management's
Discussion and Analysis.

     In January 2003, the FASB issued Interpretation No. 46 (FIN46),
"Consolidation of Variable Interest Entities", which addresses the consolidation
of variable interest entities. The interpretation applicable immediately to
variable interest entities created after January 31, 2003, and to variable
interest entities in which a Company obtains an interest after that date. For
variable interests in variable interest entities acquired before February 1,
2003, the interpretation applicable applies in the first interim period
beginning after June 15, 2003.

     The Company is in the process of evaluating all of its investments and
other interests in entities that may be deemed variable interest entities under
the provisions of FIN 46. If the Company's interests were deemed to constitute
variable interest entities, there would be no material impact because amounts
are already included as notes receivable on the accompanying condensed
consolidated balance sheets. The Company cannot make any definitive conclusion
until it completes its evaluation.

     In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations". SFAS No. 143 supersedes previous guidance for financial
accounting and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement costs. The
statement applies to legal obligations associated with the retirement of
long-lived assets that result from the acquisition, construction, development
and/or the normal operation of a long-lived asset. This statement was effective
January 1, 2003.

     In August 2001, the FASB issued SFAS No. 144, "Accounting for Impairment or
Disposal of Long-Lived Assets", which provides new accounting and financial
reporting guidance for the impairment or disposal

                                        27


of long-lived assets and the disposal of segments of a business. This statement
was effective January 1, 2002 and its adoption did not have a material impact on
the Company's financial position or results of operations.

     In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities". SFAS No. 146 requires that a
liability for a cost associated with an exit or disposal activity be recognized
when the liability is incurred. SFAS No. 146 eliminates the definition and
requirement for recognition of exit costs in Emerging Issues Task Force Issue
No. 94-3 where a liability for an exit is recognized at the date of an entity's
commitment to an exit plan. This statement is effective for exit or disposal
activities initiated after December 31, 2002.

     The Company does not believe the adoption of SFAS No. 143 and 146 will have
a material impact on its results of operations, financial position and cash
flows.

     In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation -- Transition and Disclosure -- an amendment of FASB Statement No.
123". SFAS No. 148 provides alternative transition methods for companies that
make a voluntary change to the fair-value-based method of accounting for
stock-based employee compensation. In addition, SFAS No. 148 amends the
disclosure requirements of SFAS No. 123 to require prominent disclosures in both
annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The Company has adopted the disclosure provisions of SFAS No. 148 and
its adoption had no impact on the Company's consolidated financial position or
results of operations.

PRIVATE SECURITIES LITIGATION REFORM ACT

     The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
Form 10-K and other materials filed or to be filed by the Company with the
Securities and Exchange Commission (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.

     Such forward looking information involves important risks and uncertainties
that could significantly affect the anticipated results in the future and,
accordingly, actual results may differ materially from those expressed in any
forward-looking statements made by or on behalf of the Company.

     These risks and uncertainties include, but are not limited to, those
relating to 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; continued indemnification obligations to
Grand Casinos; 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; and reliance on
Lakes' management. For further information regarding the risks and
uncertainties, see the "Business -- Risk Factors" section of this Annual Report
on Form 10-K.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company's financial instruments include cash and cash equivalents,
marketable securities and long-term debt. The Company's main investment
objectives are the preservation of investment capital and the maximization of
after-tax returns on its investment portfolio. Consequently, the Company invests
with only high-credit-quality issuers and limits the amount of credit exposure
to any one issuer. The Company does not use derivative instruments for
speculative or investment purposes.

     The Company's cash and cash equivalents are not subject to significant
interest rate risk due to the short maturities of these instruments. As of
December 29, 2002, the carrying value of the Company's cash and cash equivalents
approximates fair value. The Company has in the past and may in the future
obtain marketable debt securities (principally consisting of commercial paper,
corporate bonds, and government securities) having a weighted average duration
of one year or less. Consequently, such securities would not be subject to
significant interest rate risk.

                                        28


     The Company's primary exposure to market risk associated with changes in
interest rates involves the Company's notes receivable related to loans for the
development and construction of Native American owned casinos. The loans and
related note balances earn various interest rates based upon a defined reference
rate. The floating rate receivables will generate more or less interest income
if interest rates rise or fall. Interest income is deferred during development
of the casinos because realizability of the interest is contingent upon the
completion and positive cash flow from operation of the casino. As of December
29, 2002, Lakes had $70.0 million of floating rate notes receivables. Based on
the applicable current reference rates and assuming all other factors remain
constant, deferred interest income for a twelve month period would be $4.0
million. A reference rate increase of 100 basis points would result in an
increase in deferred interest income of $0.7 million. A 100 basis point decrease
in the reference rate would result in a decrease of $0.7 million in deferred
interest income over the same twelve month period.

                                        29


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

                   LAKES ENTERTAINMENT, INC. AND SUBSIDIARIES

                         INDEX TO FINANCIAL STATEMENTS



                                                              PAGE
                                                              ----
                                                           
Report of Independent Public Accountants....................   31
Consolidated Balance Sheets as of December 29, 2002 and
  December 30, 2001.........................................   32
Consolidated Statements of Earnings (Loss) for the fiscal
  years ended December 29, 2002, December 30, 2001 and
  December 31, 2000.........................................   33
Consolidated Statements of Comprehensive Earnings (Loss) for
  the fiscal years ended December 29, 2002, December 30,
  2001 and December 31, 2000................................   34
Consolidated Statements of Shareholders' Equity for the
  fiscal years ended December 29, 2002, December 30, 2001
  and December 31, 2000.....................................   35
Consolidated Statements of Cash Flows for the fiscal years
  ended December 29, 2002, December 30, 2001 and December
  31, 2000..................................................   36
Notes to Consolidated Financial Statements..................   37


                                        30


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Lakes Entertainment, Inc.:

     We have audited the accompanying consolidated balance sheets of Lakes
Entertainment, Inc. (a Minnesota corporation) and Subsidiaries as of December
29, 2002 and December 30, 2001 and the related consolidated statements of
earnings (loss), comprehensive earnings (loss), shareholders' equity, and cash
flows for each of the three years in the period ended December 29, 2002. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

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

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Lakes
Entertainment, Inc. and Subsidiaries as of December 29, 2002 and December 30,
2001, and the results of their operations and their cash flows for each of the
three years in the period ended December 29, 2002, in conformity with accounting
principles generally accepted in the United States of America.

DELOITTE & TOUCHE, LLP

Minneapolis, Minnesota,
January 30, 2003
(March 3, 2003 as to Note 12)

                                        31


                   LAKES ENTERTAINMENT, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                    DECEMBER 29, 2002 AND DECEMBER 30, 2001



                                                              DECEMBER 29,   DECEMBER 30,
                                                                  2002           2001
                                                              ------------   ------------
                                                                    (IN THOUSANDS)
                                                                       
                                         ASSETS
Current Assets:
  Cash and cash equivalents.................................    $ 14,106       $ 42,638
  Short-term investments....................................          --          2,027
  Current installments of notes receivable..................          --             67
  Related party receivables.................................          --          4,000
  Accounts receivable, net..................................         116          3,601
  Deferred tax asset........................................       6,771          4,549
  Other current assets......................................         547          1,079
                                                                --------       --------
Total Current Assets........................................      21,540         57,961
                                                                --------       --------
Property and Equipment-Net..................................       6,962          6,300
                                                                --------       --------
Other Assets:
  Land held under contract for sale.........................      28,832         30,826
  Land held for development.................................      27,791         24,965
  Notes receivable-less current installments................      70,955         53,201
  Cash and cash equivalents-restricted......................       8,300          9,175
  Investments in and notes from unconsolidated affiliates...       1,013            839
  Deferred tax asset........................................       3,835          3,870
  Other long-term assets....................................       6,657          6,042
                                                                --------       --------
Total Other Assets..........................................     147,383        128,918
                                                                --------       --------
Total Assets................................................    $175,885       $193,179
                                                                ========       ========

                          LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
  Accounts payable..........................................    $    226       $    105
  Current maturities of long-term debt......................          --          1,325
  Current installments of capital lease obligations.........          --            123
  Income taxes payable......................................       5,564          3,906
  Litigation and claims accrual.............................       5,847          6,572
  Accrued payroll and related...............................         252            671
  Other accrued expenses....................................       3,486          2,670
                                                                --------       --------
Total Current Liabilities...................................      15,375         15,372
                                                                --------       --------
Long-term Liabilities:
  Capital lease obligations-less current installments.......          --          5,591
  Other long-term liabilities...............................          --            225
                                                                --------       --------
Total Long-Term Liabilities.................................          --          5,816
                                                                --------       --------
Total Liabilities...........................................      15,375         21,188
                                                                --------       --------
Commitments and Contingencies Shareholders' Equity:
  Capital stock, $.01 par value; authorized 100,000 shares;
    10,638 common shares issued and outstanding at December
    29, 2002, and December 30, 2001.........................         106            106
  Additional paid-in-capital................................     131,525        131,525
  Retained Earnings.........................................      28,879         40,420
  Accumulated other comprehensive loss......................          --            (60)
                                                                --------       --------
Total Shareholders' Equity..................................     160,510        171,991
                                                                --------       --------
Total Liabilities and Shareholders' Equity..................    $175,885       $193,179
                                                                ========       ========


  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                        32


                   LAKES ENTERTAINMENT, INC. AND SUBSIDIARIES

                   CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
     YEARS ENDED DECEMBER 29, 2002, DECEMBER 30, 2001 AND DECEMBER 31, 2000



                                                                 2002          2001         2000
                                                              -----------   ----------   -----------
                                                              (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                                                
Revenues:
  Management fee income.....................................   $  1,502      $34,854      $ 59,044
Costs and Expenses:
  Selling, general and administrative.......................      9,892        9,239         9,025
  Impairment losses.........................................      8,000       25,410            --
  Depreciation and amortization.............................        481        1,329         2,910
                                                               --------      -------      --------
          Total Costs and Expenses..........................     18,373       35,978        11,935
                                                               --------      -------      --------
Earnings (loss) From Operations.............................    (16,871)      (1,124)       47,109
                                                               --------      -------      --------
Other Income (Expense):
  Interest income...........................................      1,424        1,983         5,878
  Interest expense..........................................        (90)        (170)          (97)
  Equity in loss of unconsolidated affiliates...............       (459)        (465)       (2,904)
  Loss on land held for development.........................         --       (3,731)           --
  Gain on sale of securities................................         --           --            61
  Provision for litigation loss.............................         --           --       (18,000)
  Write-down of investment in unconsolidated affiliates.....         --         (666)       (5,522)
  Other.....................................................         --         (684)            2
                                                               --------      -------      --------
          Total other income (expense), net.................        875       (3,733)      (20,582)
                                                               --------      -------      --------
Earnings (loss) before income taxes.........................    (15,996)      (4,857)       26,527
Provision (benefit) for income taxes........................     (4,455)      (1,991)       12,068
                                                               --------      -------      --------
Net Earnings (Loss).........................................   $(11,541)     $(2,866)     $ 14,459
                                                               ========      =======      ========
Basic Earnings (Loss) per Share.............................   $  (1.08)     $ (0.27)     $   1.36
                                                               ========      =======      ========
Diluted Earnings (Loss) per Share...........................   $  (1.08)     $ (0.27)     $   1.36
                                                               ========      =======      ========
Weighted Average Common Shares Outstanding..................     10,638       10,638        10,635
Dilutive Effect of Stock Compensation Programs..............         --           --             7
                                                               --------      -------      --------
Weighted Average Common and Diluted Shares Outstanding......     10,638       10,638        10,642
                                                               ========      =======      ========


  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                        33


                   LAKES ENTERTAINMENT, INC. AND SUBSIDIARIES

            CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (LOSS)
     YEARS ENDED DECEMBER 29, 2002, DECEMBER 30, 2001 AND DECEMBER 31, 2000



                                                                2002      2001      2000
                                                              --------   -------   -------
                                                                     (IN THOUSANDS)
                                                                          
Net earnings (loss).........................................  $(11,541)  $(2,866)  $14,459
Other comprehensive earnings (loss), net of tax:
  Unrealized gains (losses) on securities:
     Unrealized holding gains (losses) during the period....        10        (4)      181
     Reclassification adjustment for losses (gains) included
       in net earnings (loss)...............................        50       277       (36)
                                                              --------   -------   -------
Comprehensive earnings (loss)...............................  $(11,481)  $(2,593)  $14,604
                                                              ========   =======   =======


  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                        34


                   LAKES ENTERTAINMENT, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
     YEARS ENDED DECEMBER 29, 2002, DECEMBER 30, 2001 AND DECEMBER 31, 2000



                                                                            ACCUMULATED
                            COMMON STOCK                                       OTHER            TOTAL
                           ---------------     ADDITIONAL      RETAINED    COMPREHENSIVE    SHAREHOLDERS'
                           SHARES   AMOUNT   PAID-IN-CAPITAL   EARNINGS   EARNINGS (LOSS)      EQUITY
                           ------   ------   ---------------   --------   ---------------   -------------
                                                           (IN THOUSANDS)
                                                                          
Balance, January 2,
  2000...................  10,629     106        131,406         28,827        (478)           159,861
  Issuance of stock on
     options
     exercised -- net....       9      --             79             --          --                 79
  Tax benefits from
     exercise of common
     stock options.......      --      --             40             --          --                 40
  Other comprehensive
     earnings............      --      --             --             --         145                145
  Net earnings...........      --      --             --         14,459          --             14,459
                           ------    ----       --------       --------        ----           --------
Balance, December 31,
  2000...................  10,638     106        131,525         43,286        (333)           174,584
  Other comprehensive
     earnings............      --      --             --             --         273                273
  Net loss...............      --      --             --         (2,866)         --             (2,866)
                           ------    ----       --------       --------        ----           --------
Balance, December 30,
  2001...................  10,638     106        131,525         40,420         (60)           171,991
  Other comprehensive
     earnings............      --      --             --             --          60                 60
  Net loss...............      --      --             --        (11,541)         --            (11,541)
                           ------    ----       --------       --------        ----           --------
Balance, December 29,
  2002...................  10,638    $106       $131,525       $ 28,879          --           $160,510
                           ======    ====       ========       ========        ====           ========


  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                        35


                   LAKES ENTERTAINMENT, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
     YEARS ENDED DECEMBER 29, 2002, DECEMBER 30, 2001 AND DECEMBER 31, 2000



                                                                2002       2001       2000
                                                              --------   --------   --------
                                                                      (IN THOUSANDS)
                                                                           
OPERATING ACTIVITIES:
  Net earnings (loss).......................................  $(11,541)  $ (2,866)  $ 14,459
  Adjustments to reconcile net earnings (loss) to net cash
     provided by operating activities:
     Depreciation and amortization..........................       481      1,329      2,910
     Impairment of land held under contract for sale........     3,000         --         --
     Impairment of land held for development................     1,131     25,410         --
     Loss on land held for development......................        --      3,731         --
     Equity in loss of unconsolidated affiliates............       460        465      2,904
     Write down of related party receivable.................     4,000         --         --
     Write down of assets held as investments...............        --        666      5,522
     Deferred income taxes..................................    (2,230)     9,192     (9,480)
     Provision for litigation loss..........................        --         --     18,000
     Changes in operating assets and liabilities:
       Accounts receivable..................................     3,485     (3,307)     3,240
       Income taxes.........................................     1,658     (1,573)      (906)
       Accounts payable.....................................       121         26       (409)
       Accrued expenses.....................................       (63)      (873)    (1,001)
       Other................................................       657     (1,485)      (245)
                                                              --------   --------   --------
Net Cash Provided by Operating Activities...................     1,159     30,715     34,994
                                                              --------   --------   --------
INVESTING ACTIVITIES:
  Short-term investments, purchases.........................        --    (12,708)   (52,795)
  Short-term investments, sales/maturities..................     2,130     43,618     48,080
  Payments for land held under contract for sale............    (1,006)        --         --
  Payments for land held for development....................    (3,957)   (22,543)    (7,637)
  Advances on notes receivable..............................   (18,658)   (21,778)   (33,623)
  Proceeds from repayment of notes receivable...............        67     16,660     18,038
  Investment in and notes receivable from unconsolidated
     affiliates.............................................      (345)     1,144     (2,917)
  Decrease (increase) in restricted cash, net...............       875     (2,974)   (18,121)
  Decrease (increase) in other long-term assets.............      (615)       662         26
  Increase in property and equipment, net...................    (1,143)       (92)       (47)
                                                              --------   --------   --------
Net Cash Provided by (Used in) Investing Activities.........   (22,652)     1,989    (48,996)
                                                              --------   --------   --------
FINANCING ACTIVITIES:
  Proceeds from issuance of common stock....................        --         --         79
  Payments on long-term debt and capital lease
     obligations............................................    (7,039)      (535)        --
                                                              --------   --------   --------
Net Cash Provided by (Used in) Financing Activities.........    (7,039)      (535)        79
                                                              --------   --------   --------
Net increase (decrease) in cash and cash equivalents........   (28,532)    32,169    (13,923)
Cash and cash equivalents -- beginning of period............    42,638     10,469     24,392
                                                              --------   --------   --------
Cash and cash equivalents -- end of period..................  $ 14,106   $ 42,638   $ 10,469
                                                              ========   ========   ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid during the period for:
     Interest...............................................  $     98   $    170   $     97
     Income taxes...........................................         9      4,002     23,090
  Noncash investing and financing activities:
     Capital leased asset and obligation incurred related to
       office building......................................        --      5,724         --


  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                        36


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
          DECEMBER 29, 2002, DECEMBER 30, 2001, AND DECEMBER 31, 2000

1.  NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Lakes Entertainment, Inc., a Minnesota corporation ("Lakes" or the
"Company") was established as a public corporation on December 31, 1998, via a
distribution (the "Distribution") of its common stock, par value $.01 per share
(the "Common Stock") to the shareholders of Grand Casinos, Inc. ("Grand
Casinos"). Pursuant to the terms of a Distribution Agreement entered into
between Grand Casinos and Lakes and dated as of December 31, 1998 (the
"Distribution Agreement"), Grand Casinos shareholders received 0.25 of one share
of Lakes Common Stock for each share held in Grand Casinos.

     Immediately following the Distribution, Grand Casinos merged with a
subsidiary of Park Place Entertainment Corporation, a Delaware corporation
("Park Place"), pursuant to which Grand Casinos became a wholly owned subsidiary
of Park Place (the "Merger"), Grand Casinos shareholders received one share of
Park Place common stock in the Merger for each share they held in Grand Casinos.
The merger and distribution received all necessary shareholder and regulatory
approvals and was completed on December 31, 1998. Grand Casinos obtained a
ruling from the Internal Revenue Service (IRS) that the Distribution qualified
as a tax-free transaction, solely with respect to Grand Casinos shareholders
except to the extent that Grand Casinos shareholders received cash in lieu of
fractional shares.

     Through January 16, 2002, Lakes managed the largest casino resort in
Louisiana (Grand Casino Coushatta). The management contract for Grand Casino
Coushatta expired on January 16, 2002 and was not renewed. The Company has
entered into development and management agreements with four separate tribes for
four new casino operations, one in Michigan, two in California, and one with the
Nipmuc Nation on the East coast. The Company also has agreements for the
development of a casino on Indian owned land in California through a joint
venture.

     Lakes develops, constructs and manages Indian-owned casino properties that
offer the opportunity for long-term development of related entertainment
facilities, including hotels, theaters, recreational vehicle parks and other
complementary amenities designed to enhance the customers' total entertainment
experience and to differentiate facilities managed by Lakes from its
competitors. Lakes provides experienced corporate and casino management and
develops and implements a wide scale of marketing programs. In conjunction with
this part of Lakes' business strategy, Lakes has entered into development,
management and/or financing agreements relating to one casino project in
Michigan, three casino projects in California, and one casino project on the
east coast, with development of each subject to regulatory approvals. Lakes has
also explored, and will continue to explore, numerous other possible development
projects.

  USE OF ESTIMATES

     The preparation of financial statements in conformity with accounting
principles generally accepted in the United States 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. During the reporting period, the most significant
estimates relate to revenue recognition and realizability of notes receivable.
Actual results could differ from those estimates.

  YEAR END

     The Company has a 52- or 53-week accounting period ending on the Sunday
closest to December 31 of each year. The Company's fiscal years for the periods
shown on the accompanying consolidated statements of earnings ended on December
29, 2002 (2002), December 30, 2001 (2001), and December 31, 2000 (2000).

                                        37

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  BASIS OF PRESENTATION

     The accompanying consolidated financial statements include the accounts of
Lakes and its wholly-owned and majority-owned subsidiaries. Investments in
unconsolidated affiliates representing 50% or less of voting interests are
accounted for on the equity method. All significant intercompany balances and
transactions have been eliminated in consolidation.

     Lakes' investments in unconsolidated affiliates include a 50 percent
ownership interest in PCG Santa Rosa, LLC, a joint venture formed to develop a
casino on Indian-owned land in California and a 49 percent voting interest in
the Chateaux, LLC, a joint venture formed to develop the Shark Club parcel in
Las Vegas, Nevada, into an upscale timeshare project. Additionally, as a result
of its spin-off from Grand Casinos, Lakes received a 27 percent ownership
interest in New Horizon Kids Quest, Inc. (NHKQ), a publicly held provider of
child care facilities. In June 2001, Lakes entered into an agreement with NHKQ,
pursuant to which NHKQ would acquire Lakes' interest in NHKQ. As a result of
this transaction, Lakes incurred a one-time write-down charge of $0.7 million
before tax, during the second quarter of 2001. On December 31, 2000, Lakes wrote
off the carrying value, in the amount of $5.5 million, of certain investments in
unconsolidated affiliates. The investments include Fanball.com, Inc., a start-up
internet provider of fantasy sports services, Trak 21 Development, LLC, a
developer of player tracking systems for the casino industry, and Interactive
Learning Group, Inc., a consumer products company.

  REVENUE AND EXPENSES

     Revenue from the management of Indian-owned casino gaming facilities is
recognized when earned according to the terms of the management contracts.

     The operating expenses of the Company include the costs associated with the
management of all gaming operations for which the Company has a management
contract. Such amounts represent the direct cost of providing assistance in the
areas of casino operations, food and beverage operations, marketing and
promotion, customer service, accounting, legal and other functions.

  CASH AND CASH EQUIVALENTS

     Cash and cash equivalents consist of cash on hand and in banks,
interest-bearing deposits, money market funds and other instruments with
original maturities of three months or less. Restricted cash and cash
equivalents consist primarily of funds deposited as security to support Lakes'
indemnification obligations to Grand Casinos under each of the Distribution
Agreement and the Merger Agreement.

  SHORT-TERM INVESTMENTS

     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 (except restricted cash
reserves) as available for sale, whereby investments are reported at fair value,
with unrealized gains and losses reported as accumulated other comprehensive
earnings (loss), net of income taxes, in the accompanying consolidated
statements of shareholders' equity. 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.

     Included in the table below are available-for-sale securities as of
December 30, 2001 that were sold in 2002. These available-for-sale securities
had maturities over five years and less than ten years based on the securities'
final maturity dates and were classified as current assets because they were
readily marketable. As

                                        38

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

of December 30, 2001, the cost basis, fair value, and unrealized losses of the
Company's investments consist of the following (in thousands):



                                                            COST    UNREALIZED    FAIR
                                                           BASIS      LOSSES     VALUE
                                                           ------   ----------   ------
                                                                        
Available-for-sale securities............................  $2,132      $105      $2,027


  PROPERTY AND EQUIPMENT

     Property and equipment are stated at cost less accumulated depreciation.
Expenditures for additions, renewals, and improvements are capitalized. Costs of
repairs and maintenance are expensed when incurred. Depreciation and
amortization of property and equipment is computed using the straight-line
method over the following estimated useful lives:

                                                           
Building....................................................    40 years
Furniture and equipment.....................................  3-10 years



     Property and Equipment consist of the following (in thousands):



                                                               2002       2001
                                                              -------   --------
                                                                  
Building....................................................  $ 6,406   $     --
Building under capital lease................................       --      5,768
Furniture and equipment.....................................    2,455      1,950
                                                              -------   --------
                                                                8,861      7,718
Less: Accumulated depreciation..............................   (1,899)    (1,418)
                                                              -------   --------
Property and equipment, net.................................  $ 6,962   $  6,300
                                                              =======   ========


     The Company periodically evaluates whether events and circumstances have
occurred that may affect the recoverability of the net book value of its
long-lived assets. If such events or circumstances indicate that the carrying
amount of an asset may not be recoverable, the Company estimates the future cash
flows expected to result from the use of the asset. If the sum of the expected
future undiscounted cash flows does not exceed the carrying value of the asset,
the Company will recognize an impairment loss.

  LAND HELD FOR DEVELOPMENT

     Lakes continues to own the Shark Club property, which is an approximate 3.5
acre undeveloped site adjacent to the Polo Plaza shopping center and Travelodge
sites. During August 2002, Lakes formed a joint venture, the Chateaux, LLC, with
Diamond Resorts, LLC, a Nevada limited liability company and time-share
developer for the purpose of developing the Shark Club parcel as an upscale
time-share project. The terms of this joint venture agreement require that
Diamond and Lakes each make a working capital contribution of $250,000.

     Subject to Diamond obtaining a financing commitment for a construction loan
sufficient to fund at least the first phase of the building improvements
contemplated by the time-share project, the joint venture agreement will require
Lakes to contribute the relevant portion of the Shark Club parcel, which was
originally valued at $16 million. During December of 2002, the Shark Club parcel
was adjusted to its revised estimated market value of $15 million, resulting in
an impairment charge of approximately $1.0 million, which is reflected in
impairment losses in the accompanying consolidated statement of loss. Diamond
has agreed to perform sales, marketing, administrative and managerial services
for the project. The terms of the joint venture agreement provide for the
repayment to Lakes of its contribution of property in cash based on the joint
venture's cash flow and time-share unit sales. It is contemplated that Lakes
will be required to make no other material contributions of cash or property to
the project. It is possible that Lakes may sell the Shark Club property or its
interest in the joint venture prior to or during construction in order to
monetize this investment.

                                        39

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     On October 2, 2002, Lakes loaned $1.0 million to the joint venture.
Interest accrues at a rate of 10.0% per annum. The loan is due and payable from
first available cash flow of the joint venture (excluding any required capital
contribution from a member) and no later than October 1, 2004.

     Also included in land held for development is land held for possible
transfer to Indian Tribes for use in future casino resort projects, in the
amount of $12.8 million and $8.9 million as of December 29, 2002 and December
30, 2001, respectively.

  LAND HELD UNDER CONTRACT FOR SALE

     On December 28, 2001, the Company transferred title and ownership
obligations of the Polo Plaza shopping center property to Metroflag Polo, LLC.
In conjunction with this transaction, Lakes transferred to Metroflag BP, LLC,
rights to and obligations of the adjacent Travelodge property consisting of a
long-term land lease and a motel operation. This transaction was accounted for
under the deposit method of accounting under the requirements of Statement of
Financial Accounting Standards No. 66, Accounting for Sales of Real Estate,
rather than as a sale. Therefore, the property is included as land held under
contract for sale on the accompanying balance sheets as of December 29, 2002 and
December 30, 2001. The total price for this combined transaction was
approximately $30.9 million. Terms of the transaction include a $1.0 million
down payment, a contractual commitment to pay Lakes $23.3 million, and a second
contractual agreement to pay Lakes $7.5 million. A $0.5 million payment on the
notes was received during 2002.

     Lakes and Metroflag have restructured the terms of the Polo Plaza and
Travelodge property transactions due to deteriorating economic conditions. The
parties have reduced the purchase price for the Polo Plaza property from $23.8
million to $21.8 million. On the payment date, which is scheduled to be no later
than January 31, 2003 (see Subsequent Event Note 12 for the terms of an
extension of this date) $16.8 million of the purchase price is payable to Lakes
in cash and $4.0 million is payable through the issuance to Lakes of a preferred
membership interest in Metroflag. On or before December 24, 2003, Metroflag Polo
may elect to distribute to Lakes $3.0 million in cash as full return of Lakes'
preferred interest. If Lakes' preferred interest remains outstanding at any time
on or after December 24, 2006, Lakes can require Metroflag to repurchase the
preferred interest for $4.0 million plus a priority return of eight percent (8%)
per annum. Effective June 30, 2002, Lakes recorded a $3.0 million impairment
charge for these properties relating to the adjustment in the purchase price and
the potential discount on the return of Lakes' preferred interest. Lakes'
collateral for the two contractual commitments is the property and lease rights
described above which would revert back to Lakes in the event of default by
Metroflag.

  STOCK-BASED COMPENSATION

     At December 29, 2002, the Company has two stock-based employee compensation
plans, which are described more fully in Note 7. The Company accounts for those
plans under the recognition and measurement principles of APB Option No. 25,
Accounting for Stock Issued to Employees, and related Interpretations. No
stock-based employee compensation cost is reflected in net income, as all
options granted under those plans had an exercise price equal to the market
value of the underlying common stock on the date of grant. The following table
illustrates the effect on net income and earnings per share if the Company had

                                        40

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

applied the fair value recognition provisions of FASB Statement No. 123,
Accounting for Stock-Based Compensation, to stock-based employee compensation.



                                                           2002      2001      2000
                                                         --------   -------   -------
                                                                     
Net earnings (loss):
  As reported..........................................  $(11,541)  $(2,866)  $14,459
  Less: Total stock-based compensation expense
     determined under the fair value method, net of
     related tax effects...............................    (1,702)   (1,569)   (1,795)
  Pro forma............................................   (13,243)   (4,435)   12,664
Net earnings (loss) per share:
  As reported -- Basic.................................  $  (1.08)  $ (0.27)  $  1.36
  Pro forma -- Basic...................................     (1.24)    (0.42)     1.19
  As reported -- Diluted...............................     (1.08)    (0.27)     1.36
  Pro forma -- Diluted.................................     (1.24)    (0.42)     1.19


  INCOME TAXES

     Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The Company classifies
deferred tax liabilities and assets into current and non-current amounts based
on the classification of the related assets and liabilities.

  INTEREST INCOME

     Interest income represents interest on cash, cash equivalents, short-term
investments and interest on notes receivable, except that interest on notes
receivable from Indian Tribes related to casino development projects is deferred
because realizability of the interest is contingent upon the completion and
positive cash flow from operation of the casino. Interest deferred during the
development period is recognized over the life of the note using the effective
interest method. Interest on cash, cash equivalents and short-term investments
reflects interest income realized from investments in savings and money market
accounts and other short-term liquid investments.

  EARNINGS PER SHARE

     For all periods, basic earnings per share (EPS) is calculated by dividing
earnings (loss) by the weighted average common shares outstanding. Diluted EPS
reflects the effect of all potentially dilutive common shares outstanding by
dividing net earnings (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 2,524,129 and 2,486,343 in
2002 and 2001, respectively, were not included in the computation of diluted
earnings (loss) per share because the effects would have been anti-dilutive for
the periods presented.

  CONCENTRATIONS OF CREDIT RISK

     The financial instruments that subject the Company to concentrations of
credit risk consist principally of accounts and notes receivable. Notes
receivable are due primarily from the Pokagon Band of Potawatomi Indians, the
Shingle Springs Band of Miwok Indians, the Jamul Indian Village and the Nipmuc
Nation.

                                        41

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

     Effective January 1, 2001, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and
Hedging Activities, as amended by SFAS No. 138, Accounting for Certain
Derivative Instruments and Certain Hedging Activities. SFAS No. 133 establishes
accounting and reporting standards for derivative instruments and for hedging
activities. It requires that all derivatives, including those embedded in other
contracts, be recognized as either assets or liabilities and that they be
measured at fair value.

     The accounting for changes in the fair value of derivatives depends on
their intended use and designation. Management has reviewed the requirements of
SFAS No. 133 and has determined the Company does not have any freestanding or
embedded derivatives. All contracts that contain provisions meeting the
definition of a derivative also meet the requirements of, and have been
designated as, normal purchases or sales. The Company's policy is to not use
freestanding derivatives and to not enter into contracts with terms that cannot
be designated as normal purchases or sales.

  RECENT ACCOUNTING PRONOUNCEMENTS

     The FASB issued Interpretation No. 45, "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" in November 2002. This interpretation elaborates on the
disclosures to be made by a guarantor in its financial statements about its
obligations under certain guarantees that it has issued. It also clarifies that
a guarantor is required to recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee.

     The initial recognition and initial measurement provisions of this
interpretation are applicable to all guarantees and modification to guarantees
made after December 31, 2002. The Company's disclosure of the indemnification
and guarantee agreements of the Company is in compliance with the
interpretation. The disclosure requirements in this interpretation are effective
for financial statements of interim or annual periods ended after December 15,
2002. The Company does not believe the adoption of the interpretation will have
a material impact on its results of operations, financial position and cash
flows. The Company does have an indemnification agreement with Grand Casinos
which is fully described in Note 9 Commitments and Contingencies.

     In January 2003, the FASB issued Interpretation No. 46 (FIN46),
"Consolidation of Variable Interest Entities", which addresses the consolidation
of variable interest entities. The interpretation applicable immediately to
variable interest entities created after January 31, 2003, and to variable
interest entities in which a Company obtains an interest after that date. For
variable interests in variable interest entities acquired before February 1,
2003, the interpretation applicable applies in the first interim period
beginning after June 15, 2003.

     The Company is in the process of evaluating all of its investments and
other interests in entities that may be deemed variable interest entities under
the provisions of FIN 46. If the Company's interests were deemed to constitute
variable interest entities, there would be no material impact because amounts
are already included as notes receivable on the accompanying condensed
consolidated balance sheets. The Company cannot make any definitive conclusion
until it completes its evaluation.

     In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations". SFAS No. 143 supersedes previous guidance for financial
accounting and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement costs. The
statement applies to legal obligations associated with the retirement of
long-lived assets that result from the acquisition, construction, development
and/or the normal operation of a long-lived asset. This statement was effective
January 1, 2003.

     In August 2001, the FASB issued SFAS No. 144, "Accounting for Impairment or
Disposal of Long-Lived Assets", which provides new accounting and financial
reporting guidance for the impairment or disposal

                                        42

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

of long-lived assets and the disposal of segments of a business. This statement
was effective January 1, 2002 and its adoption did not have a material impact on
the Company's financial position or results of operations.

     In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities". SFAS No. 146 requires that a
liability for a cost associated with an exit or disposal activity be recognized
when the liability is incurred. SFAS No. 146 eliminates the definition and
requirement for recognition of exit costs in Emerging Issues Task Force Issue
No. 94-3 where a liability for an exit is recognized at the date of an entity's
commitment to an exit plan. This statement is effective for exit or disposal
activities initiated after December 31, 2002.

     The Company does not believe the adoption of SFAS No. 143 and 146 will have
a material impact on its results of operations, financial position and cash
flows.

     In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation -- Transition and Disclosure -- an amendment of FASB Statement No.
123". SFAS No. 148 provides alternative transition methods for companies that
make a voluntary change to the fair-value-based method of accounting for
stock-based employee compensation. In addition, SFAS No. 148 amends the
disclosure requirements of SFAS No. 123 to require prominent disclosures in both
annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The Company has adopted the disclosure provisions of SFAS No. 148 and
its adoption had no impact on the Company's consolidated financial position or
results of operations.

  RECLASSIFICATIONS

     Certain amounts in the 2001 and 2000 consolidated financial statements have
been reclassified to conform to the 2002 presentation. These reclassifications
had no effect on previously reported net earnings or shareholders' equity.

2.  MANAGEMENT CONTRACTS FOR INDIAN-OWNED CASINOS

     The ownership, management and operation of gaming facilities are subject to
extensive federal, state, provincial, tribal and/or local laws, regulation, 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. The Company is prohibited by the Indian Gaming Regulatory Act from
having an ownership interest in any casino it manages for Indian tribes.

     The Company reached an agreement with the Tunica-Biloxi Tribe of Louisiana,
effective March 31, 2000, for the early buyout of the management contract for
Grand Casino Avoyelles. The Tunica-Biloxi Tribe of Louisiana elected to exercise
its option for the early buyout of the contract, which was scheduled to expire
on June 3, 2001. The early buyout of the contract was provided for in the
original seven-year management agreement and, under the agreement, Lakes was
compensated for the management fees the Company would have received had it
managed Grand Casino Avoyelles through the original contract expiration date of
June 3, 2001, discounted to their present value. Included in management fee
income for the year ended December 31, 2000 is approximately $16.0 million
relating to the early buyout. Lakes was also repaid all amounts owing to it
under its loan agreements with the Tunica-Biloxi Tribe of Louisiana. The
management contract for Grand Casino Coushatta expired January 16, 2002, which
is seven years from the date the casino opened, and was not renewed.
Substantially, all of the Company's revenues were derived from this contract
during 2001 and 2002. This expiration has resulted in the loss of revenues to
the Company derived from such contract, which has had a material adverse effect
on the Company's results of operations. As of December 29, 2002, the Company has
no other management contracts from which it will derive revenues in 2003.

                                        43

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The management contracts govern the relationship between the Company and
the tribes with respect to the construction and management of the casinos. The
construction or remodeling portion of the agreements commenced with the signing
of the respective contracts and continued until the casinos opened for business;
thereafter, the management portion of the respective management contracts
continues for a period up to seven years. Under the terms of the contracts, the
Company, as manager of the casino, receives a percentage of the distributable
profits (as defined in the contract) of the operations as a management fee after
payment of certain priority distributions, a cash contingency reserve, and
guaranteed minimum payments to the tribes.

     Lakes has a contract to be the exclusive developer and manager of an
Indian-owned gaming resort near New Buffalo, Michigan with the Pokagon Band of
Potawatomi Indians. The Company has formed partnerships that hold contracts to
develop and manage two casinos to be owned by Indian tribes in California, one
near San Diego with the Jamul Indian Village, and the other near Sacramento with
the Shingle Springs Band of Miwok Indians. Lakes and another company have formed
a partnership with a contract to finance the construction of an Indian-owned
casino 60 miles north of San Francisco, California for the Cloverdale Rancheria
of Pomo Indians. The Rancheria is currently disputing the agreement with the
partnership and has notified the partnership that it wishes to terminate the
contract. The Company has also signed contracts with the Nipmuc Nation of
Massachusetts for development and management of a potential future gaming resort
in the eastern United States; however, this tribe has received a negative
finding regarding federal recognition from the Bureau of Indian Affairs (BIA).
The tribe has submitted additional information for reconsideration.

3.  NOTES RECEIVABLE

     The notes receivable from Indian Tribes are generally for the development
of gaming properties to be managed by the Company. The repayment terms are
specific to each tribe and are largely dependent upon the operating performance
of each gaming property. Repayments of the aforementioned notes receivable 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 of the notes receivable and the manager's fees under the management
contracts are subordinated to certain other financial obligations of the
respective tribes. Through December 29, 2002, no amounts have been withheld
under these provisions.

     Notes receivable consist of the following:



                                                              DECEMBER 29,   DECEMBER 30,
                                                                  2002           2001
                                                              ------------   ------------
                                                                    (IN THOUSANDS)
                                                                       
Properties under development:
Notes from the Pokagon Band of Potawatomi Indians with
  variable interest rates, (not to exceed 10%), (5.25% at
  December 29, 2002), receivable in 60 monthly installments
  subsequent to commencement date...........................    $39,470        $35,236
Notes from the Shingle Springs Band of Miwok Indians with
  variable interest rates (6.25% at December 29, 2002),
  receivable in varying monthly installments based on
  contract terms subsequent to commencement date............     14,035          6,684
Notes from the Jamul Indian Village with variable interest
  rates (6.25% at December 29, 2002), receivable in 12
  monthly installments subsequent to commencement date......      9,492          5,540
Notes from the Nipmuc Nation with variable interest rates
  (6.25%) at December 29, 2002) receivable in varying
  installments based on contract terms subsequent to
  commencement..............................................      3,814          2,310
Other.......................................................      4,144          3,498
                                                                -------        -------
Total notes receivable......................................     70,955         53,268
Less -- current installments of notes receivable............         --            (67)
                                                                -------        -------
Notes receivable, less current installments.................    $70,955        $53,201
                                                                =======        =======


                                        44

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Interest income on notes receivable from Indian Tribes related to casino
development projects is deferred because realizability of the interest is
contingent upon the completion and positive cash flow from operation of the
casino. Interest deferred during the development period is recognized over the
remaining life of the note using the effective interest method. As of December
29, 2002 and December 30, 2001, $10.1 million and $6.1 million of interest on
notes related to properties under development has been deferred.

     Management periodically evaluates the recoverability of such notes
receivable based on the current and projected operating results of the
underlying facility and historical collection experience. No impairment losses
on such notes receivable have been recognized through December 29, 2002.

     The terms of these notes require the casinos to be constructed and to
generate positive cash flows prior to the Company receiving repayment. As such,
an estimate of the fair value of these notes requires an assessment of the
timing of the construction of the related casinos and the profitability of the
related casinos. Due to the significant uncertainty involved in such an
assessment, the Company does not believe that it is practicable to accurately
estimate the fair value of these notes with the degree of precision necessary to
make such information meaningful.

4.  INCOME TAXES

     The provision (benefit) for income taxes attributable to earnings/losses
for 2002, 2001 and 2000 consisted of the following (in thousands):



                                                                  YEARS ENDED
                                                          ---------------------------
                                                           2002      2001      2000
                                                          -------   -------   -------
                                                                     
Current:
  Federal...............................................  $(2,268)  $(8,665)  $16,955
  State.................................................       --    (2,434)    4,675
                                                          -------   -------   -------
                                                          $(2,268)  (11,099)   21,630
Deferred................................................   (2,187)    9,108    (9,562)
                                                          -------   -------   -------
                                                          $(4,455)  $(1,991)  $12,068
                                                          =======   =======   =======


     Reconciliations of the statutory federal income tax rate to the Company's
actual rate based on earnings/losses before income taxes for 2002, 2001, and
2000 are summarized as follows:



                                                                   YEARS ENDED
                                                             ------------------------
                                                             2002      2001      2000
                                                             -----     -----     ----
                                                                        
Statutory federal tax rate.................................  (35.0)%   (35.0)%   35.0%
State income taxes, net of federal income taxes............   (4.1)      2.3      6.0
Tax exempt income..........................................   (0.2)     (3.4)     1.3
Valuation allowance........................................   11.3        --       --
Other, net.................................................    0.1      (4.9)     2.7
                                                             -----     -----     ----
                                                             (27.9)%   (41.0)%   45.0%
                                                             =====     =====     ====


                                        45

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The Company's deferred income tax liabilities and assets are as follows (in
thousands):



                                                               2002      2001
                                                              -------   -------
                                                                  
Current deferred tax asset:
  Accruals, reserves and other..............................  $ 6,771   $ 4,549
                                                              =======   =======
Non-current deferred taxes:
  Unrealized investment losses (gains)......................    3,268     3,064
  Deferred interest.........................................    4,487     2,616
  Capitalized interest......................................     (434)     (434)
  Development cost amortization.............................       --        98
  Other.....................................................      463       101
  Valuation allowance.......................................   (3,949)   (1,575)
                                                              -------   -------
Net non-current deferred tax asset (liability)..............  $ 3,835   $ 3,870
                                                              =======   =======


     The Company has recorded deferred tax assets that are created by asset
impairment charges that are not deductible for tax purposes until the related
assets are actually sold or disposed of. Realization of these benefits is
dependent on the generation of capital gains which is uncertain at this time
and, therefore, a valuation allowance has been established. The Company believes
the remaining deferred tax assets are recoverable.

     Under the terms of its tax sharing agreement with Grand, any further tax
benefits relating to capital losses resulting from the Company's write-off of
its investment in Stratosphere will be shared equally by Lakes and Park Place up
to a benefit of approximately $12.0 million to Lakes, which is not reflected in
the accompanying financial statements.

5.  LONG-TERM DEBT

     During 2002, the Company had two notes payable with third parties. The
first was collateralized by certificates of deposit, in the amount of $1.0
million and was repaid during the fourth quarter of 2002. The second, in the
amount of $0.4 million, was repaid during the second quarter of 2002.

6.  CAPITAL LEASE OBLIGATIONS

     Pursuant to the terms of the Distribution Agreement, Grand assigned to
Lakes, and Lakes assumed, a lease agreement dated February 1, 1996 covering
Lakes' current corporate office space of approximately 65,000 square feet with a
lease term of fifteen years. The lease commenced on October 14, 1996. During
2001, also pursuant to the terms of the Distribution Agreement, Lakes entered
into a capital lease arrangement for the corporate office space at which time
the operating lease was cancelled. Accordingly, Lakes recorded a capital leased
asset and liability in the amount of approximately $5.8 million. These amounts
are included in the accompanying condensed consolidated balance sheet as of
December 30, 2001. On January 2, 2002, the Company completed the purchase of its
corporate office building for $6.4 million, including transaction expenses. This
transaction resulted in the extinguishment of the Company's capital lease
obligation related to the building.

7.  STOCK OPTIONS

     Grand Casinos had a Stock Option and Compensation Plan and a Director Stock
Option Plan whereby incentive and nonqualified stock options and other awards to
acquire shares of Grand Casinos' common stock were granted to officers,
directors, and employees.

                                        46

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Upon the consummation of the Distribution, the holders of outstanding Grand
Casinos stock options received one new option to purchase one share of Lakes
common stock for each four options previously held, and one new option to
purchase one share of Park Place common stock for each option previously held.
The exercise price of the new options was apportioned between Lakes and Park
Place to preserve option value as it existed on December 31, 1998 as measured by
the difference between the option exercise price and the fair market value of
Grand Casinos on that date. This value was calculated by reference to the
closing price of Lakes on January 4, 1999 and the closing price of Grand Casinos
on December 31, 1998. Additionally, Lakes has a 1998 Stock Option and
Compensation Plan and a 1998 Director Stock Option Plan which are approved to
grant up to an aggregate of 2.5 million shares and 0.2 million shares,
respectively, of incentive and non-qualified stock options to officers,
directors, and employees.

     Information with respect to the stock option plans is summarized as
follows:



                                                              NUMBER OF COMMON SHARES
                                           LAKES      ----------------------------------------
                                          OPTIONS                   AVAILABLE   WEIGHTED AVE.
                                        OUTSTANDING   EXERCISABLE   FOR GRANT   EXERCISE PRICE
                                        -----------   -----------   ---------   --------------
                                                                    
Balance at January 2, 2000............   2,319,853       789,353    1,382,526       $ 9.35
  Granted.............................     105,500                   (105,500)        8.04
  Canceled............................     (85,080)                    85,080        10.32
  Exercised...........................      (9,555)                        --         8.33
                                         ---------     ---------    ---------       ------
Balance at December 31, 2000..........   2,330,718     1,118,818    1,362,106         9.26
  Granted.............................     187,000                   (187,000)        7.75
  Canceled............................     (31,375)                    31,375         9.24
  Exercised...........................          --                         --           --
                                         ---------     ---------    ---------       ------
Balance at December 30, 2001..........   2,486,343     1,419,343    1,206,481         9.14
  Granted.............................      84,000                    (84,000)        6.53
  Canceled............................     (46,214)                    46,214         7.77
  Exercised...........................          --            --           --           --
                                         ---------     ---------    ---------       ------
Balance at December 29, 2002..........   2,524,129     1,714,629    1,168,695       $ 9.08
                                         =========     =========    =========       ======




                                                                                       OPTIONS EXERCISABLE AT
                      OPTIONS OUTSTANDING AT DECEMBER 29, 2002                            DECEMBER 29, 2002
- ------------------------------------------------------------------------------------   -----------------------
                                                 WEIGHTED AVERAGE                                    WEIGHTED-
RANGE OF                             NUMBER         REMAINING       WEIGHTED-AVERAGE     NUMBER       AVERAGE
EXERCISE PRICES                    OUTSTANDING   CONTRACTUAL LIFE    EXERCISE PRICE    EXERCISABLE     PRICE
- ---------------                    -----------   ----------------   ----------------   -----------   ---------
                                                                                   
$  (5.24-7.75)  .................     251,000       8.6 years            $ 7.17            33,400     $ 7.50
  (8.33-11.34)  .................   2,244,254       5.3 years              9.21         1,652,354       9.44
 (13.53-17.72)  .................      28,875       4.6 years             15.34            28,875      15.34
- --------------                      ---------       ---------            ------         ---------     ------
$ (5.24-17.72)  .................   2,524,129       5.6 years            $ 9.08         1,714,629     $ 9.50
==============                      =========       =========            ======         =========     ======


                                        47

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The SFAS No. 123 method of accounting has not been applied to options
granted prior to January 1, 1995, thus the resulting pro forma compensation cost
may not be representative of that to be expected in future years. The fair value
of each award under the option plans is estimated on the date of grant using the
Black-Scholes option-pricing model. The following assumptions were used to
estimate the fair value of options:



                                                        2002        2001        2000
                                                      ---------   ---------   ---------
                                                                     
Risk-free interest rate.............................      4.98%       5.02%       6.48%
Expected life.......................................   10 years    10 years    10 years
Expected volatility.................................     44.31%      50.84%      45.27%
Expected dividend yield.............................         --          --          --
Weighted average fair value.........................  $    4.12   $    5.92   $    5.41


Information regarding the effect on net earnings (loss) and net earnings (loss)
per common share had the fair value expense recognition provisions of SFAS 123
been applied is included in Note 1.

8.  EMPLOYEE RETIREMENT PLAN

     Lakes has a section 401(k) employee savings plan for all full-time
employees. The savings plan allows participants to defer, on a pre-tax basis, a
portion of their salary and accumulate tax-deferred earnings as a retirement
fund. Eligibility is based on years of service and minimum age requirements.
Contributions are invested, at the direction of the employee, in one or more
available funds. Lakes matches employee contributions up to a maximum of 4% of
participating employees' gross wages. The Company contributed $.10 million, $.10
million, and $.09 million during 2002, 2001, and 2000, respectively. Company
contributions are vested over a period of five years.

9.  COMMITMENTS AND CONTINGENCIES

  OPERATING LEASES

     During 2002 the Company leased certain property and equipment, including an
airplane, under non-cancelable operating lease. During 2001 and 2000, the
Company also leased its corporate office building under a non-cancelable
operating lease. Rent expense, under non-cancelable operating leases, exclusive
of real estate taxes, insurance, and maintenance expense was $0.6 million, $1.2
million, and $1.4 million for 2002, 2001 and 2000, respectively.

     In January 2002, the Company purchased the corporate office building;
therefore, no rent payments will be due going forward related to the building.
The airplane lease expires May 1, 2003 and provides for two one-year renewal
terms. Approximate future minimum lease payments due under this lease as of
December 29, 2002, considering both one-year renewals are taken are as follows
(in thousands):

                                                            
2003........................................................   $  600
2004........................................................      600
2005........................................................      200
                                                               ------
                                                               $1,400
                                                               ======



  PURCHASE OPTIONS

     The Company has the right to purchase the airplane it leases during the
base lease term and any renewal term for approximately $8 million.

     During 2001, the option to purchase the Cable property in Las Vegas, Nevada
for the purchase price of $39.1 million was allowed to lapse. A loss of $3.2
million was recognized during 2001 and is included in Loss

                                        48

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

on Land Held for Development on the accompanying Consolidated Statement of Loss
for the year ended December 30, 2001.

  LOAN GUARANTY AGREEMENT

     On May 1, 1997, the Company entered into a guaranty agreement related to a
loan agreement entered into by the Coushatta Tribe of Louisiana in the amount of
$25.0 million, for the purpose of constructing a hotel and acquiring additional
casino equipment. The loan term is approximately five years. As of December 30,
2001 the amount outstanding was $6.8 million. Lakes was released from this
guaranty agreement at the conclusion of the management agreement on January 16,
2002.

  INDEMNIFICATION AGREEMENT

     As a part of the transaction establishing Lakes as a separate public
company on December 31, 1998, the Company has agreed to indemnify Grand against
all costs, expenses and liabilities incurred in connection with or arising out
of certain pending and threatened claims and legal proceedings to which Grand
and certain of its subsidiaries are likely to be parties. The Company's
indemnification obligations include the obligation to provide the defense of all
claims made in proceedings against Grand and to pay all related settlements and
judgments.

     As security to support Lakes' indemnification obligations to Grand, Lakes
agreed to deposit, in trust for the benefit of Grand, as a wholly owned
subsidiary of Park Place, an aggregate of $30 million, to cover various
commitments and contingencies related to or arising out of, Grand's
non-Mississippi business and assets (including by way of example, but not
limitation, tribal loan guarantees, real property lease guarantees for Lakes'
subsidiaries and director and executive officer indemnity obligations)
consisting of four annual installments of $7.5 million, during the four-year
period subsequent to December 31, 1998. Any surplus proceeds remaining in this
trust after all the secured obligations are indefeasibly paid in full and
discharged shall be paid over to Lakes.

     Lakes made the first deposit of $7.5 million on December 31, 1999 and in
July 2000, Lakes deposited $18 million in an escrow account in partial
satisfaction of the indemnification obligation. The $18 million deposit
represented a settlement agreement which was reached in June 2000 regarding both
the Stratosphere Shareholders' litigation and the Grand Casinos, Inc.
Shareholders' litigation. On August 14, 2001, the Court issued an order giving
final approval to the settlement. As such, the $18 million in restricted cash
was removed from the Company's condensed consolidated balance sheet. In January
2001, Lakes also purchased the Shark Club property in Las Vegas for $10.1
million in settlement of another obligation that was subject to the
indemnification obligations. As of December 29, 2002 and December 30, 2001, $7.5
million related to security to support Lakes' indemnification obligations to
Grand is included as restricted cash in the accompanying condensed consolidated
balance sheets. Lakes believes it has satisfied all potential obligations beyond
the amounts provided for in the Company's financial statements. Lakes is seeking
release of the restricted cash that was deposited into trust.

     As part of the indemnification agreement, Lakes has agreed that it will not
declare or pay any dividends, make any distribution of Lakes' equity interests,
or otherwise purchase, redeem, defease or retire for value any equity interests
in Lakes without the written consent of Park Place.

     The following summaries describe certain known legal proceedings to which
Grand Casinos is a party which Lakes has assumed, or with respect to which Lakes
may have agreed to indemnify Grand Casinos, in connection with the Distribution.

  SLOT MACHINE LITIGATION

     In April 1994, William H. Poulos brought an action in the U.S. District
Court for the Middle District of Florida, Orlando Division -- William H. Poulos,
et al v. Caesars World, Inc. et al -- Case No. 39-478-CIV-ORL-22 -- in which
various parties (including Grand Casinos) alleged to operate casinos or be slot
machine manufacturers were named as defendants. The plaintiff sought to have the
action certified as a class action.
                                        49

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     A subsequently filed Action  -- William Ahearn, et al v. Caesars World,
Inc. et al -- Case No. 94-532-CIV-ORL-22  -- made similar allegations and was
consolidated with the Poulos action.

     Both actions included claims under the federal Racketeering-Influenced and
Corrupt Organizations Act and under state law, and sought compensatory and
punitive damages. The plaintiffs claimed that the defendants are involved in a
scheme to induce people to play electronic video poker and slot machines based
on false beliefs regarding how such machines operate and the extent to which a
player is likely to win on any given play.

     In December 1994, the consolidated actions were transferred to the U.S.
District Court for the District of Nevada.

     In September 1995, Larry Schreier brought an action in the U.S. District
Court for the District of Nevada -- Larry Schreier, et al v. Caesars World, Inc.
et al -- Case No. CV-95-00923-DWH(RJJ). The plaintiffs' allegations in the
Schreier action were similar to those made by the plaintiffs in the Poulos and
Ahearn actions, except that Schreier claimed to represent a more precisely
defined class of plaintiffs than Poulos or Ahearn.

     In December 1996, the court ordered the Poulos, Ahearn and Schreier actions
consolidated under the title William H. Poulos, et al v. Caesars World, Inc., et
al -- Case No. CV-S-94-11236-DAE(RJJ) -- (Base File), and required the
plaintiffs to file a consolidated and amended complaint. In February 1997, the
plaintiffs filed a consolidated and amended complaint.

     In March 1997, various defendants (including Grand Casinos) filed motions
to dismiss or stay the consolidated action until the plaintiffs submitted their
claims to gaming authorities and those authorities considered the claims
submitted by the plaintiffs.

     In December 1997, the court denied all of the motions submitted by the
defendants, and ordered the plaintiffs to file a new consolidated and amended
complaint. That complaint has been filed. Grand Casinos has filed its answer to
the new complaint. The plaintiffs have filed a motion seeking an order
certifying the action as a class action. Grand Casinos and certain of the
defendants have opposed the motion. The Court has not ruled on the motion.

  STANDBY EQUITY COMMITMENT LITIGATION

     In 1997, the trustee under an indenture pursuant to which Stratosphere
Corporation issued certain first mortgage notes filed a complaint in the U.S.
District Court for the District of Nevada -- IBJ Schroeder Bank & Trust Company,
Inc. v. Grand Casinos, Inc. -- File No. CV-S-97-01252-DWH (RJJ) -- naming Grand
as defendant. The complaint alleged that Grand Casinos failed to perform under
the Standby Equity Commitment entered into between Stratosphere and Grand
Casinos in connection with Stratosphere's issuance of such first mortgage notes
in March 1995. The complaint sought an order compelling specific performance of
what the Trustee claimed were Grand Casinos' obligations under the Standby
Equity Commitment. An LLC was subsequently substituted for the trustee in the
proceeding. Following trial, on April 4, 2001, the Court entered judgment in
favor of Grand Casinos and issued its findings of fact and conclusions of law.
The plaintiff filed an appeal with the Ninth Circuit Court of appeals on May 4,
2001, Case No. 01-15947. On August 13, 2002, the Ninth Circuit affirmed the
prior ruling in favor of Grand. In November 2002, the Company announced that the
appeal period for this litigation had expired.

  STRATOSPHERE PREFERENCE ACTION

     In April 1998, Stratosphere served on Grand Casinos and Grand Media &
Electronics Distributing, Inc., a wholly owned subsidiary of Grand Casinos
("Grand Media"), a complaint in the Stratosphere bankruptcy case seeking
recovery of certain amounts paid by Stratosphere to (i) Grand Media for
electronic equipment purchased by Stratosphere from Grand Media, and (ii) Grand
as management fees and for costs and expenses under the management agreement
between Stratosphere and Grand.

                                        50

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Stratosphere claimed in its complaint that such amounts are recoverable by
Stratosphere as preferential payments under bankruptcy law. In May 1998, Grand
Casinos responded to Stratosphere's complaint denying that Stratosphere is
entitled to recover the amounts described in the complaint. Discovery was
completed on December 31, 2001 and the case proceeded to trial before the United
States Bankruptcy Court for the District of Nevada on June 20, 2002.

     On December 31, 2002, the Bankruptcy Court issued its final judgment
holding that: (i) payments to Grand Media for electronic equipment totaling
approximately $3.3 million are not recoverable by Stratosphere as avoidable
preferences, and (ii) payment to Grand for management services in the
approximate amount of $2.3 million is recoverable by Stratosphere and an
avoidable preference. Under this judgment, Lakes would be obligated to indemnify
Grand for the $2.3 million recovery. As of December 29, 2002 and December 30,
2001, $7.5 million related to security to support Lakes' indemnification
obligations to Grand is included as restricted cash in the accompanying
condensed consolidated balance sheets.

     All post-trial issues have been resolved and the parties will have an
opportunity to appeal for a period of ten days following entry of final
judgment.

  OTHER LITIGATION

     The Company has recorded a reserve assessment related to various of the
above items. The reserve is reflected as a litigation and claims accrual on the
accompanying consolidated balance sheets.

     Grand Casinos and Lakes are involved in various other inquiries,
administrative proceedings, and litigation relating to contracts and other
matters arising in the normal course of business. While any proceeding or
litigation has an element of uncertainty, management currently believes that the
final outcome of these matters is not likely to have a material adverse effect
upon Grand Casinos' or the Company's consolidated financial position or results
of operations.

10.  SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

     Year ended December 29, 2002 (in thousands, except per share amounts):



                                                   FIRST    SECOND     THIRD    FOURTH
                                                  QUARTER   QUARTER   QUARTER   QUARTER
                                                  -------   -------   -------   -------
                                                                    
Net revenues....................................  $1,502    $    --   $    --   $    --
Loss from operations............................    (696)    (9,692)   (2,830)   (3,653)
Net Loss........................................     (63)    (7,180)   (1,654)   (2,644)
Loss per share:
  Basic.........................................  $ (.01)   $  (.67)  $  (.16)  $  (.24)
  Diluted.......................................    (.01)      (.67)     (.16)     (.24)


     Year ended December 30, 2001 (in thousands, except per share amounts):



                                                    FIRST    SECOND     THIRD     FOURTH
                                                   QUARTER   QUARTER   QUARTER   QUARTER
                                                   -------   -------   -------   --------
                                                                     
Net revenues.....................................  $9,223    $9,599    $8,664    $  7,368
Earnings (loss) from operations..................   6,312     6,330     5,800     (19,566)
Net earnings (loss)..............................   4,165     3,587     3,483     (14,101)
Earnings (loss) per share:
  Basic..........................................  $  .39    $  .34    $  .33    $  (1.33)
  Diluted........................................     .39       .33       .33       (1.32)


                                        51

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11.  RELATED PARTY TRANSACTIONS

     During 2001 and 2000, Lakes made a total of $4.0 million in unsecured loans
to ViatiCare Financial Services, LLC, which has since been acquired by Living
Benefits Financial Services ("Living Benefits"). Living Benefits acquires and
services life insurance policies of terminally ill individuals. In March 2001,
the Board of Directors of Lakes decided not to make further loans to ViatiCare.
The outstanding note receivable balance from Living Benefits to Lakes was $4.0
million as of December 30, 2001. A $4.0 million impairment charge for this note
was recorded during the quarter ended June 30, 2002 due to increased competition
in the viatical business and restrictions on ability to make further policy
acquisitions.

     Subsequent to the decision by the Lakes Board to make no further loans to
ViatiCare, L. B. Acquisitions, LLC, which is owned by Lyle Berman, the chief
executive officer and Director of Lakes, made loans to Living Benefits. Advances
outstanding were approximately $4.9 million as of December 30, 2001. As an
incentive to make the loans, L. B. Acquisitions was granted an initial 9% voting
interest in Living Benefits and was given the option to convert the loan balance
into 45% of the voting interest in Living Benefits. Therefore, Lyle Berman,
through L. B. Acquisitions, beneficially owns a total of 55% of the voting
interest of Living Benefits.

     Lakes has formed two partnerships with Kean Argovitz Resorts, LLC ("KAR"),
a limited liability company based in Houston, Texas. The purpose of these
partnerships is to develop and manage casino resort projects with the Shingle
Springs Band of Miwok Indians and the Jamul Indian Village, both in California.
Lakes had notes receivable from KAR in the amount of $1.9 million as of December
29, 2002 and December 30, 2001. Lakes also has a long-term receivable from Kevin
Kean, the President of KAR, in the amount of $1.8 million and $1.7 million as of
December 29, 2002 and December 30, 2001, respectively. See Note 12 for
discussion of change in status of these partnerships.

     During 2002 and 2001, Lakes rented the use of Company equipment to another
company that had a mutual Board member during a portion of 2001. A receivable of
$121,000, as of December 30, 2001, is included in accounts receivable, net in
the accompanying balance sheet. The transaction was for full value of the
associated use and all payments for such use have been received.

12.  SUBSEQUENT EVENTS

  KAR

     On January 30, 2003, Lakes restructured a series of arrangements with two
of its joint venture partners in two separate Indian gaming development
projects, the project with the Jamul Indian Village near San Diego, California,
and the project with the Shingle Springs Band of Miwok Indians near Sacramento,
California. Lakes has effectively acquired 100% ownership of the joint ventures
in exchange for restructuring indebtedness of $1.8 million from the joint
venture partners to Lakes and an agreement to make certain conditional payments
to the joint venture partners from profits received under the respective
management contracts. These conditional payments could total up to $2 million
per year for each project, however, Lakes believes these payments will be
substantially less than the joint venture partners would have received under
their original interest. The joint venture partners have options to repurchase
their interest or obtain a comparable financial interest, in the event they are
found suitable by relevant gaming regulatory authorities.

  LAND HELD UNDER CONTRACT FOR SALE

     During March of 2003, Lakes and Metroflag agreed to additional revisions to
the terms of the Polo Plaza and Travelodge property transactions. The parties
have increased the price of the Polo Plaza property from $21.8 million to $25.8
million. On the payment date, which the parties have agreed in principle shall
be extended to no later than May 15, 2003, $16.8 million of the purchase price
is payable to Lakes in cash, $4.0 million is payable through the issuance to
Lakes of a preferred membership interest in Metroflag and $4.0 million is
payable through the issuance to Lakes of a subordinated membership interest in
Metroflag. On or before April 30, 2004, Metroflag Polo may elect to distribute
to Lakes $3.0 million plus interest in cash as

                                        52

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

full return of Lakes' preferred interest. If paid after April 30, 2004, and in
no event later than December 24, 2006, the entire $4.0 million will be payable.
The subordinated interest must be repurchased for $4.0 million at the time of
repayment of an outstanding $3.5 million contractual commitment in connection
with the Travelodge property, which is scheduled on or before December 28, 2004.
If the Travelodge commitment is not repaid by December 28, 2004, ownership of
the Travelodge lease rights would revert back to Lakes. If at any time the Polo
Plaza property is sold and the Travelodge commitment has not been repaid,
Metroflag is required to repurchase the subordinated interest for the lesser of
$4.0 million or any portion of the net cash proceeds from such sale or
refinancing that exceeds $60.0 million.

     The parties have decreased the sale price of the Travelodge property from
$7.5 million to $3.5 million. The contractual commitment to pay Lakes has also
been decreased from $7.5 million to $3.5 million and is now payable no later
than December 28, 2004.

  WORLD POKER TOUR

     During March of 2003, the World Poker Tour, LLC (WPT), a subsidiary of
Lakes, signed an agreement with the Travel Channel, LLC (TRV), granting TRV the
right to broadcast the first season of the World Poker Tour Series. Under the
agreement, TRV shall have the exclusive right, license, and privilege to
exhibit, market, distribute, transmit, perform and otherwise exploit each of the
first thirteen two-hour programs produced by WPT for an unlimited number of
times over the next three years within the United States. WPT will receive a
series of fixed license payments from TRV, subject in each case to satisfaction
of production milestones and other conditions. The license payments are expected
to cover substantially all anticipated first year production costs.

                                        53


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

     None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Information in response to this item is incorporated herein by reference to
our definitive proxy statement to be filed pursuant to Regulation 14A within 120
days after the end of the fiscal year covered by this 10-K.

ITEM 11. EXECUTIVE COMPENSATION

     Information in response to this item is incorporated herein by reference to
our definitive proxy statement to be filed pursuant to Regulation 14A within 120
days after the end of the fiscal year covered by this 10-K.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS

     Information in response to this item is incorporated herein by reference to
our definitive proxy statement to be filed pursuant to Regulation 14A within 120
days after the end of the fiscal year covered by this 10-K.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Information in response to this item is incorporated herein by reference to
our definitive proxy statement to be filed pursuant to Regulation 14A within 120
days after the end of the fiscal year covered by this 10-K.

ITEM 14. CONTROLS AND PROCEDURES

     Under the supervision and with the participation of our management,
including our chief executive officer and chief financial officer, we conducted
an evaluation of our disclosure controls and procedures, as such term is defined
under Rule 13a-14(c) promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), within 90 days of the filing of this report. Based
on this evaluation, our chief executive officer and chief financial officer
concluded that our disclosure controls and procedures are effective.

     There have been no significant changes (including corrective actions with
regard to significant deficiencies or material weaknesses) in our internal
controls or in other factors that could significantly affect these controls
subsequent to the date of the evaluation referenced above.

                                        54


                                    PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

     (a)(1) Consolidated Financial Statements:



                                                              PAGE
                                                              ----
                                                           
Report of Independent Public Accountants....................   31
Consolidated Balance Sheets as of December 29, 2002 and
  December 30, 2001.........................................   32
Consolidated Statements of Earnings (Loss) for the fiscal
  years ended December 29, 2002, December 30, 2001 and
  December 31, 2000.........................................   33
Consolidated Statements of Comprehensive Earnings (Loss) for
  the fiscal years ended December 29, 2002, December 30,
  2001 and December 31, 2000................................   34
Consolidated Statements of Shareholders' Equity for the
  fiscal years ended December 29, 2002, December 30, 2001
  and December 31, 2000.....................................   35
Consolidated Statements of Cash Flows for the fiscal years
  ended December 29, 2002, December 30, 2001 and December
  31, 2000..................................................   36
Notes to Consolidated Financial Statements..................   37


     (a)(2) None.

     (a)(3)



EXHIBITS                           DESCRIPTION
- --------                           -----------
        
  2.1      Agreement and Plan of Merger by and among Hilton, Park Place
           Entertainment Corporation, Gaming Acquisition Corporation,
           Lakes Gaming, Inc. and Grand Casinos, Inc. dated as of June
           30, 1998. (Incorporated herein by reference to Exhibit 2.2
           to Lakes' Form 10 Registration Statement as filed with the
           Securities and Exchange Commission (the "Commission") on
           October 23, 1998.) (the "Lakes Form 10")
  3.1      Articles of Incorporation of Lakes Gaming, Inc.
           (Incorporated herein by reference to Exhibit 3.1 to the
           Lakes Form 10.)
  3.2      By-laws of Lakes Gaming, Inc. (Incorporated herein by
           reference to Exhibit 3.2 to the Lakes Form 10.)
 10.1      Distribution Agreement by and between Grand Casinos, Inc.
           and Lakes Gaming, Inc., dated as of December 31, 1998.
           (Incorporated herein by reference to Exhibit 10.1 to Lakes'
           Form 8-K dated January 8, 1999.)
 10.2      Employee Benefits and Other Employment Matters Allocation
           Agreement by and between Grand Casinos, Inc. and Lakes
           Gaming, Inc., dated as of December 31, 1998. (Incorporated
           herein by reference to Exhibit 10.2 to Lakes' Form 8-K dated
           January 8, 1999.)
 10.3      Intellectual Property License Agreement by and between Grand
           Casinos, Inc. and Lakes Gaming, Inc., dated as of December
           31, 1998. (Incorporated herein by reference to Exhibit 10.5
           to Lakes' Form 8-K dated January 8, 1999.)
 10.4      Tax Allocation and Indemnity Agreement by and between Grand
           Casinos, Inc. and Lakes Gaming, Inc., dated as of December
           31, 1998. (Incorporated herein by reference to Exhibit 10.3
           to Lakes' Form 8-K dated January 8, 1999.)
 10.5      Tax Escrow Agreement by and among Grand Casinos, Inc., Lakes
           Gaming, Inc., and First Union National Bank as Escrow Agent,
           dated as of December 31, 1998. (Incorporated herein by
           reference to Exhibit 10.4 to Lakes' Form 8-K dated January
           8, 1999.)
 10.6      Trust Agreement dated as of December 31, 1998 entered into
           by and among Lakes Gaming, Inc., Grand Casinos, Inc. and
           First Union National Bank, as Trustee. (Incorporated herein
           by reference to Exhibit 10.7 to Lakes' Form 10-K dated March
           26, 1999).
 10.7      Pledge and Security Agreement dated as of December 31, 1998
           entered into by and among Lakes Gaming, Inc., as Debtor and
           First Union National Bank (the "Trustee") pursuant to the
           Trust Agreement executed in favor of Grand Casinos, Inc.
           (the "Secured Party"). (Incorporated herein by reference to
           Exhibit 10.8 to Lakes' Form 10-K dated March 26, 1999.)


                                        55




EXHIBITS                           DESCRIPTION
- --------                           -----------
        
 10.8      Lakes Gaming, Inc. 1998 Stock Option and Compensation Plan.
           (Incorporated herein by reference to Annex G to the Joint
           Proxy Statement/Prospectus of Hilton Hotels Corporation and
           Grand dated and filed with the Commission on October 14,
           1998 (the "Joint Proxy Statement") which is attached to the
           Lakes Form 10 as Annex A.) *
 10.9      Lakes Gaming, Inc. 1998 Director Stock Option Plan.
           (Incorporated herein by reference to Annex H to the Joint
           Proxy Statement/Prospectus of Hilton Hotels Corporation and
           Grand dated and filed with the Commission on October 14,
           1998 (the "Joint Proxy Statement") which is attached to the
           Lakes Form 10 as Annex A.) *
 10.10     Indemnification Agreement, dated as of December 31, 1997, by
           and between Grand Casinos, Inc. and Lyle Berman.
           (Incorporated herein by reference to Exhibit 10.79 to
           Grand's Report on Form 10-K for the fiscal year ended
           December 28, 1997.)
 10.11     Non-competition Agreement made and entered into as of
           December 31, 1998, by and between Lyle Berman and Park Place
           Entertainment Corporation (f/k/a Gaming Co., Inc.) a
           Delaware corporation. (Incorporated herein by reference to
           Exhibit 10.21 to Lakes' Report on Form 10-Q for the quarter
           ended April 4, 1999.)
 10.12     Development Agreement dated as of the 8th day of July, 1999
           by and between the Pokagon Band of Potawatomi Indians and
           Lakes Gaming, Inc., a Minnesota corporation. (Incorporated
           herein by reference to Exhibit 10.61 to Lakes' Report on
           Form 10-K for the fiscal year ended December 31, 2000.)
 10.13     Management Agreement dated as of July 8, 1999, by and
           between the Pokagon Band of Potawatomi Indians and Lakes
           Gaming, Inc., a Minnesota corporation. (Incorporated herein
           by reference to Exhibit 10.62 to Lakes' Report on Form 10-K
           for the fiscal year ended December 31, 2000.)
 10.14     Promissory Note (the "Lakes Note") dated as of July 8, 1999
           by and among the Pokagon Band of Potawatomi Indians and
           Lakes Gaming, Inc., a Minnesota corporation. (Incorporated
           herein by reference to Exhibit 10.63 to Lakes' Report on
           Form 10-K for the fiscal year ended December 31, 2000.)
 10.15     Non-Gaming Land Acquisition Line of Credit Agreement dated
           as of the 8th day of July, 1999, by and between the Pokagon
           Band of Potawatomi Indians and Lakes Gaming, Inc., a
           Minnesota corporation. (Incorporated herein by reference to
           Exhibit 10.64 to Lakes' Report on Form 10-K for the fiscal
           year ended December 31, 2000.)
 10.16     Promissory Note (the "Transition Loan Note") dated as of
           July 8, 1999 by and among the Pokagon Band of Potawatomi
           Indians and Lakes Gaming, Inc., a Minnesota corporation.
           (Incorporated herein by reference to Exhibit 10.65 to Lakes'
           Report on Form 10-K for the fiscal year ended December 31,
           2000.)
 10.17     Account Control Agreement dated as of July 8, 1999 by and
           among the Pokagon Band of Potawatomi Indians and Lakes
           Gaming, Inc., a Minnesota corporation. (Incorporated herein
           by reference to Exhibit 10.66 to Lakes' Report on Form 10-K
           for the fiscal year ended December 31, 2000.)
 10.18     Pledge and Security Agreement dated as of July 8, 1999 by
           and among the Pokagon Band of Potawatomi Indians and Lakes
           Gaming, Inc., a Minnesota corporation. (Incorporated herein
           by reference to Exhibit 10.67 to Lakes' Report on Form 10-K
           for the fiscal year ended December 31, 2000.)
 10.19     Memorandum of Agreement Regarding Gaming Development and
           Management Agreements dated as of the 15th day of February,
           2000 by and between the Jamul Indian Village and Lakes
           KAR -- California, LLC, a Delaware limited liability
           company. (Incorporated herein by reference to Exhibit 10.68
           to Lakes' Report on Form 10-K for the fiscal year ended
           December 31, 2000.)
 10.20     Operating Agreement of Lakes Kean Argovitz
           Resorts -- California, LLC dated as of the 25th day of May,
           1999 by and between Lakes Jamul, Inc. and Kean Argovitz
           Resorts -- Jamul, LLC. (Incorporated herein by reference to
           Exhibit 10.69 to Lakes' Report on Form 10-K for the fiscal
           year ended December 31, 2000.)
 10.21     Promissory Note dated as of the 15th day of February, 2000
           by and among the Jamul Indian Village and Lakes
           KAR -- California, LLC, a Delaware limited liability
           company. (Incorporated herein by reference to Exhibit 10.70
           to Lakes' Report on Form 10-K for the fiscal year ended
           December 31, 2000.)


                                        56




EXHIBITS                           DESCRIPTION
- --------                           -----------
        
 10.22     Security Agreement dated as of the 25th day of May, 1999 by
           and between Lakes Jamul, Inc., a Minnesota corporation and
           Lakes Kean Argovitz Resorts -- California, LLC, a Delaware
           limited liability company. (Incorporated herein by reference
           to Exhibit 10.71 to Lakes' Report on Form 10-K for the
           fiscal year ended December 31, 2000.)
 10.23     Management Agreement between the Shingle Springs Band of
           Miwok Indians and Kean Argovitz Resorts -- Shingle Springs,
           LLC, dated as of the 11th day of June, 1999. (Incorporated
           herein by reference to Exhibit 10.72 to Lakes' Report on
           Form 10-K for the fiscal year ended December 31, 2000.)
 10.24     Development Agreement between the Shingle Springs Band of
           Miwok Indians and Kean Argovitz Resorts -- Shingle Springs,
           LLC, dated as of the 11th day of June, 1999. (Incorporated
           herein by reference to Exhibit 10.73 to Lakes' Report on
           Form 10-K for the fiscal year ended December 31, 2000.)
 10.25     Management Agreement dated as of the 29th day of July, 1999
           by and among Lakes Shingle Springs, Inc., a Minnesota
           corporation and Lakes KAR -- Shingle Springs, LLC, a
           Delaware limited liability company. (Incorporated herein by
           reference to Exhibit 10.74 to Lakes' Report on Form 10-K for
           the fiscal year ended December 31, 2000.)
 10.26     Operating Agreement of Lakes KAR -- Shingle Springs, LLC
           dated as of the 29th day of July, 1999 by Lakes Shingle
           Springs, Inc. and Kean Argovitz Resorts -- Shingle Springs,
           LLC. (Incorporated herein by reference to Exhibit 10.75 to
           Lakes' Report on Form 10-K for the fiscal year ended
           December 31, 2000.)
 10.27     Assignment and Assumption Agreement between Kean Argovitz
           Resorts  -- Shingle Springs, LLC, a Nevada limited liability
           company, and Lakes KAR -- Shingle Springs, LLC, a Delaware
           limited liability company, dated as of the 11th day of June,
           1999. (Incorporated herein by reference to Exhibit 10.76 to
           Lakes' Report on Form 10-K for the fiscal year ended
           December 31, 2000.)
 10.28     Assignment and Assumption Agreement and Consent to
           Assignment and Assumption, by and between Lakes Gaming,
           Inc., a Minnesota corporation, and Kean Argovitz
           Resorts -- Shingle Springs, LLC, a Nevada limited liability
           company, dated as of the 11th day of June, 1999.
           (Incorporated herein by reference to Exhibit 10.77 to Lakes'
           Report on Form 10-K for the fiscal year ended December 31,
           2000.)
 10.29     Security Agreement dated as of the 29th day of July, 1999,
           by and between Lakes Shingle Springs, Inc., a Minnesota
           corporation, and Lakes KAR -- Shingle Springs, LLC, a
           Delaware limited liability company. (Incorporated herein by
           reference to Exhibit 10.78 to Lakes' Report on Form 10-K for
           the fiscal year ended December 31, 2000.)
 10.30     Promissory Note dated as of the 29th day of July, 1999, by
           and among Kean Argovitz Resorts -- Shingle Springs, LLC, a
           Nevada limited liability company, and Lakes Shingle Springs,
           Inc., a Minnesota corporation. (Incorporated herein by
           reference to Exhibit 10.79 to Lakes' Report on Form 10-K for
           the fiscal year ended December 31, 2000.)
 10.31     Pledge Agreement dated as of the 29th day of July, 1999, by
           and between Kean Argovitz Resorts -- Shingle Springs, LLC, a
           Nevada limited liability company and Lakes Shingle Springs,
           Inc., a Minnesota corporation. (Incorporated herein by
           reference to Exhibit 10.80 to Lakes' Report on Form 10-K for
           the fiscal year ended December 31, 2000.)
 10.32     Joint Contribution Agreement by and between Grand Casinos
           Nevada I, Inc., Metroplex, LLC, Lakes Gaming, Inc., and
           Metroplex-Lakes, LLC dated as of April 25, 2000.
           (Incorporated herein by reference to Exhibit 10.1 to Lakes'
           Report on Form 10-Q for the quarter ended July 2, 2000.)
 10.33     Member Control Agreement of Metroplex-Lakes, LLC, by and
           between Grand Casinos Nevada I, Inc., Metroplex, LLC, and
           Metroplex-Lakes, LLC dated as of April 25, 2000.
           (Incorporated herein by reference to Exhibit 10.2 to Lakes'
           Report on Form 10-Q for the quarter ended July 2, 2000.)
 10.34     Real Estate Option Agreement by and between Grand Casinos
           Nevada I, Inc., Metroplex-Lakes, LLC, and Metroplex, LLC
           dated as of April 25, 2000. (Incorporated herein by
           reference to Exhibit 10.3 to Lakes' Report on Form 10-Q for
           the quarter ended July 2, 2000.)
 10.35     Amended and Restated Option Agreement by and between Martin
           J. Cable and Olga B. Cable, as Trustees of the Cable Family
           Trust and Grand Casinos Nevada I, Inc. dated as of June 1,
           2000. (Incorporated herein by reference to Exhibit 10.4 to
           Lakes' Report on Form 10-Q for the quarter ended July 2,
           2000.)


                                        57




EXHIBITS                           DESCRIPTION
- --------                           -----------
        
 10.36     Acquisition and Participation Agreement, dated as of August
           7, 2000, by and between MRD Gaming, LLC, a Nevada limited
           liability company, and Lakes Gaming and Resorts, LLC, a
           Minnesota limited liability company. (Incorporated herein by
           reference to Exhibit 10.1 to Lakes' Report on Form 10-Q for
           the quarter ended October 1, 2000.)
 10.37     First Amendment to Acquisition and Participation Agreement,
           dated as of October 12, 2000, by and between MRD Gaming,
           LLC, a Nevada limited liability company, and Lakes Gaming
           and Resorts, LLC, a Minnesota limited liability company.
           (Incorporated herein by reference to Exhibit 10.2 to Lakes'
           Report on Form 10-Q for the quarter ended October 1, 2000.)
 10.38     Member Control Agreement of Pacific Coast Gaming -- Corning,
           LLC. (Incorporated herein by reference to Exhibit 10.3 to
           Lakes' Report on Form 10-Q for the quarter ended October 1,
           2000.)
 10.39     Member Control Agreement of Pacific Coast Gaming -- Santa
           Rosa, LLC. (Incorporated herein by reference to Exhibit 10.4
           to Lakes' Report on Form 10-Q for the quarter ended October
           1, 2000.)
 10.40     Promissory Note, dated as of October 12, 2000, by and
           between Pacific Coast Gaming -- Corning, LLC, a Minnesota
           limited liability company, and Lakes Corning, LLC, a
           Minnesota limited liability company. (Incorporated herein by
           reference to Exhibit 10.5 to Lakes' Report on Form 10-Q for
           the quarter ended October 1, 2000.)
 10.41     Promissory Note, dated as of October 12, 2000, by and
           between Pacific Coast Gaming -- Santa Rosa, LLC, a Minnesota
           limited liability company, and Lakes Cloverdale, LLC, a
           Minnesota limited liability company. (Incorporated herein by
           reference to Exhibit 10.6 to Lakes' Report on Form 10-Q for
           the quarter ended October 1, 2000.)
 10.42     Assignment and Assumption Agreement, dated as of October 16,
           2000, by and among Great Lakes of Michigan, LLC, a Minnesota
           limited liability company, Lakes Gaming, Inc., a Minnesota
           corporation, and Pokagon Band of Potawatomi Indians.
           (Incorporated herein by reference to Exhibit 10.7 to Lakes'
           Report on Form 10-Q for the quarter ended October 1, 2000.)
 10.43     First Amended and Restated Development Agreement, dated as
           of October 16, 2000, by and between the Pokagon Band of
           Potawatomi Indians and Great Lakes Gaming of Michigan, LLC,
           a Minnesota limited liability company (f/k/a Great Lakes of
           Michigan, LLC). (Incorporated herein by reference to Exhibit
           10.8 to Lakes' Report on Form 10-Q for the quarter ended
           October 1, 2000.)
 10.44     First Amended and Restated Management Agreement, dated as of
           October 16, 2000, by and between the Pokagon Band of
           Potawatomi Indians and Great Lakes Gaming of Michigan, LLC,
           a Minnesota limited liability company (f/k/a Great Lakes of
           Michigan, LLC). (Incorporated herein by reference to Exhibit
           10.9 to Lakes' Report on Form 10-Q for the quarter ended
           October 1, 2000.)
 10.45     First Amended and Restated Lakes Note, dated as of October
           16, 2000, by and between the Pokagon Band of Potawatomi
           Indians and Great Lakes of Michigan, LLC, a Minnesota
           limited liability company. (Incorporated herein by reference
           to Exhibit 10.10 to Lakes' Report on Form 10-Q for the
           quarter ended October 1, 2000.)
 10.46     First Amended and Restated Non-Gaming Land Acquisition Line
           of Credit, dated as of October 16, 2000, by and between the
           Pokagon Band of Potawatomi Indians and Great Lakes of
           Michigan, LLC, a Minnesota limited liability company.
           (Incorporated herein by reference to Exhibit 10.11 to Lakes'
           Report on Form 10-Q for the quarter ended October 1, 2000.)
 10.47     Amended and Restated Transition Loan Note, dated as of
           October 16, 2000, by and between the Pokagon Band of
           Potawatomi Indians and Great Lakes of Michigan, LLC, a
           Minnesota limited liability company. (Incorporated herein by
           reference to Exhibit 10.12 to Lakes' Report on Form 10-Q for
           the quarter ended October 1, 2000.)
 10.48     Amendment to Account Control Agreement, dated as of October
           16, 2000, by and among Great Lakes of Michigan, LLC, a
           Minnesota limited liability company, Lakes Gaming, Inc., a
           Minnesota corporation, the Pokagon Band of Potawatomi
           Indians, and Firstar Bank, N.A. f/k/a Firstar Bank of
           Minnesota, N.A. (Incorporated herein by reference to Exhibit
           10.13 to Lakes' Report on Form 10-Q for the quarter ended
           October 1, 2000.)
 10.49     Unlimited Guaranty, dated as of October 16, 2000, from Lakes
           Gaming, Inc., a Minnesota corporation, and Great Lakes of
           Michigan, LLC, a Minnesota limited liability company, to the
           Pokagon Band of Potawatomi Indians. (Incorporated herein by
           reference to Exhibit 10.14 to Lakes' Report on Form 10-Q for
           the quarter ended October 1, 2000.)


                                        58




EXHIBITS                           DESCRIPTION
- --------                           -----------
        
 10.50     Amendment to Pledge and Security Agreement, dated as of
           October 16, 2000, by and among the Great Lakes of Michigan,
           LLC, a Minnesota limited liability company, Lakes Gaming,
           Inc., a Minnesota corporation, and the Pokagon Band of
           Potawatomi Indians. (Incorporated herein by reference to
           Exhibit 10.15 to Lakes' Report on Form 10-Q for the quarter
           ended October 1, 2000.)
 10.51     Gaming Development Agreement for Class III Gaming Facility
           by and between The Nipmuc Nation and Lakes Nipmuc, LLC,
           dated as of July 5, 2001. (Incorporated herein by reference
           to Exhibit 10.1 to Lakes' Report on Form 10-Q for the
           quarter ended July 1, 2001.)
 10.52     Management Agreement for Class III Gaming Enterprise by and
           between The Nipmuc Nation and Lakes Nipmuc, LLC, dated as of
           July 5, 2001. (Incorporated herein by reference to Exhibit
           10.2 to lakes' Report on Form 10-Q for the quarter ended
           July 1, 2001.)
 10.53     Interim Promissory Note, dated as of July 5, 2001, by and
           between The Nipmuc Nation and Lakes Nipmuc, LLC.
           (Incorporated herein by reference to Exhibit 10.3 to Lakes'
           Report on Form 10-Q for the quarter ended July 1, 2001.)
 10.54     Security Agreement by and between The Nipmuc Nation and
           Lakes Nipmuc, LLC, dated July 5, 2001. (Incorporated herein
           by reference to Exhibit 10.4 to Lakes' Report on Form 10-Q
           for the quarter ended July 1, 2001.)
 10.55     Guaranty Agreement by Lakes Gaming, Inc. and agreed to by
           The Nipmuc Nation, dated as of July 5, 2001. (Incorporated
           herein by reference to Exhibit 10.5 to Lakes' Report on Form
           10-Q for the quarter ended July 1, 2001.)
 10.56     Purchase Agreement, dated as of December 28, 2001, by and
           among Grand Casinos Nevada I, Inc., a Minnesota corporation,
           and Metroflag Polo, LLC, a Nevada limited liability company.
           (Incorporated herein by reference to Exhibit 10.56 to Lakes'
           Report on Form 10-K for the fiscal year ended December 30,
           2001.)
 10.57     Promissory Note dated as of the 28th day of December 2001,
           by and among Metroflag Polo, LLC, a Nevada limited liability
           company, and Grand Casinos Nevada I, Inc., a Minnesota
           corporation. (Incorporated herein by reference to Exhibit
           10.57 to Lakes' Report on Form 10-K for the fiscal year
           ended December 30, 2001.)
 10.58     Deed of Trust, Assignment of Leases and Rents and Security
           Agreement, dated December 28, 2001, by and among Metroflag
           Polo, LLC, Lawyers Title of Nevada, Inc. as trusted, and
           Grand Casinos Nevada I, Inc. as beneficiary. (Incorporated
           herein by reference to Exhibit 10.58 to Lakes' Report on
           Form 10-K for the fiscal year ended December 30, 2001.)
 10.59     Purchase Agreement, dated as of December 28, 2001, by and
           among Grand Casinos Nevada I, Inc., a Minnesota corporation,
           and Metroflag BP, LLC, a Nevada limited liability company.
           (Incorporated herein by reference to Exhibit 10.59 to Lakes'
           Report on Form 10-K for the fiscal year ended December 30,
           2001.)
 10.60     Promissory Note dated as of the 28th day of December 2001,
           by and among Metroflag BP, LLC, a Nevada limited liability
           company and Grand Casinos Nevada I, Inc., a Minnesota
           corporation. (Incorporated herein by reference to Exhibit
           10.60 to Lakes' Report on Form 10-K for the fiscal year
           ended December 30, 2001.)
 10.61     Promissory Note dated as of the 28th day of December 2001,
           by and among Metroflag BP, LLC, a Nevada limited liability
           company, and Grand Casinos Nevada I, Inc., a Minnesota
           corporation. (Incorporated herein by reference to Exhibit
           10.61 to Lakes' Report on Form 10-K for the fiscal year
           ended December 30, 2001.)
 10.62     Leasehold Deed of Trust, Assignment of Leases and Rents and
           Security Agreement, dated December 28, 2001, by and among
           Metroflag BP, LLC, Lawyers Title of Nevada, Inc. as trustee,
           and Grand Casinos Nevada I, Inc. and Grand Casinos, Inc. as
           beneficiaries. (Incorporated herein by reference to Exhibit
           10.62 to Lakes' Report on Form 10-K for the fiscal year
           ended December 30, 2001.)
 10.63     Leasehold Deed of Trust, Assignment of Leases and Rents and
           Security Agreement, dated December 28, 2001 by and among
           Metroflag BP, LLC, Lawyers Title of Nevada, Inc. as trustee,
           and Grand Casinos Nevada I, Inc. as beneficiary.
           (Incorporated herein by reference to Exhibit 10.63 to Lakes'
           Report on Form 10-K for the fiscal year ended December 30,
           2001.)


                                        59




EXHIBITS                           DESCRIPTION
- --------                           -----------
        
 10.64     Buyout and Release Agreement (Shingle Springs Project) dated
           as of January 30, 2003, by and among Kean Argovitz
           Resorts -- Shingle Springs, L.L.C., Lakes KAR -- Shingle
           Springs, L.L.C., Lakes Entertainment, Inc., a Minnesota
           corporation, and Lakes Shingle Springs, Inc.
 10.65     Consent and Agreement to Buyout and Release
           (Argovitz -- Shingle Springs Project) dated as of January
           30, 2003, by and among Jerry A. Argovitz, Lakes
           KAR -- Shingle Springs, L.L.C., Lakes Entertainment, Inc.
           and Lakes Shingle Springs, Inc.
 10.66     Consent and Agreement to Buyout and Release (Kean -- Shingle
           Springs Project) dated as of January 30, 2003, by and among
           Kevin M. Kean, Lakes KAR -- Shingle Springs, L.L.C., Lakes
           Entertainment, Inc. and Lakes Shingle Springs, Inc.
 10.67     Shingle Springs Consulting Agreement dated as of January 30,
           2003, by and between Kevin M. Kean and Lakes KAR -- Shingle
           Springs, L.L.C.
 10.68     Buyout and Release Agreement (Jamul Project) dated as of
           January 30, 2003, by and among Kean Argovitz
           Resorts -- Jamul, L.L.C., Lakes Kean Argovitz
           Resorts -- California, L.L.C., Lakes Entertainment, Inc., a
           Minnesota corporation, and Lakes Jamul, Inc.
 10.69     Consent and Agreement to Buyout and Release
           (Argovitz -- Jamul Project) dated as of January 30, 2003, by
           and among Jerry A. Argovitz, Lakes Kean Argovitz
           Resorts -- California, L.L.C., Lakes Entertainment, Inc., a
           Minnesota corporation, and Lakes Jamul, Inc.
 10.70     Consent and Agreement to Buyout and Release (Kean -- Jamul
           Project) dated as of January 30, 2003, by and among Kevin M.
           Kean, Lakes Kean Argovitz Resorts -- California, L.L.C.,
           Lakes Entertainment, Inc., a Minnesota corporation, and
           Lakes Jamul, Inc.
 10.71     Jamul Consulting Agreement dated as of January 30, 2003, by
           and between Kevin M. Kean and Lakes Kean Argovitz
           Resorts -- California, L.L.C.
 10.72     Loan and Security Agreement dated as of January 30, 2003, by
           and among Lakes California Land Development, Inc., Lakes
           Entertainment, Inc., Lakes Shingle Springs, Inc., Lakes
           Jamul, Inc., Lakes KAR Shingle Springs, L.L.C., Lakes Kean
           Argovitz Resorts -- California, L.L.C. and Kevin M. Kean.
 21        Subsidiaries of the Company.
 23        Consent of Independent Public Accountants Dated March 26,
           2003.
 99.1      Certification of Chief Executive Officer
 99.2      Certification of Chief Financial Officer


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

* Management Compensatory Plan or Arrangement

     (b) Reports on Form 8-K.

          (i) A Form 8-K, Item 5. Other Events and Item 7, Financial Statements,
     Pro Forma Financial Information and Exhibits, was filed on January 8, 2003.

          (ii) A Form 8-K, Item 5, Other Events and Item 7, Financial
     Statements, Pro Forma Financial Information and Exhibits, was filed on
     January 27, 2003.

          (iii) A Form 8-K, Item 5, Other Events and Item 7, Financial
     Statements, Pro Forma Financial Information and Exhibits, was filed on
     February 12, 2003.

                                        60


                                   SIGNATURES

     In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                          LAKES ENTERTAINMENT, INC.
                                          Registrant

                                          By:        /s/ LYLE BERMAN
                                            ------------------------------------
                                            Name: Lyle Berman
                                            Title:   Chairman of the Board and
                                                Chief Executive Officer

Dated as of March 29, 2003

     Pursuant to the requirements of the Exchange Act, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities indicated as of March 29, 2003.



 NAME                                                              TITLE
 ----                                                              -----
                                                                                 

                 /s/ LYLE BERMAN                           Chairman of the Board
 ------------------------------------------------       and Chief Executive Officer
                   Lyle Berman                         (Principal Executive Officer)


               /s/ TIMOTHY J. COPE                      Chief Financial Officer and
 ------------------------------------------------                 Director
                 Timothy J. Cope                            (Principal Financial
                                                          and Accounting Officer)


               /s/ MORRIS GOLDFARB                                Director
 ------------------------------------------------
                 Morris Goldfarb


                /s/ RONALD KRAMER                                 Director
 ------------------------------------------------
                  Ronald Kramer


                 /s/ NEIL I. SELL                                 Director
 ------------------------------------------------
                   Neil I. Sell


                                        61


                                 CERTIFICATIONS

I, Lyle Berman, certify that:

     1. I have reviewed this annual report on Form 10-K of Lakes Entertainment,
Inc.;

     2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statement made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report; and

     3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

     4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

          a) designed such disclosure controls and procedures to ensure that
     material information relating to the registrant, including its consolidated
     subsidiaries, is made known to us by others within those entities,
     particularly during the period in which this annual report is being
     prepared;

          b) evaluated the effectiveness of the registrant's disclosure controls
     and procedures as of a date within 90 days prior to the filing date of this
     annual report (the "Evaluation Date"); and

          c) presented in this annual report our conclusions about the
     effectiveness of the disclosure controls and procedures based on our
     evaluation as of the Evaluation Date;

     5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):

          a) all significant deficiencies in the design or operation of internal
     controls which could adversely affect the registrant's ability to record,
     process, summarize and report financial data and have identified for the
     registrant's auditors any material weaknesses in internal controls; and

          b) any fraud, whether or not material, that involves management or
     other employees who have a significant role in the registrant's internal
     controls; and

     6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

                                                    /s/ LYLE BERMAN
                                          --------------------------------------
                                                       Lyle Berman
                                                 Chief Executive Officer

                                        62


I, Timothy J. Cope, certify that:

     1. I have reviewed this annual report on Form 10-K of Lakes Entertainment,
Inc.;

     2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statement made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report; and

     3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

     4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

          a) designed such disclosure controls and procedures to ensure that
     material information relating to the registrant, including its consolidated
     subsidiaries, is made known to us by others within those entities,
     particularly during the period in which this annual report is being
     prepared;

          b) evaluated the effectiveness of the registrant's disclosure controls
     and procedures as of a date within 90 days prior to the filing date of this
     annual report (the "Evaluation Date"); and

          c) presented in this annual report our conclusions about the
     effectiveness of the disclosure controls and procedures based on our
     evaluation as of the Evaluation Date;

     5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):

          a) all significant deficiencies in the design or operation of internal
     controls which could adversely affect the registrant's ability to record,
     process, summarize and report financial data and have identified for the
     registrant's auditors any material weaknesses in internal controls; and

          b) any fraud, whether or not material, that involves management or
     other employees who have a significant role in the registrant's internal
     controls; and

     6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

                                                  /s/ TIMOTHY J. COPE
                                          --------------------------------------
                                                     TIMOTHY J. COPE
                                                 Chief Financial Officer

                                        63

EX-10.64

                                                                   EXHIBIT 10.64

                          BUYOUT AND RELEASE AGREEMENT
                            (SHINGLE SPRINGS PROJECT)

     THIS BUYOUT AND RELEASE AGREEMENT is made and entered into this 30th day of
January, 2003, by and among Kean Argovitz Resorts-Shingle Springs, L.L.C.
("KARSS"), Lakes KAR-Shingle Springs, L.L.C., a Delaware limited liability
company (the "Project Company"), Lakes Entertainment, Inc. f/k/a Lakes Gaming,
Inc. ("Lakes Entertainment"), and Lakes Shingle Springs, Inc. (hereinafter
referred to as "LASS" and which entity is a wholly owned subsidiary of Lakes
Gaming and Resorts, LLC which is a wholly owned subsidiary of Lakes
Entertainment).

                                    RECITALS

WHEREAS, KARSS (a limited liability company owned by Kevin M. Kean ("Kean") and
Jerry A. Argovitz ("Argovitz")) previously entered into a Development Agreement,
Management Agreement and related documents (the "Original Development
Documents") with the Shingle Springs Band of Miwok Indians (the "Tribe") related
to the design, construction and management of an Indian gaming facility on its
tribal lands (the "Project");

WHEREAS, pursuant to a letter agreement dated June 21, 1999 (the "Letter
Agreement") between KARSS and Lakes Entertainment, such parties agreed to form a
joint venture to design, construct and manage the Project and in connection
therewith executed or caused to be executed each of the documents described
below (collectively with the Letter Agreement, the "Joint Venture Documents"):

     (i)   LASS and KARSS created and are the sole members of the Project
           Company pursuant to that certain Operating Agreement dated July 29,
           1999 (the "Operating Agreement");

     (ii)  Pursuant to that certain Assignment and Assumption Agreement dated
           July 29, 1999 between LASS and the Project Company, KARSS assigned
           to the Project Company all of KARSS's right, title and interest in
           and to the Original Development Documents;

     (iii) Pursuant to that certain Assignment and Assumption Agreement and
           Consent to Assignment and Assumption dated July 29, 1999, among Lakes
           Entertainment, LASS and KARSS, Lakes Entertainment assigned to LASS
           all of Lakes Entertainment's right, title and interest in and to the
           Letter Agreement;

     (iv)  Pursuant to that certain Guaranty dated July 29, 1999 executed by
           Lakes Entertainment in favor of KARSS (the "Guaranty"), Lakes
           Entertainment guaranteed the obligations of LASS under the Operating
           Agreement and certain other documents described with specificity
           therein;





     (v)   Pursuant to that certain Management Agreement dated July 29, 1999
           between LASS and the Project Company (the "LASS Management
           Agreement"), the parties agreed that LASS would provide certain
           management services on behalf of the Project Company with respect to
           the Project;

     (vi)  Pursuant to the Letter Agreement and the Operating Agreement, LASS
           has extended certain loans to the Project Company referred to as the
           "Development Loan" and "Equity Advance" which are evidenced by a
           certain Promissory Note dated July 29, 1999 made payable by the
           Project Company to LASS in (the "Project Company Note"), which Note
           is secured by that certain Security Agreement dated July 29, 1999
           executed by the Project Company in favor of LASS, pursuant to which
           the Project Company granted LASS a security interest in all of its
           assets; such Note is also sometimes referred to as the "Interim
           Promissory Note"; and

     (vii) LASS extended a $970,000 loan to KARSS the repayment of which is
           evidenced by certain Promissory Note dated July 29, 1999 made payable
           by KARSS to LASS in the original principal amount of $970,000 (the
           "KARSS Note"), which Note is secured by that certain Pledge Agreement
           dated July 29, 1999 executed by KARSS in favor of LASS (the "KARSS
           Pledge Agreement") pursuant to which KARSS granted LASS a security
           interest in all of KARSS membership interest and related rights in
           and to the Project Company;

WHEREAS, the Original Development Documents were amended and restated pursuant
to that certain Memorandum of Agreement Regarding Gaming Development and
Management Agreement (the "Amended Management Agreement") and related documents
dated as of May 5, 2000 (as heretofore and hereafter amended, the Amended
Management Agreement and such related documents shall be collectively referred
to as the "Amended Development Documents");

WHEREAS, to achieve regulatory approvals in a timely manner for the Amended
Management Agreement and related documents and agreements, if necessary, related
to the Project from the National Indian Gaming Commission (the "NIGC") and other
applicable regulatory authorities (the "Regulatory Approvals"), KARSS has agreed
to enter into this Agreement;

WHEREAS, Kean and Argovitz entered into a Settlement Agreement dated October 22,
2002 that resolved the disputes and litigation between them in order to minimize
the costs of litigation and the risk of economic loss to each of them
individually and to KAR (the "Argovitz Settlement Agreement");

WHEREAS, KARSS believes that its execution of this Agreement is in the best
interest of the Tribe to preserve and protect the Project, from which all tribal
members should benefit, and in order to move the Projects forward in a timely
manner without delay, the parties hereto desire to enter into this Agreement;
and


                                       2



WHEREAS, Lakes Entertainment and Lakes Resorts, to the best of their knowledge
and based upon conversations with staff of the NIGC, believe this Agreement will
be acceptable to the NIGC and the NIGC will take no affirmative action to
nullify or otherwise disrupt this Agreement.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties agree as follows:

1.   BUYOUT. For and in consideration of $1.00, KARSS hereby absolutely sells
and conveys to LASS all of KARSS right, title and interest in the Project
Company and each of the Joint Venture Documents (the "Transferred Rights"). To
induce and in consideration for each of KARSS, the Project Company, Lakes
Entertainment and LASS executing this Agreement, the Project Company, LASS and
Lakes Entertainment will contemporaneously with the execution of this Agreement
be entering into separate agreements with Argovitz to provide him certain rights
of repurchase in and to the Project Company or in lieu thereof, the payment of
certain sale proceeds, and with Kean to, among other things, provide certain
loans, each as more specifically set forth therein (collectively, the
"Kean-Argovitz Agreements"). In addition KARSS acknowledges, agrees and consents
that LASS intends to cause the Amended Development Documents to be transferred
from the Project Company to LASS and upon the effective date of such transfer,
LASS shall be deemed to be the "Project Company" for all purposes of this
Agreement and shall be deemed to have succeeded to and assumed all of the
Project Company's rights and obligations hereunder.

2.   KARSS NOTE. LASS hereby agrees to release KARSS from its obligations under
the KARSS Note and KARSS Security Agreement (but is not otherwise satisfying or
canceling such obligations), which obligations may upon certain events be wholly
or partially assumed by Kean and/or Argovitz as more specifically provided under
their separate Kean-Argovitz Agreements. As of September 30, 2002, the parties
acknowledge that the outstanding principal and interest balances of the KARSS
Note was $970,000 and $224,077 respectively and that no payments have been made
on such Note since September 30, 2002.

3.   RELEASE. KARSS hereby releases the Project Company, Lakes Entertainment,
Lakes Resorts, LASS, all of their subsidiaries, and each of their directors,
officers, shareholders, employees, agents and attorneys (collectively, the
"Lakes Related Parties"), and the Lakes Related Parties hereby release KARSS
from any claims or potential claims it or he has or may have against each other
concerning the Project, the Project Company, the Joint Venture Documents or any
of the Amended Development Documents for acts or omissions occurring on or prior
to the effective date of this Agreement, but specifically excluding any claims
arising from any misrepresentation, act or omission or failure to perform any
obligation under this Agreement and any claims under Section 4 hereof.

4.   INDEMNIFICATION. KARSS agrees to indemnify and hold harmless each of the
Lakes Related Parties from any and all loss, costs and expenses (including,
without limitation, all legal fees and costs) resulting from any
misrepresentation of KARSS under this Agreement and any claims or potential
claims from third parties based on any prior dealings between such third




                                       3


parties and any of KARSS, Kean or Argovitz concerning the Project, the Project
Company and the subject matter of the Amended Development Documents provided
that the Project Company shall remain responsible to perform its express
obligations set forth in the Amended Development Documents.

Each of the Lakes Related Parties agrees to indemnify and hold harmless KARSS
from any and all loss, costs and expenses (including, without limitation, all
legal fees and costs) resulting from any misrepresentation made by Lakes
Entertainment or LASS under this Agreement and any claims or potential claims
from third parties (excluding the rights and obligations set forth in the
Amended Management Agreement and any agreement expressly referred to therein)
based on any prior dealings between such third parties and any of the Lakes
Related Parties concerning the Project, The Project Company and the subject
matter of the Amended Development Documents which were not permitted dealings
thereunder or under the Joint Venture Documents.

5.   NONCOMPETE/CONFIDENTIALITY. KARSS agrees that (a) it shall and shall cause
each of its officers, directors, shareholders, equity owners, family members of
any of the foregoing and any entity in which it or any of the foregoing persons
shall directly or indirectly own equity interests (collectively, the "Noncompete
Parties"), to comply with each of the noncompetition and confidentiality
provisions set forth in the Amended Development Documents to the same extent as
if any of such Noncompete Parties was the Project Company thereunder, each of
which provisions are hereby incorporated by reference, and (b) in addition to
the foregoing, that it shall not and shall cause each of the other Noncompete
Parties to not directly or indirectly solicit or enter into any consulting,
brokerage, management, financing or other similar agreement with any Indian
tribe with respect to its gaming enterprise or with any party seeking such an
agreement with such an Indian tribe or other gaming enterprise, related to a
gaming enterprise located or to be located within a fifty (50) mile radius of
the Shingle Springs Tribe's gaming enterprise or the Lake Tahoe area. The
Project Company acknowledges and agrees that neither Argovitz nor Kean have the
ability to control what the other individual may do in the future.

6.   REPRESENTATIONS AND WARRANTIES. KARSS to the best of its knowledge hereby
represents and warrants that (a) KARSS has transferred to the Project Company
all rights and assets held by KARSS with respect to the Project, the Original
Development Documents and the Amended Development Documents, (b) except for the
Joint Venture Documents, the Amended Management Agreement and any agreement
expressly referred to therein and any agreements referenced on Schedule 6(c)
hereof, KARSS has not entered into any agreements or understandings with any
party with respect to the Project, (c) KARSS has not taken any act or failed to
take any act that would cause a default or breach by the Project Company of its
obligations under the Amended Development Documents, except those acts
referenced on Schedule 6(c) hereof, (d) KARSS has not directly or indirectly
assigned, conveyed, pledged or otherwise transferred to any party any interest
or rights in the Project, the Project Company or any revenues or profits to be
derived therefrom except for the KARSS Pledge Agreement, and (e) KARSS has the
full legal right and authority to execute, deliver and perform this Agreement
and the consent, authority or signature of no other party is required in
connection therewith.

7.   FURTHER ASSURANCES. Each of the parties hereto agrees to execute such
additional


                                       4


documents and agreements as are necessary to effectuate the intents and purposes
of this Agreement.

8.   GOVERNING LAW. This Agreement will be governed by and interpreted in
accordance with Delaware law.

9.   DISPUTE RESOLUTION/ARBITRATION. In connection with any dispute hereunder,
the parties agree to negotiate in good faith for up to twenty days. If they are
unable to resolve the dispute in such period, then either party may demand and
such dispute shall be submitted to and resolve by binding arbitration in
accordance with the following terms:

          (a) Governing Rules. Any arbitration proceeding will (i) proceed in a
     location in Minneapolis Minnesota selected by the American Arbitration
     Association ("AAA"); (ii) be governed by the Federal Arbitration Act (Title
     9 of the United States Code), notwithstanding any conflicting choice of law
     provision in any of the documents between the parties; and (iii) be
     conducted by the AAA, or such other administrator as the parties shall
     mutually agree upon, in accordance with the AAA's commercial dispute
     resolution procedures. Any party who fails or refuses to submit to
     arbitration following a demand by any other party shall bear all costs and
     expenses incurred by such other party in compelling arbitration of any
     dispute. The arbitration requirement does not limit the right of any party
     to obtain provisional or ancillary remedies such as replevin, injunctive
     relief, attachment or the appointment of a receiver or the exercise of any
     foreclosure or self-help remedies, before during or after the pendency of
     any arbitration proceeding.

          (b) Arbitrator Powers. The arbitrator will determine whether or not an
     issue is arbitratable and will give effect to the statutes of limitation in
     determining any claim. In any arbitration proceeding the arbitrator will
     decide (by documents only or with a hearing at the arbitrator's discretion)
     any pre-hearing motions which are similar to motions to dismiss for failure
     to state a claim or motions for summary adjudication. The arbitrator may
     grant any remedy or relief that a court of such state could order or grant
     within the scope hereof and such ancillary relief as is necessary to make
     effective any award. The arbitrator shall also have the power to award
     recovery of all costs and fees, to impose sanctions and to take such other
     action as the arbitrator deems necessary to the same extent a judge could
     pursuant to the Federal Rules of Civil Procedure, the Minnesota Rules of
     Civil Procedure or other applicable law. Judgment upon the award rendered
     by the arbitrator may be entered in any court having jurisdiction. The
     institution and maintenance of an action for judicial relief or pursuit of
     a provisional or ancillary remedy shall not constitute a waiver of the
     right of any party, including the plaintiff, to submit the controversy or
     claim to arbitration if any other party contests such action for judicial
     relief.

          (c) Miscellaneous. The arbitrator shall award all costs and expenses
     of the arbitration proceeding. To the maximum extent practicable, the AAA,
     the arbitrators and the parties shall take all action required to conclude
     any arbitration proceeding within 180 days of the filing of the dispute
     with the AAA. No arbitrator or other party to an



                                       5


     arbitration proceeding may disclose the existence, content or results
     thereof, except for disclosures of information by a party required in the
     ordinary course of its business or by applicable law or regulation. If more
     than one agreement for arbitration by or between the parties potentially
     applies to a dispute, the arbitration provision most directly related to
     the documents between the parties or the subject matter of the dispute
     shall control. This arbitration provision shall survive termination,
     amendment or expiration of any of the documents or any relationship between
     the parties.

10.  ADVERSE NIGC ACTION. The parties acknowledge and agree that an important
purpose of this Agreement is to allow LASS and the Project Company to become
immediately licensed by the NIGC and to immediately allow the Project to move
forward. Should the NIGC take any action to nullify or otherwise disrupt this
Agreement, then the parties shall immediately meet and negotiate in good faith
to agree to such modifications as may be necessary to obtain NIGC approval
hereof while still maintaining the intents and purposes of this Agreement, with
any disputes related thereto resolved by arbitration under Section 9 above.

11.  MISCELLANEOUS. Time is of the essence in the performance of this Agreement.
This Agreement and the Joint Venture Documents embody the entire agreement and
understanding between the parties with respect to the subject matter hereof and
thereof. This Agreement supersedes all prior agreements and understandings
relating to the subject matter hereof. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, except that KARSS may not assign its rights or obligations hereunder
without the prior written consent of LASS. This Agreement may be executed in any
number of counterparts and by facsimile, all of which taken together shall
constitute one and the same instrument, and any of the parties hereto may
execute this Agreement by signing any such counterpart, provided that this
Agreement shall not become effective until all parties have executed the same.

12.  ACKNOWLEDGMENT OF EUGENE J. KEAN. By signing below, Eugene J. Kean joins
in this Agreement for the sole purposes of acknowledging and agreeing that he
either has no membership or other interest in KARSS or consents and agrees to
the terms of Section 1 hereof including the transfer to LASS of KARSS's rights
and interests in the Project Company, and further that he shall have no further
rights, interests or claims against any of the Lakes Related Parties under this
Agreement or any of the Kean-Argovitz Agreements or otherwise in any manner with
respect to the Project, the Project Company, KARSS, the Development Documents or
any other document or agreement.

         [The remainder of this page has been intentionally left blank]



                                       6




IN WITNESS WHEREOF, the parties have executed this agreement as of the date and
year first above written.

KEAN ARGOVITZ RESORTS-SHINGLE SPRINGS, L.L.C.

By: /s/ Kevin M. Kean
- -----------------------------------------
Name: Kevin M. Kean
Its: Manager and Member

And

By: /s/ Jerry A. Argovitz
- -----------------------------------------
Name: Jerry A. Argovitz
Its: Manager and Member


LAKES KAR SHINGLE SPRINGS, L.L.C.

By: Kean Argovitz Resorts-Shingle Springs, L.L.C.
Its: Member

         By:  /s/ Kevin M. Kean
         ----------------------------------------
         Name: Kevin M. Kean
         Its: Manager and Member

         And

         By:  /s/ Jerry A. Argovitz
         ----------------------------------------
         Name: Jerry A. Argovitz
         Its: Manager and Member


LAKES ENTERTAINMENT, INC.

By:  /s/ Timothy L. Cope
- -----------------------------------------
Timothy J. Cope
Its: Chief Financial Officer


    [SIGNATURE PAGE TO BUYOUT AND RELEASE AGREEMENT-SHINGLE SPRINGS PROJECT]






LAKES SHINGLE SPRINGS, INC.

By:  /s/ Timothy L. Cope
- -----------------------------------------
Timothy J. Cope
Its: Chief Financial Officer



For purposes of agreeing to the terms of Section 12 above:

     /s/ Eugene J. Kean
- -----------------------------------------
EUGENE J. KEAN




    [SIGNATURE PAGE TO BUYOUT AND RELEASE AGREEMENT-SHINGLE SPRINGS PROJECT]

EX-10.65

                                                                   EXHIBIT 10.65

                              CONSENT AND AGREEMENT
                                       TO
                               BUYOUT AND RELEASE
                      (ARGOVITZ - SHINGLE SPRINGS PROJECT)

     THIS CONSENT AND AGREEMENT TO BUYOUT AND RELEASE is made and entered into
this 30th day of January, 2003, by and among Jerry A. Argovitz ("Argovitz")
Lakes KARSS-Shingle Springs, L.L.C., a Delaware limited liability company (the
"Project Company"), Lakes Entertainment, Inc. f/k/a Lakes Gaming, Inc. ("Lakes
Entertainment"), and Lakes Shingle Springs, Inc. (hereinafter referred to as
"LASS" and which entity is a wholly owned subsidiary of Lakes Gaming and
Resorts, LLC which is a wholly owned subsidiary of Lakes Entertainment).

                                    RECITALS

WHEREAS, Kean Argovitz Resorts-Shingle Springs, L.L.C. ("KARSS" and a limited
liability company owned by Kevin M. Kean ("Kean") and Argovitz) previously
entered into a Development Agreement, Management Agreement and related documents
(the "Original Development Documents") with the Shingle Springs Band of Miwok
Indians (the "Tribe") related to the design, construction and management of a
new Indian gaming facility on its tribal lands (the "Project");

WHEREAS, pursuant to a letter agreement dated June 21, 1999 (the "Letter
Agreement") between KARSS and Lakes Entertainment, such parties agreed to form a
joint venture to design, construct and manage the Project and in connection
therewith executed or caused to be executed each of the documents described
below (collectively with the Letter Agreement, the "Joint Venture Documents"):

      (i)   LASS and KARSS created and are the sole members of the Project
            Company pursuant to that certain Operating Agreement dated July 29,
            1999 (the "Operating Agreement");

      (ii)  Pursuant to that certain Assignment and Assumption Agreement dated
            July 29, 1999 between LASS and the Project Company, KARSS assigned
            to the Project Company all of KARSS's right, title and interest in
            and to the Original Development Documents;

      (iii) Pursuant to that certain Assignment and Assumption Agreement and
            Consent to Assignment and Assumption dated July 29, 1999, among
            Lakes Entertainment, LASS and KARSS, Lakes Entertainment assigned to
            LASS all of Lakes Entertainment's right, title and interest in and
            to the Letter Agreement;

      (iv)  Pursuant to that certain Guaranty dated July 29, 1999 executed by
            Lakes Entertainment in favor of KARSS (the "Guaranty"), Lakes
            Entertainment





            guaranteed the obligations of LASS under the Operating Agreement and
            certain other documents described with specificity therein;

      (v)   Pursuant to that certain Management Agreement dated July 29, 1999
            between LASS and the Project Company (the "LASS Management
            Agreement"), the parties agreed that LASS would provide certain
            management services on behalf of the Project Company with respect to
            the Project;

      (vi)  Pursuant to the Letter Agreement and the Operating Agreement, LASS
            has extended certain loans to the Project Company referred to as the
            "Development Loan" and "Equity Advance" which are evidenced by a
            certain Promissory Note dated July 29, 1999 made payable by the
            Project Company to LASS in (the "Project Company Note"), which Note
            is secured by that certain Security Agreement dated July 29, 1999
            executed by the Project Company in favor of LASS, pursuant to which
            the Project Company granted LASS a security interest in all of its
            assets; such Note is also sometimes referred to as the "Interim
            Promissory Note"; and

      (vii) LASS extended a $970,000 loan to KARSS the repayment of which is
            evidenced by certain Promissory Note dated July 29, 1999 made
            payable by KARSS to LASS in the original principal amount of
            $970,000 (the "KARSS Note"), which Note is secured by that certain
            Pledge Agreement dated July 29, 1999 executed by KARSS in favor of
            LASS (the "KARSS Pledge Agreement") pursuant to which KARSS granted
            LASS a security interest in all of KARSS membership interest and
            related rights in and to the Project Company; and

WHEREAS, the Original Development Documents were amended and restated pursuant
to that certain Memorandum of Agreement Regarding Gaming Development and
Management Agreement (the "Amended Management Agreement") and related documents
dated as of May 5, 2000 (as heretofore and hereafter amended, the Amended
Management Agreement and such related documents shall be collectively referred
to as the "Amended Development Documents");

WHEREAS, to achieve regulatory approvals in a timely manner for the Amended
Management Agreement and related documents and agreements, if necessary, related
to the Project from the National Indian Gaming Commission (the "NIGC") and other
applicable regulatory authorities (the "Regulatory Approvals"), KARSS and
Argovitz have agreed to enter into this Agreement;

WHEREAS, the parties hereto believes that its execution of this Agreement is in
the best interest of the Tribe to preserve and protect the Project, from which
all tribal members should benefit, and in order to move the Project forward in a
timely manner without delay, the parties hereto desire to enter into this
Agreement; and

WHEREAS, Lakes Entertainment and Lakes Resorts, to the best of their knowledge
and based upon conversations with staff of the NIGC, believe this Agreement will
be acceptable to the




                                       2


NIGC and the NIGC will take no affirmative action to nullify or otherwise
disrupt this Agreement.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged and to induce the Project Company, LASS, Lakes
Entertainment and KARSS to enter into the KARSS Buyout Agreement (as hereinafter
defined), the parties agree as follows:

1.    BUYOUT/RIGHT OF REPURCHASE. Pursuant to that certain Buyout and Release
Agreement dated January 30, 2003 between KARSS, the Project Company, Lakes
Entertainment and LASS (the "KARSS Buyout Agreement") and for and in
consideration of $1.00, KARSS has absolutely sold and conveyed to LASS all of
KARSS's right, title and interest in the Project Company and each of the Joint
Venture Documents (the "Transferred Rights"). The parties hereto acknowledge and
agree that if and when Argovitz has obtained all necessary Regulatory Approvals
so as to permit such party to be a member of the Project Company, then Argovitz
shall upon providing written notice thereof to LASS (each such date hereinafter
referred to as a "Regulatory Approval Notice Date") have the right for the
payment of $1.00 to repurchase the Transferred Rights in lieu of the making any
elections under Section 2 hereof and Argovitz shall be admitted to the Project
Company on substantially the same terms as are applicable to KARSS under the
Joint Venture Documents on the date hereof; provided further however, that (a)
Argovitz shall respectively only be entitled to a fifteen percent (15%)
ownership interest and related financial rights in the Project Company under the
Joint Venture Documents, (b) Argovitz shall (i) assume fifty percent (50%) of
the then outstanding obligations under the KARSS Note by executing a new
promissory note in favor of LASS, which Note shall continue to accrue interest
from the date hereof, be secured and otherwise be repayable on the same terms
and conditions currently applicable to KARSS under the terms of the KARSS Note,
the KARSS Pledge Agreement and the other applicable Joint Venture Documents,
including without limitation, that the repayment of such obligation will be
secured by a first priority security interests upon Argovitz's membership
interest and rights in the Project Company, and (ii) as a further condition
hereto, Argovitz shall assume 50% of the "KAR Note" as contemplated by Section
1(b) of the Argovitz Jamul Consent and the same shall be cross-collateralized
and repayable by the same collateral under the KARSS Pledge Agreement described
above on the same terms as are provided under Section 23 of the "Letter
Agreement" referenced in the Recitals to this Agreement, and (c) Argovitz shall
not be entitled to any share of profits or income of the Project Company
accruing from the Project or any other source prior to the applicable Regulatory
Approval Notice Date. As of September 30, 2002, fifty percent of the KARSS Note
obligation would have equaled principal of $485,000 and accrued interest of
$112,038.50.

2.    SALE OF ASSET ELECTION. If Agrovitz shall so elect in a written notice to
LASS at any time prior to exercising his rights under Section 1 hereof (such
notification date hereinafter referred to as a "Election Date"), his rights
under Section 1 hereof shall terminate and in lieu thereof LASS shall pay to
Argovitz, the "Purchase Amount" as set forth below as the sole payment for his
past interest in the Project and Project Company. The "Purchase Amount" shall be
equal to $1,000,000 for each year or portion thereof (and such annual amount
shall be prorated based on a




                                       3



365 day year in which both of the following conditions were satisfied for only
part of any calendar year) that both of the following conditions are satisfied:
(a) Class III Gaming is being conducted at the new Project and (b) during such
period either the Project Company is the manager of the Project (with LASS or
another Subsidiary of Lakes Entertainment continuing as a member of such entity)
or LASS or another Subsidiary of Lakes Entertainment is the direct manager of
the Project; provided however that (i) such amounts shall be payable only during
the initial term of the Amended Management Agreement which term may be up to
seven (7) years subject to tribal and NIGC approval and not for any renewal term
or other period thereafter, and (ii) Argovitz shall not be entitled to any
Purchase Amount for the period accruing prior to the Election Date. Subject to
the satisfaction of the foregoing conditions, each annual portion of the
Purchase Amount shall be payable on a monthly basis.

3.    SALE OF MANAGEMENT RIGHTS. If Argovitz shall not have made an election
under Section 1 above (each an "Applicable Party") and the Project Company
should sell its rights in the Amended Development Documents to any third party
(excluding an assignment to any subsidiary of Lakes Entertainment), then LASS
shall preserve the rights of the Applicable Party under this Agreement and LASS
shall cause such purchaser to assume the obligations of the Project Company and
LASS under this Agreement.

4.    CONSENT TO TRANSFER TO LASS. The parties acknowledge, agree and consent
that LASS intends to cause the Amended Development Documents to be transferred
from the Project Company to LASS and upon the effective date of such transfer,
LASS shall be deemed to be the "Project Company" for all purposes of this
Agreement and shall be deemed to have succeeded to and assumed all of the
Project Company's rights and obligations hereunder.

5.    KARSS NOTE. Argovitz acknowledges and agrees that (a) LASS has released
KARSS from its obligations under the KARSS Note and the KARSS Pledge Agreement
pursuant to the KARSS Buyout Agreement (but is not otherwise satisfying or
canceling such indebtedness, which indebtedness shall continue in full force and
effect and continue to accrue interest in accordance with its original terms),
(b) LASS shall have no further obligation to make advances to KARSS or any other
party under Section 4 of the Letter Agreement whether or not the rights set
forth in Sections 1 or 2 hereof shall be ever exercised at a future date, and
(c) as of September 30, 2002, the outstanding principal and interest balances of
the KARSS Note was $970,000 and $224,077 respectively and that no payments have
been made on such Note since September 30, 2002.

6.    RELEASE. Argovitz hereby releases the Project Company, Lakes
Entertainment, Lakes Resorts, LASS, all of their subsidiaries, and each of their
directors, officers, shareholders, employees, agents and attorneys
(collectively, the "Lakes Related Parties"), and the Lakes Related Parties
hereby release Argovitz from any claims or potential claims it or he has or may
have against each other concerning the Project, the Project Company, the Joint
Venture Documents or any of the Amended Development Documents for acts or
omissions occurring on or prior to the effective date of this Agreement, but
specifically excluding any claims arising from any misrepresentation, act or
omission or failure to perform any obligation under this Agreement and any
claims under Section 7 hereof.



                                       4


7.    INDEMNIFICATION. Argovitz agrees to indemnify and hold harmless each of
the Lakes Related Parties from any and all loss, costs and expenses (including,
without limitation, all legal fees and costs) resulting from any
misrepresentation of Argovitz under this Agreement and any claims or potential
claims from third parties (specifically including any claims by Willard Eugene
"Bud" Smith) based on any prior dealings between such third parties and Argovitz
or KARSS concerning the Project and the subject matter of the Amended
Development Documents provided that (a) without limiting the forgoing, Argovitz
acknowledges and agrees that he shall remain responsible for any such claims
arising from Willard Eugene "Bud" Smith and Argovitz's spouse, and (b) the
Project Company shall remain responsible to perform its express obligations set
forth in the Amended Development Documents. However, Argovitz shall have no
personal liability therefore (excluding claims of his spouse) and Lakes shall
seek recourse only against payments to which Argovitz (or any of his assigns)
would be entitled to under the terms of this Agreement. If Mr. Smith or anyone
else recovers any money from any of the Lakes Related Parties arising from any
claim within the scope of the foregoing indemnity, then and only then may the
Lakes Related Parties offset fifty percent (50%) of such recovery against the
amounts due Argovitz under this Agreement, provided however, that upon the
commencement of an action with respect to such claim, the Lakes Related Parties
may suspend any such payments, in a reasonable amount based upon the allegations
stated in the action, and hold the same in escrow until the claim has been
finally settled or adjudicated with interest accruing thereon at a reasonable
rate to be agreed upon by the parties and if they can't agree, the issue will be
settled by arbitration under Section 13 hereof.

Each of the Lakes Related Parties agrees to indemnify and hold harmless Argovitz
from any and all loss, costs and expenses (including, without limitation, all
legal fees and costs) resulting from any misrepresentation of any of the Lakes
Related Parties under this Agreement and any claims or potential claims from
third parties (excluding the rights and obligations set forth in the Amended
Management Agreement and any agreement expressly referred to therein) based on
any prior dealings between such third parties and any of the Lakes Related
Parties concerning the Project, The Project Company and the subject matter of
the Amended Development Documents which were not permitted dealings thereunder
or under the Joint Venture Documents.

8.    NONCOMPETE/CONFIDENTIALITY. Argovitz agrees that (a) he shall and shall
cause each of his family members and any entity in which he or any of the
foregoing persons shall directly or indirectly own equity interests together
with any officers, directors and equity owners of such entity (collectively, the
"Noncompete Parties"), to comply with each of the noncompetition and
confidentiality provisions set forth in the Amended Development Documents to the
same extent as if any of such Noncompete Parties was the Project Company
thereunder, each of which provisions are hereby incorporated by reference, and
(b) in addition to the foregoing, that he shall not and shall cause each of the
other Noncompete Parties to not directly or indirectly solicit or enter into any
consulting, brokerage, management, financing or other similar agreement with any
Indian tribe with respect to its gaming enterprise or with any party seeking
such an agreement with such an Indian tribe or other gaming enterprise, related
to a gaming enterprise located or to be located within a fifty (50) mile radius
of the Shingle Springs Tribe's gaming enterprise or the Lake Tahoe area.



                                       5



9.    REPRESENTATIONS AND WARRANTIES. Argovitz hereby represents and warrants
that (a) to the best of his knowledge, KARSS has transferred to the Project
Company all rights and assets held by KARSS with respect to the Project, the
Original Development Documents and the Amended Development Documents, (b) except
for the Joint Venture Documents, the Amended Management Agreement and any
agreement expressly referred to therein and any agreements referenced on
Schedule 9(c) hereof, neither he nor to the best of his knowledge, KARSS has
entered into any agreements or understandings with any party with respect to the
Project, (c) neither he nor to the best of his knowledge, KARSS has taken any
act or failed to take any act that would cause a default or breach by the
Project Company of its obligations under the Amended Development Documents,
except those acts referenced on Schedule 9(c) hereof, (d) neither he nor to the
best of his knowledge, KARSS has directly or indirectly assigned, conveyed,
pledged or otherwise transferred to any party any interest or rights in the
Project, the Project Company or any revenues or profits to be derived therefrom
except for the KARSS Pledge Agreement, and (e) he has the full legal right and
authority to execute, deliver and perform this Agreement and the consent,
authority or signature of no other party is required in connection therewith.

10.   SETOFF/RECOUPMENT RIGHTS. The parties acknowledge and agree that each of
the Lakes Related Parties (each of which shall be an intended third party
beneficiary of this provision) shall have the right to setoff or recoup any
amount owing to it by Argovitz against any obligations owing by it to Argovitz
under this Agreement and/or any future documents and agreements relating to
Argovitz's exercise of his rights under Section 1 above or which may be entered
into amongst the parties and relating to the subject matter of this Agreement.

11.   FURTHER ASSURANCES. Each of the parties hereto agree to execute such
additional documents and agreements as are necessary to effectuate the intents
and purposes of this Agreement.

12.   GOVERNING LAW. This Agreement will be governed by and interpreted in
accordance with Delaware law.

13.   DISPUTE RESOLUTION/ARBITRATION. In connection with any dispute hereunder,
the parties agree to negotiate in good faith for up to twenty days. If they are
unable to resolve the dispute in such period, then either party may demand and
such dispute shall be submitted to and resolve by binding arbitration in
accordance with the following terms:

            (a) Governing Rules. Any arbitration proceeding will (i) proceed in
      a location in Minneapolis Minnesota selected by the American Arbitration
      Association ("AAA"); (ii) be governed by the Federal Arbitration Act
      (Title 9 of the United States Code), notwithstanding any conflicting
      choice of law provision in any of the documents between the parties; and
      (iii) be conducted by the AAA, or such other administrator as the parties
      shall mutually agree upon, in accordance with the AAA's commercial dispute
      resolution procedures. Any party who fails or refuses to submit to
      arbitration following a demand by any other party shall bear all costs and
      expenses incurred by such other party in



                                       6



      compelling arbitration of any dispute. The arbitration requirement does
      not limit the right of any party to obtain provisional or ancillary
      remedies such as replevin, injunctive relief, attachment or the
      appointment of a receiver or the exercise of any secured creditor rights
      necessary to protect any collateral granted to any of the Lakes Related
      Parties, before during or after the pendency of any arbitration
      proceeding.

            (b) Arbitrator Powers. The arbitrator will determine whether or not
      an issue is arbitratable and will give effect to the statutes of
      limitation in determining any claim. In any arbitration proceeding the
      arbitrator will decide (by documents only or with a hearing at the
      arbitrator's discretion) any pre-hearing motions which are similar to
      motions to dismiss for failure to state a claim or motions for summary
      adjudication. The arbitrator may grant any remedy or relief that a court
      of such state could order or grant within the scope hereof and such
      ancillary relief as is necessary to make effective any award. The
      arbitrator shall also have the power to award recovery of all costs and
      fees, to impose sanctions and to take such other action as the arbitrator
      deems necessary to the same extent a judge could pursuant to the Federal
      Rules of Civil Procedure, the Minnesota Rules of Civil Procedure or other
      applicable law. Judgment upon the award rendered by the arbitrator may be
      entered in any court having jurisdiction. The institution and maintenance
      of an action for judicial relief or pursuit of a provisional or ancillary
      remedy shall not constitute a waiver of the right of any party, including
      the plaintiff, to submit the controversy or claim to arbitration if any
      other party contests such action for judicial relief.

            (c) Miscellaneous. The arbitrator shall award all costs and expenses
      of the arbitration proceeding. To the maximum extent practicable, the AAA,
      the arbitrators and the parties shall take all action required to conclude
      any arbitration proceeding within 180 days of the filing of the dispute
      with the AAA. No arbitrator or other party to an arbitration proceeding
      may disclose the existence, content or results thereof, except for
      disclosures of information by a party required in the ordinary course of
      its business or by applicable law or regulation. If more than one
      agreement for arbitration by or between the parties potentially applies to
      a dispute, the arbitration provision most directly related to the
      documents between the parties or the subject matter of the dispute shall
      control. This arbitration provision shall survive termination, amendment
      or expiration of any of the documents or any relationship between the
      parties.

14.   ADVERSE NIGC ACTION. The parties acknowledge and agree that an important
purpose of this Agreement is to allow LASS and the Project Company to get
immediately licensed by the NIGC and to immediately allow the Project to move
forward. Should the NIGC take any action to nullify or otherwise disrupt this
Agreement, then the parties shall immediately meet and negotiate in good faith
to agree to such modifications as may be necessary to obtain NIGC approval
hereof while still maintaining the intents and purposes of this Agreement, with
any disputes related thereto resolved by arbitration under Section 13 above.

15.   ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective heirs, successors and assigns, except
that Argovitz may not



                                       7


assign his rights or obligations hereunder except (a) with the prior written
consent of LASS or (b) an assignment of rights, but not obligations, that is
based on a "Third Party Offer" (as such term is defined in the Operating
Agreement) and provided (i) he shall first provide to LASS a right of first
refusal to purchase such rights upon the same terms and conditions set forth in
Section 13.4 of the Operating Agreement (provided further that no such right of
first refusal shall apply after Argovitz has exercised and elected to proceed
with his buyout rights under Section 2 hereof), and (ii) the Third Party Offer
must not contain any contingencies and the prospective purchaser thereunder
shall have deposited into escrow with Argovitz at least $500,000 as a earnest
money pending the completion of the transfer, or (c) an assignment or pledge of
payment rights only to Argovitz's spouse in connection with his pending divorce
and/or his attorney Walker Beavers on the same terms and conditions applicable
to the Pledge of a membership interest as set forth in Section 13.7 of the
Operating Agreement. Any permitted assignment above shall be further conditioned
upon (I) all rights of any assignee under this Agreement and any related
documents and agreements shall be expressly subject and subordinate to the
rights and interests of each of the Lakes Related Parties hereunder and
thereunder and such assignee shall execute and deliver in favor of the Lakes
Related Parties a subordination agreement in form and substance reasonably
acceptable to the Lakes Related Parties, and (II) LASS receiving prior to the
completion of such transfer: (i) a copy of the Third Party Offer, if applicable,
and all documents and agreements relating to the transfer, (ii) a copy of the
written notice from the National Indian Gaming Commission pursuant to which it
shall either approve such transfer or acknowledge that no such approval is
necessary for the transfer; (iii) a legal opinion in form and substance
reasonably acceptable to LASS that such transfer is in compliance with all
applicable federal, state and tribal laws, rules and regulations, including
without limitation the Indian Gaming Regulatory Act, as amended (collectively,
the "Applicable Laws"), and no additional approvals or consents of any federal,
state or tribal governmental entity or third party is required with respect
thereto under any Applicable Law, the Amended Development Documents or any other
agreement between Argovitz and the Tribe or any of the Lakes Related Parties,
(iv) a written assignment and assumption agreement executed by Argovitz and the
transferee in form and substance reasonably acceptable to LASS whereby such
transferee shall receive and assume the rights and obligations of Argovitz under
this Agreement; and (v) payment of all reasonable and necessary costs and
expenses (including attorneys fees) of LASS incurred in connection with
completing such transfer.

16.   MISCELLANEOUS. Time is of the essence in the performance of this
Agreement. This Agreement, the KARSS Buyout Agreement and the Joint Venture
Documents embody the entire agreement and understanding between the parties with
respect to the subject matter hereof and thereof. This Agreement supersedes all
prior agreements and understandings relating to the subject matter hereof. This
Agreement may be executed in any number of counterparts and by facsimile, all of
which taken together shall constitute one and the same instrument, and any of
the parties hereto may execute this Agreement by signing any such counterpart,
provided that this Agreement shall not become effective until all parties have
executed the same.

         [The remainder of this page has been intentionally left blank]



                                       8



IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and
year first above written.

   /s/ Jerry A. Argovitz
- -------------------------------------
JERRY A. ARGOVITZ


LAKES KAR-SHINGLE SPRINGS, L.L.C.
By: Kean Argovitz Resorts-Shingle Springs, L.L.C.
Its: Member

         By:  /s/ Jerry A. Argovitz
         ----------------------------
         Name:  Jerry A. Argovitz
         Its: Manager and Member

         and

         By:  /s/ Kevin M. Kean
         ----------------------------
         Name:  Kevin M. Kean
         Its: Manager and Member


LAKES ENTERTAINMENT, INC.

By:  Timothy J. Cope
- -------------------------------------
Timothy J, Cope
Its: Chief Financial Officer


LAKES SHINGLE SPRINGS, INC.

By:  Timothy J. Cope
- -------------------------------------
Timothy J. Cope
Its: Chief Financial Officer



             SIGNATURE PAGE TO CONSENT AND AGREEMENT TO BUYOUT AND
                        RELEASE-SHINGLE SPRINGS PROECT]

EX-10.66

                                                                   EXHIBIT 10.66


                              CONSENT AND AGREEMENT
                                       TO
                               BUYOUT AND RELEASE
                         (KEAN- SHINGLE SPRINGS PROJECT)

      THIS CONSENT AND AGREEMENT TO BUYOUT AND RELEASE is made and entered into
this 30th day of January 2003, by and among Kevin M. Kean ("Kean"), Lakes KAR
Shingle Springs, L.L.C., a Delaware limited liability company (the "Project
Company"), Lakes Entertainment, Inc. f/k/a Lakes Gaming, Inc. ("Lakes
Entertainment"), and Lakes Shingle Springs, Inc. (hereinafter referred to as
"LASS" and which entity is a wholly owned subsidiary of Lakes Gaming and
Resorts, LLC which is a wholly owned subsidiary of Lakes Entertainment).

                                    RECITALS

WHEREAS, Kean Argovitz Resorts-Shingle Springs, L.L.C. ("KARSS" and a limited
liability company owned by Kean and Jerry A. Argovitz ("Argovitz")) previously
entered into a Development Agreement, Management Agreement and related documents
(the "Original Development Documents") with the Shingle Springs Band of Miwok
Indians (the "Tribe") related to the design, construction and management of a
new Indian gaming facility on its tribal lands (the "Project");

WHEREAS, pursuant to a letter agreement dated June 21, 1999 (the "Letter
Agreement") between KARSS and Lakes Entertainment, such parties agreed to form a
joint venture to design, construct and manage the Project and in connection
therewith executed or caused to be executed each of the documents described
below (collectively with the Letter Agreement, the "Joint Venture Documents"):

      (i)   LASS and KARSS created and are the sole members of the Project
            Company pursuant to that certain Operating Agreement dated July 29,
            1999 (the "Operating Agreement");

      (ii)  Pursuant to that certain Assignment and Assumption Agreement dated
            July 29, 1999 between LASS and the Project Company, KARSS assigned
            to the Project Company all of KARSS's right, title and interest in
            and to the Original Development Documents;

      (iii) Pursuant to that certain Assignment and Assumption Agreement and
            Consent to Assignment and Assumption dated July 29, 1999, among
            Lakes Entertainment, LASS and KARSS, Lakes Entertainment assigned to
            LASS all of Lakes Entertainment's right, title and interest in and
            to the Letter Agreement;

      (iv)  Pursuant to that certain Guaranty dated July 29, 1999 executed by
            Lakes Entertainment in favor of KARSS (the "Guaranty"), Lakes
            Entertainment




                                       1



            guaranteed the obligations of LASS under the Operating Agreement and
            certain other documents described with specificity therein;

      (v)   Pursuant to that certain Management Agreement dated July 29, 1999
            between LASS and the Project Company (the "LASS Management
            Agreement"), the parties agreed that LASS would provide certain
            management services on behalf of the Project Company with respect to
            the Project;

      (vi)  Pursuant to the Letter Agreement and the Operating Agreement, LASS
            has extended certain loans to the Project Company referred to as the
            "Development Loan" and "Equity Advance" which are evidenced by a
            certain Promissory Note dated July 29, 1999 made payable by the
            Project Company to LASS in (the "Project Company Note"), which Note
            is secured by that certain Security Agreement dated July 29, 1999
            executed by the Project Company in favor of LASS, pursuant to which
            the Project Company granted LASS a security interest in all of its
            assets; such Note is also sometimes referred to as the "Interim
            Promissory Note"; and

      (vii) LASS extended a $970,000 loan to KARSS the repayment of which is
            evidenced by certain Promissory Note dated July 29, 1999 made
            payable by KARSS to LASS in the original principal amount of
            $970,000 (the "KARSS Note"), which Note is secured by that certain
            Pledge Agreement dated July 29, 1999 executed by KARSS in favor of
            LASS (the "KARSS Pledge Agreement") pursuant to which KARSS granted
            LASS a security interest in all of KARSS membership interest and
            related rights in and to the Project Company; and

WHEREAS, the Original Development Documents were amended and restated pursuant
to that certain Memorandum of Agreement Regarding Gaming Development and
Management Agreement (the "Amended Management Agreement") and related documents
dated as of May 5, 2000 (as heretofore and hereafter amended, the Amended
Management Agreement and such related documents shall be collectively referred
to as the "Amended Development Documents");

WHEREAS, to achieve regulatory approvals in a timely manner for the Amended
Management Agreement and related documents and agreements, if necessary, related
to the Project from the National Indian Gaming Commission (the "NIGC") and other
applicable regulatory authorities (the "Regulatory Approvals"), KARSS and Kean
have agreed to enter into this Agreement;

WHEREAS, Kean and Argovitz entered into a Settlement Agreement dated October 22,
2002 that resolved the disputes and litigation between them in order to minimize
the costs of litigation and the risk of economic loss to each of them
individually and to KARSS (the "Argovitz Settlement Agreement";

WHEREAS, the parties hereto believes that its execution of this Agreement is in
the best interest of the Tribe to preserve and protect the Project, from which
all tribal members should benefit, and in order to move the Project forward in a
timely manner without delay, the parties hereto




                                       2


desire to enter into this Agreement; and

WHEREAS, Lakes Entertainment and Lakes Resorts, to the best of their knowledge
and based upon discussions with staff of the NIGC, believe this Agreement will
be acceptable to the NIGC and the NIGC will take no affirmative action to
nullify or otherwise disrupt this Agreement.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, and to induce the Project Company, LASS, Lakes
Entertainment and KARSS to enter into the KARSS Buyout Agreement and the
Consulting Agreement (each as hereinafter defined), the parties agree as
follows:

1.    BUYOUT. Pursuant to that certain Buyout and Release Agreement dated
January 30, 2003 between KARSS, the Project Company, Lakes Entertainment and
LASS (the "KARSS Buyout Agreement") and for and in consideration of $1.00, KARSS
has absolutely sold and conveyed to LASS all of KARSS's right, title and
interest in the Project Company and each of the Joint Venture Documents (the
"Transferred Rights"). Kean, as a 50% owner and member of KARSS, hereby
acknowledges that his consent and agreement to the KARSS Buyout Agreement is
granted in consideration of the additional terms and provisions of this
Agreement, including without limitation, the loans to be provided under the Loan
and Security Agreement referenced in Section 2 hereof.

2.    LOAN AND SECURITY AGREEMENT/REPAYMENT OF SECURED OBLIGATIONS. In
connection with this Agreement, Kean, as debtor, and Lakes Entertainment, LASS,
Lakes Jamul, Inc., the Project Company, Lakes Kean Argovitz Resorts-California,
L.L.C. and Lakes California Land Development, Inc.("Lakes California"), as
secured parties, have entered into that certain Loan and Security Agreement of
even date herewith (the "Loan and Security Agreement"), pursuant to which (a)
Lakes California agreed to extend certain loans to Kean as more specifically
provided therein and such secured parties have been granted a security interest
in, among other things, Kean's rights and interests under this Agreement and the
Consulting Agreement to secure said loans as well as the Kean Residential Loan
Obligation (as defined below) and certain other obligations owed to such secured
parties, all as more specifically described therein. Kean acknowledges and
agrees that any amounts payable to him with respect to this Agreement and/or the
Consulting Agreement (each such payment herein referred to as a "Contract
Payment"), shall first be paid to each of the "Secured Parties" described in the
Loan and Security Agreement until all of the "Secured Obligations" described
therein have been indefeasibly paid in full; provided that prior to the
occurrence of an Event of Default (as such term is defined in the Loan and
Security Agreement) and provided that such payment does not represent proceeds
arising from a sale or assignment of his rights under this Agreement and/or the
Consulting Agreement, Kean shall be entitled to first receive fifty percent
(50%) of such Contract Payment and the balance remaining shall then be applied
to the Secured Obligations in such order of priority amongst such obligations as
the secured parties shall determine. As used herein, the term "Kean Residential
Loan Obligation" shall mean Kean's obligations to Lakes Entertainment now or
hereafter owing and arising from (i) Lakes Entertainment's performance of that
certain Commercial Guaranty Agreement dated November 6, 1999 to Hibernia
National Bank which Guaranty secured Kean's Promissory Note dated November 22,
1999, as amended May 15, 2000, payable to the order of Hibernia in the original
principal face amount of $1,986,995.09, and (ii) that certain related



                                       3


Agreement For Indemnification dated May 16, 2000 between Kean and Lakes
Entertainment. Kean acknowledges and agrees that as of September 30, 2002, the
outstanding principal and interest balance of the Kean Residential Loan
Obligation was $1,740,106 and $97,649, respectively, and further includes in
addition thereto $25,000 in attorneys' fees due and owing to Lakes Entertainment
in connection with the litigation and June 2002 settlement related to the Kean
Residential Loan Obligation.

3.    CONSENT TO TRANSFER TO LASS. The parties acknowledge, agree and consent
that LASS intends to cause the Amended Development Documents to be transferred
from the Project Company to LASS and upon the effective date of such transfer,
LASS shall be deemed to be the "Project Company" for all purposes of this
Agreement and shall be deemed to have succeeded to and assumed all of the
Project Company's rights and obligations hereunder.

4.    KARSS NOTE. Kean acknowledges and agrees that (a) LASS has released KARSS
from its obligations under the KARSS Note and the KARSS Pledge Agreement
pursuant to the KARSS Buyout Agreement (but is not otherwise satisfying or
canceling such indebtedness, which indebtedness shall continue in full force and
effect and continue to accrue interest in accordance with its original terms),
(b) LASS shall have no further obligation to make advances to KARSS or any other
party under Section 4 of the Letter Agreement whether or not the rights set
forth in Sections 2 or 4 hereof shall be ever exercised at a future date, and
(c) as of September 30, 2002, the outstanding principal and interest balances of
the KARSS Note is $970,000 and $224,077 respectively and that no payments have
been made on such Note since September 30, 2002.

5.    RELEASE. Kean hereby releases the Project Company, Lakes Entertainment,
Lakes Resorts, LASS, all of their subsidiaries, and each of their directors,
officers, shareholders, employees, agents and attorneys (collectively, the
"Lakes Related Parties"), and the Lakes Related Parties hereby release Kean from
any claims or potential claims it or he has or may have against each other
concerning the Project, the Project Company, the Joint Venture Documents or any
of the Amended Development Documents for acts or omissions occurring on or prior
to the effective date of this Agreement, but specifically excluding any claims
arising from any misrepresentation, act or omission or failure to perform any
obligation under this Agreement or the Consulting Agreement.

6.    INDEMNIFICATION. Kean agrees to indemnify and hold harmless each of the
Lakes Related Parties from any and all loss, costs and expenses (including,
without limitation, all legal fees and costs) resulting from any
misrepresentation of Kean to any of them under this Agreement and any claims or
potential claims from third parties (and specifically including any claims of
Willard Eugene "Bud" Smith or Eugene J. Kean) based on any prior dealings
between such third parties and any of KARSS, Kean or Argovitz (collectively, the
"KARSS Related Parties") concerning the Project, the Project Company and the
subject matter of the Amended Development Documents provided that the Project
Company shall remain responsible to perform its express obligations set forth in
the Amended Development Documents. Without limiting the forgoing, Kean further
acknowledges and agrees that he shall remain responsible for any such claims
arising from Willard Eugene "Bud" Smith, Eugene J. Kean and Kean's spouse.



                                       4


Each of the Lakes Related Parties agrees to indemnify and hold harmless Kean
from any and all loss, costs and expenses (including, without limitation, all
legal fees and costs) resulting from any misrepresentation of any of them under
this Agreement and any claims or potential claims from third parties (excluding
the rights and obligations set forth in the Amended Management Agreement and any
agreement expressly referred to therein) based on any prior dealings between
such third parties and any of the Lakes Related Parties concerning the Project,
the Project Company and the subject matter of the Amended Development Documents
which were not permitted dealings thereunder or under the Joint Venture
Documents.

7.    NONCOMPETE/CONFIDENTIALITY. Unless otherwise agreed to by the Tribe, Kean
agrees that (a) he shall and shall cause each entity in which he shall directly
or indirectly own any equity interests (or if such entity is a publicly traded
entity, any such entity in which he owns at least 10% of the outstanding voting
equity interests), together with any officers, directors, equity owners,
employees and agents of such entity (collectively, the "Noncompete Parties"), to
comply with each of the noncompetition and confidentiality provisions set forth
in the Amended Development Documents to the same extent as if any of such
Noncompete Parties was the Project Company thereunder, each of which provisions
are hereby incorporated by reference, and (b) in addition to the foregoing, that
he shall not and shall cause each of the other Noncompete Parties to not
directly or indirectly solicit or enter into any consulting, brokerage,
management, financing or other similar agreement with any Indian tribe with
respect to its gaming enterprise or with any party seeking such an agreement
with such an Indian tribe or other gaming enterprise, related to a gaming
enterprise located or to be located within a fifty (50) mile radius of the
Shingle Springs Tribe's gaming enterprise or the Lake Tahoe area.

8.    REPRESENTATIONS AND WARRANTIES. Kean hereby represents and warrants that
(a) KARSS has transferred to the Project Company all rights and assets held by
KARSS with respect to the Project, the Original Development Documents and the
Amended Development Documents, (b) except for the Joint Venture Documents, the
Amended Management Agreement and any agreement expressly referred to therein and
any agreements referenced on Schedule 8(c) hereof, neither he nor KARSS has
entered into any agreements or understandings with any party with respect to the
Project or the Project Company, (c) neither he nor KARSS has taken any act or
failed to take any act that would cause a default or breach by the Project
Company of its obligations under the Amended Development Documents, except those
acts referenced on Schedule 8(c) hereof, (d) neither he nor KARSS has directly
or indirectly assigned, conveyed, pledged or otherwise transferred to any party
any interest or rights in the Project, the Project Company or any revenues or
profits to be derived therefrom except for the KARSS Pledge Agreement and other
than any economic interest assigned to Kean's father, Eugene J. Kean, and (e) he
has the full legal right and authority to execute, deliver and perform this
Agreement and on behalf of KARSS, to execute, deliver and perform the KARSS
Buyout Agreement, and the consent, authority or signature of no other party
(including, without limitation, Eugene J. Kean) is required in connection
therewith.

9.    SETOFF/RECOUPMENT RIGHTS. The parties acknowledge and agree that each of
the Lakes Related Parties (each of which shall be an intended third party
beneficiary of this provision) shall have the right to setoff or recoup any
amount owing to it by Kean (including without limitation, the Secured
Obligations described in the Loan and Security Agreement) against any
obligations



                                       5


owing by it to Kean under this Agreement, the Consulting Agreement and/or any
related documents and agreements.

10.   FURTHER ASSURANCES. Kean agrees to execute such additional documents and
agreements as are necessary to effectuate the intents and purposes of this
Agreement.

11.   GOVERNING LAW. This Agreement will be governed by and interpreted in
accordance with Delaware law.

12.   DISPUTE RESOLUTION/ARBITRATION. In connection with any dispute hereunder,
the parties agree to negotiate in good faith for up to twenty days. If they are
unable to resolve the dispute in such period, then either party may demand and
such dispute shall be submitted to and resolve by binding arbitration in
accordance with the following terms:

            (a) Governing Rules. Any arbitration proceeding will (i) proceed in
      a location in Minneapolis Minnesota selected by the American Arbitration
      Association ("AAA"); (ii) be governed by the Federal Arbitration Act
      (Title 9 of the United States Code), notwithstanding any conflicting
      choice of law provision in any of the documents between the parties; and
      (iii) be conducted by the AAA, or such other administrator as the parties
      shall mutually agree upon, in accordance with the AAA's commercial dispute
      resolution procedures. Any party who fails or refuses to submit to
      arbitration following a demand by any other party shall bear all costs and
      expenses incurred by such other party in compelling arbitration of any
      dispute. The arbitration requirement does not limit the right of any party
      to obtain provisional or ancillary remedies such as replevin, injunctive
      relief, attachment or the appointment of a receiver or the exercise of any
      foreclosure or self-help remedies, before during or after the pendency of
      any arbitration proceeding.

            (b) Arbitrator Powers. The arbitrator will determine whether or not
      an issue is arbitratable and will give effect to the statutes of
      limitation in determining any claim. In any arbitration proceeding the
      arbitrator will decide (by documents only or with a hearing at the
      arbitrator's discretion) any pre-hearing motions which are similar to
      motions to dismiss for failure to state a claim or motions for summary
      adjudication. The arbitrator may grant any remedy or relief that a court
      of such state could order or grant within the scope hereof and such
      ancillary relief as is necessary to make effective any award. The
      arbitrator shall also have the power to award recovery of all costs and
      fees, to impose sanctions and to take such other action as the arbitrator
      deems necessary to the same extent a judge could pursuant to the Federal
      Rules of Civil Procedure, the Minnesota Rules of Civil Procedure or other
      applicable law. Judgment upon the award rendered by the arbitrator may be
      entered in any court having jurisdiction. The institution and maintenance
      of an action for judicial relief or pursuit of a provisional or ancillary
      remedy shall not constitute a waiver of the right of any party, including
      the plaintiff, to submit the controversy or claim to arbitration if any
      other party contests such action for judicial relief.

            (c) Miscellaneous. The arbitrator shall award all costs and expenses
      of the arbitration proceeding. To the maximum extent practicable, the AAA,
      the arbitrators and




                                       6


      the parties shall take all action required to conclude any arbitration
      proceeding within 180 days of the filing of the dispute with the AAA. No
      arbitrator or other party to an arbitration proceeding may disclose the
      existence, content or results thereof, except for disclosures of
      information by a party required in the ordinary course of its business or
      by applicable law or regulation. If more than one agreement for
      arbitration by or between the parties potentially applies to a dispute,
      the arbitration provision most directly related to the documents between
      the parties or the subject matter of the dispute shall control. This
      arbitration provision shall survive termination, amendment or expiration
      of any of the documents or any relationship between the parties.

13.   ADVERSE NIGC ACTION. The parties acknowledge and agree that an important
purpose of this Agreement is to allow LASS and the Project Company to get
immediate approval by the NIGC of the Amended Management Agreement and related
documents if necessary and to immediately allow the Project to move forward.
Should the NIGC take any action to nullify or otherwise disrupt this Agreement,
then the parties shall immediately meet and negotiate in good faith to agree to
such modifications as may be necessary to obtain such NIGC approval while still
maintaining the intents and purposes of this Agreement, with any disputes
related thereto resolved by arbitration under Section 12 above.

14.   ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective heirs, successors and assigns, except
that Kean may not assign his rights or obligations hereunder except with the
prior written consent of LASS in its sole discretion.

15.   MISCELLANEOUS. Time is of the essence in the performance of this
Agreement. This Agreement, the documents referred to herein, the KARSS Buyout
Agreement and the Joint Venture Documents embody the entire agreement and
understanding between the parties with respect to the subject matter hereof and
thereof. This Agreement supersedes all prior agreements and understandings
relating to the subject matter hereof. This Agreement may be executed in any
number of counterparts and by facsimile, all of which taken together shall
constitute one and the same instrument, and any of the parties hereto may
execute this Agreement by signing any such counterpart, provided that this
Agreement shall not become effective until all parties have executed the same.

         [The remainder of this page has been intentionally left blank]



                                       7




IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and
year first above written.

  /s/ Kevin M. Kean
- -------------------------------------
KEVIN M. KEAN


LAKES KAR-SHINGLE SPRINGS, L.L.C.
By: Kean Argovitz Resorts-Shingle Springs, L.L.C.
Its: Member

         By:  /s/ Kevin M. Kean
         ----------------------------
         Name:  Kevin M. Kean
         Its: Manager and Member


LAKES ENTERTAINMENT, INC.

By:  /s/ Timothy J. Cope
- -------------------------------------
Timothy J. Cope
Its: Chief Financial Officer


LAKES SHINGLE SPRINGS, INC.

By:  /s/ Timothy J. Cope
- -------------------------------------
Timothy J. Cope
Its: Chief Financial Officer



             [SIGNATURE PAGE TO CONSENT AND AGREEMENT TO BUYOUT AND
                        RELEASE-SHINGLE SPRINGS PROECT]

EX-10.67

                                                                   EXHIBIT 10.67

                      SHINGLE SPRINGS CONSULTING AGREEMENT

      This consulting agreement (this "Agreement") effective on January 30,
2003, between Kevin M. KEAN, 210 E. Flamingo Rd. #101, Las Vegas, NV 89109-4707
("KEAN"), and Lakes KAR Shingle Springs, L.L.C., a Delaware limited liability
company (the "PROJECT COMPANY")

                                   BACKGROUND

A.    KEAN is experienced in establishing and maintaining business relationships
and business ventures, including gaming projects, with federally recognized
Native American Indian Tribes specifically including the Shingle Springs Band of
Miwok Indians (the "Tribe");

B.    PROJECT COMPANY has established and entered into a business venture or
gaming project with the Tribe related to the design, construction and management
of an Indian gaming facility to be located on tribal lands in San Diego County,
California, (the "Project") pursuant to the terms and conditions of, among other
things, that certain Memorandum of Agreement Regarding Gaming Development and
Management Agreement (the "Amended Management Agreement") and related documents
dated as of May 5, 2000;

C.    KEAN and PROJECT COMPANY, Lakes Shingle Springs, Inc. ("LASS") and Lakes
Entertainment, Inc. (collectively, the "Lakes Entities") have entered into that
certain Consent and Agreement to Buyout and Release of even date herewith (the
"Kean Consent"); capitalized terms used but not otherwise defined herein shall
have the meanings set forth in the Kean Consent;

D.    KEAN has agreed to provide consulting services to assist PROJECT COMPANY
in successfully developing the Project and future business ventures or
relationships with Tribe and to assist PROJECT COMPANY with Tribal and community
relations and trust land acquisition, among other things, necessary to the
success of the Project, all pursuant to the terms of this Agreement.

      ACCORDINGLY, KEAN and PROJECT COMPANY hereby covenant, agree and obligate
themselves as follows:

1.    Background. The Background statement is made a part of this Agreement.

2.    Services. Subject to the terms of Section 4 hereof, KEAN shall act as a
consultant to PROJECT COMPANY with respect to the Project. KEAN's only duties
under this Agreement, unless otherwise mutually agreed to, shall be for KEAN or
his agent (and only if such agent is first found to be "suitable" and has
obtained any necessary licenses under the Indian Gaming Regulatory Act and other
applicable law to participate in Indian gaming by the NIGC and any other
applicable regulatory authorities) to make at least twenty-four (24) personal
contacts with the Tribe each calendar year during the term of this Agreement and
any extensions thereafter for the purpose of meeting with the Tribal Chair or
members of the Tribal Council or the Tribes administrative staff to discuss and
further foster good relations between the Tribe and PROJECT COMPANY. PROJECT
COMPANY will make all final decisions and be responsible for the development and
management







of the Project and any other project or venture with the Tribe. KEAN will not
have any authority or any duties or obligations of management of the Project or
any other gaming or other business ventures between PROJECT COMPANY and the
Tribe.

3.    Authority. In performing his obligations hereunder, KEAN shall not be and
shall not represent himself as an agent of PROJECT COMPANY and shall not have
any authority to bind PROJECT COMPANY, contractually or otherwise, or to cause
PROJECT COMPANY to incur any obligation to any third party including the Tribe.

4.    Consulting Term. If KEAN shall exercise his option under Section 5 below,
KEAN shall act as the consultant of PROJECT COMPANY under this Agreement for a
term which shall commence only upon satisfaction of all of the following
conditions (such date hereinafter referred to as the "Consulting Agreement
Commencement Date"): (a) KEAN is first found to be "suitable" and has obtained
any necessary licenses under the Indian Gaming Regulatory Act and other
applicable law to participate in Indian gaming by the NIGC and any other
applicable regulatory authorities; (b) KEAN shall have provided PROJECT COMPANY
a copy of the written findings/licenses of such authorities; (c) KEAN has
assumed the KARSS Note and the KAR Note and executed and delivered all necessary
documents and agreements related thereto as required under Section 7 hereof; and
(d) PROJECT COMPANY shall have received either the written approval of the NIGC
to the terms of this Consulting Agreement and related documents or written
notice that no such approval is required. Upon request, PROJECT COMPANY agrees
to provide reasonable cooperation to KEAN in his suitability/licensing
proceedings. After the occurrence of the Consulting Agreement Commencement Date,
the term of this Agreement shall only terminate upon the earlier of (1)
termination or expiration of the Amended Management Agreement, as same may be
renewed or extended or (2) the date that neither PROJECT COMPANY or any other
assignee or transferee of the Amended Management Agreement is manager of the
Project. In the event that the Amended Management Agreement is terminated or
expires and PROJECT COMPANY or any subsidiary of PROJECT COMPANY or Lakes
Entertainment, Inc., whether directly or indirectly, enters into a new contract
or agreement with the Tribe for management of the Project within two (2) years
after such termination or expiration, then this Agreement shall be reinstituted
between KEAN and the PROJECT COMPANY or such subsidiary, as the case may be,
upon the same terms as contained herein as of the date the new management
contract is executed between the PROJECT COMPANY or such subsidiary and the
Tribe.

5.    Fee Option. KEAN shall have the right, so long as he has not exercised the
Buyout Option as described in Section 6 below, to elect to act as a consultant
of PROJECT COMPANY under the terms of this Agreement and be paid an annual
consulting fee ("Consulting Fee") for services rendered hereunder. KEAN shall
notify PROJECT COMPANY, in writing, of his intent to exercise this election in
order for it to be effective. The Consulting Fee shall be equal to fifteen
percent (15.0%) of the sum of (a) the Management Fee received by PROJECT COMPANY
under the Amended Management Agreement for such period, less (b) an annual
credit in favor of PROJECT COMPANY for the sum of Four Hundred Thousand and
00/100 Dollars ($400,000.00) for PROJECT COMPANY's cost of operations which
credit shall be apportioned in equal monthly amounts. The Consulting Fee shall
be payable to KEAN if and only if PROJECT COMPANY shall receive its Management
Fee from the Tribe for such period. To the extent that PROJECT COMPANY shall
receive less than its required Management Fee, the Consulting Fee due KEAN






shall be reduced by a similar proportionate basis. Subject to the limitations
set forth in Section 2 of the Kean Consent, the Consulting Fee will be paid on a
monthly basis within thirty (30) days after receipt by PROJECT COMPANY of its
Management Fee for such month. KEAN shall further not be entitled to any
Consulting Fee under this provision for any period prior to the occurrence of
the Consulting Agreement Commencement Date. The term "Management Fee" shall mean
the "management compensation" to be paid to PROJECT COMPANY under Section 6.5(b)
of the Amended Management Agreement.

6.    Buyout Option. If KEAN shall so elect in a written notice to PROJECT
COMPANY prior to the occurrence of the Consulting Agreement Commencement Date,
KEAN's rights under Sections 2, 4 and 5 hereof shall terminate, he shall not act
as the consultant of PROJECT COMPANY and PROJECT COMPANY shall pay KEAN as the
sole consideration for his rights under this Agreement, an amount equal to One
Million and 00/100 Dollars ($1,000,000.00) for each year or portion thereof (and
such consideration shall be prorated based on a 365 day year in which both of
the following conditions were satisfied for only part of any calendar year) that
both of the following conditions are satisfied: (a) Class III Gaming is being
conducted at the Project and (b) during such period either PROJECT COMPANY is
the manager of the Project (with LASS or another subsidiary of PROJECT COMPANY
continuing as a member of such entity) or LASS or another subsidiary of Lakes
Entertainment is the direct manager of the Project; provided however that (i)
such consideration shall be payable only during the initial term of the Amended
Management Agreement and not for any renewal term or other period thereafter,
and (ii) KEAN shall not be entitled to any amounts for the period accruing prior
to the KEAN's election of this buyout option. Subject to the satisfaction of the
foregoing conditions and further subject to the limitations set forth in Section
2 of the Kean Consent, the annual payments shall be payable to KEAN on a monthly
basis.

7.    Loan Assumption. In the event that KEAN shall elect to be paid a
Consulting Fee under Section 5 above, KEAN shall assume fifty percent (50%) of
the then outstanding obligations under the KARSS Note (as defined in the
Recitals of the Kean Consent) by executing a new promissory note in favor of
LASS, which note shall continue to accrue interest from the date hereof, be
secured and otherwise be repayable on the same terms and conditions currently
applicable to KARSS under the terms of the KARSS Note, the KARSS Pledge
Agreement and any other applicable documents, including without limitation, that
the repayment of such obligation will be secured by a first priority security
interests upon the Consulting Fee earned hereunder, and provided further that
such obligation shall be repayable from all Consulting Fees as and when payable
to or received by KEAN hereunder the until such assumed obligations are paid in
full. KEAN further agrees that (a) the security interest described above shall
also secure the repayment of the obligations described in the Loan and Security
Agreement (as defined in Section 2 of the Kean Consent) and the Kean Residential
Loan Obligation on the same repayment and security terms as are currently
applicable to such Kean Residential Loan Obligation, including without
limitation that such obligation shall be immediately payable from the first
distributions of consulting fees otherwise payable to KEAN hereunder until such
obligation is paid in full and (b) as a further condition hereto, KEAN shall
assume fifty percent (50%) of that certain loan in the principal amount of
$970,000.00 extended by Lakes Jamul, Inc. ("LAJA") to Kean Argovitz
Resorts-Jamul, L.L.C. ("KAR") and the repayment of which is evidenced by that
certain Promissory Note dated May 25, 1999 made payable by KAR to LAJA (the "KAR
Note") and the same shall be cross-collateralized by the Consulting Fees that





may be due hereunder. The term "Kean Residential Loan Obligation" shall mean
Kean's obligations to Lakes Entertainment now or hereafter owing and arising
from (i) Lakes Entertainment's performance of that certain Commercial Guaranty
Agreement dated November 6, 1999 to Hibernia National Bank which Guaranty
secured KEAN's Promissory Note dated November 22, 1999, as amended May 15, 2000,
payable to the order of Hibernia in the original principal face amount of
$1,986,995.09, and (ii) that certain related Agreement For Indemnification dated
May 16, 2000 between KEAN and Lakes Entertainment. KEAN acknowledges and agrees
that as of September 30, 2002, the outstanding principal and interest balance of
the KEAN Residential Loan Obligation was $1,740,106 and $97,649, respectively,
and further includes in addition thereto $25,000 in attorneys' fees due and
owing to Lakes Entertainment pursuant to the terms of that certain settlement
and compromise agreement dated June 22, 2002 (the "Settlement and Compromise
Agreement") concerning and related to the KEAN Residential Loan Obligation.

8.    Inspection of Records. After the Consulting Agreement Commencement Date,
KEAN and/or his designated representative(s) shall be allowed once per calendar
quarter and at his expense to review and inspect (including copying) any and all
books, records and/or data in the possession and/or control of PROJECT COMPANY
that concerns or relates to any revenues and/or receipts of any kind between
PROJECT COMPANY and the TRIBE. KEAN and/or his representatives may conduct any
review and inspection at the business office of PROJECT COMPANY or such other
place as the documents are normally and customarily maintained at any time
during the hours of 8:00 a.m. through 5:00 p.m., Monday through Friday. KEAN
shall give PROJECT COMPANY five (5) business days written notice of the date and
time that he intends to begin any review and inspection of documents. KEAN shall
and shall cause his agents to keep all such books, records and information
confidential in accordance with the following confidentiality provisions:

      (a)   For purposes of this agreement, "Confidential Information" means
            non-public information relating to PROJECT COMPANY, but does not
            include information that KEAN can demonstrate (i) was already known
            to KEAN, or (ii) was or becomes generally available to the public,
            or part of the public domain, through no fault of, or disclosure by,
            KEAN or his agents, or (iii) was or becomes available to KEAN from a
            source other than the PROJECT COMPANY, Lakes Entertainment or any
            affiliate of Lakes Entertainment, provided that such source is not
            bound by a duty of confidentiality to any of them.

      (b)   KEAN agrees to use Confidential Information solely in connection
            with discussions with the PROJECT COMPANY or related transactions,
            and to keep all such Confidential Information strictly secret and
            confidential. Unless authorized in writing by the PROJECT COMPANY,
            KEAN will maintain all Confidential Information in confidence and
            will not divulge to anyone outside the PROJECT COMPANY or use any of
            the Confidential Information for KEAN's own or another's benefit.
            KEAN shall be responsible for any breach of this agreement by any
            his agents and any person (other than the PROJECT COMPANY, Lakes
            Entertainment or any affiliate of Lakes Entertainment and their
            respective officers, directors, employees and independent
            contractors of the PROJECT COMPANY) to whom KEAN discloses any of
            the Confidential Information.

      (c)   If, notwithstanding this agreement, any of the Confidential
            Information is required to be disclosed by applicable law or legal
            process, KEAN will give the PROJECT






            COMPANY prompt notice of such requirement and, if requested, will
            assist the PROJECT COMPANY in seeking a protective order or other
            measures to preserve the confidentiality of such Confidential
            Information insofar as possible.

      (d)   Once this Agreement has ended, upon the PROJECT COMPANY's request,
            all Confidential Information theretofore provided by the PROJECT
            COMPANY to KEAN (and all copies, summaries and notes of the contents
            or parts thereof) shall be returned to the PROJECT COMPANY and not
            retained by KEAN in any form, and KEAN shall upon request promptly
            provide to the PROJECT COMPANY a certificate signed by KEAN
            confirming that all such materials have been returned to the PROJECT
            COMPANY.


9.    No Joint Venture/Funding of Venture. This Agreement is not intended to
create any joint venture between PROJECT COMPANY and KEAN. PROJECT COMPANY shall
be solely responsible for funding, financing or otherwise capitalizing any
business or venture or project that it may enter into with the Tribe. KEAN does
not represent that he has the capability to or that he will be responsible in
any manner for funding, financing or otherwise capitalizing all or any portion
any business or venture or project that PROJECT COMPANY may enter into with the
Tribe.

10.   Best Efforts. KEAN shall perform his duties hereunder, both express and
implied, at all times in good faith and to the best of his ability and shall use
his best efforts in connection with providing consulting services to PROJECT
COMPANY

11.   Non-Compete/Confidentiality. Unless approved by the Tribe, KEAN agrees
that (a) he shall and shall cause any entity in which he shall directly or
indirectly own an equity interest together with any officers, directors, equity
owners, employees and agents of such entity (collectively, the "Non-compete
Parties"), to comply with each of the non-competition agreements set forth in
the Amended Management Agreement (b) in addition to the foregoing, that he shall
not and shall cause each of the other Non-compete Parties to not directly or
indirectly solicit or enter into any consulting, brokerage, management,
financing or other similar agreement with any Indian Tribe or other gaming
enterprise or with any party seeking such an agreement with such an Indian Tribe
or other gaming enterprise, related to a gaming enterprise located or to be
located within a fifty (50) mile radius of the Project or the Lake Tahoe area.

12.   Further Assurances. KEAN agrees to execute such additional documents and
agreements as are necessary to effectuate the intents and purposes of this
Agreement

13.   Governing Law/Venue. This Agreement will be governed by and interpreted in
accordance with Minnesota law. SUBJECT TO THE TERMS OF SECTION 14 HEREOF, THE
PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS
AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS
LOCATED IN THE COUNTY OF HENNEPIN, STATE OF MINNESOTA OR, AT THE SOLE OPTION OF
THE PROJECT COMPANY ENTITIES, IN ANY OTHER COURT IN WHICH THE PROJECT COMPANY
ENTITIES SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT
MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. THE PARTIES WAIVE, TO THE
EXTENT PERMITTED UNDER APPLICABLE LAW, ANY







RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT
TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS
SECTION.

14.   Dispute Resolution/Arbitration. In connection with any dispute hereunder,
the parties agree to negotiate in good faith for up to twenty days. If they are
unable to resolve the dispute in such period, then either party may demand and
such dispute shall be submitted to and resolve by binding arbitration in
accordance with the following terms:

      (a) Governing Rules. Any arbitration proceeding will (i) proceed in a
      location in Minneapolis Minnesota selected by the American Arbitration
      Association ("AAA"); (ii) be governed by the Federal Arbitration Act
      (Title 9 of the United States Code), notwithstanding any conflicting
      choice of law provision in any of the documents between the parties; and
      (iii) be conducted by the AAA, or such other administrator as the parties
      shall mutually agree upon, in accordance with the AAA's commercial dispute
      resolution procedures. Any party who fails or refuses to submit to
      arbitration following a demand by any other party shall bear all costs and
      expenses incurred by such other party in compelling arbitration of any
      dispute. The arbitration requirement does not limit the right of any party
      to obtain provisional or ancillary remedies such as replevin, injunctive
      relief, attachment or the appointment of a receiver or the exercise of any
      foreclosure or self-help remedies under the Minnesota Uniform Commercial
      Code, before during or after the pendency of any arbitration proceeding.

      (b) Arbitrator Powers. The arbitrator will determine whether or not an
      issue is arbitratable and will give effect to the statutes of limitation
      in determining any claim. In any arbitration proceeding the arbitrator
      will decide (by documents only or with a hearing at the arbitrator's
      discretion) any pre-hearing motions which are similar to motions to
      dismiss for failure to state a claim or motions for summary adjudication.
      The arbitrator may grant any remedy or relief that a court of such state
      could order or grant within the scope hereof and such ancillary relief as
      is necessary to make effective any award. The arbitrator shall also have
      the power to award recovery of all costs and fees, to impose sanctions and
      to take such other action as the arbitrator deems necessary to the same
      extent a judge could pursuant to the Federal Rules of Civil Procedure, the
      Minnesota Rules of Civil Procedure or other applicable law. Judgment upon
      the award rendered by the arbitrator may be entered in any court having
      jurisdiction. The institution and maintenance of an action for judicial
      relief or pursuit of a provisional or ancillary remedy shall not
      constitute a waiver of the right of any party, including the plaintiff, to
      submit the controversy or claim to arbitration if any other party contests
      such action for judicial relief.

      (c) Miscellaneous. The arbitrator shall award all costs and expenses of
      the arbitration proceeding. To the maximum extent practicable, the AAA,
      the arbitrators and the parties shall take all action required to conclude
      any arbitration proceeding within 180 days of the filing of the dispute
      with the AAA. No arbitrator or other party to an arbitration proceeding
      may disclose the existence, content or results






      thereof, except for disclosures of information by a party required in the
      ordinary course of its business or by applicable law or regulation. If
      more than one agreement for arbitration by or between the parties
      potentially applies to a dispute, the arbitration provision most directly
      related to the documents between the parties or the subject matter of the
      dispute shall control. This arbitration provision shall survive
      termination, amendment or expiration of any of the documents or any
      relationship between the parties

15.   Adverse NIGC Action. The parties acknowledge and agree that an important
purpose of this Agreement is to allow PROJECT COMPANY to promptly achieve
regulatory approval and become licensed by the National Indian Gaming Commission
("NIGC") and to immediately allow the completion of design, construction and
management of a new gaming facility on lands of the TRIBE. Should the NIGC take
any action to nullify or otherwise disrupt this Agreement, then the parties
shall immediately meet and negotiate in good faith to agree to such
modifications as may be necessary to obtain NIGC approval hereof while still
maintaining the intents and purposes of this Agreement, with any disputes
related thereto resolved by arbitration as provided for above.

16.   Assignment. This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective heirs, successors and assigns, except
that KEAN may not assign his rights or obligations hereunder, provided however,
that subject to the additional requirements and limitations set forth below
(including without limitation the requirement for NIGC approval of any such
assignment or transfer) KEAN may assign his rights as follows: (a) with the
prior written consent of PROJECT COMPANY or (b) after the occurrence of either
the Consulting Agreement Commencement Date or KEAN's election to proceed with
the buyout option under Section 6 of this Agreement, an assignment of payment
rights under either Sections 5 or 6 hereof only, and not any other rights or
obligations of KEAN hereunder. Any permitted assignment above shall be further
conditioned upon (y) all rights of any assignee under this Agreement and any
related documents and agreements shall be expressly subject and subordinate to
the rights and interests of each of the Lakes Related Parties hereunder and
under the Kean Consent, the Loan and Security Agreement and any related
documents and agreements and such assignee shall execute and deliver in favor of
the Lakes Related Parties a subordination agreement in form and substance
reasonably acceptable to the Lakes Related Parties, and (z) PROJECT COMPANY
receiving prior to the completion of such transfer: (i) a copy of all documents
and agreements relating to the transfer, (ii) a copy of the written notice from
the NIGC pursuant to which it shall either approve such transfer or acknowledge
that no such approval is necessary for the transfer; (iii) written evidence that
such transferee is "suitable" and has obtained any necessary licenses under the
Indian Gaming Regulatory Act and other applicable law to participate in Indian
gaming by the NIGC and any other applicable regulatory authorities or in the
alternative that no such findings or licenses are required; (iv) a legal opinion
in form and substance reasonably acceptable to PROJECT COMPANY that such
transfer is in compliance with all applicable federal, state and tribal laws,
rules and regulations, including without limitation the Indian Gaming Regulatory
Act, as amended (collectively, the "Applicable Laws"), and no additional
approvals or consents of any federal, state or tribal governmental entity or
third party is required with respect thereto under any Applicable Law, the
Amended Development Documents or any other agreement between KEAN or any of the
Lakes Related Parties (as defined in the Kean Consent) or between PROJECT
COMPANY and the Tribe, (v) if applicable, a written assignment and assumption
agreement executed by KEAN and the






transferee in form and substance reasonably acceptable to PROJECT COMPANY
whereby such transferee shall receive and assume the rights and obligations of
KEAN under this Agreement; (vi) all sale proceeds payable on account of such
transfer shall be paid to PROJECT COMPANY to be applied to each of the "Secured
Obligations" owing to each "Secured Party" by KEAN under that the Loan and
Security Agreement, and (vii) payment of all costs and expenses (including
attorneys fees) of PROJECT COMPANY incurred in connection with completing such
transfer.

17.   Entire Agreement. This Agreement, the Kean Consent, the KARSS Buyout
Agreement, the Loan and Security Agreement and the documents and agreements
executed in conjunction therewith contain the entire understanding of the
parties regarding its subject matter, and supercedes all prior negotiations,
understandings and agreements of the parties with respect thereto. The express
terms of this Agreement shall control and supercede any course of performance
and/or customary practice inconsistent with such terms. Any agreement between
the parties hereunder made shall not change or modify this Agreement unless in
writing and signed by the party against whom enforcement of such change or
modification is sought. Any amendments to this Agreement must be in writing and
signed by all parties.

18.   Notices. All notices, requests, consents and other communications required
or permitted hereunder shall be in writing and shall be delivered, or mailed
first class postage prepaid, registered or certified mail, addressed to a party
at the address set forth in the introductory paragraph, or to such other address
as a party may hereafter designate by notice.

19.   Counterparts. This Agreement may be executed in any number of counterparts
and by facsimile, each of which shall constitute one and the same agreement, and
any of the parties hereto may execute this Agreement by signing such
counterpart, provided that this Agreement shall not become effective until all
parties have executed the same.

IN WITNESS WHEREOF, the parties have executed this Consulting Agreement as of
the date and year first above written.

  /s/ Kevin M. Kean
- -----------------------------------------
KEVIN M. KEAN


LAKES KAR-SHINGLE SPRINGS, L.L.C.
By: Lakes Shingle Springs, Inc.
Its: Member

         By:  /s/ Timothy J. Cope
         --------------------------------
         Timothy J. Cope
         Its: Chief Financial Officer

EX-10.68

                                                                   EXHIBIT 10.68

                          BUYOUT AND RELEASE AGREEMENT
                                 (JAMUL PROJECT)

      THIS BUYOUT AND RELEASE AGREEMENT is made and entered into this 30th day
of January, 2003, by and among Kean Argovitz Resorts-Jamul, L.L.C. ("KAR"),
Lakes Kean Argovitz Resorts-California, L.L.C., a Delaware limited liability
company (the "Project Company"), Lakes Entertainment, Inc. f/k/a Lakes Gaming,
Inc. ("Lakes Entertainment"), and Lakes Jamul, Inc. (hereinafter referred to as
"LAJA" and which entity is a wholly owned subsidiary of Lakes Gaming and
Resorts, LLC which is a wholly owned subsidiary of Lakes Entertainment).

                                    RECITALS

WHEREAS, KAR (a limited liability company owned by Kevin M. Kean ("Kean") and
Jerry A. Argovitz ("Argovitz")) previously entered into a Development Agreement,
Management Agreement and related documents dated February 26, 1999 (the
"Development Documents") with the Jamul Indian Village (the "Tribe") related to
the design, construction and management of an Indian gaming facility on its
tribal lands (the "Project");

WHEREAS, pursuant to a letter agreement dated May 7, 1999 (the "Letter
Agreement") between KAR and Lakes Entertainment, such parties agreed to form a
joint venture to design, construct and manage the Project and in connection
therewith executed or caused to be executed each of the documents described
below (collectively with the Letter Agreement, the "Joint Venture Documents"):

      (i)   LAJA and KAR created and are the sole members of the Project Company
            pursuant to that certain Operating Agreement dated May 25, 1999 (the
            "Operating Agreement");

      (ii)  Pursuant to that certain Assignment and Assumption Agreement dated
            May 25, 1999 between LAJA and the Project Company, KAR assigned to
            the Project Company all of KAR's right, title and interest in and to
            the Development Documents;

      (iii) Pursuant to that certain Assignment and Assumption Agreement and
            Consent to Assignment and Assumption dated May 25, 1999, among Lakes
            Entertainment, LAJA and KAR, Lakes Entertainment assigned to LAJA
            all of Lakes Entertainment's right, title and interest in and to the
            Letter Agreement;

      (iv)  Pursuant to that certain Management Agreement dated May 25, 1999
            between LAJA and the Project Company (the "LAJA Management
            Agreement"), the parties agreed that LAJA would provide certain
            management services on behalf of the Project Company with respect to
            the Project;

      (v)   Pursuant to the Letter Agreement and the Operating Agreement, LAJA
            has





            extended certain loans to the Project Company referred to as the
            "Development Loan" and "Equity Advance" which are evidenced by a
            certain Promissory Note dated May 25, 1999 made payable by the
            Project Company to LAJA in (the "Project Company Note"), which Note
            is secured by that certain Security Agreement dated May 25, 1999
            executed by the Project Company in favor of LAJA, pursuant to which
            the Project Company granted LAJA a security interest in all of its
            assets; such Note is also sometimes referred to as the "Interim
            Promissory Note"; and

      (vi)  LAJA extended a $970,000 loan to KAR the repayment of which is
            evidenced by certain Promissory Note dated May 25, 1999 made payable
            by KAR to LAJA in the original principal amount of $970,000 (the
            "KAR Note"), which Note is secured by that certain Pledge Agreement
            dated May 25, 1999 executed by KAR in favor of LAJA (the "KAR Pledge
            Agreement") pursuant to which KAR granted LAJA a security interest
            in all of KAR's membership interest and related rights in and to the
            Project Company;

WHEREAS, to achieve regulatory approvals in a timely manner for the Amended
Management Agreement and related documents and agreements, if necessary, related
to the Project from the National Indian Gaming Commission (the "NIGC") and other
applicable regulatory authorities (the "Regulatory Approvals"), KAR has agreed
to enter into this Agreement;

WHEREAS, KAR believes that its execution of this Agreement is in the best
interest of the Tribe to preserve and protect the Project, from which all tribal
members should benefit, and in order to move the Projects forward in a timely
manner without delay, the parties hereto desire to enter into this Agreement;
and

WHEREAS, Kean and Argovitz entered into a Settlement Agreement dated October 22,
2002 that resolved the disputes and litigation between them in order to minimize
the costs of litigation and the risk of economic loss to each of them
individually and to KAR (the "Argovitz Settlement Agreement");

WHEREAS, Lakes Entertainment and LAJA, to the best of their knowledge and based
upon conversations with staff of the NIGC, believe this Agreement will be
acceptable to the NIGC and the NIGC will take no affirmative action to nullify
or otherwise disrupt this Agreement.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties agree as follows:


1.    BUYOUT. For and in consideration of $1.00, KAR hereby absolutely sells and
conveys to LAJA all of KAR right, title and interest in the Project Company and
each of the Joint Venture Documents (the "Transferred Rights"). To induce and in
consideration for each of KAR, the Project Company, Lakes Entertainment and LAJA
executing this Agreement, the Project Company, LAJA and Lakes Entertainment will
contemporaneously with the execution of this




                                       2


Agreement be entering into separate agreements with Argovitz to provide him
certain rights of repurchase in and to the Project Company or in lieu thereof,
the payment of certain sale proceeds, and with Kean to, among other things,
provide certain loans, each as more specifically set forth therein
(collectively, the "Kean-Argovitz Agreements"). In addition KAR acknowledges,
agrees and consents that LAJA intends to cause the Development Documents to be
transferred from the Project Company to LAJA and upon the effective date of such
transfer, LAJA shall be deemed to be the "Project Company" for all purposes of
this Agreement and shall be deemed to have succeeded to and assumed all of the
Project Company's rights and obligations hereunder.

2.    KAR NOTE. LAJA hereby agrees to release KAR from its obligations under the
KAR Note and KAR Security Agreement (but is not otherwise satisfying or
canceling such obligations), which obligations may upon certain events be wholly
or partially assumed by Kean and/or Argovitz as more specifically provided under
their separate Kean-Argovitz Agreements. As of September 30, 2002, the parties
acknowledge that the outstanding principal and interest balances of the KAR Note
was $970,000 and $250,356respectively and that no payments have been made on
such Note since September 30, 2002.

3.    RELEASE. KAR hereby releases the Project Company, Lakes Entertainment,
Lakes Resorts, LAJA, all of their subsidiaries, and each of their directors,
officers, shareholders, employees, agents and attorneys (collectively, the
"Lakes Related Parties"), and the Lakes Related Parties hereby release KAR from
any claims or potential claims they have or may have against each other
concerning the Project, the Project Company, the Joint Venture Documents or any
of the Development Documents for acts or omissions occurring on or prior to the
effective date of this Agreement, but specifically excluding any claims arising
from any misrepresentation, act or omission or failure to perform any obligation
under this Agreement and any claims under Section 4 hereof.

4.    INDEMNIFICATION. KAR agrees to indemnify and hold harmless each of the
Lakes Related Parties from any and all loss, costs and expenses (including,
without limitation, all legal fees and costs) resulting from any
misrepresentation of KAR under this Agreement and any claims or potential claims
from third parties based on any prior dealings between such third parties and
any of KAR, Kean or Argovitz concerning the Project, the Project Company and the
subject matter of the Development Documents provided that the Project Company
shall remain responsible to perform its express obligations set forth in the
Development Documents. Each of the Lakes Related Parties agrees to indemnify and
hold harmless KAR from any and all loss, costs and expenses (including, without
limitation, all legal fees and costs) resulting from any misrepresentation made
by Lakes Entertainment or LAJA under this Agreement and any claims or potential
claims from third parties (excluding the rights and obligations set forth in the
Management Agreement dated February 26, 1999 with the Tribe and any agreement
expressly referred to therein) based on any prior dealings between such third
parties and any of the Lakes Related Parties concerning the Project, the Project
Company and the subject matter of the Development Documents which were not
permitted dealings thereunder or under the Joint Venture Documents.



                                       3


5.    NONCOMPETE/CONFIDENTIALITY. KAR agrees that (a) it shall and shall cause
each of its officers, directors, shareholders, equity owners, family members of
any of the foregoing and any entity in which it or any of the foregoing persons
shall directly or indirectly own equity interests (collectively, the "Noncompete
Parties"), to comply with each of the noncompetition and confidentiality
provisions set forth in the Development Documents to the same extent as if any
of such Noncompete Parties was the Project Company thereunder, each of which
provisions are hereby incorporated by reference, and (b) in addition to the
foregoing, that it shall not and shall cause each of the other Noncompete
Parties to not directly or indirectly solicit or enter into any consulting,
brokerage, management, financing or other similar agreement with any Indian
tribe with respect to its gaming enterprise or with any party seeking such an
agreement with such an Indian tribe or other gaming enterprise, related to a
gaming enterprise located or to be located (i) within any area south of the city
limits of Escondido, California, and/or (ii) within a fifty (50) mile radius of
each of the Jamul Tribe's gaming enterprise. The Project Company acknowledges
and agrees that neither Argovitz nor Kean have the ability to control what the
other individual may do in the future.

6.    REPRESENTATIONS AND WARRANTIES. KAR to the best of its knowledge hereby
represents and warrants that (a) KAR has transferred to the Project Company all
rights and assets held by KAR with respect to the Project, the Original
Development Documents and the Development Documents, (b) except for the Joint
Venture Documents, the Development Agreement and Management Agreement entered
into with the Tribe and any agreement expressly referred to therein and any
agreements referenced on Schedule 6(c) hereof, KAR has not entered into any
agreements or understandings with any party with respect to the Project, (c) KAR
has not taken any act or failed to take any act that would cause a default or
breach by the Project Company of its obligations under the Development
Documents, except those acts referenced on Schedule 6(c) hereof, (d) KAR has not
directly or indirectly assigned, conveyed, pledged or otherwise transferred to
any party any interest or rights in the Project, the Project Company or any
revenues or profits to be derived therefrom except for the KAR Pledge Agreement,
and (e) KAR has the full legal right and authority to execute, deliver and
perform this Agreement and the consent, authority or signature of no other party
is required in connection therewith.

7.    FURTHER ASSURANCES. Each of the parties hereto agree to execute such
additional documents and agreements as are necessary to effectuate the intents
and purposes of this Agreement.

8.    GOVERNING LAW. This Agreement will be governed by and interpreted in
accordance with Delaware law.

9.    DISPUTE RESOLUTION/ARBITRATION. In connection with any dispute hereunder,
the parties agree to negotiate in good faith for up to twenty days. If they are
unable to resolve the dispute in such period, then either party may demand and
such dispute shall be submitted to and resolve by binding arbitration in
accordance with the following terms:

            (a) Governing Rules. Any arbitration proceeding will (i) proceed in
      a location in Minneapolis Minnesota selected by the American Arbitration
      Association ("AAA");



                                       4


      (ii) be governed by the Federal Arbitration Act (Title 9 of the United
      States Code), notwithstanding any conflicting choice of law provision in
      any of the documents between the parties; and (iii) be conducted by the
      AAA, or such other administrator as the parties shall mutually agree upon,
      in accordance with the AAA's commercial dispute resolution procedures. Any
      party who fails or refuses to submit to arbitration following a demand by
      any other party shall bear all costs and expenses incurred by such other
      party in compelling arbitration of any dispute. The arbitration
      requirement does not limit the right of any party to obtain provisional or
      ancillary remedies such as replevin, injunctive relief, attachment or the
      appointment of a receiver or the exercise of any foreclosure or self-help
      remedies, before during or after the pendency of any arbitration
      proceeding.

            (b) Arbitrator Powers. The arbitrator will determine whether or not
      an issue is arbitratable and will give effect to the statutes of
      limitation in determining any claim. In any arbitration proceeding the
      arbitrator will decide (by documents only or with a hearing at the
      arbitrator's discretion) any pre-hearing motions which are similar to
      motions to dismiss for failure to state a claim or motions for summary
      adjudication. The arbitrator may grant any remedy or relief that a court
      of such state could order or grant within the scope hereof and such
      ancillary relief as is necessary to make effective any award. The
      arbitrator shall also have the power to award recovery of all costs and
      fees, to impose sanctions and to take such other action as the arbitrator
      deems necessary to the same extent a judge could pursuant to the Federal
      Rules of Civil Procedure, the Minnesota Rules of Civil Procedure or other
      applicable law. Judgment upon the award rendered by the arbitrator may be
      entered in any court having jurisdiction. The institution and maintenance
      of an action for judicial relief or pursuit of a provisional or ancillary
      remedy shall not constitute a waiver of the right of any party, including
      the plaintiff, to submit the controversy or claim to arbitration if any
      other party contests such action for judicial relief.

            (c) Miscellaneous. The arbitrator shall award all costs and expenses
      of the arbitration proceeding.To the maximum extent practicable, the AAA,
      the arbitrators and the parties shall take all action required to conclude
      any arbitration proceeding within 180 days of the filing of the dispute
      with the AAA. No arbitrator or other party to an arbitration proceeding
      may disclose the existence, content or results thereof, except for
      disclosures of information by a party required in the ordinary course of
      its business or by applicable law or regulation. If more than one
      agreement for arbitration by or between the parties potentially applies to
      a dispute, the arbitration provision most directly related to the
      documents between the parties or the subject matter of the dispute shall
      control. This arbitration provision shall survive termination, amendment
      or expiration of any of the documents or any relationship between the
      parties.

10.   ADVERSE NIGC ACTION. The parties acknowledge and agree that an important
purpose of this Agreement is to allow LAJA and the Project Company to become
immediately licensed by the NIGC and to immediately allow the Project to move
forward. Should the NIGC take any action to nullify or otherwise disrupt this
Agreement, then the parties shall immediately meet and negotiate in good faith
to agree to such modifications as may be necessary to obtain NIGC




                                       5


approval hereof while still maintaining the intents and purposes of this
Agreement, with any disputes related thereto resolved by arbitration under
Section 9 above.

11.   MISCELLANEOUS. Time is of the essence in the performance of this
Agreement. This Agreement and the Joint Venture Documents embody the entire
agreement and understanding between the parties with respect to the subject
matter hereof and thereof. This Agreement supersedes all prior agreements and
understandings relating to the subject matter hereof. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that KAR may not assign its rights or obligations
hereunder without the prior written consent of LAJA. This Agreement may be
executed in any number of counterparts and by facsimile, all of which taken
together shall constitute one and the same instrument, and any of the parties
hereto may execute this Agreement by signing any such counterpart, provided that
this Agreement shall not become effective until all parties have executed the
same.

12.   ACKNOWLEDGMENT OF EUGENE J. KEAN. By signing below, Eugene J. Kean joins
in this Agreement for the sole purposes of acknowledging and agreeing that he
either has no membership or other interest in KAR or consents and agrees to the
terms of Section 1 hereof including the transfer to LAJA of KAR's rights and
interests in the Project Company, and further that he shall have no further
rights, interests or claims against any of the Lakes Related Parties under this
Agreement or any of the Kean-Argovitz Agreements or otherwise in any manner with
respect to the Project, the Project Company, KAR, the Development Documents or
any other document or agreement.

         [The remainder of this page has been intentionally left blank]



                                       6



IN WITNESS WHEREOF, the parties have executed this agreement as of the date and
year first above written.

KEAN ARGOVITZ RESORTS-JAMUL, L.L.C.


By:  /s/ Kevin M. Kean
- ---------------------------------------
Name: Kevin M. Kean
Its: Manager and Member

And

By: /s/ Jerry A. Argovitz
- ---------------------------------------
Name:  Jerry A. Argovitz
Its Manager and Member


LAKES KEAN ARGOVITZ RESORTS-CALIFORNIA, L.L.C.
By: Kean Argovitz Resorts-Jamul, L.L.C.
Its: Member

         By: /s/ Jerry A. Argovitz
         ------------------------------
         Name:  Jerry A. Argovitz
         Its: Manager and Member

         and

         By: /s/ Kevin M. Kean
         ------------------------------
         Name:  Kevin M. Kean
         Its: Manager and Member

LAKES ENTERTAINMENT, INC.

By: /s/ Timothy J. Cope
- ---------------------------------------
Timothy J. Cope
Its: Chief Financial Officer


        [SIGNATURE PAGE TO BUYOUT AND RELEASE AGREEMENT - JAMUL PROJECT]




LAKES JAMUL, INC.

By: /s/ Timothy J. Cope
- ---------------------------------------
Timothy J. Cope
Its: Chief Financial Officer



For purposes of agreeing to the terms of Section 12 above:


  /s/ Eugene J. Kean
- ---------------------------------------
EUGENE J. KEAN


        [SIGNATURE PAGE TO BUYOUT AND RELEASE AGREEMENT - JAMUL PROJECT]

EX-10.69

                                                                   EXHIBIT 10.69

                              CONSENT AND AGREEMENT
                                       TO
                               BUYOUT AND RELEASE
                           (ARGOVITZ - JAMUL PROJECT)

      THIS CONSENT AND AGREEMENT TO BUYOUT AND RELEASE is made and entered into
this 30th day of January, 2003, by and among Jerry A. Argovitz ("Argovitz")
Lakes Kean Argovitz Resorts-California, L.L.C., a Delaware limited liability
company (the "Project Company"), Lakes Entertainment, Inc. f/k/a Lakes Gaming,
Inc. ("Lakes Entertainment"), and Lakes Jamul, Inc. (hereinafter referred to as
"LAJA" and which entity is a wholly owned subsidiary of Lakes Gaming and
Resorts, LLC which is a wholly owned subsidiary of Lakes Entertainment).

                                    RECITALS

WHEREAS, Kean Argovitz Resorts-Jamul, L.L.C. ("KAR"), a limited liability
company owned by Kevin M. Kean ("Kean") and Argovitz), previously entered into a
Development Agreement, Management Agreement and related documents dated February
26, 1999 (as heretofore and hereafter amended, the "Development Documents") with
the Jamul Indian Village (the "Tribe") related to the design, construction, and
management of an Indian gaming facility on its tribal lands (the "Project");

WHEREAS, pursuant to a letter agreement dated May 7, 1999 (the "Letter
Agreement") between KAR and Lakes Entertainment, such parties agreed to form a
joint venture to design, construct and manage the Project and in connection
therewith executed or caused to be executed each of the documents described
below (collectively with the Letter Agreement, the "Joint Venture Documents"):

      (i)   LAJA and KAR created and are the sole members of the Project Company
            pursuant to that certain Operating Agreement dated May 25, 1999 (the
            "Operating Agreement");

      (ii)  Pursuant to that certain Assignment and Assumption Agreement dated
            May 25, 1999 between LAJA and the Project Company, KAR assigned to
            the Project Company all of KAR's right, title and interest in and to
            the Development Documents;

      (iii) Pursuant to that certain Assignment and Assumption Agreement and
            Consent to Assignment and Assumption dated May 25, 1999, among Lakes
            Entertainment, LAJA and KAR, Lakes Entertainment assigned to LAJA
            all of Lakes Entertainment's right, title and interest in and to the
            Letter Agreement;

      (iv)  Pursuant to that certain Management Agreement dated May 25, 1999
            between LAJA and the Project Company (the "LAJA Management
            Agreement"), the parties agreed that LAJA would provide certain
            management services on






            behalf of the Project Company with respect to the Project;

      (v)   Pursuant to the Letter Agreement and the Operating Agreement, LAJA
            has extended certain loans to the Project Company referred to as the
            "Development Loan" and "Equity Advance" which are evidenced by a
            certain Promissory Note dated May 25, 1999 made payable by the
            Project Company to LAJA in (the "Project Company Note"), which Note
            is secured by that certain Security Agreement dated May 25, 1999
            executed by the Project Company in favor of LAJA, pursuant to which
            the Project Company granted LAJA a security interest in all of its
            assets; such Note is also sometimes referred to as the "Interim
            Promissory Note"; and

      (vi)  LAJA extended a $970,000 loan to KAR the repayment of which is
            evidenced by certain Promissory Note dated May 25, 1999 made payable
            by KAR to LAJA in the original principal amount of $970,000 (the
            "KAR Note"), which Note is secured by that certain Pledge Agreement
            dated May 25, 1999 executed by KAR in favor of LAJA (the "KAR Pledge
            Agreement") pursuant to which KAR granted LAJA a security interest
            in all of KAR's membership interest and related rights in and to the
            Project Company;

WHEREAS, to achieve regulatory approvals in a timely manner for the Amended
Management Agreement and related documents and agreements, if necessary, related
to the Project from the National Indian Gaming Commission (the "NIGC") and other
applicable regulatory authorities (the "Regulatory Approvals"), KAR and Argovitz
have agreed to enter into this Agreement;

WHEREAS, the parties hereto believes that its execution of this Agreement is in
the best interest of the Tribe to preserve and protect the Project, from which
all tribal members should benefit, and in order to move the Project forward in a
timely manner without delay, the parties hereto desire to enter into this
Agreement; and

WHEREAS, Lakes Entertainment and Lakes Resorts, to the best of their knowledge
and based upon conversations with staff of the NIGC, believe this Agreement will
be acceptable to the NIGC and the NIGC will take no affirmative action to
nullify or otherwise disrupt this Agreement.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged and to induce the Project Company, LAJA, Lakes
Entertainment and KAR to enter into the KAR Buyout Agreement (as hereinafter
defined), the parties agree as follows:

1.    BUYOUT/RIGHT OF REPURCHASE. Pursuant to that certain Buyout and Release
Agreement dated January 30, 2003 between KAR, the Project Company, Lakes
Entertainment and LAJA (the "KAR Buyout Agreement") and for and in consideration
of $1.00, KAR has absolutely sold and conveyed to LAJA all of KAR's right, title
and interest in the Project Company and each of the Joint Venture Documents (the
"Transferred Rights"). The parties hereto acknowledge and




                                       2


agree that if and when Argovitz has obtained all necessary Regulatory Approvals
so as to permit Argovitz to be a member of the Project Company then Argovitz
shall upon providing written notice thereof to LAJA (each such date hereinafter
referred to as a "Regulatory Approval Notice Date") have the right for the
payment of $1.00 to repurchase the Transferred Rights in lieu of the making any
elections under Section 2 hereof and Argovitz shall be admitted to the Project
Company on substantially the same terms as are applicable to KAR under the Joint
Venture Documents on the date hereof; provided further however, that (a)
Argovitz shall only be entitled to a twenty percent (20%) ownership interest and
related financial rights in the Project Company under the Joint Venture
Documents, (b) Argovitz shall (i) assume fifty percent (50%) of the then
outstanding obligations under the KAR Note by executing a new non-recourse
promissory note in favor of LAJA, which Note shall continue to accrue interest
from the date hereof, be secured and otherwise be repayable on the same terms
and conditions currently applicable to KAR under the terms of the KAR Note, the
KAR Pledge Agreement and the other applicable Joint Venture Documents, including
without limitation, that the repayment of such obligation will be secured by a
first priority security interests upon Argovitz's membership interest and rights
in the Project Company, and (ii) as a further condition hereto, Argovitz shall
assume 50% of the "KARSS Note" as contemplated by Section 1(b) of the Argovitz
Shingle Springs Consent and the same shall be cross-collateralized and repayable
by the same collateral under the KAR Pledge Agreement described above on the
same terms as are provided under Section 23 of the "Letter Agreement" referenced
and defined in the Argovitz Shingle Springs Consent (as used herein, the
"Argovitz Shingle Springs Consent" shall mean the Consent and Agreement to
Buyout and Release of even date herewith among Argovitz, Lakes Shingle Springs,
LLC, Lakes Entertainment and Lakes KAR Shingle Springs, L.L.C.), and (c)
Argovitz shall not be entitled to any share of profits or income of the Project
Company accruing from the Project or any other source prior to the applicable
Regulatory Approval Notice Date. As of September 30, 2002, fifty percent of the
KAR Note obligation would have equaled principal of $485,000 and accrued
interest of $112,038.50.

2.    SALE OF ASSET ELECTION. If Agrovitz shall so elect in a written notice to
LAJA at any time prior to exercising his rights under Section 1 hereof (such
notification date hereinafter referred to as a "Election Date"), his rights
under Section 1 hereof shall terminate and in lieu thereof LAJA shall pay to
Argovitz, the "Purchase Amount" as set forth below as the sole payment for his
interest in the Project and Project Company. The "Purchase Amount" shall be
equal to $1,000,000 for each year or portion thereof (and such annual amount
shall be prorated based on a 365 day year in which both of the following
conditions were satisfied for only part of any calendar year) that both of the
following conditions are satisfied: (a) Class III Gaming is being conducted at
the new Project and (b) during such period either the Project Company is the
manager of the Project (with LAJA or another Subsidiary of Lakes Entertainment
continuing as a member of such entity) or LAJA or another Subsidiary of Lakes
Entertainment is the direct manager of the Project; provided however that (i)
such amounts shall be payable only during the initial term of the Management
Agreement with the Tribe dated February 26, 1999 (the "Management Agreement" and
which term may be up to seven (7) years subject to tribal and NIGC approval) and
not for any renewal term or other period thereafter, and (ii) Argovitz shall not
be entitled to any Purchase Amount for the period accruing prior to the Election
Date. Subject to the satisfaction of the foregoing conditions, each annual
portion of the Purchase




                                       3


Amount shall be payable on a monthly basis.

3.    SALE OF MANAGEMENT RIGHTS. If Argovitz shall not have made an election
under Section 1 above and the Project Company should sell its rights in the
Development Documents to any third party (excluding an assignment to any
subsidiary of Lakes Entertainment), then LAJA shall preserve the rights of
Argovitz under this Agreement and LAJA shall cause such purchaser to assume the
obligations of the Project Company and LAJA under this Agreement.

4.    CONSENT TO TRANSFER TO LAJA. The parties acknowledge, agree and consent
that LAJA intends to cause the Development Documents to be transferred from the
Project Company to LAJA and upon the effective date of such transfer, LAJA shall
be deemed to be the "Project Company" for all purposes of this Agreement and
shall be deemed to have succeeded to and assumed all of the Project Company's
rights and obligations hereunder.

5.    KAR NOTE. Argovitz acknowledges and agrees that (a) LAJA has released KAR
from its obligations under the KAR Note and the KAR Pledge Agreement pursuant to
the KAR Buyout Agreement (but is not otherwise satisfying or canceling such
indebtedness, which indebtedness shall continue in full force and effect and
continue to accrue interest in accordance with its original terms), (b) LAJA
shall have no further obligation to make advances to KAR or any other party
under Section 4 of the Letter Agreement whether or not the rights set forth in
Sections 1 or 2 hereof shall be ever exercised at a future date, and (c) as of
September 30, 2002, the outstanding principal and interest balances of the KAR
Note was $970,000 and $250,356 respectively and that no payments have been made
on such Note since September 30, 2002.

6.    RELEASE. Argovitz hereby releases the Project Company, Lakes
Entertainment, Lakes Resorts, LAJA, all of their subsidiaries, and each of their
directors, officers, shareholders, employees, agents and attorneys
(collectively, the "Lakes Related Parties"), and the Lakes Related Parties
hereby release Argovitz from any claims or potential claims they have or may
have against each other concerning the Project, the Project Company, the Joint
Venture Documents or any of the Development Documents for acts or omissions
occurring on or prior to the effective date of this Agreement, but specifically
excluding any claims arising from any misrepresentation, act or omission or
failure to perform any obligation under this Agreement and any claims under
Section 7 hereof.

7.    INDEMNIFICATION. Argovitz agrees to indemnify and hold harmless each of
the Lakes Related Parties from any and all loss, costs and expenses (including,
without limitation, all legal fees and costs) resulting from any
misrepresentation of Argovitz under this Agreement and any claims or potential
claims from third parties (and specifically including any claims by Willard
Eugene "Bud" Smith, John Peebles and/or Monteau, Peebles and Marks) based on any
prior dealings between such third parties and Argovitz or KAR concerning the
Project and the subject matter of the Development Documents provided that (a)
without limiting the forgoing, Argovitz acknowledges and agrees that he shall
remain responsible for any such claims arising from Willard Eugene "Bud" Smith,
Argovitz's spouse, John Peebles and/or Monteau, Peebles and Marks and (b) the
Project Company shall remain responsible to perform its express obligations set
forth in the Amended Development Documents. However, Argovitz shall have no
personal




                                       4


liability therefore (excluding claims of his spouse) and Lakes shall seek
recourse only against payments to which Argovitz (or any of his assigns) would
be entitled to under the terms of this Agreement. If Mr. Smith, Mr. Peebles, or
anyone else recovers any money from any of the Lakes Related Parties arising
from any claim within the scope of the foregoing indemnity, then and only then
may the Lakes Related Parties offset fifty percent (50%) of such recovery
against the amounts due Argovitz under this Agreement, provided however, that
upon the commencement of an action with respect to such claim, the Lakes Related
Parties may suspend any such payments, in a reasonable amount based upon the
allegations stated in the action, and hold the same in escrow until the claim
has been finally settled or adjudicated with interest accruing thereon at a
reasonable rate to be agreed upon by the parties and if they can't agree, the
issue will be settled by arbitration under Section 13 hereof.

Each of the Lakes Related Parties agrees to indemnify and hold harmless Argovitz
from any and all loss, costs and expenses (including, without limitation, all
legal fees and costs) resulting from any misrepresentation of any of the Lakes
Related Parties under this Agreement and any claims or potential claims from
third parties (excluding the rights and obligations set forth in the Management
Agreement and any agreement expressly referred to therein) based on any prior
dealings between such third parties and any of the Lakes Related Parties
concerning the Project, The Project Company and the subject matter of the
Development Documents which were not permitted dealings thereunder or under the
Joint Venture Documents.

8.    NONCOMPETE/CONFIDENTIALITY. Argovitz agrees that (a) he shall and shall
cause each of his family members and any entity in which he or any of the
foregoing persons shall directly or indirectly own equity interests together
with any officers, directors and equity owners of such entity (collectively, the
"Noncompete Parties"), to comply with each of the noncompetition and
confidentiality provisions set forth in the Development Documents to the same
extent as if any of such Noncompete Parties was the Project Company thereunder,
each of which provisions are hereby incorporated by reference, and (b) in
addition to the foregoing, that he shall not and shall cause each of the other
Noncompete Parties to not directly or indirectly solicit or enter into any
consulting, brokerage, management, financing or other similar agreement with any
Indian tribe with respect to its gaming enterprise or with any party seeking
such an agreement with such an Indian tribe or other gaming enterprise, related
to a gaming enterprise located or to be located (i) within any area south of the
city limits of Escondido, California, and/or (ii) within a fifty (50) mile
radius of each of the Jamul Tribe's gaming enterprises.

9.    REPRESENTATIONS AND WARRANTIES. Argovitz hereby represents and warrants
that (a) to the best of his knowledge, KAR has transferred to the Project
Company all rights and assets held by KAR with respect to the Project, the
Original Development Documents and the Development Documents, (b) except for the
Joint Venture Documents, the Management Agreement and any agreement expressly
referred to therein and any agreements referenced on Schedule 9(c) hereof,
neither he nor to the best of his knowledge, KAR has entered into any agreements
or understandings with any party with respect to the Project, (c) neither he nor
to the best of his knowledge, KAR has taken any act or failed to take any act
that would cause a default or breach by the Project Company of its obligations
under the Development Documents, except those acts referenced on Schedule 9(c)
hereof, (d) neither he nor to the best of his knowledge, KAR has




                                       5


directly or indirectly assigned, conveyed, pledged or otherwise transferred to
any party any interest or rights in the Project, the Project Company or any
revenues or profits to be derived therefrom except for the KAR Pledge Agreement,
and (e) he has the full legal right and authority to execute, deliver and
perform this Agreement and the consent, authority or signature of no other party
is required in connection therewith.

10.   SETOFF/RECOUPMENT RIGHTS. The parties acknowledge and agree that each of
the Lakes Related Parties (each of which shall be an intended third party
beneficiary of this provision) shall have the right to setoff or recoup any
amount owing to it by Argovitz against any obligations owing by it to Argovitz
under this Agreement and/or any future documents and agreements relating to
Argovitz's exercise of his rights under Section 1 above or which may be entered
into amongst the parties and relating to the subject matter of this Agreement.

11.   FURTHER ASSURANCES. Each of the parties hereto agree to execute such
additional documents and agreements as are necessary to effectuate the intents
and purposes of this Agreement.

12.   GOVERNING LAW. This Agreement will be governed by and interpreted in
accordance with Delaware law.

13.   DISPUTE RESOLUTION/ARBITRATION. In connection with any dispute hereunder,
the parties agree to negotiate in good faith for up to twenty days. If they are
unable to resolve the dispute in such period, then either party may demand and
such dispute shall be submitted to and resolve by binding arbitration in
accordance with the following terms:

            (a) Governing Rules. Any arbitration proceeding will (i) proceed in
      a location in Minneapolis Minnesota selected by the American Arbitration
      Association ("AAA"); (ii) be governed by the Federal Arbitration Act
      (Title 9 of the United States Code), notwithstanding any conflicting
      choice of law provision in any of the documents between the parties; and
      (iii) be conducted by the AAA, or such other administrator as the parties
      shall mutually agree upon, in accordance with the AAA's commercial dispute
      resolution procedures. Any party who fails or refuses to submit to
      arbitration following a demand by any other party shall bear all costs and
      expenses incurred by such other party in compelling arbitration of any
      dispute. The arbitration requirement does not limit the right of any party
      to obtain provisional or ancillary remedies such as replevin, injunctive
      relief, attachment or the appointment of a receiver or the exercise of any
      secured creditor rights necessary to protect any collateral granted to any
      of the Lakes Related Parties, before during or after the pendency of any
      arbitration proceeding.

            (b) Arbitrator Powers. The arbitrator will determine whether or not
      an issue is arbitratable and will give effect to the statutes of
      limitation in determining any claim. In any arbitration proceeding the
      arbitrator will decide (by documents only or with a hearing at the
      arbitrator's discretion) any pre-hearing motions which are similar to
      motions to dismiss for failure to state a claim or motions for summary
      adjudication. The arbitrator may grant any remedy or relief that a court
      of such state could order or grant within the



                                       6


      scope hereof and such ancillary relief as is necessary to make effective
      any award. The arbitrator shall also have the power to award recovery of
      all costs and fees, to impose sanctions and to take such other action as
      the arbitrator deems necessary to the same extent a judge could pursuant
      to the Federal Rules of Civil Procedure, the Minnesota Rules of Civil
      Procedure or other applicable law. Judgment upon the award rendered by the
      arbitrator may be entered in any court having jurisdiction. The
      institution and maintenance of an action for judicial relief or pursuit of
      a provisional or ancillary remedy shall not constitute a waiver of the
      right of any party, including the plaintiff, to submit the controversy or
      claim to arbitration if any other party contests such action for judicial
      relief.

            (c) Miscellaneous. The arbitrator shall award all costs and expenses
      of the arbitration proceeding. To the maximum extent practicable, the AAA,
      the arbitrators and the parties shall take all action required to conclude
      any arbitration proceeding within 180 days of the filing of the dispute
      with the AAA. No arbitrator or other party to an arbitration proceeding
      may disclose the existence, content or results thereof, except for
      disclosures of information by a party required in the ordinary course of
      its business or by applicable law or regulation. If more than one
      agreement for arbitration by or between the parties potentially applies to
      a dispute, the arbitration provision most directly related to the
      documents between the parties or the subject matter of the dispute shall
      control. This arbitration provision shall survive termination, amendment
      or expiration of any of the documents or any relationship between the
      parties.

14.   ADVERSE NIGC ACTION. The parties acknowledge and agree that an important
purpose of this Agreement is to allow LAJA and the Project Company to get
immediately licensed by the NIGC and to immediately allow the Project to move
forward. Should the NIGC take any action to nullify or otherwise disrupt this
Agreement, then the parties shall immediately meet and negotiate in good faith
to agree to such modifications as may be necessary to obtain NIGC approval
hereof while still maintaining the intents and purposes of this Agreement, with
any disputes related thereto resolved by arbitration under Section 13 above.

15.   ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective heirs, successors and assigns, except
that Argovitz may not assign his rights or obligations hereunder except (a) with
the prior written consent of LAJA or (b) an assignment of rights, but not
obligations, that is based on a "Third Party Offer" (as such term is defined in
the Operating Agreement) and provided (i) he shall first provide to LAJA a right
of first refusal to purchase such rights upon the same terms and conditions set
forth in Section 13.4 of the Operating Agreement (provided further that no such
right of first refusal shall apply after Argovitz has exercised and elected to
proceed with his buyout rights under Section 2 hereof), and (ii) the Third Party
Offer must not contain any contingencies and the prospective purchaser
thereunder shall have deposited into escrow with Argovitz at least $500,000 as a
earnest money pending the completion of the transfer, or (c) an assignment or
pledge of payment rights only to Argovitz's spouse in connection with his
pending divorce and/or his attorney Walker Beavers on the same terms and
conditions applicable to the Pledge of a membership interest as set forth in
Section 13.7 of the Operating Agreement. Any permitted assignment




                                       7


above shall be further conditioned upon (I) all rights of any assignee under
this Agreement and any related documents and agreements shall be expressly
subject and subordinate to the rights and interests of each of the Lakes Related
Parties hereunder and thereunder and such assignee shall execute and deliver in
favor of the Lakes Related Parties a subordination agreement in form and
substance reasonably acceptable to the Lakes Related Parties, and (II) LAJA
receiving prior to the completion of such transfer: (i) a copy of the Third
Party Offer, if applicable, and all documents and agreements relating to the
transfer, (ii) a copy of the written notice from the National Indian Gaming
Commission pursuant to which it shall either approve such transfer or
acknowledge that no such approval is necessary for the transfer; (iii) a legal
opinion in form and substance reasonably acceptable to LAJA that such transfer
is in compliance with all applicable federal, state and tribal laws, rules and
regulations, including without limitation the Indian Gaming Regulatory Act, as
amended (collectively, the "Applicable Laws"), and no additional approvals or
consents of any federal, state or tribal governmental entity or third party is
required with respect thereto under any Applicable Law, the Development
Documents or any other agreement between Argovitz and the Tribe or any of the
Lakes Related Parties, (iv) a written assignment and assumption agreement
executed by Argovitz and the transferee in form and substance reasonably
acceptable to LAJA whereby such transferee shall receive and assume the rights
and obligations of Argovitz under this Agreement; and (v) payment of all
reasonable and necessary costs and expenses (including attorneys fees) of LAJA
incurred in connection with completing such transfer.

16.   MISCELLANEOUS. Time is of the essence in the performance of this
Agreement. This Agreement, the KAR Buyout Agreement and the Joint Venture
Documents embody the entire agreement and understanding between the parties with
respect to the subject matter hereof and thereof. This Agreement supersedes all
prior agreements and understandings relating to the subject matter hereof. This
Agreement may be executed in any number of counterparts and by facsimile, all of
which taken together shall constitute one and the same instrument, and any of
the parties hereto may execute this Agreement by signing any such counterpart,
provided that this Agreement shall not become effective until all parties have
executed the same.

         [The remainder of this page has been intentionally left blank]



                                       8



IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and
year first above written.

/s/ Jerry A. Argovitz
- ---------------------------------------
JERRY A. ARGOVITZ


LAKES KEAN ARGOVITZ RESORTS-CALIFORNIA, L.L.C.
By: Kean Argovitz Resorts-Jamul, L.L.C.
Its:  Member

         By:  /s/ Jerry A. Argovitz
              -------------------------
         Name:  Jerry A. Argovitz
         Its: Manager and Member

         and

         By:  /s/ Kevin M. Kean
              -------------------------
         Name:  Kevin M. Kean
         Its: Manager and Member

LAKES ENTERTAINMENT, INC.

By:  /s/ Timothy J. Cope
     ----------------------------------
Timothy J. Cope
Its: Chief Financial Officer


LAKES JAMUL, INC.

By:  /s/ Timothy J. Cope
     ----------------------------------
Timothy J. Cope
Its: Chief Financial Officer



  [SIGNATURE PAGE TO CONSENT AND AGREEMENT TO BUYOUT AND RELEASE-JAMUL PROECT]

EX-10.70

                                                                   EXHIBIT 10.70

                              CONSENT AND AGREEMENT
                                       TO
                               BUYOUT AND RELEASE
                              (KEAN-JAMUL PROJECT)

      THIS CONSENT AND AGREEMENT TO BUYOUT AND RELEASE is made and entered into
this 30th day of January, 2003, by and among Kevin M. Kean ("Kean") Lakes Kean
Argovitz Resorts-California, L.L.C., a Delaware limited liability company (the
"Project Company"), Lakes Entertainment, Inc. f/k/a Lakes Gaming, Inc. ("Lakes
Entertainment"), and Lakes Jamul, Inc. (hereinafter referred to as "LAJA" and
which entity is a wholly owned subsidiary of Lakes Gaming and Resorts, LLC which
is a wholly owned subsidiary of Lakes Entertainment).

                                    RECITALS

WHEREAS, Kean Argovitz Resorts-Jamul, L.L.C. ("KAR" and a limited liability
company owned by Kean and Jerry A. Argovitz ("Argovitz")) previously entered
into a Development Agreement, Management Agreement and related documents dated
February 26, 1999 (as heretofore and hereafter amended, the "Development
Documents") with the Jamul Indian Village (the "Tribe") related to the design,
construction and management of an Indian gaming facility on its tribal lands
(the "Project");

WHEREAS, pursuant to a letter agreement dated May 7, 1999 (the "Letter
Agreement") between KAR and Lakes Entertainment, such parties agreed to form a
joint venture to design, construct and manage the Project and in connection
therewith executed or caused to be executed each of the documents described
below (collectively with the Letter Agreement, the "Joint Venture Documents"):

      (i)   LAJA and KAR created and are the sole members of the Project Company
            pursuant to that certain Operating Agreement dated May 25, 1999 (the
            "Operating Agreement");

      (ii)  Pursuant to that certain Assignment and Assumption Agreement dated
            May 25, 1999 between LAJA and the Project Company, KAR assigned to
            the Project Company all of KAR's right, title and interest in and to
            the Development Documents;

      (iii) Pursuant to that certain Assignment and Assumption Agreement and
            Consent to Assignment and Assumption dated May 25, 1999, among Lakes
            Entertainment, LAJA and KAR, Lakes Entertainment assigned to LAJA
            all of Lakes Entertainment's right, title and interest in and to the
            Letter Agreement;

      (iv)  Pursuant to that certain Management Agreement dated May 25, 1999
            between LAJA and the Project Company (the "LAJA Management
            Agreement"), the parties agreed that LAJA would provide certain
            management services on






            behalf of the Project Company with respect to the Project;

      (v)   Pursuant to the Letter Agreement and the Operating Agreement, LAJA
            has extended certain loans to the Project Company referred to as the
            "Development Loan" and "Equity Advance" which are evidenced by a
            certain Promissory Note dated May 25, 1999 made payable by the
            Project Company to LAJA in (the "Project Company Note"), which Note
            is secured by that certain Security Agreement dated May 25, 1999
            executed by the Project Company in favor of LAJA, pursuant to which
            the Project Company granted LAJA a security interest in all of its
            assets; such Note is also sometimes referred to as the "Interim
            Promissory Note"; and

      (vi)  LAJA extended a $970,000 loan to KAR the repayment of which is
            evidenced by certain Promissory Note dated May 25, 1999 made payable
            by KAR to LAJA in the original principal amount of $970,000 (the
            "KAR Note"), which Note is secured by that certain Pledge Agreement
            dated May 25, 1999 executed by KAR in favor of LAJA (the "KAR Pledge
            Agreement") pursuant to which KAR granted LAJA a security interest
            in all of KAR's membership interest and related rights in and to the
            Project Company;

WHEREAS, to achieve regulatory approvals in a timely manner for the Management
Agreement and related documents and agreements, if necessary, related to the
Project from the National Indian Gaming Commission (the "NIGC") and other
applicable regulatory authorities (the "Regulatory Approvals"), KAR and Kean
have agreed to enter into this Agreement;

WHEREAS, Kean and Argovitz entered into a Settlement Agreement dated October 22,
2002 that resolved the disputes and litigation between them in order to minimize
the costs of litigation and the risk of economic loss to each of them
individually and to KAR (the "Argovitz Settlement Agreement");

WHEREAS, the parties hereto believes that its execution of this Agreement is in
the best interest of the Tribe to preserve and protect the Project, from which
all tribal members should benefit, and in order to move the Project forward in a
timely manner the parties hereto desire to enter into this Agreement; and

WHEREAS, Lakes Entertainment and Lakes Resorts, to the best of their knowledge
and based upon discussions with staff of the NIGC, believe this Agreement will
be acceptable to the NIGC and the NIGC will take no affirmative action to
nullify or otherwise disrupt this Agreement.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged and to induce the Project Company, LAJA, Lakes
Entertainment and KAR to enter into the KAR Buyout Agreement and the Consulting
Agreement (each as hereinafter defined), the parties agree as follows:





                                       2



1.    BUYOUT. Pursuant to that certain Buyout and Release Agreement dated
January 30, 2003 between KAR, the Project Company, Lakes Entertainment and LAJA
(the "KAR Buyout Agreement") and for and in consideration of $1.00, KAR has
absolutely sold and conveyed to LAJA all of KAR's right, title and interest in
the Project Company and each of the Joint Venture Documents (the "Transferred
Rights"). Kean as a 50% owner and member of KAR, hereby acknowledges that his
consent and agreement to the KAR Buyout Agreement is granted in consideration of
the additional terms and provisions of this Agreement, including without
limitation, the loans to be provided under the Loan and Security Agreement
referenced in Section 2 hereof.

2.    LOAN AND SECURITY AGREEMENT/REPAYMENT OF SECURED OBLIGATIONS. In
connection with this Agreement, Kean, as debtor, and Lakes Entertainment, LAJA,
Lakes Shingle Springs, Inc., the Project Company, Lakes KAR Shingle Springs,
L.L.C. and Lakes California Land Development, Inc.("Lakes California"), as
secured parties, have entered into that certain Loan and Security Agreement of
even date herewith (the "Loan and Security Agreement"), pursuant to which (a)
Lakes California agreed to extend certain loans to Kean as more specifically
provided therein and such secured parties have been granted a security interest
in, among other things, Kean's rights and interests under this Agreement to
secure said loans as well as the Kean Residential Loan Obligation (as defined
below) and certain other obligations owed to such secured parties, all as more
specifically described therein. Kean acknowledges and agrees that any amounts
payable to him with respect to this Agreement and/or the Consulting Agreement
(each such payment herein referred to as a "Contract Payment"), shall first be
paid to each of the "Secured Parties" described in the Loan and Security
Agreement until all of the "Secured Obligations" described therein have been
indefeasibly paid in full; provided that prior to the occurrence of an Event of
Default (as such term is defined in the Loan and Security Agreement) and
provided that such payment does not represent proceeds arising from a sale or
assignment of his rights under this Agreement and/or the Consulting Agreement,
Kean shall be entitled to first receive fifty percent (50%) of such Contract
Payment and the balance remaining shall then be applied to the Secured
Obligations in such order of priority amongst such obligations as the secured
parties shall determine. As used herein, the term "Kean Residential Loan
Obligation" shall mean Kean's obligations to Lakes Entertainment now or
hereafter owing and arising from (i) Lakes Entertainment's performance of that
certain Commercial Guaranty Agreement dated November 6, 1999 to Hibernia
National Bank which Guaranty secured Kean's Promissory Note dated November 22,
1999, as amended May 15, 2000, payable to the order of Hibernia in the original
principal face amount of $1,986,995.09, and (ii) that certain related Agreement
For Indemnification dated May 16, 2000 between Kean and Lakes Entertainment.
Kean acknowledges and agrees that as of September 30, 2002, the outstanding
principal and interest balance of the Kean Residential Loan Obligation was
$1,740,106 and $97,649, respectively, and further includes in addition thereto
$25,000 in attorneys' fees due and owing to Lakes Entertainment in connection
with the litigation and June 2002 settlement related to the Kean Residential
Loan Obligation.

3.    CONSENT TO TRANSFER TO LAJA. The parties acknowledge, agree and consent
that LAJA intends to cause the Development Documents to be transferred from the
Project Company to



                                       3


LAJA and upon the effective date of such transfer, LAJA shall be deemed to be
the "Project Company" for all purposes of this Agreement and shall be deemed to
have succeeded to and assumed all of the Project Company's rights and
obligations hereunder.

4.    KAR NOTE. Kean acknowledges and agrees that (a) LAJA has released KAR from
its obligations under the KAR Note and the KAR Pledge Agreement pursuant to the
KAR Buyout Agreement (but is not otherwise satisfying or canceling such
indebtedness, which indebtedness shall continue in full force and effect and
continue to accrue interest in accordance with its original terms), (b) LAJA
shall have no further obligation to make advances to KAR or any other party
under Section 4 of the Letter Agreement whether or not Kean shall hereafter
assume such loan, and (c) as of September 30, 2002, the outstanding principal
and interest balances of the KAR Note is $970,000 and $250,356 respectively and
that no payments have been made on such Note since September 30, 2002.

5.    RELEASE. Kean hereby releases the Project Company, Lakes Entertainment,
Lakes Resorts, LAJA, all of their subsidiaries, and each of their directors,
officers, shareholders, employees, agents and attorneys (collectively, the
"Lakes Related Parties"), and the Lakes Related Parties hereby release Kean from
any claims or potential claims it or he has or may have against each other
concerning the Project, the Project Company, the Joint Venture Documents or any
of the Development Documents for acts or omissions occurring on or prior to the
effective date of this Agreement, but specifically excluding any claims arising
from any misrepresentation, act or omission or failure to perform any obligation
under this Agreement.

6.    INDEMNIFICATION. Kean agrees to indemnify and hold harmless each of the
Lakes Related Parties from any and all loss, costs and expenses (including,
without limitation, all legal fees and costs) resulting from any
misrepresentation of Kean to any of them under this Agreement and any claims or
potential claims from third parties (and specifically including any claims of
Willard Eugene "Bud" Smith, Eugene J. Kean, John Peebles and/or Monteau, Peebles
and Marks) based on any prior dealings between such third parties and any of
KAR, Kean or Argovitz (collectively, the "KAR Related Parties") concerning the
Project, the Project Company and the subject matter of the Development Documents
provided that the Project Company shall remain responsible to perform its
express obligations set forth in the Development Documents. Without limiting the
forgoing, Kean further acknowledges and agrees that he shall remain responsible
for any such claims arising from Willard Eugene "Bud" Smith, Eugene J. Kean,
Kean's spouse, John Peebles and/or Monteau, Peebles and Marks.

Each of the Lakes Related Parties agrees to indemnify and hold harmless Kean
from any and all loss, costs and expenses (including, without limitation, all
legal fees and costs) resulting from any misrepresentation of any of them under
this Agreement and any claims or potential claims from third parties (excluding
the rights and obligations set forth in the Amended Management Agreement and any
agreement expressly referred to therein) based on any prior dealings between
such third parties and any of the Lakes Related Parties concerning the Project,
The Project Company and the subject matter of the Amended Development Documents
which were not permitted dealings thereunder or under the Joint Venture
Documents.



                                       4


7.    NONCOMPETE/CONFIDENTIALITY. Unless otherwise agreed to by the Tribe, Kean
agrees that (a) he shall and shall cause each entity in which he shall directly
or indirectly own any equity interests (or if such entity is a publicly traded
entity, any such entity in which he owns at least 10% of the outstanding voting
equity interests), together with any officers, directors, equity owners,
employees and agents of such entity (collectively, the "Noncompete Parties"), to
comply with each of the noncompetition and confidentiality provisions set forth
in the Development Documents to the same extent as if any of such Noncompete
Parties was the Project Company thereunder, each of which provisions are hereby
incorporated by reference, and (b) in addition to the foregoing, that he shall
not and shall cause each of the other Noncompete Parties to not directly or
indirectly solicit or enter into any consulting, brokerage, management,
financing or other similar agreement with any Indian tribe with respect to its
gaming enterprise or with any party seeking such an agreement with such an
Indian tribe or other gaming enterprise, related to a gaming enterprise located
or to be located (i) within any area in the State of California south of the
city limits of Escondido, California.

8.    REPRESENTATIONS AND WARRANTIES. Kean hereby represents and warrants that
(a) KAR has transferred to the Project Company all rights and assets held by KAR
with respect to the Project, the Original Development Documents and the
Development Documents, (b) except for the Joint Venture Documents, the
Management Agreement and any agreement expressly referred to therein and any
agreements referenced on Schedule 8(c) hereof, neither he nor KAR has entered
into any agreements or understandings with any party with respect to the Project
or the Project Company, (c) neither he nor KAR has taken any act or failed to
take any act that would cause a default or breach by the Project Company of its
obligations under the Development Documents, except those acts referenced on
Schedule 8(c) hereof, (d) neither he nor KAR has directly or indirectly
assigned, conveyed, pledged or otherwise transferred to any party any interest
or rights in the Project, the Project Company or any revenues or profits to be
derived therefrom except for the KAR Pledge Agreement and other than any
economic interest assigned to Kean's father, Eugene J. Kean, and (e) he has the
full legal right and authority to execute, deliver and perform this Agreement
and on behalf of KAR, to execute, deliver and perform the KAR Buyout Agreement,
and the consent, authority or signature of no other party (including, without
limitation, Eugene J. Kean) is required in connection therewith.

9.    SETOFF/RECOUPMENT RIGHTS. The parties acknowledge and agree that each of
the Lakes Related Parties (each of which shall be an intended third party
beneficiary of this provision) shall have the right to setoff or recoup any
amount owing to it by Kean (including without limitation, the Secured
Obligations described in the Loan and Security Agreement) against any
obligations owing by it to Kean or to any of Kean's assignees under this
Agreement, the Consulting Agreement and/or any related documents and agreements.

10.   FURTHER ASSURANCES. Kean agrees to execute such additional documents and
agreements as are necessary to effectuate the intents and purposes of this
Agreement.

11.   GOVERNING LAW. This Agreement will be governed by and interpreted in
accordance with Delaware law.



                                       5



12.   DISPUTE RESOLUTION/ARBITRATION. In connection with any dispute hereunder,
the parties agree to negotiate in good faith for up to twenty days. If they are
unable to resolve the dispute in such period, then either party may demand and
such dispute shall be submitted to and resolve by binding arbitration in
accordance with the following terms:

            (a) Governing Rules. Any arbitration proceeding will (i) proceed in
      a location in Minneapolis Minnesota selected by the American Arbitration
      Association ("AAA"); (ii) be governed by the Federal Arbitration Act
      (Title 9 of the United States Code), notwithstanding any conflicting
      choice of law provision in any of the documents between the parties; and
      (iii) be conducted by the AAA, or such other administrator as the parties
      shall mutually agree upon, in accordance with the AAA's commercial dispute
      resolution procedures. Any party who fails or refuses to submit to
      arbitration following a demand by any other party shall bear all costs and
      expenses incurred by such other party in compelling arbitration of any
      dispute. The arbitration requirement does not limit the right of any party
      to obtain provisional or ancillary remedies such as replevin, injunctive
      relief, attachment or the appointment of a receiver or the exercise of any
      foreclosure or self-help remedies, before during or after the pendency of
      any arbitration proceeding.

            (b) Arbitrator Powers. The arbitrator will determine whether or not
      an issue is arbitratable and will give effect to the statutes of
      limitation in determining any claim. In any arbitration proceeding the
      arbitrator will decide (by documents only or with a hearing at the
      arbitrator's discretion) any pre-hearing motions which are similar to
      motions to dismiss for failure to state a claim or motions for summary
      adjudication. The arbitrator may grant any remedy or relief that a court
      of such state could order or grant within the scope hereof and such
      ancillary relief as is necessary to make effective any award. The
      arbitrator shall also have the power to award recovery of all costs and
      fees, to impose sanctions and to take such other action as the arbitrator
      deems necessary to the same extent a judge could pursuant to the Federal
      Rules of Civil Procedure, the Minnesota Rules of Civil Procedure or other
      applicable law. Judgment upon the award rendered by the arbitrator may be
      entered in any court having jurisdiction. The institution and maintenance
      of an action for judicial relief or pursuit of a provisional or ancillary
      remedy shall not constitute a waiver of the right of any party, including
      the plaintiff, to submit the controversy or claim to arbitration if any
      other party contests such action for judicial relief.

            (c) Miscellaneous. The arbitrator shall award all costs and expenses
      of the arbitration proceeding. To the maximum extent practicable, the AAA,
      the arbitrators and the parties shall take all action required to conclude
      any arbitration proceeding within 180 days of the filing of the dispute
      with the AAA. No arbitrator or other party to an arbitration proceeding
      may disclose the existence, content or results thereof, except for
      disclosures of information by a party required in the ordinary course of
      its business or by applicable law or regulation. If more than one
      agreement for arbitration by or between the parties potentially applies to
      a dispute, the arbitration provision most directly related




                                       6


      to the documents between the parties or the subject matter of the dispute
      shall control. This arbitration provision shall survive termination,
      amendment or expiration of any of the documents or any relationship
      between the parties.

13.   ADVERSE NIGC ACTION. The parties acknowledge and agree that an important
purpose of this Agreement is to allow LAJA and the Project Company to get
immediate approval by the NIGC of the Management Agreement and related
documents, if necessary, and to immediately allow the Project to move forward.
Should the NIGC take any action to nullify or otherwise disrupt this Agreement,
then the parties shall immediately meet and negotiate in good faith to agree to
such modifications as may be necessary to obtain such NIGC approval while still
maintaining the intents and purposes of this Agreement, with any disputes
related thereto resolved by arbitration under Section 12 above.

14.   ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective heirs, successors and assigns, except
that Kean may not assign his rights or obligations hereunder except with the
prior written consent of LAJA in its sole discretion.

15.   MISCELLANEOUS. Time is of the essence in the performance of this
Agreement. This Agreement, the documents referred to herein, the KAR Buyout
Agreement and the Joint Venture Documents embody the entire agreement and
understanding between the parties with respect to the subject matter hereof and
thereof. This Agreement supersedes all prior agreements and understandings
relating to the subject matter hereof. This Agreement may be executed in any
number of counterparts and by facsimile, all of which taken together shall
constitute one and the same instrument, and any of the parties hereto may
execute this Agreement by signing any such counterpart, provided that this
Agreement shall not become effective until all parties have executed the same.


         [The remainder of this page has been intentionally left blank]



                                       7



IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and
year first above written.

 /s/ Kevin M. Kean
- --------------------------------------
KEVIN M. KEAN


LAKES KEAN ARGOVITZ RESORTS-CALIFORNIA, L.L.C.
By: Kean Argovitz Resorts-Jamul, L.L.C.
Its: Member

         By:  /s/ Kevin M. Kean
         -----------------------------
         Name:  Kevin M. Kean
         Its: Manager and Member



LAKES ENTERTAINMENT, INC.

By:  /s/ Timothy J. Cope
- --------------------------------------
Timothy J. Cope
Its: Chief Financial Officer


LAKES JAMUL, INC.

By:  /s/ Timothy J. Cope
- --------------------------------------
Timothy J. Cope
Its: Chief Financial Officer



  [SIGNATURE PAGE TO CONSENT AND AGREEMENT TO BUYOUT AND RELEASE-JAMUL PROECT]

EX-10.71

                                                                   EXHIBIT 10.71

                           JAMUL CONSULTING AGREEMENT

      This consulting agreement (this "Agreement") effective on January 30,
2003, between Kevin M. KEAN, 210 E. Flamingo Rd. #101, Las Vegas, NV 89109-4707
("KEAN"), and Lakes Kean Argovitz Resorts-California, L.L.C., a Delaware limited
liability company (the "PROJECT COMPANY")

                                   BACKGROUND

A.    KEAN is experienced in establishing and maintaining business relationships
and business ventures, including gaming projects, with federally recognized
Native American Indian Tribes specifically including the Jamul Indian Village
(the "Tribe");

B.    PROJECT COMPANY has established and entered into a business venture or
gaming project with the Tribe related to the design, construction and management
of an Indian gaming facility to be located on its tribal lands (the "Project")
pursuant to the terms and conditions of, among other things, that certain
Management Agreement (the "Management Agreement") and related documents dated as
of May 25, 1999;

C.    KEAN and PROJECT COMPANY, Lakes Jamul, Inc. ("LAJA") and Lakes
Entertainment, Inc. (collectively, the "Lakes Entities") have entered into that
certain Consent and Agreement to Buyout and Release of even date herewith (the
"Kean Consent"); capitalized terms used but not otherwise defined herein shall
have the meanings set forth in the Kean Consent;

D.    KEAN has agreed to provide consulting services to assist PROJECT COMPANY
in successfully developing the Project and future business ventures or
relationships with Tribe and to assist PROJECT COMPANY with Tribal and community
relations and trust land acquisition, among other things, necessary to the
success of the Project, all pursuant to the terms of this Agreement.

      ACCORDINGLY, KEAN and PROJECT COMPANY hereby covenant, agree and obligate
themselves as follows:

1.    Background. The Background statement is made a part of this Agreement.

2.    Services. Subject to the terms of Section 4 hereof, KEAN shall act as a
consultant to PROJECT COMPANY with respect to the Project. KEAN's only duties
under this Agreement, unless otherwise mutually agreed to, shall be for KEAN or
his agent (and only if such agent is first found to be "suitable" and has
obtained any necessary licenses under the Indian Gaming Regulatory Act and other
applicable law to participate in Indian gaming by the NIGC and any other
applicable regulatory authorities) to make at least twenty-four (24) personal
contacts with the Tribe each calendar year during the term of this Agreement and
any extensions thereafter for the purpose of conferring with the Tribal Chair or
members of the Tribal Council or the Tribes administrative staff to discuss and
further foster good relations between the Tribe and PROJECT COMPANY. PROJECT
COMPANY will make all final decisions and be responsible for the development and





management of the Project and any other project or venture with the Tribe. KEAN
will not have any authority or any duties or obligations of management of the
Project or any other gaming or other business ventures between PROJECT COMPANY
and the Tribe.

3.    Authority. In performing his obligations hereunder, KEAN shall not be and
shall not represent himself as an agent of PROJECT COMPANY and shall not have
any authority to bind PROJECT COMPANY, contractually or otherwise, or to cause
PROJECT COMPANY to incur any obligation to any third party including the Tribe.

4.    Consulting Term. If KEAN shall exercise his option under Section 5 below,
KEAN shall act as the consultant of PROJECT COMPANY under this Agreement for a
term which shall commence only upon satisfaction of all of the following
conditions (such date hereinafter referred to as the "Consulting Agreement
Commencement Date"): (a) KEAN is first found to be "suitable" and has obtained
any necessary licenses under the Indian Gaming Regulatory Act and other
applicable law to participate in Indian gaming by the NIGC and any other
applicable regulatory authorities; (b) KEAN shall have provided PROJECT COMPANY
a copy of the written findings/licenses of such authorities; (c) KEAN has
assumed the KARSS Note and the KAR Note and executed and delivered all necessary
documents and agreements related thereto as required under Section 7 hereof; and
(d) PROJECT COMPANY shall have received either the written approval of the NIGC
to the terms of this Consulting Agreement and related documents or written
notice that no such approval is required. Upon request, PROJECT COMPANY agrees
to provide reasonable cooperation to KEAN in his suitability/licensing
proceedings. After the occurrence of the Consulting Agreement Commencement Date,
the term of this Agreement shall only terminate upon the earlier of (1)
termination or expiration of the Management Agreement, as same may be renewed or
extended or (2) the date that neither PROJECT COMPANY or any other assignee or
transferee of the Management Agreement is manager of the Project. In the event
that the Management Agreement is terminated or expires and PROJECT COMPANY or
any subsidiary of PROJECT COMPANY or Lakes Entertainment, Inc., whether directly
or indirectly, enters into a new contract or agreement with the Tribe for
management of the Project within two (2) years after such termination or
expiration, then this Agreement shall be reinstituted between KEAN and the
PROJECT COMPANY or such subsidiary, as the case may be, upon the same terms as
contained herein as of the date the new management contract is executed between
the PROJECT COMPANY or such subsidiary and the Tribe.

5.    Fee Option. KEAN shall have the right, so long as he has not exercised the
Buyout Option as described in Section 6 below, to elect to act as a consultant
of PROJECT COMPANY under the terms of this Agreement and be paid an annual
consulting fee ("Consulting Fee") for services rendered hereunder. KEAN shall
notify PROJECT COMPANY, in writing, of his intent to exercise this election in
order for it to be effective. The Consulting Fee shall be equal to twenty
percent (20.0%) of the sum of (a) the Management Fee received by PROJECT COMPANY
under the Management Agreement for such period, less (b) an annual credit in
favor of PROJECT COMPANY for the sum of Four Hundred Thousand and 00/100 Dollars
($400,000.00) for PROJECT COMPANY's cost of operations which credit shall be
apportioned in equal monthly amounts. The Consulting Fee shall be payable to
KEAN if and only if PROJECT COMPANY shall receive its Management Fee from the
Tribe for such period. To the extent that PROJECT COMPANY shall receive less
than its required Management Fee, the Consulting Fee due KEAN





shall be reduced by a similar proportionate basis. Subject to the limitations
set forth in Section 2 of the Kean Consent, the Consulting Fee will be paid on a
monthly basis within thirty (30) days after receipt by PROJECT COMPANY of its
Management Fee for such month. KEAN shall further not be entitled to any
Consulting Fee under this provision for any period prior to the occurrence of
the Consulting Agreement Commencement Date. The term "Management Fee" shall mean
the "management compensation" to be paid to PROJECT COMPANY under Section 6.5(b)
of the Management Agreement.

6.    Buyout Option. If KEAN shall so elect in a written notice to PROJECT
COMPANY prior to the occurrence of the Consulting Agreement Commencement Date,
KEAN's rights under Sections 2, 4 and 5 hereof shall terminate, he shall not act
as the consultant of PROJECT COMPANY and PROJECT COMPANY shall pay KEAN as the
sole consideration for his rights under this Agreement, an amount equal to One
Million and 00/100 Dollars ($1,000,000.00) for each year or portion thereof (and
such consideration shall be prorated based on a 365 day year in which both of
the following conditions were satisfied for only part of any calendar year) that
both of the following conditions are satisfied: (a) Class III Gaming is being
conducted at the Project and (b) during such period either PROJECT COMPANY is
the manager of the Project (with LAJA or another subsidiary of PROJECT COMPANY
continuing as a member of such entity) or LAJA or another subsidiary of Lakes
Entertainment is the direct manager of the Project; provided however that (i)
such consideration shall be payable only during the initial term of the
Management Agreement and not for any renewal term or other period thereafter,
and (ii) KEAN shall not be entitled to any amounts for the period accruing prior
to the KEAN's election of this buyout option. Subject to the satisfaction of the
foregoing conditions and further subject to the limitations set forth in Section
2 of the Kean Consent, the annual payments shall be payable to KEAN on a monthly
basis.

7.    Loan Assumption. In the event that KEAN shall elect to be paid a
Consulting Fee under Section 5 above, KEAN shall assume fifty percent (50%) of
the then outstanding obligations under the KAR Note (as defined in the Recitals
of the Kean Consent) by executing a new promissory note in favor of LAJA, which
note shall continue to accrue interest from the date hereof, be secured and
otherwise be repayable on the same terms and conditions currently applicable to
KAR under the terms of the KAR Note, the KAR Pledge Agreement and any other
applicable documents, including without limitation, that the repayment of such
obligation will be secured by a first priority security interests upon the
Consulting Fee earned hereunder, and provided further that such obligation shall
be repayable from all Consulting Fees as and when payable to or received by KEAN
hereunder the until such assumed obligations are paid in full. KEAN further
agrees that (a) the security interest described above shall also secure the
repayment of the obligations described in the Loan and Security Agreement (as
defined in Section 2 of the Kean Consent) and the Kean Residential Loan
Obligation on the same repayment and security terms as are currently applicable
to such Kean Residential Loan Obligation, including without limitation that such
obligation shall be immediately payable from the first distributions of
consulting fees otherwise payable to KEAN hereunder until such obligation is
paid in full and (b) as a further condition hereto, KEAN shall assume fifty
percent (50%) of that certain loan in the principal amount of $970,000.00
extended by Lakes Shingle Springs, Inc. ("LASS") to Kean Argovitz
Resorts-Shingle Springs, L.L.C. ("KARSS") and the repayment of which is
evidenced by that certain Promissory Note dated July 29, 1999 made payable by
KARSS to LASS (the "KARSS Note") and the same shall be cross-collateralized by
the





Consulting Fees that may be due hereunder. The term "Kean Residential Loan
Obligation" shall mean KEAN's obligations to Lakes Entertainment now or
hereafter owing and arising from (i) Lakes Entertainment's performance of that
certain Commercial Guaranty Agreement dated November 6, 1999 to Hibernia
National Bank which Guaranty secured KEAN's Promissory Note dated November 22,
1999, as amended May 15, 2000, payable to the order of Hibernia in the original
principal face amount of $1,986,995.09, and (ii) that certain related Agreement
For Indemnification dated May 16, 2000 between KEAN and Lakes Entertainment.
KEAN acknowledges and agrees that as of September 30, 2002, the outstanding
principal and interest balance of the Kean Residential Loan Obligation was
$1,740,106 and $97,649, respectively, and further includes in addition thereto
$25,000 in attorneys' fees due and owing to Lakes Entertainment pursuant to the
terms of that certain settlement and compromise agreement dated June 22, 2002
(the "Settlement and Compromise Agreement") concerning and related to the Kean
Residential Loan Obligation.

8.    Inspection of Records. After the Consulting Agreement Commencement Date,
KEAN and/or his designated representative(s) shall be allowed once per calendar
quarter and at his expense to review and inspect (including copying) any and all
books, records and/or data in the possession and/or control of PROJECT COMPANY
that concerns or relates to any revenues and/or receipts of any kind between
PROJECT COMPANY and the TRIBE. KEAN and/or his representatives may conduct any
review and inspection at the business office of PROJECT COMPANY or such other
place as the documents are normally and customarily maintained at any time
during the hours of 8:00 a.m. through 5:00 p.m., Monday through Friday. KEAN
shall give PROJECT COMPANY five (5) business days written notice of the date and
time that he intends to begin any review and inspection of documents. KEAN shall
and shall cause his agents to keep all such books, records and information
confidential in accordance with the following confidentiality provisions:

      (a)   For purposes of this agreement, "Confidential Information" means
            non-public information relating to PROJECT COMPANY, but does not
            include information that KEAN can demonstrate (i) was already known
            to KEAN, or (ii) was or becomes generally available to the public,
            or part of the public domain, through no fault of, or disclosure by,
            KEAN or his agents, or (iii) was or becomes available to KEAN from a
            source other than the PROJECT COMPANY, Lakes Entertainment or any
            affiliate of Lakes Entertainment, provided that such source is not
            bound by a duty of confidentiality to any of them.

      (b)   KEAN agrees to use Confidential Information solely in connection
            with discussions with the PROJECT COMPANY or related transactions,
            and to keep all such Confidential Information strictly secret and
            confidential. Unless authorized in writing by the PROJECT COMPANY,
            KEAN will maintain all Confidential Information in confidence and
            will not divulge to anyone outside the PROJECT COMPANY or use any of
            the Confidential Information for KEAN's own or another's benefit.
            KEAN shall be responsible for any breach of this agreement by any
            his agents and any person (other than the PROJECT COMPANY, Lakes
            Entertainment or any affiliate of Lakes Entertainment and their
            respective officers, directors, employees and independent
            contractors of the PROJECT COMPANY) to whom KEAN discloses any of
            the Confidential Information.






      (c)   If, notwithstanding this agreement, any of the Confidential
            Information is required to be disclosed by applicable law or legal
            process, KEAN will give the PROJECT COMPANY prompt notice of such
            requirement and, if requested, will assist the PROJECT COMPANY in
            seeking a protective order or other measures to preserve the
            confidentiality of such Confidential Information insofar as
            possible.

      (d)   Once this Agreement has ended, upon the PROJECT COMPANY's request,
            all Confidential Information theretofore provided by the PROJECT
            COMPANY to KEAN (and all copies, summaries and notes of the contents
            or parts thereof) shall be returned to the PROJECT COMPANY and not
            retained by KEAN in any form, and KEAN shall upon request promptly
            provide to the PROJECT COMPANY a certificate signed by KEAN
            confirming that all such materials have been returned to the PROJECT
            COMPANY.


9.    No Joint Venture/Funding of Venture. This Agreement is not intended to
create any joint venture between PROJECT COMPANY and KEAN. PROJECT COMPANY shall
be solely responsible for funding, financing or otherwise capitalizing any
business or venture or project that it may enter into with the Tribe. KEAN does
not represent that he has the capability to or that he will be responsible in
any manner for funding, financing or otherwise capitalizing all or any portion
any business or venture or project that PROJECT COMPANY may enter into with the
Tribe.

10.   Best Efforts. KEAN shall perform his duties hereunder, both express and
implied, at all times in good faith and to the best of his ability and shall use
his best efforts in connection with providing consulting services to PROJECT
COMPANY

11.   Non-Compete/Confidentiality. Unless approved by the Tribe, KEAN agrees
that (a) he shall and shall cause any entity in which he shall directly or
indirectly own an equity interest together with any officers, directors, equity
owners, employees and agents of such entity (collectively, the "Non-compete
Parties"), to comply with each of the non-competition agreements set forth in
the Management Agreement (b) in addition to the foregoing, that he shall not and
shall cause each of the other Non-compete Parties to not directly or indirectly
solicit or enter into any consulting, brokerage, management, financing or other
similar agreement with any Indian Tribe or other gaming enterprise or with any
party seeking such an agreement with such an Indian Tribe or other gaming
enterprise, related to a gaming enterprise located or to be located within any
area in the State of California south of the city limits of Escondido,
California.

12.   Further Assurances. KEAN agrees to execute such additional documents and
agreements as are necessary to effectuate the intents and purposes of this
Agreement

13.   Governing Law/Venue. This Agreement will be governed by and interpreted in
accordance with Minnesota law. SUBJECT TO THE TERMS OF SECTION 14 HEREOF, THE
PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS
AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS
LOCATED IN THE COUNTY OF HENNEPIN, STATE OF MINNESOTA OR, AT THE SOLE OPTION OF
THE PROJECT COMPANY ENTITIES, IN ANY OTHER COURT IN WHICH THE PROJECT COMPANY
ENTITIES SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS






SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. THE PARTIES WAIVE,
TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT
THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY
PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION.

14.   Dispute Resolution/Arbitration In connection with any dispute hereunder,
the parties agree to negotiate in good faith for up to twenty days. If they are
unable to resolve the dispute in such period, then either party may demand and
such dispute shall be submitted to and resolve by binding arbitration in
accordance with the following terms:

      (a) Governing Rules. Any arbitration proceeding will (i) proceed in a
      location in Minneapolis Minnesota selected by the American Arbitration
      Association ("AAA"); (ii) be governed by the Federal Arbitration Act
      (Title 9 of the United States Code), notwithstanding any conflicting
      choice of law provision in any of the documents between the parties; and
      (iii) be conducted by the AAA, or such other administrator as the parties
      shall mutually agree upon, in accordance with the AAA's commercial dispute
      resolution procedures. Any party who fails or refuses to submit to
      arbitration following a demand by any other party shall bear all costs and
      expenses incurred by such other party in compelling arbitration of any
      dispute. The arbitration requirement does not limit the right of any party
      to obtain provisional or ancillary remedies such as replevin, injunctive
      relief, attachment or the appointment of a receiver or the exercise of any
      foreclosure or self-help remedies under the Minnesota Uniform Commercial
      Code, before during or after the pendency of any arbitration proceeding.

      (b) Arbitrator Powers. The arbitrator will determine whether or not an
      issue is arbitratable and will give effect to the statutes of limitation
      in determining any claim. In any arbitration proceeding the arbitrator
      will decide (by documents only or with a hearing at the arbitrator's
      discretion) any pre-hearing motions which are similar to motions to
      dismiss for failure to state a claim or motions for summary adjudication.
      The arbitrator may grant any remedy or relief that a court of such state
      could order or grant within the scope hereof and such ancillary relief as
      is necessary to make effective any award. The arbitrator shall also have
      the power to award recovery of all costs and fees, to impose sanctions and
      to take such other action as the arbitrator deems necessary to the same
      extent a judge could pursuant to the Federal Rules of Civil Procedure, the
      Minnesota Rules of Civil Procedure or other applicable law. Judgment upon
      the award rendered by the arbitrator may be entered in any court having
      jurisdiction. The institution and maintenance of an action for judicial
      relief or pursuit of a provisional or ancillary remedy shall not
      constitute a waiver of the right of any party, including the plaintiff, to
      submit the controversy or claim to arbitration if any other party contests
      such action for judicial relief.

      (c) Miscellaneous. The arbitrator shall award all costs and expenses of
      the arbitration proceeding. To the maximum extent practicable, the AAA,
      the arbitrators and the parties shall take all action required to conclude
      any arbitration proceeding





      within 180 days of the filing of the dispute with the AAA. No arbitrator
      or other party to an arbitration proceeding may disclose the existence,
      content or results thereof, except for disclosures of information by a
      party required in the ordinary course of its business or by applicable law
      or regulation. If more than one agreement for arbitration by or between
      the parties potentially applies to a dispute, the arbitration provision
      most directly related to the documents between the parties or the subject
      matter of the dispute shall control. This arbitration provision shall
      survive termination, amendment or expiration of any of the documents or
      any relationship between the parties

15.   Adverse NIGC Action. The parties acknowledge and agree that an important
purpose of this Agreement is to allow PROJECT COMPANY to promptly achieve
regulatory approval and become licensed by the National Indian Gaming Commission
("NIGC") and to immediately allow the completion of design, construction and
management of a new gaming facility on lands of the TRIBE. Should the NIGC take
any action to nullify or otherwise disrupt this Agreement, then the parties
shall immediately meet and negotiate in good faith to agree to such
modifications as may be necessary to obtain NIGC approval hereof while still
maintaining the intents and purposes of this Agreement, with any disputes
related thereto resolved by arbitration as provided for above.

16.   Assignment. This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective heirs, successors and assigns, except
that KEAN may not assign his rights or obligations hereunder, provided however,
that subject to the additional requirements and limitations set forth below
(including without limitation the requirement for NIGC approval of any such
assignment or transfer) KEAN may assign his rights as follows: (a) with the
prior written consent of PROJECT COMPANY or (b) after the occurrence of either
the Consulting Agreement Commencement Date or KEAN's election to proceed with
the buyout option under Section 6 of this Agreement, an assignment of payment
rights under either Sections 5 or 6 hereof only, and not any other rights or
obligations of KEAN hereunder. Any permitted assignment above shall be further
conditioned upon (y) all rights of any assignee under this Agreement and any
related documents and agreements shall be expressly subject and subordinate to
the rights and interests of each of the Lakes Related Parties hereunder and
under the Kean Consent, the Loan and Security Agreement and any related
documents and agreements and such assignee shall execute and deliver in favor of
the Lakes Related Parties a subordination agreement in form and substance
reasonably acceptable to the Lakes Related Parties, and (z) PROJECT COMPANY
receiving prior to the completion of such transfer: (i) a copy of all documents
and agreements relating to the transfer, (ii) a copy of the written notice from
the NIGC pursuant to which it shall either approve such transfer or acknowledge
that no such approval is necessary for the transfer; (iii) written evidence that
such transferee is "suitable" and has obtained any necessary licenses under the
Indian Gaming Regulatory Act and other applicable law to participate in Indian
gaming by the NIGC and any other applicable regulatory authorities or in the
alternative that no such findings or licenses are required; (iv) a legal opinion
in form and substance reasonably acceptable to PROJECT COMPANY that such
transfer is in compliance with all applicable federal, state and tribal laws,
rules and regulations, including without limitation the Indian Gaming Regulatory
Act, as amended (collectively, the "Applicable Laws"), and no additional
approvals or consents of any federal, state or tribal governmental entity or
third party is required with respect thereto under any Applicable Law, the
Amended Development Documents or any other agreement between KEAN or any of the






Lakes Related Parties (as defined in the Kean Consent) or between PROJECT
COMPANY and the Tribe, (v) if applicable, a written assignment and assumption
agreement executed by KEAN and the transferee in form and substance reasonably
acceptable to PROJECT COMPANY whereby such transferee shall receive and assume
the rights and obligations of KEAN under this Agreement; (vi) all sale proceeds
payable on account of such transfer shall be paid to PROJECT COMPANY to be
applied to each of the "Secured Obligations" owing to each "Secured Party" by
KEAN under that the Loan and Security Agreement, and (vii) payment of all costs
and expenses (including attorneys fees) of PROJECT COMPANY incurred in
connection with completing such transfer.

17.   Entire Agreement. This Agreement, the Loan and Security Agreement and the
documents and agreements executed in conjunction therewith contain the entire
understanding of the parties regarding its subject matter, and supercedes all
prior negotiations, understandings and agreements of the parties with respect
thereto. The express terms of this Agreement shall control and supercede any
course of performance and/or customary practice inconsistent with such terms.
Any agreement between the parties hereunder made shall not change or modify this
Agreement unless in writing and signed by the party against whom enforcement of
such change or modification is sought. Any amendments to this Agreement must be
in writing and signed by all parties.

18.   Notices. All notices, requests, consents and other communications required
or permitted hereunder shall be in writing and shall be delivered, or mailed
first class postage prepaid, registered or certified mail, addressed to a party
at the address set forth in the introductory paragraph, or to such other address
as a party may hereafter designate by notice.

19.   Counterparts. This Agreement may be executed in any number of counterparts
and by facsimile, each of which shall constitute one and the same agreement, and
any of the parties hereto may execute this Agreement by signing such
counterpart, provided that this Agreement shall not become effective until all
parties have executed the same.


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and
year first above written.


  /s/ Kevin M. Kean
- --------------------------------------
KEVIN M. KEAN


LAKES KEAN ARGOVITZ RESORTS-CALIFORNIA, L.L.C.
By:  Lakes Jamul, Inc.
Its:  Member


         By:  /s/ Timothy J. Cope
         -----------------------------
         Timothy J. Cope
         Its:  Chief Financial Officer

EX-10.72

                                                                   EXHIBIT 10.72

                           LOAN AND SECURITY AGREEMENT


DATE:      January 30, 2003

PARTIES:   LAKES CALIFORNIA LAND DEVELOPMENT, Inc.
           130 Cheshire Lane
           Minnetonka, MN 55305                                ("Secured Party")

           LAKES ENTERTAINMENT, INC.
           130 Cheshire Lane
           Minnetonka, MN 55305                                ("Secured Party")

           LAKES SHINGLE SPRINGS, INC.
           130 Cheshire Lane
           Minnetonka, MN 55305                                ("Secured Party")

           LAKES JAMUL, INC.
           130 Cheshire Lane
           Minnetonka, MN 55305                                ("Secured Party")

           LAKES KAR SHINGLE SPRINGS, L.L.C.
           130 Cheshire Lane
           Minnetonka, MN 55305                                ("Secured Party")

           LAKES KEAN ARGOVITZ RESORTS-CALIFORNIA, L.L.C.
           130 Cheshire Lane
           Minnetonka, MN 55305                                ("Secured Party")

           KEVIN M. KEAN
           210 E. Flamingo Rd. #101
           Las Vegas, NV 89109-4707
           Social Security Number:  ###-##-####                       ("Debtor")


                                R E C I T A L S:

      WHEREAS, on the date hereof, Lakes Shingle Springs, Inc., Lakes
Entertainment, Inc., Lakes KAR Shingle Springs, L.L.C. and the Debtor have
entered into that certain Consent and Agreement to Buyout and Release (the
"Shingles Springs Buyout Agreement"); and

      WHEREAS, on the date hereof, Lakes Entertainment, Inc., Lakes Jamul, Inc.,
and Lakes Kean Argovitz Resorts-California, L.L.C. and the Debtor have entered
into that certain Consent and Agreement to Buyout and Release (the "Jamul Buyout
Agreement"); and


                                       1



      WHEREAS, in connection with entering into the Jamul Buyout Agreement,
Lakes California Land Development, Inc. ("Lakes California") has agreed to
provide certain loans to the Debtor which shall be secured by the rights and
payments to be received by the Debtor under each of the Jamul Buyout Agreement
and the Shingle Springs Buyout Agreement (collectively, the "Buyout Agreements")
and any additional documents and agreements to be entered into as contemplated
thereby, all pursuant to the terms and conditions set forth herein and in the
Buyout Agreements;

      WHEREAS, the Debtor and Jerry A. Argovitz ("Argovitz") are the sole
members of Land Baron West, LLC, a California limited liability company ("Land
Baron"); and Land Baron and the Lakes California are the sole members of 2022
Ranch, LLC, a California limited liability company ("2022 Ranch"), the principal
purpose and the formation of which entity was to acquire a 2022 acre parcel of
unimproved real property in San Diego County, California known as the "Honey
Springs Ranch" (the "Property") to hold for resale or exchange; and in
connection with the acquisition of the Property, 2022 Ranch executed that
certain Promissory Note dated as of May 9, 2000 and made payable to the order of
Home Springs Ranch, LLC in the original principal amount of $4,000,000 (the
"Honey Springs Note");

      WHEREAS, under the terms of the Operating Agreement dated effective as of
May 4, 2000 (date of filing of the Articles of 2022 Ranch) between Land Baron
and Lakes California, such parties each agreed under Section 2 of such Operating
Agreement to contribute cash on a fifty/fifty (50/50) basis to 2022 Ranch as may
be necessary to timely pay the interest and principal on the Note, plus property
tax and other incidental costs and expenses of owning the Property; and pursuant
to the organizational agreements of Land Baron, Argovitz and Debtor have agreed
to contribute such cash on a fifty/fifty (50/50) basis to Land Baron as may be
necessary to permit Land Baron to fund its obligations with respect to the Honey
Springs Note and the Property described above;

      WHEREAS, part of the loan to be provided hereunder is to be used to fund
the Debtor's obligations to make the contributions to Land Baron for funding the
balloon payment on the Honey Springs Note when due (the "Honey Springs
Obligation").

                              A G R E E M E N T S:

      NOW THEREFORE, IN CONSIDERATION of one dollar and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:

      1.    Loan and Note. From time to time and subject to the terms and
conditions set forth herein, Lakes California agrees to make advances to the
Debtor up to but not in excess of One Million Two Hundred Fifty Thousand Dollars
($1,250,000) (the "Loan"), which Loan and advances thereof shall be evidenced by
that certain Promissory Note of even date herewith executed by the Debtor and
payable to the order of Lakes California (as heretofore and hereafter amended,
supplemented or renewed from time to time, the "Note"). The Loan shall be a
multiple advance loan but shall not be a revolving loan. Notwithstanding the
foregoing, the Debtor's right to obtain advances under the Loan shall be subject
to the following limitations:



                                       2


            (a)   Debtor may obtain advances of up to Two Hundred Fifty Thousand
Dollars ($250,000) upon written request to Secured Party, the proceeds of which
may be used for any purpose in the sole discretion of the Debtor; and

            (b)   The balance of remaining available advances under the Loan
equal to One Million Dollars ($1,000,000) shall be reserved and may be obtained
upon request by the Debtor only (a) if Lakes California has decided to and has
funded its share of the Honey Springs Obligation (i.e. the balloon payment on
the Honey Springs Note) when the same becomes due, and (b) for the purpose of
paying the Debtor's share of such Honey Springs Obligation (i.e. the balloon
payment on the Honey Springs Note); and the Debtor further agrees that if Lakes
California has funded its share thereof but the Debtor has not paid its share of
the Honey Springs Obligation when the same becomes due, Lakes California may, at
its option and sole discretion, make an advance on the Loan to pay the same
without further notice to or consent of the Debtor.

      Outstanding principal under the Note shall accrue interest and principal
and interest shall be repaid each in accordance with the terms and provisions
set forth in the Note. In addition to any other remedies of Lakes California
provided herein, upon the occurrence of any event, circumstance or condition
constituting an Event of Default, Lakes California may at any time
(notwithstanding any notice requirements or grace/cure periods under this or
other agreements between the Debtor and the Bank) immediately suspend its
obligation, if any, to make additional advances to the Debtor.

      Each time the Debtor desires to obtain a Loan advance, such request shall
be in writing (which may be by telecopy) or by telephone promptly confirmed in
writing, and must be given so as to be received by Lakes California not later
than 11:00 a.m., Minneapolis time, on the date of the requested advance. Each
request for an advance shall specify (i) the borrowing date (which shall be a
day (other than a Saturday, Sunday or legal holiday in the State of Minnesota)
on which state banks are permitted to be open in Minneapolis, Minnesota) and
(ii) the amount of such advance. Subject to the terms hereof, the amount of the
requested advance will be available to the Debtor in immediately available funds
not later than two (2) business days after the date requested. At the time of
making a request for any advance, Lakes California may require as a condition to
such advance that the Debtor provide copies of any documents, invoices and other
information supporting any costs to be paid by such advance.

      Lakes California shall record in its records the date and amount of each
advance of the Loan, and each repayment thereof. The aggregate unpaid principal
and interest amounts so recorded shall be presumptive evidence thereof as owing
and unpaid by the Debtor absent manifest error. Failure to so record any such
amount or any error in so recording any such amount shall not, however, limit or
otherwise affect the obligations of the Debtor to repay such principal and
interest.

      2.    Grant of Security Interest and Collateral. In order to secure
payment of all of the Debtor's debts, liabilities, obligations, covenants,
warranties, and duties to each Secured Party under and pursuant to the Note,
this Agreement, the Kean Residential Loan Obligations (as defined in the Buyout
Agreements), the Buyout Agreements, each "Consulting Agreement" (as




                                       3


respectively defined in the Buyout Agreements), to the extent assumed by Debtor,
each of the KARSS Note and the KAR Note (as respectively defined in the Buyout
Agreements) and any other agreements, documents and/or instruments now or
hereafter executed by the Debtor in favor of any Secured Party in connection
therewith or related thereto (as heretofore and hereafter amended, collectively,
the "Loan Documents"), each whether now or hereafter existing or incurred,
whether liquidated or unliquidated, whether absolute or contingent, and
including principal, interest, collection costs and expenses (including, without
limitation, reasonable attorneys' fees) and other charges related to any of the
foregoing (collectively referred to herein as the "Secured Obligations"), Debtor
hereby grants each Secured Party a security interest (the "Security Interest")
in the following property each whether now owned or hereafter acquired
(collectively the "Collateral"):

            (a)   Membership Rights and Rights to Payment: Each and every right
      of Debtor to the Membership Rights and the Rights to Payment (as each of
      such terms are hereinafter defined), whether such interest or right to
      payment now exists or hereafter arises, whether such interest or right to
      payment is or is not already earned by performance, and howsoever such
      interest or right to payment may be evidenced, together with all other
      rights and interests (including all liens and security interests) which
      Debtor may at any time have by law or agreement against any account debtor
      or other obligor obligated to make any such payment or against any of the
      property of such account debtor or other obligor;

together with all substitutions and replacements for any of the foregoing
property and any and all profits, income, dividends, distributions, instruments,
other rights and general intangibles and proceeds of or arising from any and all
of the foregoing property. As used herein the following terms have the following
meaning:

            (i)   The term "Membership Interests" shall mean the now existing or
hereafter acquired membership or other equity interests of the Debtor in each of
Land Baron, Lakes KAR Shingle Springs, L.L.C., a Delaware limited liability
company, Lakes Shingle Springs, Inc., a Minnesota corporation, Lakes Kean
Argovitz Resorts - California L.L.C., a Delaware limited liability company,
Lakes Jamul, Inc., a Minnesota corporation and any other entity which may now or
hereafter own or hold a management contract, consulting agreement or similar
agreement with either the Shingle Springs Band of Miwok Indians or the Jamul
Indian Village, together with all substitution or replacement rights and
interests given in exchange therefore.

            (ii)  The term "Rights to Payment" shall mean each and all of the
contract rights and rights to payment of the Debtor arising under each of the
Buyout Agreements, the "Consulting Agreements" (as respectively defined in the
Buyout Agreements) and under or arising from any consulting, broker or other
agreement involving (1) either Kevin Kean or any affiliate of Kean in which he
directly or indirectly owns an ownership interest or is a director, officer,
employee or agent, and (2) either or both of the Shingle Springs Band of Miwok
Indians and/or the Jamul Indian Village or with any Secured Party, together with
all substitutions, replacements and amendments thereto, each whether now
existing or hereafter arising.


                                       4



      2.    Representations, Warranties and Agreements. Debtor represents,
warrants and agrees with each secured party that:

            (a)   Debtor has full power and authority to execute and deliver
      this Agreement, to perform Debtor's obligations hereunder and to subject
      the Collateral to the Security Interest and no consent, authorization or
      approval of any other person or entity is necessary with respect thereto
      or to grant each Secured Party a first perfected security interest in the
      Collateral. Debtor's social security number is the number shown at the
      beginning of this Agreement.

            (b)   The Loan and Collateral will be used primarily for business
      purposes.

            (c)   Debtor's principal residence is located at the address shown
      at the beginning of this Agreement. Debtor's records concerning its
      accounts and contract rights are kept at such address. Debtor will give at
      least 30 days advance written notice to Secured Party of any change in
      Debtor's principal residence. At reasonable times, the Secured Party may
      examine the Collateral and the Debtor's records pertaining to it, wherever
      located, and make copies of such records at the Debtor's expense; and the
      Debtor shall assist the Secured Party in so doing.

            (d)   Debtor has (or will have at the time Debtor acquires rights in
      Collateral hereafter arising) and will maintain absolute title to each
      item of Collateral free and clear of all security interests, liens and
      encumbrances, except the Security Interest, and will defend the Collateral
      against all claims or demands of all persons other than Secured Party and
      security interests, liens and encumbrances so existing of record on the
      date of this Agreement.

            (e)   Debtor will not lease, sell or otherwise transfer or dispose
      of the Collateral or any interest therein except with the prior written
      consent of the Secured Party.

            (f)   Debtor will not agree to any modification, amendment or
      cancellation of any Collateral without Secured Party's prior written
      consent, and will not subordinate any such right to payment to claims of
      other creditors of such account debtor or other obligor.

            (g)   Debtor will promptly pay all taxes and other governmental
      charges levied or assessed upon or against any Collateral or upon or
      against the creation, perfection or continuance of the Security Interest.

            (h)   Debtor will promptly notify Secured Party of any material loss
      of or to any Collateral or of any adverse change in the prospect of
      payment of any material sums due on or under any instrument, chattel
      paper, account or contract right constituting Collateral or of any
      material adverse change in the Debtor's condition (financial or
      otherwise).

            (i)   Debtor will if Secured Party at any time so requests (whether
      the request is made before or after the occurrence of an Event of
      Default), promptly deliver to Secured



                                       5



      Party any payment obligations, instrument, document or chattel paper
      constituting Collateral, duly endorsed or assigned by Debtor to Secured
      Party.

            (j)   Debtor will from time to time execute or cause to be executed
      such financing statements, control and other agreements as Secured Party
      may reasonably deem required to be filed or obtained from any party in
      order to perfect the Security Interest and obtain "control" of any
      Collateral under the Uniform Commercial Code.

            (k)   Debtor will pay when due or reimburse Secured Party on demand
      for all costs of collection of the Secured Obligations and all other
      out-of-pocket expenses (including in each case all reasonable attorneys'
      fees) incurred by Secured Party in connection with the creation,
      perfection, satisfaction or enforcement of the Security Interest or the
      execution or creation, continuance or enforcement of this Security
      Agreement, the Note or any other Loan Documents.

            (l)   Debtor will execute, deliver or endorse any and all
      instruments, documents, assignments, security agreements and other
      agreements and writings which Secured Party may at any time reasonably
      request in order to secure, protect, perfect or enforce the Security
      Interest and Secured Party's rights and priorities under this Security
      Agreement.

            (m)   Debtor will not use or keep any Collateral, or permit it to be
      used or kept, for any unlawful purpose or in violation of any federal,
      state or local law, statute or ordinance.

            (n)   Debtor will cause to be executed and delivered such
      intercreditor or subordination agreements as may be requested from time to
      time by and in form and substance acceptable to Secured Party from any
      other creditors holding a security interest or other liens in and to any
      Collateral as of the date of this Agreement or that may have a lien senior
      in priority to the Security Interest of the Secured Party and agrees to at
      all times comply with and not to take any action which would be in
      violation of any of the terms and conditions set forth in such agreements.

            (o)   The Debtor will (i) maintain accounting records in accordance
      with generally recognized and accepted principles of accounting
      consistently applied throughout the accounting periods involved; (ii)
      provide the Secured Party with such information concerning its business
      affairs and financial condition as the Secured Party may reasonably
      request.

            (p)   Each representation and warranty set forth in this Section 2
      or elsewhere in this Agreement or any other Loan Documents shall be deemed
      to be restated and reaffirmed by the Debtor to the Secured Party on and as
      of the date of each advance under this Agreement.

If Debtor at any time fails to perform or observe any agreement contained in
Sections 2(d) through 2(l), immediately upon the occurrence of such failure,
without notice or lapse of time,



                                       6


Secured Party may (but need not) perform or observe such agreement on behalf and
in the name, place and stead of Debtor (or, at Secured Party's option, in
Secured Party's own name) and may (but need not) take any and all other actions
which Secured Party may reasonably deem necessary to cure or correct such
failure (including, without limitation, the payment of taxes, the satisfaction
of security interests, liens, or encumbrances, the performance of obligations
under contracts or agreements with account debtors or other obligors, the
procurement and maintenance of insurance, the execution of financing statements,
the endorsement of instruments, or any other applicable Collateral); and, except
to the extent that the effect of such payment would be to render any loan or
forbearance of money usurious or otherwise illegal under any applicable law,
Debtor shall thereupon pay Secured Party on demand the amount of all moneys
expended and all costs and expenses (including reasonable attorneys' fees)
incurred by Secured Party in connection with or as a result of Secured Party's
performing or observing such agreements or taking such actions, together with
interest thereon from the date expended or incurred by Secured Party at the rate
applicable to the Note. To facilitate the performance or observance by Secured
Party of such agreements of Debtor, Debtor hereby irrevocably appoints (which
appointment is coupled with an interest) Secured Party, or its delegate, as the
attorney-in-fact of Debtor with the right (but not the duty) from time to time
to create, prepare, complete, execute, deliver, endorse or file, in the name and
on behalf of Debtor, any and all instruments, documents, financing statements,
applications for insurance and other agreements and writings required to be
obtained, executed, delivered or endorsed by Debtor under this Section 2.

      3.    Events of Default. The occurrence of any Event of Default, as
defined in the Note, shall constitute an Event of Default hereunder.

      4.    Remedies Upon Event of Default. Upon the occurrence of an Event of
Default and at any time thereafter until such Event of Default is cured, each
Secured Party may terminate and/or suspend its obligation, if any, to make
additional advances to the Debtor and/or to declare the outstanding unpaid
principal balance of the Note, the accrued and unpaid interest thereon and all
other Secured Obligations of the Debtor to each Secured Party to be due and
payable in full, whereupon all such obligations shall immediately become due and
payable in each case without presentation, demand, protest or further notice of
any kind, all of which are hereby absolutely and forever waived, notwithstanding
anything to the contrary contained herein or in any other applicable documents.
Upon the occurrence of any Act of Bankruptcy (as such term is defined in the
Note), then the unpaid principal balance of the Note, together with all interest
accrued thereon and all other Secured Obligations shall thereupon be immediately
due and payable, all without presentation, demand, protest or notice of any
kind, all of which are hereby waived, and notwithstanding anything to the
contrary contained herein or in any other applicable documents. In addition to
the remedies for default set forth in the Note, this Agreement or any other Loan
Documents, the Secured Party upon the occurrence of an Event of Default shall
have all other rights and remedies for default provided by the Uniform
Commercial Code, as well as any other applicable law and this Agreement,
INCLUDING, WITHOUT LIMITATION, THE RIGHT TO REPOSSESS, RENDER UNUSABLE AND/OR
DISPOSE OF THE COLLATERAL WITHOUT JUDICIAL PROCESS. The rights and remedies
specified herein are cumulative and are not exclusive of any rights or remedies
which the Secured Party would otherwise have. With respect to such rights and
remedies:



                                       7


      (a)   Assembling Collateral; Storage; Use of the Debtor Name/Other
            Property. The Secured Party may require the Debtor to assemble the
            Collateral and to make it available to the Secured Party at any
            convenient place designated by the Secured Party. The Debtor
            recognizes that the Secured Party will not have an adequate remedy
            in Law if this obligation is breached and accordingly, Debtor's
            obligation to assemble the Collateral shall be specifically
            enforceable. The Secured Party shall have the right to take
            immediate possession of said Collateral, and to exercise all voting
            rights with respect to the Collateral. Further, the Debtor releases
            the Secured Party from obtaining a bond or surety with respect to
            any repossession and/or disposition of the Collateral.

      (b)   Notice of Disposition. Written notice, when required by law, sent to
            any address of the Debtor in this Agreement, at least ten (10)
            calendar days (counting the day of sending) before the date of a
            proposed disposition of the Collateral is reasonable notice.
            Notification to account debtors by the Secured Party shall not be
            deemed a disposition of the Collateral.

      (c)   Possession of Collateral/Commercial Reasonableness. The Secured
            Party shall not, at any time, be obligated to either take or retain
            possession or control of the Collateral. With respect to Collateral
            in the possession or control of the Secured Party, the Debtor and
            the Secured Party agree that as a standard for determining
            commercial reasonableness, the Secured Party need not liquidate,
            correct, sell or otherwise dispose of any of the Collateral if the
            Secured Party believes, in good faith, that disposition of the
            Collateral would not be commercially reasonable, would subject the
            Secured Party to third-party claims or liability, that other
            potential purchasers could be attracted or that a better price could
            be obtained if the Secured Party held the Collateral for up to one
            year or longer as may be appropriate in any circumstance, and the
            Secured Party shall not then be deemed to have retained the
            Collateral in satisfaction of the Obligations. Furthermore, the
            Secured Party may sell the Collateral on credit (and reduce the
            Obligations only when payment is received from the buyer), at
            wholesale and/or with or without an agent or broker, and the Secured
            Party need not complete, process or repair the Collateral prior to
            disposition.

      (d)   Waiver by the Secured Party. The Secured Party may permit the Debtor
            to attempt to remedy any default without waiving its rights and
            remedies hereunder, and the Secured Party may waive any default
            without waiving any other subsequent or prior default by the Debtor.
            Furthermore, delay on the part of the Secured Party in exercising
            any right, power or privilege hereunder or at law shall not operate
            as a waiver thereof, nor shall any single or partial exercise of
            such right, power or privilege preclude other exercise thereof or
            the exercise of any other right, power or privilege. No waiver or
            suspension shall be deemed to have occurred unless the Secured Party
            has expressly agreed in writing specifying such waiver or
            suspension.



                                       8


      (e)   Collateral Preservation. The Secured Party shall use reasonable care
            in the custody and preservation of any Collateral in its physical
            possession but in determining such standard of reasonable care, the
            Debtor expressly acknowledges that the Secured Party has no duty to:
            (i) insure the Collateral against hazards; (ii) ensure that the
            Collateral will not cause damage to property or injury to third
            parties; (iii) protect it from seizure, theft or conversion by third
            parties, third parties' claims or acts of God; (iv) give to the
            Debtor any notices received by the Secured Party regarding the
            Collateral; (v) perfect or continue perfection of any security
            interest in favor of the Debtor, (vi) perform any services, complete
            any work-in-process or take any other action in connection with the
            management or maintenance of the Collateral; or (vii) sue or
            otherwise effect collection upon any accounts even if the Secured
            Party shall have made a demand for payment upon individual account
            debtors. Notwithstanding any failure by the Secured Party to use
            reasonable care in preserving the Collateral, the Debtor agrees that
            the Secured Party shall not be liable for consequential or special
            damages arising therefrom.

      5.    Other Personal Property. If at the time Secured Party takes
possession of any tangible Collateral, any goods, papers or other properties of
Debtor, not affixed to or constituting a part of such Collateral, are located or
to be found upon or within such Collateral, Debtor agrees to notify Secured
Party in writing of that fact, describing the property so located or to be
found, within 7 calendar days after the date on which Secured Party took
possession. Unless and until Secured Party receives such notice from Debtor,
Secured Party shall not be responsible or liable to Debtor for any action taken
or omitted by or on behalf of Secured Party with respect to such property
without actual knowledge of the existence of any such property or without actual
knowledge of the fact that it was located or to be found upon such Collateral.

      6.    Amendment; Waivers. This Agreement can be waived, modified, amended,
terminated or discharged, and the Security Interest can be released, only
explicitly in a writing signed by Secured Party and Debtor. A waiver shall be
effective only in the specific instance and for the specific purpose given. Mere
delay or failure to act shall not preclude the exercise or enforcement of any of
Secured Party's rights or remedies.

      7.    Notices. All notices to be given to Debtor shall be deemed
sufficiently given if mailed by registered or certified mail, postage prepaid,
or delivered to Debtor at Debtor's address set forth above or at the most recent
address shown on Secured Party's records or by telex or facsimile.

      8.    Miscellaneous. The rights, options, powers and remedies granted in
this Agreement shall extend to the Secured Party and to its successors and
assigns, and shall be binding upon the Debtor and its successors and assigns and
shall be applicable hereto and to all renewals and/or extensions hereof. This
Agreement shall take effect when signed by Debtor and delivered to Secured
Party, and Debtor waives notice of Secured Party's acceptance hereof. Secured
Party may execute this Agreement if appropriate for the purpose of filing, but
the failure of Secured Party to execute this Agreement shall not affect or
impair the validity or effectiveness of this Agreement. This Agreement may be
executed by the parties hereto in several counterparts




                                       9


and by facsimile and each such counterpart shall be deemed to be an original and
all of which shall constitute together but one in the same agreement. None of
the provisions of this Agreement shall inure to the benefit of any person or
entity other than the parties hereto. This Agreement shall not be construed to
create a partnership or joint venture between the Debtor and the Secured Party.
This Agreement shall be governed by and construed in accordance with Minnesota
law without regard to conflicts of law principles.

      9.    WAIVER OF JURY TRIAL/JURISDICTION. THE DEBTOR AND THE SECURED PARTY
HEREBY JOINTLY AND SEVERALLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING RELATING TO ANY OF THE LOAN DOCUMENTS, THE OBLIGATIONS
THEREUNDER, ANY COLLATERAL SECURING THE OBLIGATIONS OR ANY TRANSACTION ARISING
THEREFROM OR CONNECTED THERETO. THE DEBTOR AND THE SECURED PARTY EACH REPRESENTS
TO THE OTHER THAT THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY GIVEN.

      THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION
WITH THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND
LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF
HENNEPIN, STATE OF MINNESOTA OR, AT THE SOLE OPTION OF THE SECURED PARTY, IN ANY
OTHER COURT IN WHICH THE SECURED PARTY SHALL INITIATE LEGAL OR EQUITABLE
PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN
CONTROVERSY. DEBTOR AND SECURED PARTY WAIVES, TO THE EXTENT PERMITTED UNDER
APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION 9.

      10.   DISPUTE RESOLUTION/ARBITRATION. Notwithstanding the foregoing, the
parties hereby agree that, in connection with any dispute hereunder, the parties
will negotiate in good faith for up to twenty days. If they are unable to
resolve the dispute in such period, then either party may demand and such
dispute shall be submitted to and resolve by binding arbitration in accordance
with the following terms:

            (a)   Governing Rules. Any arbitration proceeding will (i) proceed
      in a location in Minneapolis Minnesota selected by the American
      Arbitration Association ("AAA"); (ii) be governed by the Federal
      Arbitration Act (Title 9 of the United States Code), notwithstanding any
      conflicting choice of law provision in any of the documents between the
      parties; and (iii) be conducted by the AAA, or such other administrator as
      the parties shall mutually agree upon, in accordance with the AAA's
      commercial dispute resolution procedures. Any party who fails or refuses
      to submit to arbitration following a demand by any other party shall bear
      all costs and expenses incurred by such other party in compelling
      arbitration of any dispute. The arbitration requirement does not limit the
      right of any party to obtain provisional or ancillary remedies such as
      replevin, injunctive relief,




                                       10


      attachment or the appointment of a receiver or the exercise of any
      foreclosure or self-help remedies, before during or after the pendency of
      any arbitration proceeding.

            (b)   Arbitrator Powers. The arbitrator will determine whether or
      not an issue is arbitratable and will give effect to the statutes of
      limitation in determining any claim. In any arbitration proceeding the
      arbitrator will decide (by documents only or with a hearing at the
      arbitrator's discretion) any pre-hearing motions which are similar to
      motions to dismiss for failure to state a claim or motions for summary
      adjudication. The arbitrator may grant any remedy or relief that a court
      of such state could order or grant within the scope hereof and such
      ancillary relief as is necessary to make effective any award. The
      arbitrator shall also have the power to award recovery of all costs and
      fees, to impose sanctions and to take such other action as the arbitrator
      deems necessary to the same extent a judge could pursuant to the Federal
      Rules of Civil Procedure, the Minnesota Rules of Civil Procedure or other
      applicable law. Judgment upon the award rendered by the arbitrator may be
      entered in any court having jurisdiction. The institution and maintenance
      of an action for judicial relief or pursuit of a provisional or ancillary
      remedy shall not constitute a waiver of the right of any party, including
      the plaintiff, to submit the controversy or claim to arbitration if any
      other party contests such action for judicial relief.

            (c)   Miscellaneous. The arbitrator shall award all costs and
      expenses of the arbitration proceeding. To the maximum extent practicable,
      the AAA, the arbitrators and the parties shall take all action required to
      conclude any arbitration proceeding within 180 days of the filing of the
      dispute with the AAA. No arbitrator or other party to an arbitration
      proceeding may disclose the existence, content or results thereof, except
      for disclosures of information by a party required in the ordinary course
      of its business or by applicable law or regulation. If more than one
      agreement for arbitration by or between the parties potentially applies to
      a dispute, the arbitration provision most directly related to the
      documents between the parties or the subject matter of the dispute shall
      control. This arbitration provision shall survive termination, amendment
      or expiration of any of the documents or any relationship between the
      parties.

         [The remainder of this page has intentionally been left blank.]



                          (THE SIGNATURE PAGE FOLLOWS.)



                                       11




      THE PARTIES have executed this Loan and Security Agreement the day and
year first above written.

SECURED PARTIES:    LAKES ENTERTAINMENT, INC.

                    By: /s/ Timothy J. Cope
                        --------------------------------------------
                        Timothy J. Cope
                        Its: CFO

                    LAKES SHINGLES SPRINGS, INC.

                    By: /s/ Timothy J. Cope
                        --------------------------------------------
                        Timothy J. Cope
                        Its: CFO

                    LAKES JAMUL, INC.

                    By: /s/ Timothy J. Cope
                        --------------------------------------------
                        Timothy J. Cope
                        Its: CFO

                    LAKES CALIFORNIA LAND
                    DEVELOPMENT, INC.

                    By: /s/ Timothy J. Cope
                        --------------------------------------------
                        Timothy J. Cope
                        Its: CFO

                    LAKES KAR-SHINGLE SPRINGS, L.L.C.
                    By:  Lakes Shingle Springs, Inc.
                    Its: Member

                    By: /s/ Timothy J. Cope
                        --------------------------------------------
                        Timothy J. Cope
                        Its: Chief Financial Officer

                    LAKES KAR-SHINGLE SPRINGS, L.L.C.
                    By:  Lakes Shingle Springs, Inc.
                    Its: Member

                    By: /s/ Timothy J. Cope
                        --------------------------------------------
                        Timothy J. Cope
                        Its: Chief Financial Officer


DEBTOR:             KEVIN M. KEAN

                    /s/ Kevin M. Kean
                    ------------------------------------------------

EX-21

                                                                      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.     Magnum Investments of Lake Charles, Inc.
           9.     Grand Casinos & Resorts of Canada, Inc.
          10.     Grand Casinos Ontario, Inc.
          11.     Great Lakes Gaming of Michigan, LLC
          12.     Mille Lacs Gaming, LLP
          13.     TRAK 21, LLC
          14.     Lakes Jamul, Inc.
          15.     Lakes Kean Argovitz Resorts - California, LLC
          16.     Lakes Shingle Springs, Inc.
          17.     Lakes KAR - Shingle Springs, LLC
          18.     Lakes Gaming & Resorts, LLC
          19.     RFC Acquisition Co.
          20.     Lakes Game Development, LLC
          21.     Lakes Nipmuc, LLC
          22.     Metroplex - Lakes, LLC
          23.     Lakes California Land Development, Inc.
          24.     2022 Ranch, LLC
          25.     Lakes Cloverdale, LLC
          26.     Pacific Coast Gaming - Santa Rosa, LLC
          27.     Lakes Corning, LLC
          28.     Pacific Coast Gaming Corning, LLC
          29.     Borders Land Company, LLC
          30.     Lakes Poker Tour, LLC
          31.     World Poker Tour, LLC

EX-23

                                                                      EXHIBIT 23







INDEPENDENT AUDITORS' CONSENT





We consent to the incorporation by reference in Registration Statement File Nos.
333-77247, 333-77249, 333-77591 of Lakes Entertainment, Inc. on Form S-8 of our
report dated January 30, 2003 (March 3, 2003 as to Note 12) appearing in this
Annual Report on Form 10-K of Lakes Entertainment, Inc. for the year ended
December 29, 2002.







Deloitte & Touche LLP
Minneapolis, Minnesota
March 26, 2003

EX-99.1

                                                                    Exhibit 99.1



                            CERTIFICATION PURSUANT TO
                            18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



    In connection with the Annual Report of Lakes Entertainment, Inc. (the
"Company") on Form 10-K for the period ended December 29, 2002 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Lyle
Berman, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:

    1. The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and

    2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.







                                                     /s/ Lyle Berman
                                                     ---------------------------
                                                     Lyle Berman
                                                     Chief Executive Officer
                                                     March 29, 2003

EX-99.2

                                                                   Exhibit 99.2





                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002





    In connection with the Annual Report of Lakes Entertainment, Inc. (the
"Company") on Form 10-K for the period ended December 29, 2002 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Timothy
J. Cope, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:

    1. The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and

    2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.









                                                     /s/ Timothy J. Cope
                                                     ---------------------------
                                                     Timothy J. Cope
                                                     Chief Financial Officer
                                                     March 29, 2003