DEVELOPMENT AGREEMENT FOR WISCONSIN DELLS ADDITION

Exhibit 10.2

DEVELOPMENT AGREEMENT FOR

WISCONSIN DELLS ADDITION

THIS AGREEMENT is made and entered into as of this 11 day of October, 2005 (the “ Effective Date ”) by and between CNL INCOME GW WI-DEL, LP, a Delaware limited partnership (the “ Owner ”), and GREAT BEAR LODGE OF WISCONSIN DELLS, LLC, a Delaware limited liability company (the “ Developer ”).

W I T N E S S E T H:

WHEREAS, Developer, Great Bear Lodge of Sandusky, LLC, a Delaware limited Liability company, Great Wolf Resorts, Inc., a Delaware corporation (“ Wolf ”), and CNL Income Partners, LP, a Delaware limited partnership (“ CNL ”), entered into that certain Venture Formation and Contribution Agreement dated October 3, 2005 (the “ Formation Agreement ”) which contemplates, among other things, the formation of Owner and the transfer by Developer to Owner of title to the real property more particularly described on Exhibit “A” attached hereto and all fixtures, buildings, structures, parking areas, and other improvements presently located thereon, including, without limitation, a three hundred nine (309) room hotel, an approximately thirty-eight thousand (38,000) square foot indoor water-park component, an approximately ten thousand (10,000) square foot outdoor water-park component and all restaurant, bar, gift shop, casual dining and spa facilities located thereon (the “ Improvements ”), all located in Sauk County, Wisconsin, and commonly referred to as the “Great Wolf Lodge-Wisconsin Dells” (hereinafter referred to as the “ Property ”); and

WHEREAS, simultaneously with the execution of this Agreement, the Property has been contributed to Owner pursuant to the Formation Agreement; and

WHEREAS, simultaneously with the execution of this Agreement, the Wolf Partner (as defined in the Formation Agreement), an affiliate of Developer, has sold all of the general and certain of the limited partnership interests in Owner to an affiliate of CNL; and

WHEREAS, prior to the contribution of the Property to Owner and the sale of all of the general and certain of the limited partnership interests by Wolf Partner, Developer commenced development of an approximately 35,000 square foot addition to the indoor water-park component of the Improvements which addition includes a wave pool and other amenities and features (the “ Project ”); and

WHEREAS, the value allocated to the Property pursuant to the Formation Agreement and the sums of money simultaneously distributed to Wolf Partner pursuant to the Partnership Agreement (as such term is defined in the Formation Agreement) were based upon the value of the Property upon the satisfactory completion of the development of the Project; and

WHEREAS, Developer has received a direct benefit from the transactions contemplated by the Formation Agreement including, without limitation, the sale of the general and limited partnership interests to CNL; and

WHEREAS, the execution of this Agreement by Developer constitutes consideration to CNL for CNL entering into and consummating the transactions contemplated by the Formation Agreement including, without limitation, the purchase of the general and limited partnership interests from Wolf Partner, without which consideration CNL would not have entered into and consummated the transactions contemplated by the Formation Agreement; and

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WHEREAS, the parties to the Formation Agreement have established as of the date hereof an escrow account (the “ Construction Account ”) in which an amount equal to one hundred twenty percent (120%) of the budgeted cost of the remaining construction of the Project has been escrowed to be disbursed pursuant to this Agreement; and

WHEREAS, Developer has agreed to complete development of the Project; and

WHEREAS , Owner and Developer desire to enter into this Agreement to ensure the timely and complete development of the Project and the funding of the same.

NOW THEREFORE , in consideration of the mutual promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Recitals . The foregoing recitals are true and correct, and are incorporated herein by this reference.

2. Definitions .

a. The term “ Budget ” shall mean that certain budget for the construction of the Project attached hereto as Exhibit “B” .

b. The term “ Closing ” shall mean the date Owner acquired title to the Property pursuant to the Formation Agreement.

c. The term “ Collateral Assignment ” shall mean the collateral assignment of all Working Drawings, Permits, Warranties, construction contracts and all other documents relating to the development and construction of the Project executed by Developer in favor of Owner of even date herewith a copy of which is attached hereto as Exhibit “C ”.

d. The term “ Completed ” or “ Completion ” of the Project shall mean completion of construction of the Project materially in accordance with the Working Drawings (except for Punchlist Items, as defined herein) and the issuance of a Certificate of Occupancy for the Project.

e. The term “ Construction Contract ” shall mean the general contract between Developer and the general contractor attached hereto as Exhibit “D” .

f. The term “ Cost Overruns ” shall mean any construction costs in excess of the amounts set forth on the Budget for such line item and any unbudgeted cost of completing construction of the Project, excluding the contingency line items.

g. The term “ Cost Savings ” shall mean any savings realized because the actual cost of construction of any line item on the Budget is less than the amount set forth on the Budget for such line item, excluding the contingency line items.

h. The term “ Final Plan ” shall have the meaning ascribed to it in Section 5(a)(i) hereof.

i. The term “ General Contractor ” shall mean Kraemer Brothers LLC.

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j. The term “ Legal Requirements ” shall mean all applicable zoning, subdivision, land use, building construction, landmark, occupational health and safety, environmental and pollution control laws, statutes, codes, ordinances, and regulations.

k. The term “ Major Subcontract(s) ” shall mean a contract between Developer and a contractor or between the General Contractor and a subcontractor for the construction of the Project which has a face value of at least $50,000.

l. The term “ Net Cost Overruns ” shall mean the amount by which aggregate Cost Overruns exceed aggregate Costs Savings.

m. The term “ Permits ” shall mean a building permit and all other permits required by any governmental agency having jurisdiction over the Property, authorizing the construction of the Project.

n. The term “ Project Plan ” shall mean collectively the Budget, the Final Plan, the Working Drawings and the Project Schedule, all as defined herein.

o. The term “ Project Schedule ” shall mean that certain development schedule for the Completion of the Project, proposed draw request schedules and the expected dates of completion, which schedule is attached hereto as Exhibit “E” .

p. The term “ Punchlist Items ” shall mean only minor details of construction or decoration which remain to be done which do not unreasonably prevent the use of the Project for its intended purpose.

q. The term “ Warranties ” shall mean any and all warranties or guarantees provided by any contractor, supplier, or manufacturer in connection with the development and construction of the Project, including without limitation, any warranties or guarantees (i) contained in the Construction Contract; (ii) warranting or guaranteeing workmanship on the Project; (iii) associated with any roof(s) on the Project, or (iv) warranting or guaranteeing any equipment, fixtures, or appliances supplied or incorporated to the Project.

r. The term “ Working Drawings ” shall mean all working construction plans, specifications and drawings required for the construction of the Project.

3. Appointment . Owner hereby appoints and employs Developer as an independent contractor for the development of the Project in accordance with the Project Plan. Developer hereby accepts such appointment and employment and shall perform and fully discharge all of its duties, responsibilities and obligations set forth herein diligently, promptly and in full compliance with the provisions hereof. It is expressly understood and agreed by the parties hereto that the Developer shall deliver the Project to Owner substantially in accordance with the Project Plan. Developer may not incur debt or liabilities on Owner’s behalf. Developer hereby accepts such appointment and employment and shall perform and fully discharge all of its duties, responsibilities and obligations set forth herein diligently, promptly and in full compliance with the provisions hereof. Developer hereby acknowledges the collateral assignment to Owner of all Working Drawings, Permits, Warranties, construction contracts and all other documents associated with or useful in the construction of the Project pursuant to the Collateral Assignment, to which Developer or any affiliate of Developer is a party or of which Developer or any affiliate of Developer is a beneficiary, and which is assignable and in the event that any such contracts are not assignable without the counter-party’s consent, Developer shall obtain such consent.

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4. Term . The term of this Agreement shall commence on the Effective Date and shall, unless sooner terminated as herein provided, terminate upon Completion.

5. Scope of Developer’s Work . Developer shall develop and construct the Project in accordance with the Project Plan. In that regard, Developer’s duties, obligations and responsibilities shall include, but not be limited to the following services for Owner in connection with the development and construction of the Project.

a. Project Plan .

(i) Developer has caused the final site plan attached hereto as Exhibit “F” (the “ Final Plan ”) to be prepared for the Project. Based upon the Final Plan, Developer has engaged engineers and other professionals to perform site investigations in order to determine the physical and legal feasibility of the development of the Project. Such investigations have been completed in a satisfactory manner and construction of the Project has commenced. Prior to execution of this Agreement, Developer has delivered to the Owner the Project Plan, and a summary of the findings of the investigation completed through such date.

b. Due Diligence . Prior to the date hereof or simultaneously herewith, Developer has coordinated and delivered to Owner all material due diligence materials it obtained on and in connection with the Project.

c. Construction of the Project . The parties to this Agreement agree and acknowledge that the Working Drawings are not final as of the date hereof. Developer shall promptly commence and diligently pursue to completion the construction of the Project substantially in accordance with the Working Drawings as of the date of this Agreement, which Working Drawings shall not be materially changed without the consent of Owner (other than to finalize the Working Drawings in a manner consistent with the Working Drawings as of the date hereof and to implement the Working Drawings as so finalized), which consent may be withheld by Owner in its reasonable discretion, and with all applicable ordinances and statutes and in accordance with all Legal Requirements.

d. Contracts and Agreements . Developer shall (i) execute all contracts and agreements with architects, the General Contractor, the surveyor and engineers, (ii) act as the Project representative with respect to any such contract; (iii) provide a complete, fully executed original counterpart of each such contract entered into prior to the date hereof to Owner; and (iv) provide a complete, fully executed original counterpart of each such contract entered into as of or after the date hereof to Owner prior to the commencement of work or delivery of materials pursuant to such contract. Developer shall provide Owner with a copy of an executed Major Subcontract within ten (10) days of full execution.

e. Construction . Developer shall promptly commence and diligently pursue to Completion the construction of the Project substantially in accordance with the Project Plan and this Agreement.

f. Payments . Developer shall receive, review and approve requests for payment from contractors, consultants and other vendors of the Project prior to submittal of an advance request to Owner.

6. Authority of Developer; Designated Personnel . Owner hereby grants Developer the power and authority to perform the services required to be performed by Developer hereunder, and Developer agrees to perform same, in a manner consistent with the prevailing standard for developers of similar projects.

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7. Inspections. The Owner shall have the right, during the construction of the Project, to inspect it at any reasonable time and to reject and require to be replaced any materials or workmanship that do not substantially comply with the Working Drawings. It is agreed that all inspection services rendered by Owner’s officers or agents shall be rendered solely for the protection and benefit of the Owner. The Owner, its officers, or agents, shall not be liable for the failure of any dealer, contractor, craftsman or laborer to deliver the goods or perform the services to be delivered or performed by them. If Owner so desires, Owner may or Owner may engage a third party Inspecting Engineer (the “ Inspecting Engineer ”) to: (i) review and approve any changes to the Working Drawings, (ii) perform a construction cost analysis for the Owner, (iii) determine whether Developer has obtained the appropriate regulatory approvals, (iv) inspect and approve all construction, (v) approve all requests for disbursements, and (vi) conduct monthly inspections of the work on the Project. All costs incurred in connection with the services of Inspecting Engineer shall be paid for by the Owner.

8. Supervising Architect . At all times there shall be a supervising architect employed to supervise the construction of the Project. At the request of the Developer, Owner has approved Architectural Design Consultants, Inc. as the supervising architect (the “ Supervising Architect ”). Upon completion of the Project the Supervising Architect must issue a final certificate of completion certifying that the Project has been completed substantially in accordance with the Working Drawings, and that such Working Drawings comply with the Legal Requirements in all material respects.

9. Completion Date . Developer shall use all reasonable and diligent efforts to cause the Project to be Completed on or before March 31, 2006, and shall in any event cause the Project to be Completed on or before May 31, 2006, subject to delays caused by Force Majeure (the “ Completion Date ”), however, even in the event of delays cause by Force Majeure, no later than September 30, 2006. In the event that the Project is not Completed on or before March 31, 2006, all liquidated damages due and payable to Developer or any of its Affiliates by the General Contractor or any other contractor shall be promptly collected by Developer and delivered to Owner upon receipt thereof. For the purposes hereof, the term “Force Majeure” shall mean delays caused by reason of strikes, casualties, failure of utilities, riots, insurrection or Acts of God, beyond the reasonable control of a party.

10. Use and Disbursement of Funds .

a. Use of Funds . The Developer agrees that the proceeds disbursed to it hereunder are to be used solely for and in connection with the Project including the payment of material bills, labor and other uses and purposes all as contemplated pursuant to the Budget, or as otherwise approved by Owner.

b. Calculation of Advance . Advances shall consist of (a) the amounts payable by Developer pursuant to the Construction Contract and all other construction contracts, and (b) all other sums shown in the Budget, payable by or on behalf of Developer in connection with the Project. The aggregate amount of the advances will be the total of sums actually paid or incurred by Developer for each of the cost line items specified in the Budget, but in no event will the advances exceed the total of all sums allocated to such cost line items in the Budget. Notwithstanding anything herein to the contrary, Owner in its sole discretion shall have the right, but shall not be obligated, to authorize any advance, in whole or in part, before it becomes due and to authorize the increase, decrease, reallocation or reapplication of the amount of the funds to be disbursed for each item set forth in the Budget, provided, however, that no such approval shall be required in connection with reallocating funds from the

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contingency line items in the Budget to any other line item. To the extent that the value of the executed contract with the General Contractor exceeds the amount set forth in the line item in the Budget for such contract, funds shall be reallocated from the contingency line items in the budget to the line item for the contract with the General Contractor. Upon such reallocation, the remaining balance escrowed in connection with the contingency line items in excess of One Hundred Thousand and No/100 Dollars ($100,000.00) shall be released from escrow and paid to Developer; provided, however, that such release shall be conditioned upon the funds escrowed in connection with the line item in the Budget for the contract with the General Contractor being equal to one hundred twenty percent (120%) of the line item in the Budget for such contract. Owner shall not be obligated to authorize advances for construction costs more than the lesser of (a) the sum of (i) the cost of the work or materials incorporated into the Project, (ii) the costs of any deposits paid in connection with work or materials to be incorporated into the Project, and (iii) the cost of any materials purchased but not yet incorporated into the Project, provided however, that all such materials must, to the extent practical, be stored on-site at the Project, and to the extent not practical, must be under the control of Developer and stored off-site in a lien-free manner at a secure facility to which Owner shall be granted access upon its request, or (b) the sum of (i) the percentage of the work in place multiplied by the estimated total cost of the construction of the Project, as determined from time to time by Owner or Owner’s Inspecting Engineer, (ii) the costs of any deposits paid in connection with work or materials to be incorporated into the Project, and (iii) the cost of any materials purchased but not yet incorporated into the Project (subject to the limitations set forth in clause (a) above), all less the amount by which such estimated total cost exceeds the Budget and less the aggregate amount of advances theretofore made, all as approved for payment by Owner.

c. Method of Disbursement .

(i) Upon request from Developer, made no more frequently than once per month, Owner shall advance to Developer from the Construction Account costs and expenses in accordance with the Budget, including all necessary governmental applicant and permitting fees. Each such request to Owner shall be accompanied by a copy of the invoice or other reasonably satisfactory evidence of the expense and shall be on the draw request form attached hereto as Exhibit “G” and shall be signed by the General Contractor or other applicable contractor and approved by the Developer. The Owner will disburse one hundred percent (100%) of the amount due based on the status of completion of the Project. In addition, upon the request of Developer in accordance with the requirements of this subparagraph, Owner shall disburse that portion of the funds contained in the Construction Account which relate to work on the Project completed but exceed the amounts previously paid for such work at three (3) intervals: (i) at such time as the Project is twenty-five percent (25%) Complete; (ii) at such time as the Project is fifty percent (50%) Complete; and (iii) at such time as the Project is seventy-five (75%) Complete all as reasonably determined by Owner or Owner’s Inspecting Engineer; all so that (x) as of first such payment, the Construction Account shall contain one hundred twenty percent (120%) of the budgeted cost to complete the remaining seventy-five percent (75%) of the Project, (y) as of second such payment, the Construction Account shall contain one hundred twenty percent (120%) of the budgeted cost to Complete the remaining fifty percent (50%) of the Project; and (z) as of third such payment, the Construction Account shall contain Seven Hundred Fifty Thousand and No/100 Dollars ($750,000.00). Notwithstanding anything to the contrary herein, in no event prior to the final disbursement contemplated by Section 10(e) below shall the funds held in the Construction Account be less than Seven Hundred Fifty Thousand and No/100 Dollars ($750,000.00). Owner shall be given a minimum of fifteen (15) days notice prior to the time funds are to be advanced in order to allow time for inspection. Owner shall make payment directly to Developer by single payee check within fifteen (15) days after Developer’s request to Owner and delivery by Developer to Owner of the items set forth in Subsection 10.d. below.

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(ii) Owner shall have no obligation to fund Net Cost Overruns, but instead, Developer shall be obligated to absorb, incur and pay any and all Net Cost Overruns.

(iii) The balance of the Construction Account, if any, regardless of the cost of Completion of the Project, shall be disbursed to Developer upon Completion of construction and the satisfaction of all requirements of Subsection 10.e. below.

d. All Disbursements . The following shall be conditions precedent to all disbursements:

(i) The Developer shall not be in default in the performance of the terms and provisions of this Agreement.

(ii) Requests for disbursements shall be accompanied by:

(1) A certificate by the Developer that all bills for labor, materials and services then incurred and payable in connection with the Project have been paid or will be paid from the advance being requested, except those being disputed by Developer and for which arrangements reasonably satisfactory to Owner ens