GAMING DEVELOPMENT CONSULTING AGREEMENT

 

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                                                                   Exhibit 10.87

 

                               GAMING DEVELOPMENT

                              CONSULTING AGREEMENT

 

     THIS GAMING DEVELOPMENT CONSULTING AGREEMENT (hereinafter referred to as

the "Agreement") is made as of January 12, 2005 ("Effective Date") by and

between the Pawnee Trading Post Gaming Corporation ("Pawnee"), a wholly-owned

subsidiary of the Pawnee Tribal Development Corporation ("Pawnee TDC"), each

created under the Constitution of and a governmental subdivision of the Pawnee

Nation of Oklahoma ("Pawnee Nation"), a federally recognized Indian tribe, and

Lakes Pawnee Consulting, LLC, a Minnesota limited liability company ("Lakes").

 

                                     RECITALS

 

     A. The Pawnee Nation is a federally recognized Indian tribe eligible for

the special programs and services provided by the United States to Indian

tribes, and is recognized as possessing and exercising powers of

self-government. As a tribally-chartered corporation and governmental

subdivision, Pawnee TDC is vested with the sovereign immunity of the tribe, and

has been established to control and manage the economic affairs of the Pawnee

Nation. Pawnee TDC has established Pawnee, a wholly-owned subsidiary of Pawnee

TDC and tribally-chartered corporation, as the legal entity which will own and

operate certain gaming projects which are to be developed by Pawnee TDC on

behalf of the Pawnee Nation.

 

     B. Pawnee wishes to develop, construct and operate gaming facility projects

which will conduct Class II Gaming (and also Class III Gaming activities in the

event of federal agency approval of a Tribal-State Compact between the Pawnee

Nation and the State of Oklahoma permitting such gaming) ("Gaming Facilities,"

as further defined herein), together with related amenities such as a hotel,

food and beverage facilities, retail outlets, and ancillary building and

enterprises that enhance the Gaming Facilities ("Ancillary Facilities," as

further defined herein) (the Gaming Facilities and the Ancillary Facilities

together, the "Project Facilities"). Pawnee and Lakes intend that the Project

Facilities will be developed as individual projects according to a development

schedule agreed to by the parties. The Project Facilities are expected to

generate substantial revenues for Pawnee TDC, and therefore significantly

improve the social, economic and health conditions of present and future tribal

members, while strengthening the Pawnee Nation's overall economic

self-sufficiency and self-determination.

 

     C. Lakes has the requisite skills, resources, experience, and expertise

related to real estate acquisitions, financing, development and construction,

and operations of gaming facilities and related amenities to assist Pawnee in

the development, financing and construction of the Project Facilities and to

provide consulting services relating to Project Facilities.

 

 

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     D. Pawnee presently lacks the resources to develop and finance the Project

Facilities and desires to retain the services of the Lakes as set forth herein.

 

     E. For the compensation set forth herein, Lakes wishes to provide the

following services to Pawnee as more fully set forth herein: (1) funding of

Project Preliminary Development Loans; (2) assistance in arranging the Project

Permanent Financings; (3) development and construction management for the

Project Facilities; and (4) consulting services in connection with pre-opening

and post-opening operations of the Project Facilities.

 

     F. Pawnee desires to grant to Lakes the exclusive right to develop, arrange

for financing of, construct, equip and consult in connection with pre-opening

and post-opening operations of Pawnee's Project Facilities as set forth in this

Agreement, and Lakes desires to undertake those responsibilities in accordance

with this Agreement. Pawnee also desires to grant to Lakes the right to

participate in any other gaming project opportunity Pawnee pursues in the State

of Oklahoma under the same terms and conditions described herein.

 

     G. Pawnee and Lakes intend that this Agreement shall be operative and

binding upon the date of execution by the parties ("Effective Date").

 

     NOW, THEREFORE, in consideration of the hereinafter mutual promises and

covenants, and for other good and valuable consideration as set forth herein,

the receipt and sufficiency of which are expressly acknowledged, Pawnee and

Lakes agree as follows:

 

                                    ARTICLE 1

                                   DEFINITIONS

 

     "Affiliate" means, with respect to any specified Person, any other Person

that directly or indirectly, through one or more intermediaries, controls, is

controlled by, or is under common control with the specified Person. For the

purposes of this definition, "control" (including the terms controlling,

controlled by, or under common control with) means the possession, direct or

indirect, or the power to direct or cause the direction of the management and

policies of a person, whether through the ownership of voting securities,

partnership or member interests, by contract or otherwise.

 

     "Agreement" means this Gaming Development Consulting Agreement, as it may

be amended, supplemented, restated or replaced from time to time.

 

     "Ancillary Facilities" means any hotel, convention center, food and

beverage outlets, retail outlets, and any other enterprise designed to promote,

support, or enhance the particular Project's Gaming Facility; provided, however,

unless the parties otherwise agree, the term "Ancillary Facilities" shall not

include any of Pawnee Tribe's existing enterprises consisting of: fuel and

retail sales made at the existing U.S. Hwy 412 & State Hwy 18 "Travel Plaza"

currently operated by the Pawnee TDC.

 

     "Architect" any architectural or engineering firm duly licensed to provide

architectural services for the Project Facilities.

 

 

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     "BIA" means the Bureau of Indian Affairs, established within the United

States Department of Interior.

 

     "Capital Expenditures" means any expenditure that is considered a capital

expenditure under GAAP.

 

     "Claim" means any dispute, claim, question, or disagreement between Pawnee

and Lakes or any Affiliate of Lakes that is directly or indirectly related to

this Agreement, any Pawnee Note or the Project Facilities, whether arising under

law or in equity, whether arising as a matter of contract or a tort, and whether

arising during or after the expiration of this Agreement or the maturity of any

Pawnee Note.

 

     "Class II Gaming" means class II gaming as defined in IGRA.

 

     "Class III Gaming" means class III gaming as defined in IGRA.

 

     "Collateral" is defined in Section 3.1(a).

 

     "Compact" means any Tribal-State Compact executed between the Pawnee Nation

and the State of Oklahoma entered into and approved by the United States

Secretary of the Interior either before or after the Effective Date of this

Agreement, and any amendments or modifications thereto.

 

     "Contractor" means any Person providing materials or services for the

Project pursuant to a contract.

 

     "Costs of Operations" means, with respect to any period of time occurring

on or after the Opening Date, the total of all costs required under GAAP to be

treated as operating expenses of a particular Project's Gaming Facility,

including but not limited to the following (so long as they constitute such

expenses):

 

          (a) all fees imposed upon the particular Project's Gaming Facility by

     the NIGC;

 

          (b) all amounts required to be paid to the State pursuant to a Compact

     or all amounts required to be paid to any local governmental entity under

     any agreement to mitigate off-reservation impacts related to the particular

     Project's Gaming Facility;

 

          (c) license or other fees for background investigations performed by

     the Gaming Commission of "key employees" and "primary management officials"

     of the particular Project's Gaming Facility, as defined in 25 C.F.R.

     Section 502.14 and 25 C.F.R. Section 502.19, less any amounts collected

     from employees for those fees, provided, however, such amounts allocable

     hereunder shall not exceed $25 per employee per any 12 month period

      (although the Gaming Commission may charge employees more for such licenses

     or fees); and reasonable and customary regulatory fees imposed on the

     Gaming Facility by the Gaming Commission (which amounts shall be subject to

     an annually approved budget submitted by the Gaming Commission).

 

 

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          (d) depreciation and amortization expenses computed over reasonable

     periods permitted under GAAP and as further set forth below; and

 

           (e) to the extent properly allocable to the operation of the

     particular Project's Gaming Facility under GAAP, the following:

 

               (1) costs of administration, recruiting, hiring, firing and

          training employees;

 

                (2) compensation and benefits of employees;

 

               (3) interest charges on indebtedness (including the Project

          Permanent Financing) related to the particular Project's Gaming

          Facility; and

 

               (4) all other expenses, including, without limitation, those

          incurred for materials, supplies, inventory, utilities, repairs and

          maintenance (excluding Capital Expenditures), insurance and bonding,

          marketing, advertising, annual audits, accounting, legal or other

          professional and consulting, surveillance/security or guard services;

 

provided however, that "Costs of Operations" do not include repayment of

principal or Capital Expenditures or capital leases; and notwithstanding the

foregoing, for purposes of this definition of Costs of Operations, depreciation

for personal property shall be determined on a straight-line basis over a period

of seven (7) years from the date such property is placed in service, and

depreciation for real property, including improvements and buildings shall be

determined on a straight-line basis over a period of thirty (30) years.

 

     "Design Professional" means any Person other than an Architect engaged in

the business of providing engineering, landscape, interior design or other

design services.

 

     "Development Committee" is defined in Section 2.2.

 

     "Effective Date" means the date the parties execute this Agreement.

 

     "Equipment Contract" means any contract to finance or acquire equipment or

property for use in connection with the Project Facilities, exclusive of

property to be provided pursuant to a Project Construction Contract, whether

constituting or characterized as a loan or credit agreement, purchase agreement,

financing lease, capital lease, participating lease, license or otherwise.

 

     "Equipment Vendor" means any Person that sells, leases or licenses personal

property to Pawnee for use in connection with the Project Facilities.

 

     "Furnishings and Equipment" shall mean all furniture, furnishings and

equipment required for the operation of the Project Facilities, including,

without limitation:

 

          (i) cashier, money sorting and money counting equipment, surveillance

     and communication equipment, and security equipment;

 

 

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          (ii) slot machines, video games of chance, table games, keno equipment

     and other gaming equipment;

 

          (iii) office furnishings and equipment;

 

          (iv) specialized equipment necessary for the operation of any portion

     of the Project for accessory purposes, including equipment for kitchens,

     laundries, dry cleaning, cocktail lounges, restaurants, public rooms,

     commercial and parking spaces, and recreational facilities;

 

          (v) hotel equipment, furniture and furnishings (to the extent a hotel

     is included in the Project); and

 

          (vi) all other furnishings and equipment now or hereafter located and

     installed in or about the Project Facilities which are used in the

     operation of the Project Facilities.

 

     "GAAP" means generally accepted accounting principles set forth in the

opinions and pronouncements of the Accounting Principles Board of the American

Institute of Certified Public Accountants and statements and pronouncements of

the Financial Accounting Standards Board or in such other statements by such

other entity as have been approved by a significant segment of the accounting

profession.

 

     "Gaming Commission" means any tribal commission or body of the Pawnee

Nation that is lawfully performing the obligations and exercising the rights of

the tribal gaming regulatory agency established pursuant to the Pawnee Nation's

Gaming Ordinance.

 

     "Gaming Facility" means, in connection with the particular Project, all

buildings, structures and improvements, together with all furniture, fixtures

and equipment and personal property (whether tangible or intangible) to be used

in connection with the operation of Class II Gaming and/or Class III Gaming.

 

     "Gaming Facility Site" is defined in Section 2.4.

 

     "Gaming Operation" means a "gaming operation" as defined in NIGC

regulations, 25 C.F.R. Section 502.10.

 

     "Gaming Ordinance" means any valid gaming ordinance of the Pawnee Nation

that is in effect for purposes of and to the extent required by IGRA or the

Compact.

 

     "Governmental Authority" means the United States, the BIA, the State, the

Pawnee Nation and any governmental court, agency, department, commission, board,

bureau or instrumentality of the foregoing (including the NIGC), but only to the

extent it has legal jurisdiction over Class II Gaming or Class III Gaming at the

Gaming Facility, the construction of the Project Facilities, operation of the

Project Facilities, or Pawnee's or Lakes' obligations under this Agreement or

any Pawnee Note.

 

 

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     "IGRA" means the Indian Gaming Regulatory Act of 1988, P.L. 100-497, 25

U.S.C. Sections 2701, et seq., as it may be amended from time to time, and all

regulations of the NIGC promulgated thereunder.

 

     "Lakes" means Lakes Pawnee Consulting, LLC, a Minnesota limited liability

company and a wholly owned subsidiary of Lakes Gaming and Resorts, LLC.

 

     "Lakes Event of Default" is defined in Section 10.1.

 

     "Legal Requirements" means the Compact and all present and future federal,

State, Tribe and local laws, ordinances, rules, regulations, permits, licenses

and certificates, and any and all present and future orders of courts and

administrative bodies of competent jurisdiction, applicable to the Project, the

Project Facilities, this Agreement, or any Pawnee Note.

 

     "Management Contact" means a management contract as defined in IGRA.

 

     "Material Breach" by any party means (a) a material failure of the party to

perform a material obligation under this Agreement for reasons not excused under

Section 13.5 (Force Majeure); or (b) any material representation or warranty

made by a party to this Agreement proves to be knowingly false or erroneous in

any material way when made or at any time shall fail to be true and correct in

all material respects.

 

     "NIGC" means the National Indian Gaming Commission, established by IGRA.

 

     "Opening Date" means the first day on which a Project's Gaming Facility is

open to the public for the conduct of Class II Gaming and/or Class III Gaming

following the first advance under the Project Preliminary Development Loan.

 

     "Pawnee Event of Default" is defined in Section 10.3.

 

     "Pawnee Note or Pawnee Notes" are defined in Section 3.1(a).

 

     "Person" means any entity, whether an individual, trustee, corporation,

general partnership, limited partnership, limited liability company, limited

liability partnership, joint stock company, trust, estate, unincorporated

organization, business association, Indian tribe, commission, instrumentality,

firm, joint venture, Governmental Authority, or otherwise.

 

     "Project" means the development, construction and equipping and future

expansion of each Gaming Facility and, if mutually agreed by the Parties, the

development, construction and equipping of one or more Ancillary Facilities in

connection with the individual gaming projects, whether such work shall occur

simultaneously or in phases during the term of this Agreement, which the parties

anticipate to be developed under this Agreement, including, but not limited to,

the following: the "Trading Post Project". The scope of each Project and its

Project Facilities shall be mutually agreed to by the parties and made a part

hereof through an addendum to this Agreement.

 

     "Project Architect" is defined in Section 2.5(a).

 

 

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     "Project Architectural Agreement" is defined in Section 2.5(b).

 

     "Project Budget" is defined in Section 2.7.

 

     "Project Construction Contract" is defined in Section 5.1.

 

     "Project Costs" means (a) all costs of any nature (whether considered an

expense or Capital Expenditure) incurred by or on behalf of Pawnee, or by or on

behalf of Lakes or its Affiliates, in connection with any particular Project in

accordance with this Agreement, including all amounts advanced by Lakes to

Pawnee for the particular Project, including but not limited to all amounts

advanced under the Project Preliminary Development Loan and all amounts

evidenced by the Pawnee Notes; (b) all other amounts mutually agreed upon by

Lakes and Pawnee necessary for the development, construction and equipping of

the particular Project; and (c) with respect to the first Project developed

hereunder, $85,000 as required for initial and first year payments under the

Compact.

 

     "Project Development Fee" means the Project Development Fee for the

particular Project as calculated pursuant to Section 7.1 herein.

 

     "Project General Contractor" is defined in Section 5.1.

 

     "Project Permanent Financing" means one or more debt financings, which may

be in the form of one or more loans, financings, operating leases, issues of

debt securities, or other credit facilities, for which the source of funding is

not Lakes or an Affiliate of Lakes, incurred or issued by or on behalf of Pawnee

to finance or refinance all of the Project Preliminary Development Loan and

Project Costs.

 

     "Project Permanent Financing Date" means the first day on which Project

Permanent Financing is advanced to or made available for the benefit of Pawnee

for development of a particular Project.

 

     "Project Preliminary Development Budget" is defined in Section 3.1.

 

     "Project Preliminary Development Loan" is defined in Section 3.1.

 

     "Project Facilities" means the Gaming Facility and the Ancillary Facilities

in connection with the particular Project.

 

     "Proprietary Interest" means proprietary interest in a Gaming Operation

within the meaning of IGRA.

 

     "Revenues" means, with respect to a particular Project and any period of

time, all revenues of any nature derived directly or indirectly from the

operation of the Project Facilities and permitted under GAAP to be included in

the Project Facilities' total revenues for that period, less any credits or

refunds made to customers, guests, or patrons of the Project Facilities, not

considered a Cost of Operations and not applied in any prior period to reduce

Revenues. "Revenues" shall not include (i) any gratuities or service charges

added to the bill of a customer, guest or patron of the Project Facilities and

payable to employees of the Project Facilities, (ii)

 

 

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promotional allowances for which there is not a direct offsetting item treated

as a Cost of Operations, (iii) any sales, excise, gross receipt, admission,

entertainment, tourist or other taxes or charges (or assessments equivalent

thereto, or payments made in lieu thereof) that are received from a customer,

guest or patron and passed on to governmental or quasi-governmental entities

unrelated to the Pawnee, (iv) any lawful federal, state, or local taxes or

impositions (including any payment or fee in lieu of the foregoing) that are

collected from patrons of or vendors to the Project Facilities, (v) proceeds of

indebtedness of the Pawnee, and (vi) proceeds from insurance or condemnation

(other than proceeds of business interruption insurance and other proceeds

received to reimburse the Project's Project Facilities for any item accounted

for under GAAP as a Cost of Operations).

 

     "State" means the State of Oklahoma.

 

     "Term" of this Agreement is defined in Section 11.1.

 

     "Trading Post Project" means operation of the "Trading Post" in Pawnee

County currently operated by the Pawnee TDC at the intersection of State Highway

412 and County Road 18 to include the offering of Class II and/or Class III

gaming and other amenities to attract gaming customers of the Pawnee Trading

Post to be operated by Pawnee.

 

     "Tribal Agreement" shall mean the agreement between the Pawnee Nation and

Pawnee TDC and Lakes or its affiliates described in Section 8.2(n).

 

                                    ARTICLE 2

                             PRE-CONSTRUCTION PHASE

 

     Section 2.1 Effective Date. This Agreement shall become effective and

binding upon the date of execution by the parties.

 

     Section 2.2 Creation of Development Committee. Within 15 days after the

Effective Date of this Agreement, the parties shall establish a Development

Committee that will have the powers, obligations and authorities as provided

herein. The Development Committee shall consist of five (5) persons: three

Pawnee representatives and two Lakes representatives. Decisions of the

Development Committee shall be made by majority vote of all members with at

least one Pawnee representative and one Lakes representative present and if not

present, the other Pawnee representatives and the other Lakes representative,

participating and voting via teleconference.

 

     Section 2.3 Exclusive Right to Develop. Pawnee hereby grants to Lakes the

exclusive right to assist in the financing, development, construction, equipping

and consulting in connection with pre-opening and post-opening operations of any

Class II Gaming and/or Class III Gaming facility and any ancillary facilities

enhancing such gaming facility operated by Pawnee in the State of Oklahoma,

including a hotel, any convention center, food and beverage outlets, retail

outlets, and any other enterprise designed to promote, support, or enhance such

gaming facility.

 

 

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     Section 2.4 Gaming Facility Site Selection. With respect to each particular

Project, the Development Committee shall designate the location of the proposed

site on which the Gaming Facility shall be constructed (the "Gaming Facility

Site"), provided, the site upon which the facility housing Class II and/or Class

III Gaming shall be located on and must constitute "Indian lands" upon which the

Pawnee Nation may legally conduct gaming under IGRA.

 

     Section 2.5 Project Architect; Plans and Specifications; Design

Professionals. With respect to the pre-construction development of each

particular Project, the parties agree to the following provisions.

 

     (a)   Selection of Project Architect. As soon as reasonably practical after

          the Effective Date of this Agreement, Lakes shall propose to the

          Development Committee one or more Architects to provide customary

          architectural services with respect to the Particular Project's

          Project Facilities, although Pawnee also shall have the right to

          propose to the Development Committee additional architects for

          consideration.. As soon as reasonably practical, the Development

          Committee shall either approve or reject each proposed Architect. In

          the case of a rejection, the process described in this Section 2.5(a)

          shall be repeated until the Development Committee has approved one or

          more Architects proposed for the particular Project ("Project

          Architect").

 

     (b)   Project Architectural Agreement; Plans and Specifications. Once an

          Architect has been approved under Section 2.5(a), Lakes shall

          negotiate proposed agreements with each Architect approved, and shall

          propose the same to the Development Committee (each, a "Project

          Architectural Agreement"). As soon as reasonably practical, the

           Development Committee shall either approve or reject each proposed

          Project Architectural Agreement. In the case of a rejection, the

          process described in this Section 2.5(b) shall be repeated until the

          Development Committee has approved the Project Architectural

          Agreements proposed by Lakes. Upon approval, Pawnee shall take

          necessary action to authorize and execute the applicable Project

          Architectural Agreements. After execution of each Project

          Architectural Agreement, Lakes shall coordinate the Architect's

          preparation of mutually agreeable preliminary basic plans, drawings

          and specifications for the Project's Project Facilities. Lakes shall

          also coordinate the Architect's preparation of mutually agreeable

          construction drawings and final design, plans and specifications for

          the Project Facilities, and propose the same for approval by the

          Development Committee. The completed and approved final plans,

          together with any modifications thereof proposed by Lakes and approved

          by the Development Committee, shall constitute the "Project Plans and

          Specifications."

 

     (c)   Selection of Additional Design Professionals for Project. If the

          Development Committee determines that design services for the

          Project's Project Facilities from Design Professionals are desirable,

          Lakes and Pawnee may propose to the Development Committee one or more

          Design Professionals and the proposed

 

 

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          services of each. As soon as reasonably practical, the Development

          Committee shall either approve or reject the proposed Design

          Professionals. In the case of a rejection, the process described in

          this Section 2.5(c) shall be repeated until the Development Committee

          has approved all Design Professionals proposed by Lakes. After

          approval of each Design Professional by the Development Committee,

          Lakes shall coordinate the services of each Design Professional.

 

     Section 2.6 Other Project Contractors. Lakes shall propose to the

Development Committee for its approval all third-party professionals, such as

environmental specialists, feasibility analysts, and others providing services

or materials to the Project's Project Facilities as are customary for

undertakings such as the particular Project ("Project Contractors"). Pawnee

shall also have the right to propose Project Contractors to the Development

Committee. Lakes, in consultation with the Development Committee, and subject to

the final approval by the Development Committee, shall negotiate all Project

Contractor contracts. All contracts shall require the Project Contractor to

adhere in regard to recruitment, employment, reduction in force, promotion,

training and related employment actions to a publicly announced policy and

practice of Pawnee Nation preference and/or any publicly announced policy of

Indian preference, both of which must be reasonably promulgated by the Pawnee

Nation. Except as provided in this Agreement, each Project Contractor contract

shall be between the Project Contractor and Pawnee as determined by the

Development Committee. Notwithstanding the foregoing, all legal representation

of Pawnee shall be determined solely by Pawnee.

 

     Section 2.7 Project Budget. Lakes shall consult with the Architect to

develop and propose to the Development Committee a budget for all Project Costs

relating to the particular Project, along with a scheduled timeframe(s) for

development of the Project. Revisions to the Project budget may be proposed to

the Development Committee from time to time by Lakes until a final budget is

approved by the Development Committee. The Project budget approved by the

Development Committee, together with any modification thereafter proposed by

Lakes and approved by the Development Committee, shall include all Project Costs

and shall be the "Project Budget."

 

     Section 2.8 Contracts with Project Professionals. All professionals

providing services to a Project shall be independent of Lakes and its

Affiliates, unless otherwise agreed to by the parties in writing, and all

contracts with such professionals will be negotiated by Lakes and Pawnee on an

arms-length basis and in the best interests of Pawnee.

 

                                    ARTICLE 3

                      PROJECT PRELIMINARY DEVELOPMENT LOANS

 

     Section 3.1 Project Preliminary Development Loan. Subject to the terms and

conditions in this Article 3, Lakes shall make loans if needed from time to time

to Pawnee with respect to each particular Project for payment of Project

preliminary development costs (collectively the "Project Preliminary Development

Loan") set forth in a Project preliminary development budget proposed by Lakes

and approved by the Development Committee ("Project Preliminary Development

Budget"). Lakes shall have no obligation to advance any funds under the Project

Preliminary Development Loan in excess of the approved Project Preliminary

 

 

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Development Budget. The Project Preliminary Development Loan for a particular

Project shall become part of its Project Costs and shall include all advances

made by Lakes to Pawnee for that Project, including but not limited to those

evidenced by the initial Pawnee Note. A new Pawnee Note shall be executed for

each Project. Any Project Preliminary Development Loan and Lakes' obligation to

advance funds to Pawnee for any particular Project, shall be subject to each of

the following requirements:

 

     (a)   All advances made pursuant to a Project Preliminary Development Loan

          shall be evidenced by one or more promissory notes prepared by Lakes,

          substantially in the form attached as EXHIBIT A to this Agreement

          ("Pawnee Note"), in each case executed on behalf of Pawnee, and dated

          the date of the applicable loan (collectively with any note executed

           by Pawnee in favor of Lakes in connection with the development of any

          Project, the "Pawnee Notes"), to be secured by certain security

          interests and liens on (i) the proceeds of any Project Permanent

          Financing; (ii) all Revenues from the Project; (iii) the Project's

          Furnishing and Equipment; (iv) any fee lands upon which the Project is

          located (collectively, the "Collateral"). In no event shall Lakes have

          recourse to Revenue distributions already received by Pawnee from the

          Project and made to the Pawnee TDC in accordance with this Agreement

          and/or any applicable dominion account agreement.

 

     (b)   If the principal amount of the Pawnee Note is exceeded by any pending

           advance on the Project Preliminary Development Loan, prior to such

          advance being made and prior to Lakes having any obligation to fund

          such advance, Pawnee shall execute and deliver to Lakes either (i) an

          amendment to such Pawnee Note, increasing the principal amount of the

          note by an amount at least equal to the pending advance, or (ii) an

          additional Pawnee Note with a principal amount at least equal to the

          principal amount of the pending advance, as determined by Lakes.

 

     (c)   Amounts advanced from time to time as part of the Project Preliminary

          Development Loan shall bear interest, from the date of advance, at the

          greater of either the prime interest rate of Chase Manhattan Bank

          U.S.A., N.A. (or any successor bank) plus two percent (2%) or the same

          rate as the Project Permanent Financing for each particular Project in

          place at the time of the advance.

 

     (d)   Unless otherwise agreed by the parties in writing, all principal and

          interest accrued on each Project Preliminary Development Loan shall

          become due and payable in twenty-four (24) equal monthly installments

          beginning on the 25th day following the Opening Date for the Project

          if the loan has not previously been repaid through the Project

          Permanent Financing. Pawnee shall use its best efforts to cause the

          Project Preliminary Development Loan to be paid out of the proceeds of

           the Project Permanent Financing. Notwithstanding the foregoing, the

          Project Preliminary Development Loan shall become due and owing in its

          entirety upon (i) the occurrence of a Pawnee Event of Default under

          Section 10.3, which default is either incapable of cure or has not

          been cured within the time period set forth in Section 10.4, or (ii)

          termination of this Agreement under Section 11.3.

 

 

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     (e)   The Project Preliminary Development Loan may be prepaid without

          penalty by Pawnee at any time, in whole or in part, together with

          accrued and unpaid interest thereon.

 

     (f)   No amounts shall be loaned under the Project Preliminary Development

          Loan except for costs set forth in the Project Preliminary Development

          Budget, unless Lakes in its sole discretion agrees to advance such

          funds, in which case, such advances shall be Project Costs. Lakes

          shall have no obligation to advance funds for costs unless such costs

          are set forth in the Project Preliminary Development Budget and such

          costs:

 

          (i)   have been approved in advance by the Development Committee, or

 

          (ii) constitute payments properly due within the terms and scope of

               Project Contractors contracts.

 

          Upon any such payment by Lakes, an advance on the Project Preliminary

          Development Loan shall automatically occur.

 

     (g)   The Project Preliminary Development Loan, together with interest

          thereon, shall be payable from and secured by a pledge of the

          Collateral.

 

          To that end, Pawnee hereby pledges and grants a security interest in

          all the Collateral to Lakes to secure Pawnee's obligations under this

          Agreement and under the Pawnee Notes, further agrees to enter into

          standard and customary dominion account agreements/security

          agreements/mortgages or deeds of trust necessary to evidence and

          effectuate such liens, and authorizes Lakes to file those financing

          statements and similar documents and agreements as Lakes may believe

          appropriate to perfect such liens.

 

     (i)   Notwithstanding anything to the contrary in this Article 3, Lakes

          shall not be obligated to fund any advances on each Project

          Preliminary Development Loan after the earliest of:

 

          (i)   the Project Permanent Financing Date for the applicable Project;

 

          (ii) the second anniversary of the first advance under the applicable

               Project Preliminary Development Loan;

 

          (iii) the failure of Pawnee to cure, within the time prescribed in

               this Agreement, any default under this Agreement or any Pawnee

               Note for which Pawnee receives written notice;

 

          (iv) sixty (60) days after written notice by Lakes that a reasonable

               basis exists for concluding that this Agreement, the development

               of the Project, or the operation of the Project's Gaming Facility

               is not lawful;

 

 

                                      -12-

 

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