EXHIBIT 10.226
EMPLOYMENT AGREEMENT
     This Agreement (the “Agreement”) is made and entered into as of this 5th
day of March, 2005 by and between Mark Sicilia, an individual resident of the
State of Mississippi (the “Executive”) and Lakes Entertainment, Inc., a
Minnesota corporation, including its subsidiaries and affiliates (collectively,
“Employer” or the “Company”).
RECITALS
     WHEREAS, the Board of Directors of the Company (the “Board”) has determined
that it is in the best interests of the Company to employ and retain Executive
as its Vice President of Food & Beverage; and
     WHEREAS, Executive has accepted this position with the Company; and
     WHEREAS, the Board and the Executive wish to enter into this Agreement to
document the terms of the Executive’s employment with the Company; and
     WHEREAS, the Board wishes to encourage the Executive to continue his
employment with the Company subject to the terms and conditions of this
Agreement, and the Board believes that this objective can be best achieved by
providing for a compensation arrangement for the Executive upon the Executive’s
termination of employment under certain circumstances (as hereinafter defined).
     NOW, THEREFORE, in consideration of the mutual promises and covenants and
the respective undertakings of the Company and Executive set forth below, the
Company and Executive agree as follows:
AGREEMENT
     1. Employment. The Company hereby employs Executive as its Vice President
of Food & Beverage, and Executive accepts such employment and agrees to perform
services for the Company, for the period and upon the other terms and conditions
set forth in this Agreement.
     2. Term. Executives employment by the Company will be for a term of three
years, commencing January 24, 2005 (the “Initial Term”), unless earlier
terminated as provided in Section 8 below. If either Company or Executive
desires to continue the employment relationship beyond the Initial Term, such
party will give the other party written notice by November 1, 2007. The Initial
Term will be automatically extended for successive one-year periods, unless
either party gives written notice to the other at least 90 days prior to the
expiration of the Initial Term or applicable one-year extension that such party
elects not to extend the period of employment. Like the Initial Term, any
one-year extension may be earlier terminated as provided in Section 8 below.
     3. Base Salary. Employer shall pay Executive an annualized base salary
(“Base Salary”) in the amount of $200,000, or such higher amount as may from
time-to-time be determined by Employer in its sole discretion. Such salary shall
be paid in equal installments in the manner and at the times as other employees
of Employer are paid.

 

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     4. Incentive Compensation/Stock.
     a) Incentive Compensation. Except as provided in Section 8(b) below,
Executive will receive an annual bonus in an amount equal to at least 40%, and
up to 60%, of Executive’s Base Salary. The amount of the bonus will be subject
to the recommendation of Employer’s senior management and the approval of the
Compensation Committee of Employer’s Board of Directors.
     b) Stock. Pursuant to the Lakes Entertainment, Inc. 1998 Stock Option and
Compensation Plan, Executive will be granted a nonqualified stock option for the
purchase of 75,000 shares of common stock of the Company, provided that
Executive executes the Non-Qualified Stock Option Agreement in form and content
substantially similar to Exhibit A attached hereto.
     5. Benefits. The Company shall provide to Executive such benefits as are
provided by Employer to its other vice presidents. Executive shall pay for the
portion of the cost of such benefits as is from time-to-time established by
Employer as the portion of such cost to be paid by its vice presidents. Employer
will also reimburse Executive for the reasonable costs that he incurs to
relocate to the Twin Cities metropolitan area pursuant to Employer’s relocation
policy.
     6. Costs and Expenses. Employer will reimburse Executive for reasonable
travel and other business expenses incurred while performing Executive’s duties
under this Agreement upon Executive submitting suitable documentation.
     7. Duties. The duties to be performed by Executive during the term of this
Agreement shall be designated from time-to-time by the President or his
designee(s).
     8. Termination.
     a) Without Cause or Constructive Termination. In the event Company
terminates Executive’s employment “Without Cause,” or Executive terminates
Executive’s employment and such termination constitutes a “Constructive
Termination” (as both quoted terms are defined in Section 9 below), Executive
shall be entitled to receive the benefits in subsections (1) through (5) below.
All payments are subject to applicable federal and state income tax and other
legally required withholdings and any other deductions that Executive
voluntarily authorizes in writing. All payments in subsections (1), (2), and
(3) will be on a regular basis pursuant to Sections 3 and 4 of this Agreement.
The payments in subsections (2) through (5) are conditioned on Executive
executing a General Release of legal claims in form and content satisfactory to
Employer.

  (1)   Executive’s Base Salary through the last day of Executive’s employment;
    (2)   An amount equal to 12 months of Executive’s Base Salary;     (3)   An
amount equal to the average bonus that Executive received in the Company’s
fiscal year(s) prior to the fiscal year in which Executive’s employment
terminated;     (4)   All outstanding options to purchase shares of stock in the
Company shall immediately vest and become immediately exercisable and, Executive
or Executive’s legal

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      representative shall have until the date that is two years after the date
on which Executive ceases to be employed by the Company to exercise Executive’s
right to purchase shares of stock of the Company under any such option
agreements (whether entered into before or after the date of this Agreement);
and

  (5)   Executive and Executive’s dependents will have the right under
applicable law to continue coverage for all medical and dental insurance
benefits of the type that they received immediately prior to the date of such
termination (or, in the event their participation in a plan pursuant to which
any such benefits are provided is barred by the terms of such plan, benefits
that are not less favorable to them than the benefits under such plan). Employer
will pay its share of the cost of such benefits for 12 months from the last day
of Executive’s employment, or until Executive obtains essentially equivalent and
no less favorable benefits from a subsequent employer, whichever occurs first.
Executive and his dependents will continue to bear the same portion of the cost
of such benefits, if any, as they bore immediately prior to the date of such
termination. Executive will complete and submit the necessary paperwork to
continue the above benefits.

     b) With Cause or Voluntary Resignation. In the event Company terminates
Executive’s employment other than “Without Cause,” or Executive voluntarily
terminates employment and such termination is not a “Constructive Termination,”
Executive shall be entitled to receive only the payments set forth in
Section 8(a)(1) above. In either event, Executive’s bonus for the fiscal year in
which such termination occurred will be deemed to have been not earned and due
and owing.
     9. Certain Definitions.
     a) Termination Without Cause.
     Termination “Without Cause” shall mean termination of the Executive’s
employment by the Company for reasons other than:

  (1)   the commission of a felony;     (2)   the theft or embezzlement of
property of Employer or the commission of any similar act involving moral
turpitude;     (3)   the failure of Executive to substantially perform his
material duties and responsibilities under this Agreement for any reason other
than the Executive’s death or disability, which failure if, in the opinion of
the Company such failure is curable, is not cured within 30 days after written
notice of such failure from the Company’s Board of Directors specifying such
failure;     (4)   the Executive’s material violation of a significant Company
policy; which violation the Executive fails to cure within 30 days after written
notice of such violation from the Company specifying such failure; or which
violation the Company, in its opinion, deems noncurable; or

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  (5)   the revocation of any gaming license issued by any governmental entity
to Executive as a result of any act or omission by the Executive.

     b) Constructive Termination.
          “Constructive Termination” shall mean termination of the Executive’s
employment by Executive, exercising good faith, and for any of the following
reasons, which Company fails to cure or resolve within 30 days after written
notice of such matter from the Executive specifying such matter:

  (1)   a material, adverse change of Executive’s responsibilities, authority,
status, position, offices, titles, duties or reporting requirements;     (2)   a
material adverse change in Executive’s annual compensation or benefits (but not
if such change is the result of a general reduction in the annual compensation
or benefits of the Company’s other vice presidents;     (3)   a requirement to
relocate in excess of 50 miles from Executive’s then current place of employment
without Executive’s consent; or     (4)   the breach by the Company of any
material provision of this Agreement or failure to fulfill any other contractual
duties owed to the Executive.

     For the purposes of this definition, Executive’s responsibilities,
authority, status, position, offices, titles, duties and reporting requirements
are to be determined as of the date of this Agreement.
     11. Confidentiality.
     Except to the extent required by law, Executive shall keep confidential and
shall not, without the Company’s prior, express written consent, disclose to any
third party, other than as reasonably necessary or appropriate in connection
with Executive’s performance of his duties under this Agreement or any
employment agreement, if any, any information regarding the Company, its
business, methods of operation, employees, projects, plans and prospects, which
information has not been released to the public by the Company. The provisions
of this Section 11 shall remain in full force and effect beyond the date of
termination of Executive’s employment for any reason.
     12. Agreement Not to Compete.
     a) Noncompetition. Executive will not directly or indirectly engage in any
of the following actions on or before the date that is two years after the date
on which Executive’s employment by the Company is terminated by either party for
any reason:

  (1)   Own any interest in, manage, operate, join, control, lend money or
render other financial assistance to, participate in or be connected with, as an
officer, employee, partner, stockholder, consultant or otherwise, any entity
that has a gaming operation within 50 miles of

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      any of the Company’s existing operations or proposed sites which are under
contract at the time of such termination; or   (2)   Solicit for employment,
endeavor to entice away from the Company or otherwise interfere with the
Company’s relationship with any person who is employed by or otherwise engaged
to perform services for the Company, whether for Executive’s own account or for
the account of any other individual, partnership, firm or corporation or other
business entity.

     b) Blue Pencil Doctrine. If the scope of the restrictions in this
Section 12 is determined by any court of competent jurisdiction to be too broad
to permit the enforcement of all of the provisions of this Section 12 to their
fullest extent, then the provisions of this Section 12 shall be construed (and
each of the parties hereto hereby confirm that its/his intent is that such
provisions be so construed) to be enforceable to the fullest extent permitted by
applicable law. To the maximum extent permitted by applicable law, Executive
hereby consents to the judicial modification of the provisions of this
Section 12 in any proceeding brought to enforce such provisions in such a manner
that renders such provisions enforceable to the maximum extent permitted by
applicable law.
     c) Survival of Terms. The provisions of this Section 12 shall remain in
full force and effect beyond the date of termination of Executive’s employment
for any reason.
     13. Acknowledgments; Irreparable Harm.
     Executive agrees that the restrictions on competition, solicitation and
disclosure in this Agreement are fair, reasonable and necessary for the
protection of the legitimate interests of the Company. Executive further agrees
that a breach of any of the covenants set forth in Sections 11 and 12 of this
Agreement will result in irreparable injury and damage to the Company for which
the Company would have no adequate remedy at law, and Executive further agrees
that in the event of a breach, the Company will be entitled to an immediate
restraining order and injunction to prevent such violation or continued
violation, without having to prove damages, in addition to any other remedies to
which the Company may be entitled to at law or in equity.
     14. Notification to Subsequent Employers.
     Executive grants the Company the right to notify any future employer or
prospective employer of Executive concerning the existence of and terms of this
Agreement and grants the Company the right to provide a copy of this Agreement
to any such subsequent employer or prospective employer.
     15. Resolution of Disputes.
     Any controversy, claim, or dispute of any kind arising out of or relating
to this Agreement, its interpretation, or alleged breach shall be settled by
binding arbitration in accordance with the Commercial Arbitration Rules of the
American Arbitration Association, and a judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction. The parties
acknowledge that binding arbitration offers the opportunity to have any dispute
resolved in the fairest possible manner. Both sides would give up any right to a
jury trial, but the parties believe that the benefits of arbitration
significantly outweigh any disadvantage.

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     The parties also believe arbitration is likely to be both less expensive
and less time-consuming than litigation of any dispute there might be.
Arbitration will be conducted in the Minneapolis-St. Paul metropolitan area. An
arbitration panel will be created, consisting of one arbitrator whom Executive
selects, one arbitrator selected by the Company, and a neutral arbitrator
selected by the other two arbitrators. The Company will pay the fees of the
arbitrator whom it selects and the neutral arbitrator, and Executive will pay
the fees of the arbitrator whom he selects.
     16. Withholding.
     The Company may withhold from any amounts payable under this Agreement the
minimum federal, state and local taxes and other legally required withholdings
as shall be required pursuant to any applicable law, statute or regulation.
     17. Successors and Assigns.
     This Agreement is binding upon, and shall inure to the benefit of the
Company and the Executive, and all successors and assigns of the Company. This
Agreement shall be binding upon and inure to the benefit of the Executive and
his heirs and personal representatives. The Company may assign this Agreement.
     18. Miscellaneous.
     a) Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Minnesota, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified except by a written agreement executed by the parties
hereto or their respective successors and legal representatives.
     b) Notices. All notices and other communications under this Agreement shall
be in writing and shall be given by hand to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
IF TO THE EXECUTIVE:

Mark Sicilia
Lakes Entertainment, Inc.
130 Cheshire Lane
Minnetonka, MN 55305-1062

IF TO THE COMPANY:

Lakes Gaming, Inc.
Attn: Timothy J. Cope, President and Chief Financial Officer
130 Cheshire Lane
Minnetonka, MN 55305

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WITH A REQUIRED COPY TO:

Maslon Edelman Borman & Brand, LLP
Attn: Neil I. Sell
3300 Wells Fargo Center
90 South Seventh Street
Minneapolis, MN 55402-4140
or to such other address as either party furnishes to the other in writing in
accordance with this paragraph (b) of Section 18. Notices and communications
shall be effective when actually received by the addressee.
     c) Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement. If any provision of this Agreement shall be held
invalid or unenforceable in part, the remaining portion of such provision,
together with all other provisions of this Agreement, shall remain valid and
enforceable and continue in full force and effect to the fullest extent
consistent with the law.
     d) Withholding. Notwithstanding any other provision of this Agreement, the
Company may withhold from amounts payable under this Agreement all federal,
state, local and foreign taxes that are required to be withheld by applicable
laws or regulations.
     e) No Waiver. The Executive’s or the Company’s failure to insist upon
strict compliance with any provision of, or to assert any right under, this
Agreement shall not be deemed to be a waiver of such provision or right or of
any other provision of or right under this Agreement.
     f) Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed an original, and said counterparts shall
constitute but one and the same instrument.
     19. Entire Agreement.
     This Agreement constitutes the entire agreement between the parties,
supersedes all prior agreements and understandings between the parties with
respect to the subject matter hereof and may not be modified or terminated
orally. No modification, termination or attempted waiver of this Agreement shall
be valid unless in writing and signed by the party against whom the same is
sought to be enforced.
     20. Voluntary Agreement.
     Executive acknowledges that he has had the opportunity to review this
Agreement and confer with legal counsel of his choice prior to executing it.
Executive enters into this Agreement voluntarily and has not relied on any
statements or representations by the Company except as set forth in this
Agreement.

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     IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and
pursuant to the due authorization of its Board, the Company has caused this
Agreement to be executed in its name and on its behalf, all as of the day and
year first written above.

      LAKES ENTERTAINMENT, INC   EXECUTIVE: By: /S/ Timothy Cope
 
Its: President   /S/ Mark Sicilia
 
Mark Sicilia

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