Exhibit 10.4
Loan Number: 2757504497
UNCONDITIONAL GUARANTY
     THIS UNCONDITIONAL GUARANTY is executed by the undersigned on this 28th day
of October, 2008.
     LYLE BERMAN (the “Guarantor”), hereby requests and authorizes FIRST STATE
BANK (“Lender”) to extend credit to LAKES ENTERTAINMENT, INC. (the “Borrower”),
an affiliate of the Guarantor, pursuant to the terms and conditions of, among
other documents:

  (a)   that $8,000,000 Secured Line of Credit Promissory Note;     (b)   that
Mortgage, Security Agreement, and Absolute Assignment of Rents (the “Mortgage”);
    (c)   that Secured Line of Credit Loan Agreement;     (d)   that Regulatory
Indemnification Agreement;     (e)   that Collateral Assignment of Life
Insurance Policy; and     (f)   that Absolute Assignment of Leases, Rents,
Contracts, Permits and Agreements, all of even date herewith

all of the above-referenced documents, along with all other documents executed
by Borrower and Guarantor to and in favor of Lender, being collectively referred
to herein as the “Loan Agreement.”
     It is recognized and agreed that Guarantor is a key employee, shareholder,
and chief executive officer of Borrower and will receive substantial financial
consideration, benefit and gain as a result of Lender’s extension of credit to
Borrower and Guarantor’s execution of this document.
     In consideration of the granting of said financial and credit
accommodations by Lender to Borrower, and for other good and valuable
consideration, and recognizing that Lender would not otherwise advance a loan to
Borrower absent the execution of this Unconditional Guaranty by Guarantor,
Guarantor hereby covenant and agrees with Lender as follows:
     1. Performance. Guarantor hereby guarantees the prompt payment and
performance, on demand, of:

  (a)   All of Borrower’s financial and other obligations and liabilities of
every nature as are set forth and specified in the Loan Agreement and in all
other documents referenced in the Loan Agreement or otherwise pertaining to the
subject financial transaction;     (b)   All of Borrower’s present and future
obligations and indebtedness incurred or created with respect to the Loan
Agreement or which otherwise may be created and reduced to writing by and
between Lender and Borrower; and     (c)   Any and all obligations of Borrower
under the terms of the Loan Agreement or any instrument evidencing, securing or
pertaining thereto.

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Loan Number: 2757504497
Time is of the essence in connection with the performance of Guarantor’s
obligations hereunder. Payment shall be made in any certified and
readily-available funds that, at the time of payment, are legal tender in the
United States of America for public and private debts. Guarantor’s obligations
hereunder are unconditional and irrevocable.
     2. Change of Terms. In such manner, upon such terms, and at such times as
Lender deems best, and without notice to the undersigned, by agreement between
them, Lender and Borrower may alter, compromise, accelerate, extend, or change
the time or manner for the payment of the indebtedness hereunder or the
performance of any other obligation hereby guaranteed; release Borrower, by
acceptance of a deed in lieu of foreclosure or otherwise, as to all or any
portion of the indebtedness; release, substitute, or add any one or more
guarantors or endorsers; accept additional or substituted security therefor; or
exchange, release, surrender, realize upon, or subordinate any security therefor
or deal with it in any manner that Lender may determine. No exercise or
non-exercise by Lender of any right hereby given Lender, no dealing by Lender
with Borrower or guarantor, endorser, or any other person, and no change,
impairment, or suspension of any right or remedy of Lender shall in any way
affect any of the obligations of Guarantor hereunder or any security furnished
by Guarantor or give Guarantor any recourse against Lender.
     3. Continuing Guaranty. This is a continuing guaranty relating to any and
all indebtedness extended by Lender to Borrower in connection with the Loan
Agreement from time to time. This continuing guaranty shall ensure the payment
and performance by Guarantor of all renewals, modifications and/or extensions of
the Loan Agreement.
     4. All Liability Included. The guaranteed debt includes, without limit, all
liability of the Borrower to the Lender, whether now or hereafter incurred under
the Loan Agreement, and any other document executed in connection therewith or
otherwise executed by Borrower or its affiliates in favor of Lender up to a
principal amount of $8,000,000 plus all other amounts owed pursuant to the Loan
Agreement. Termination of this Guaranty shall be effective only as to that
portion of the debt incurred after written notice of termination has been
received by an officer of Lender, and this Guaranty shall remain in full force
and effect as to all debt incurred before that time including loan commitments.
Regardless of when a renewal, extension, or pre-termination of the debt
guaranteed hereby occurs (with or without adjustment of interest rate or other
terms), the debt is deemed to have been incurred prior to termination to the
extent of the renewal or extension and to be fully covered by this Guaranty.
     5. Security Interest. In addition to all liens and rights of setoff given
to Lender by law against any property of Borrower or of Guarantor, Lender shall
have a general lien on and security interest in and a right of setoff against
all property of Guarantor now or hereafter in the physical possession of or on
deposit with Lender, whether held in a general or special account, on deposit or
for safekeeping or otherwise. Each such lien, security interest, and right of
setoff may be enforced or exercised without demand upon or notice to Guarantor
(unless such notice or demand is required by statute), shall continue in full
force unless specifically waived or released by Lender in writing and shall not
be deemed waived by any conduct of Lender, by any failure of Lender to exercise
any such right of setoff or to enforce any such lien or security interest or by
any neglect or delay in so doing.

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Loan Number: 2757504497
     6. Waiver. Guarantor hereby waives and agrees not to assert or take
advantage of:

  (a)   Any right to require Lender to proceed against Borrower or any other
person or to proceed against or exhaust any security held by Lender at any time
or to pursue any other remedy in Lender’s power before proceeding against
Guarantor;     (b)   The defense of the statute of limitations in any action
hereunder or in any action for the collection of the Loan Agreement or the
performance of any other obligation hereby guaranteed;     (c)   Any defense
that may arise by reason of the incapacity, illegality, lack of authority, death
or disability of any other person or persons or the failure of Lender to file or
enforce a claim against the estate (in administration, bankruptcy or any other
proceeding) of any other person or persons;     (d)   Demand, protest, and
notice of any kind including, without limiting the generality of the foregoing,
notice of the existence, creation, or incurring of any new or additional
indebtedness or obligation or of any action or non-action on the part of
Borrower, Lender, and endorser or creditor of Borrower or Guarantor or on the
part of any other person whomsoever under this or any other instrument in
connection with any obligation or evidence of indebtedness held by Lender as
collateral or in connection with the Loan Agreement or any other obligation
hereby guaranteed;     (e)   Any defense based upon an election of remedies by
Lender, including without limitation an election to proceed by non-judicial
rather than judicial foreclosure, which destroys or otherwise impairs the
subrogation rights of Guarantor or the rights of Guarantor to proceed against
Borrower for reimbursement, or both; and     (f)   Any duty on the part of
Lender to disclose to Guarantor any facts Lender may now or hereafter know about
Borrower, regardless of whether Lender has reason to believe that any such facts
materially increase the risk beyond that which Guarantor intends to assume or
has reason to believe that such facts are unknown to Guarantor or has a
reasonable opportunity to communicate such facts to Guarantor, it being
understood and agreed that Guarantor is fully responsible and has the means
available for being and keeping informed of the financial condition of Borrower
and of all circumstances bearing on the risk of non-payment of the Loan
Agreement or nonperformance of any other obligation hereby guaranteed.

The foregoing is not to be construed as a waiver of any notice requirement
explicitly set forth in the Loan Agreement or related documents.
     7. Guarantor Information. Guarantor warrants to Lender that he has adequate
means to obtain from Borrower, on a continuing basis, information concerning the
financial condition of Borrower and that he is not relying on Lender to provide
such information either now or in the

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Loan Number: 2757504497
future. Guarantor shall supply to Lender his financial statement on Lender’s
written request and in no event more frequently than on each anniversary date of
this Loan Agreement and otherwise as reasonably requested by Lender. Guarantor
covenants and agrees that he will always be fully informed regarding the status
of the Loan Agreement, all advances of principal under the Loan Agreement, the
in-balance or out-of-balance nature of the Loan Agreement, and all other
financial and other aspects of every nature pertaining to the Loan Agreement.
Lender will possess no obligation of any nature to provide Guarantor with any
information regarding the status of the Loan Agreement.
     8. Subrogation. Until all obligations outstanding in connection with the
Loan Agreement have been paid in full, Guarantor shall have no right of
subrogation and waives any right to enforce any remedy that Lender now has or
may hereafter have against Borrower and any benefit of, and any right to
participate in, any security now or hereafter held by Lender. Until all
obligations outstanding in connection with the Loan Agreement have been paid in
full, Guarantor shall not be a creditor with respect to this Guaranty in any
bankruptcy proceeding by or against Borrower. Instead, Guarantor shall be an
“entity” under the bankruptcy code in any such proceeding. Until all obligations
outstanding in connection with the Loan Agreement have been paid in full,
Guarantor shall have neither a contingent nor a non-contingent claim against
Borrower under this Guaranty.
     9. Subordination. Except as otherwise provided in this Paragraph, all
existing and future indebtedness of Borrower to Guarantor or to any person owned
in whole or in part by Guarantor and, if Borrower is a partnership, the right of
Guarantor to cause or permit any person owned in whole or in part by Guarantor
to withdraw any capital invested by such person in Borrower, is hereby
subordinated to the obligations under the Loan Agreement and, following an Event
of Default (as defined in the Loan Agreement) without the prior written consent
of Lender, such subordinated indebtedness shall not be paid or withdrawn in
whole or in part nor will Guarantor cause or permit any person owned in whole or
in part by Guarantor to accept any payment of or on account of any such
indebtedness or as a withdrawal of capital while this Guaranty is in effect. At
Lender’s request, Guarantor shall cause Borrower to pay to Lender all or any
part of such subordinated indebtedness and any capital which any such person
owned by any Guarantor is entitled to withdraw. Each such payment by Borrower in
violation of this Guaranty following an Event of Default shall be received by
the person to whom paid in trust for Lender, and Guarantor shall cause the same
to be paid to Lender immediately on account of the indebtedness.
     10. Bankruptcy. Except as provided in Paragraph 8 above, Guarantor shall
file in any bankruptcy or other proceeding in which the filing of claims is
required by law, all claims which Guarantor may have against Borrower relating
to any indebtedness of Borrower to Guarantor and will assign to Lender all
rights of Guarantor thereunder. If Guarantor does not file any such claim,
Lender, as attorney-in-fact for Guarantor, is hereby authorized to do so in the
name of Guarantor or, in Lender’s discretion, to assign the claim to a nominee
and to cause proof of claim to be filed in the name of Lender’s nominee. In all
such cases, whether in administration, bankruptcy or otherwise, the person or
persons authorized to pay such claim shall pay to Lender the full amount hereof
and, to the full extent necessary for that purpose; Guarantor hereby assigns to
Lender all of Guarantor’s rights to any such payment or distributions to which
Guarantor would otherwise be entitled.

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Loan Number: 2757504497
     11. Application of Payment. With or without notice to Guarantor, Lender, in
Lender’s sole discretion and at any time and from time to time and in such
manner and upon such terms as Lender deems fit, may apply any or all payments or
recoveries from Borrower or from any other Guarantor or endorser under any other
instrument or realized from any security, in such manner and order of priority
as Lender may determine, to any indebtedness of Borrower to Lender, whether or
not such indebtedness is guaranteed hereby or is otherwise secured or is due at
the time of such application. Any recovery realized from any other Guarantor
under any other instrument shall be first credited upon that portion (if any) of
the indebtedness of Borrower to Lender that is not guaranteed hereby.
     12. Cumulative Rights. The amount of Guarantor’s liability and all rights,
powers and remedies of Lender hereunder and under any other agreement now or at
any time hereafter in force between Lender and Guarantor, including any other
guarantee executed by Guarantor relating to any indebtedness of Borrower to
Lender, shall be cumulative and not alternative and such rights, powers and
remedies shall be in addition to all rights, powers and remedies given to Lender
by law. This Guaranty is in addition to and exclusive of the guarantee of any
other Guarantor of any indebtedness of Borrower to Lender.
     13. Independent Obligations. The obligations of Guarantor hereunder are
independent of the obligations of Borrower and, in the event of any default
hereunder, a separate action or actions may be brought and prosecuted against
Guarantor whether or not Borrower is joined therein or a separate action or
actions are brought against Borrower. In this regard, Guarantor waives any right
to require Lender to (a) proceed against Borrower, (b) proceed against or
exhaust any security held by Lender for payment of the note executed by Borrower
pursuant to the Loan Agreement, or (c) pursue any other remedy that Lender has
or to which it may be entitled. Without limiting the foregoing, Guarantor waives
any necessity or requirement, substantive or procedural, that an action
previously be commenced or a judgment previously be rendered against Borrower or
any other person or entity or that any other person or entity be joined in such
cause or that a separate action be brought against Borrower or any other person
or entity. Lender may maintain successive actions for other defaults. Lender’s
rights hereunder shall not be exhausted by its exercise of any of its rights or
remedies or by any such action or by any number of successive actions until and
unless all sums owing to Lender in connection with the Loan Agreement have been
paid in full and all other obligations hereby guaranteed have been fully
performed.
     14. Costs and Fees. Guarantor shall pay to Lender, promptly upon demand,
reasonable attorneys’ fees and all costs and other expenses that Lender expends
or incurs in collecting or compromising the indebtedness under the Loan
Agreement or any other obligation hereby guaranteed or in enforcing this
Guaranty against Guarantor whether or not suit is filed, expressly including
without limitation all costs, attorneys’ fees and expenses incurred by Lender in
connection with any insolvency, bankruptcy, reorganization, arrangement or
similar proceedings involving Guarantor that in any way affect the exercise by
Lender of its rights and remedies hereunder.
     15. Severability. Should any one or more provisions of this Guaranty be
determined to be illegal or unenforceable, all other provisions shall
nevertheless be effective.

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Loan Number: 2757504497
     16. Binding Effect. This Guaranty shall inure to the benefit of Lender, its
successors and assigns, including the assignees of any indebtedness hereby
guaranteed, and shall bind the heirs, executors, administrators, successors and
assigns of Guarantor. This Guaranty may be assigned by Lender with respect to
all or any portion of the Loan Agreement, and when so assigned Guarantor shall
be liable under this Guaranty to the assignee(s) of the portion(s) of the Loan
Agreement so assigned without in any manner affecting the liability of Guarantor
hereunder to Lender with respect to any portion of the Loan Agreement retained
by Lender.
     17. Expiration. Upon the payment in full to Lender of all sums owing to
Lender in connection with the Loan Agreement and the full performance of all
other obligations of Borrower to Lender hereby guaranteed, this Guaranty shall
be of no further force or effect.
     18. Reasonableness. Guarantor warrants and agrees that each of the waivers
set forth in this Guaranty are made with Guarantor’s full knowledge of their
significance and consequences, and that under the circumstances, the waivers are
reasonable and not contrary to public policy or law. No provisions of this
Guaranty or right of Lender hereunder can be waived nor can Guarantor be
released from his obligations hereunder except by a writing duly executed by an
authorized officer of Lender.
     19. Terminology. When the context and construction so require, all words
used in the singular herein shall be deemed to have been used in the plural and
the masculine shall include the feminine and neuter and vice versa. The word
“person” as used herein shall include any individual, company, firm,
association, partnership, corporation, trust or other legal entity of any kind
whatsoever.
     20. Exclusive Statement. This writing is intended by the parties as a final
expression of this Unconditional Guaranty and is also intended as a complete and
exclusive statement of the terms hereof. No course of dealing, course of
performance or trade usage, and no parol evidence of any nature shall be used to
supplement or modify any terms. Nor are there any conditions to the full
effectiveness of this agreement.
     21. Joint and Several Liability. If two or more persons are signing this
Guaranty as Guarantor, then all such persons shall be jointly and severally
liable for the obligations of Guarantor hereunder.
     22. Waiver of Change. Guarantor hereby expressly waives (a) any renewals or
extensions of time for payment of the guaranteed debt (b) any changes in the
terms of the guaranteed debt including increase or decrease in installment
payments or any interest rate adjustments, or (c) any other change in the
guaranteed debt including a change in the business structure of the Borrower.
     23. Dealing with Security Interest. The undersigned Guarantor hereby
expressly waives (a) surrender, release, exchange, substitution, dealing with or
taking any additional collateral, (b) abstaining from taking advantage of or
realizing upon any security interest, or other guarantee, (c) any impairment of
collateral by Lender including but not limited to, failure to perfect a security

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Loan Number: 2757504497
interest in the collateral, and (d) any impairment by Lender of Guarantor’s
rights of recourse against other parties.
     24. Unconditional Liability. Guarantor has signed this Unconditional
Guaranty and has unconditionally delivered it to Lender, and failure to sign
this or any other guaranty by any other person shall not discharge the liability
of any signer. The unconditional liability of the signers applies whether signer
is jointly and severally liable for the entire amount of the debt, or for only a
pro rata portion.
     25. Errors and Omissions. Guarantor hereby waives all errors and omissions
in connection with Lender’s administration of the guaranteed debt, except
behavior which amounts to bad faith.
     26. Remedies. As a condition of the payment or performance by Guarantor,
Lender is not required to enforce any remedies against Borrower or any other
party liable to Lender on account of the guaranteed debt. Nor is Lender required
to seek to enforce or resort to any remedies with respect to any security
interest, lien or encumbrance to Lender by the Borrower or any other party.
     27. Enforceability. This Unconditional Guaranty remains fully enforceable
irrespective of any defenses which Borrower may assert on the underlying debt,
including but not limited to failure of consideration, breach of warranty,
payment, statute of frauds, statute of limitations, accord and satisfaction, and
usury.
     28. Liability for Full Amount. Guarantor agrees that, if at any time all or
any part of any payment previously applied by Lender to any of the guaranteed
debt must be returned by Lender for any reason, whether by court order, or
settlement, the Guarantor remains liable for the full amount returned as if such
amount had never been received by Lender notwithstanding any termination of the
guaranty agreement or cancellation of any note or other agreement evidencing the
obligation of Borrower.
     29. Governing Law. This Guaranty shall be governed by and construed in
accordance with the laws of the State of Arkansas. Except as provided in any
other written agreement now or at any time hereafter in force between Lender and
Guarantor, this Guaranty shall constitute the entire agreement of Guarantor with
Lender with respect to the subject matter hereof, and no representation,
understanding, promise or condition concerning the subject matter hereof shall
be binding upon Lender unless expressed herein. Guarantor hereby irrevocably
consents to the exclusive jurisdiction of the courts of the State of Arkansas
with respect to any action or proceedings arising between the parties and
expressly covenants and agrees that the exclusive jurisdiction for all disputes
and enforcement actions arising hereunder shall occur in Faulkner County,
Arkansas.
     30. JURY WAIVER. GUARANTOR HEREBY WAIVES GUARANTOR’S RIGHT TO A JURY TRIAL
IN THE EVENT OF ANY DISPUTE OR LITIGATION ARISING HEREUNDER OR UNDER ANY RELATED
DOCUMENTS EXECUTED IN CONNECTION HEREWITH.

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Loan Number: 2757504497
     31. Multiple Counterpart Execution. It is expressly agreed and understood
that this document is being executed in multiple counterparts and with multiple
signature pages and that all signature pages, when attached to and assembled
with this document, shall constitute and comprise a single document that is
enforceable against all parties on all signature pages in accordance with this
document’s terms.
     32. Notices. All notices or other written communications hereunder shall be
deemed to have been properly given (a) upon delivery, if delivered in person or
by facsimile transmission with receipt acknowledged by the recipient thereof,
(b) one (1) Business Day (defined below) after having been deposited for
overnight delivery with any reputable overnight courier service, or (c) three
(3) Business Days after having been deposited in any post office or mail
depository regularly maintained by the U.S. Postal Service and sent by
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
If to Guarantor:
LYLE BERMAN
c/o Berman Consulting Corp.
130 Cheshire Lane, Suite 101
Minnetonka, Minnesota 55305-1062
With a copy to:
MASLON EDELMAN BORMAN & BRAND, LLP
3300 Wells Fargo Center
90 South Seventh Street
Minneapolis, Minnesota 55402
Attn: Neil I. Sell
If to Lender:
FIRST STATE BANK
Attn: Randy Sims
620 Chestnut Street
Conway, Arkansas 72032
With a copy to:
GILL ELROD RAGON OWEN & SHERMAN, P.A.
Attn: Daniel Goodwin
425 West Capitol Avenue, Suite 3801
Little Rock, Arkansas 72201
or addressed as such party may from time to time designate by written notice to
the other parties.
     Either party by notice to the other may designate additional or different
addresses for subsequent notices or communications.

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Loan Number: 2757504497
     For purposes of this Subsection, “Business Day” shall mean a day on which
commercial banks are authorized to conduct business or Lender is open for
business in the State of Arkansas.
[The remainder of this page intentionally left blank;
signatures appear on next page.]

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Loan Number: 2757504497
[Unconditional Guaranty Signature Page]
     THIS UNCONDITIONAL GUARANTY is executed on the date set forth in the
preface.

            GUARANTOR:
      /s/ Lyle Berman      Lyle Berman           

ACKNOWLEDGMENT
STATE OF MINNESOTA )
                                              )ss.
COUNTY OF HENNEPIN )
     On the 27 day of October, 2008, personally appeared before me, the
undersigned authority, duly commissioned and qualified in and for said county
and state, the within named LYLE BERMAN, duly identified before me, who
acknowledged that he is the Guarantor in the foregoing Unconditional Guaranty.
     WITNESS my hand and official seal at my office in the state and county
aforesaid on this 27 day of October, 2008.

          (STAMP) [c47410c4741001.gif]     /s/ Damon E. Schramm    Notary Public
    My Commission expires:
Jan 31, 2001     

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