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                                                                   EXHIBIT 10.75


                               OPERATING AGREEMENT
                                       OF
                       LAKES KARSS-SHINGLE SPRINGS, L.L.C.


         This OPERATING AGREEMENT of LAKES KARSS - SHINGLE SPRINGS, L.L.C. (the
"Company") is made as of this 29th day of July, 1999 by Lakes Shingle Springs,
Inc. ("LASS") and Kean Argovitz Resorts-Shingle Springs, L.L.C. ("KARSS") and
those other persons, if any, who from time to time become parties to or are
otherwise bound by this Agreement as provided herein.

         WHEREAS, Lakes Gaming, Inc. ("LACO") and KARSS have entered into a
Letter Agreement of even date, a copy of which is attached hereto as Exhibit
"A", (the "Letter Agreement") which sets forth the terms under which they
propose to develop and operate a gaming Facility and related facilities for the
Shingle Springs Band of Miwok Indians (the "Tribe");

         WHEREAS, KARSS is a party with the Tribe to a certain Development
Agreement dated June 11, 1999, a copy of which is attached hereto as Exhibit B
(the "Development Agreement");

         WHEREAS, KARSS is a party with the Tribe to a certain Management
Agreement dated June 11, 1999, a copy of which is attached hereto as Exhibit C
(the "Tribe Management Agreement");

         WHEREAS, KARSS has assigned its rights under the Development Agreement
and the Management Agreement to the Company and the Company has assumed KARSS's
obligations under the Agreements (the "Assignment and Assumption Agreement") ;

         WHEREAS, the Company has entered into a management agreement with LASS,
a copy of which is attached as Exhibit D (the "LASS Management Agreement"),
pursuant to which LASS will provide services on behalf of the Company as
required under the Tribe Management Agreement;

         NOW THEREFORE, the parties hereto, desiring to form a limited liability
company for the purposes set forth in this Agreement, hereby agree as follows:

                     ARTICLE 1: ORGANIZATION AND DEFINITIONS

         1.1 FORMATION AND NAME. The Members agree to the formation of a limited
liability company under the name "LAKES KAR-Shingle Springs, L.L.C.," or any
other name determined by the Company in accordance with governing law pursuant
to the provisions of the Act and this Agreement, and have caused the Certificate
of Formation to be prepared, executed and filed with the Secretary of State of
the State of Delaware. The Company will develop and operate a gaming


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facility and certain related facilities.

1.2 INITIAL OWNERSHIP. Upon execution of this Operating Agreement, the Ownership
Interests of the Company are as set forth below:

<TABLE>
<CAPTION>
         MEMBER                                        OWNERSHIP INTEREST                 INITIAL CONTRIBUTION
         ------                                        ------------------                 --------------------
<S>                                                    <C>                                <C>
         Kean Argovitz Resorts-                               40%                                $500
         Shingle Springs, L.L.C.

         Lakes Shingle Springs, Inc.                          60%                                $500
</TABLE>

         The Ownership Interests may be adjusted from time to time in accordance
with the provisions of this Agreement. If LACO pledges, guarantees, loans or
otherwise materially encumbers its balance sheet in any way or makes a
commitment in excess of $25 million dollars in furtherance of the Equity Advance
for funding obligations to the Tribe under the Agreements, then the Ownership
Interest shall be 30% to KARSS and 70% to LACO. In the event that LACO does
pledge, guarantee, loan or otherwise materially encumber is balance sheet in
excess of $25 million dollars, it is agreed that KARSS has the option to
participate in this commitment of whatever nature and to share the obligation
equally with LACO ("the Excess $25 million dollars Commitment"). If KARSS
chooses to exercise its option to participate in the excess $25 million dollars
Commitment, and demonstrates to the reasonable satisfaction of LACO its ability
to perform on the commitment, then KARSS shall retain its 40% Ownership Interest
in the Company. The Ownership Interests of the Members shall at all times be
maintained on Appendix I hereto.

1.3 OFFICE AND AGENT: PRINCIPAL PLACE OF BUSINESS. The initial registered office
of the Company in Delaware is located at 1209 Orange Street, Wilmington,
Delaware 19801, and its initial registered agent at such address is CT
Corporation. The Company may subsequently change its registered office or
registered agent in Delaware in accordance with the Act. The initial principal
place of business of the Company shall be at 130 Cheshire Lane, Minnetonka,
Minnesota.

1.4 TERM. The Company begins on the date its Certificate of Formation is filed
with the Delaware Secretary of State and shall continue in perpetuity, or such
earlier date as a Dissolution may occur.

1.5 FOREIGN QUALIFICATION. After formation of the Company under the Act, the
Company will apply for any required certificate of authority to do business in
California or in any other state or jurisdiction where it conducts business, as
appropriate.

1.6 DEFINITIONS. Terms used with initial capital letters will have the meanings
specified in Appendix II applicable to both singular and plural forms, for all
purposes of this Agreement.

                         ARTICLE 2: PURPOSES AND POWERS


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2.1 PRINCIPAL PURPOSE. The business and principal purpose of the Company is to
develop, operate and manage certain facilities to be owned by the Jamul Indian
Village of Jamul, California, and to engage in all activities related thereto,
including, without limitation, the operation of casinos, restaurants,
entertainment facilities, retail or commercial facilities and/or hotels.

2.2 POWERS. The Company has all of the powers granted to a limited liability
company under the Act, as well as all powers necessary or convenient to achieve
its purposes and to further its business.

                        ARTICLE 3: CAPITAL CONTRIBUTIONS

3.1 INITIAL CAPITAL OF THE COMPANY. The Members have made an initial Capital
Contribution to the Company and have received the Initial Ownership Interests
set forth in Section 1.2 above.

3.2 NO ADDITIONAL CAPITAL CONTRIBUTIONS. Except as may be separately agreed to
in writing by a Member, no Member shall be required to make an additional
Capital Contribution to the Company.

3.3 NO WITHDRAWAL. Except as specifically provided in this Agreement, no Member
will be entitled to withdraw all or any part of such Member's capital from the
Company or, when such withdrawal of capital is permitted, to demand a
distribution of property other than cash.

3.4 NO INTEREST ON CAPITAL. Except as provided in the Letter Agreement with
respect to the Equity Advance, no Member will be entitled to receive interest on
such Member's Capital Contribution or Capital Account.

3.5 LOANS BY MEMBERS. Subject to the provisions of the Letter Agreement, the
Company may borrow money from any Member or Affiliate for Company purposes on
such terms as the Company and such Member or Affiliate may agree; provided that,
such terms may not be less favorable to the Company than the terms available
from an unrelated lender dealing at arms'-length (including a reasonable
financing fee). Except as otherwise provided in the Letter Agreement, any such
advance or loan will be treated as indebtedness of the Company, and will not be
treated as a Capital Contribution by a Member.

3.6 CAPITAL ACCOUNTS. A Capital Account will be maintained for each Member and
credited, charged and otherwise adjusted in accordance with generally accepted
accounting principles consistently applied. Each Member's Capital Account will
be:

         (a) Credited with (i) the Capital Contributions (net of liabilities
secured by such property that the Company takes subject to or assumes), (ii) the
Member's allocable share of Profits and (iii) all other items properly credited
to the Member's Capital Account; and


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         (b) Charged with (i) the amount of cash distributed to the Member by
the Company, (ii) the Fair Market Value of property distributed to the Member by
the Company (net of liabilities secured by such property that the Member takes
subject to or assumes), (iii) the Member's allocable share of Losses and (iv)
all other items properly charged to the Member's Capital Account.

         Any unrealized appreciation or depreciation with respect to any asset
distributed in kind will be allocated among the Members in accordance with the
provisions of Article 5 as though such asset had been sold for its Fair Market
Value on the date of Distribution, and each Member's Capital Account will be
adjusted to reflect both the deemed realization of such appreciation or
depreciation and the Distribution of such property. In determining the Fair
Market Value of any asset of the Company for purposes of any Distribution, the
Company may obtain the written report of any one or more independent qualified
appraisers (or appraisal firms). If more than one appraisal report is obtained
by the Company, Fair Market Value will be determined as the average of such
appraised values. The Company will select each such appraiser (or appraisal
firm), and bear the cost of any such appraisal.

         The Capital Account of each Member shall be determined and maintained
in accordance with generally accepted accounting principles consistently
applied. For income tax purposes, the Company shall make all required
allocations under Section 704(b) of the Code and the Regulations.

3.7 TRANSFER. If all or any part of an Ownership Interest is transferred in
accordance with this Agreement, the Capital Account and Ownership Interest of
the Transferor (including a pro-rata share of Capital Contributions) that is
attributable to the transferred interest will carry over to the Transferee.

3.8 CERTIFICATES FOR OWNERSHIP INTERESTS. Ownership Interests in the Company
shall be represented by Certificates, which shall be in such form as may be
determined by the Managers. Certificates shall be signed by a majority of the
Managers. All Certificates shall be consecutively numbered or otherwise
identified. The name of the Person to whom the Ownership Interests are issued,
with the percentage Ownership Interest and the date of issue, shall be entered
on the books of the Company. All Certificates surrendered to the Company for
transfer shall be canceled and no new Certificate shall be issued until the
former Certificate for a like percentage of Ownership Interest shall have been
surrendered and canceled, except that in the case of a lost, destroyed or
mutilated certificate a new one may be issued therefor upon such terms and
indemnity to the Company as the Managers may prescribe. Transfers of Ownership
Interests of the Company shall be made only on the books of the Company by the
holder of record thereof or by his legal representative, who shall furnish
proper evidence of authority to transfer, or by his attorney thereunto
authorized by power of attorney duly executed and filed with the Company, and,
on surrender for cancellation of the Certificate for such Ownership Interest.
The Person in whose name an Ownership Interest stands on the books of the
Company shall be deemed the


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owner thereof for all purposes as regards the Company.

                         ARTICLE 4: MEMBERS AND MANAGERS

4.1 INITIAL MANAGERS, ACTION, MEETINGS. There shall be five Managers of which
LASS shall be entitled to elect three Managers, and KARSS shall be entitled to
elect two Managers. The initial Managers of the Company shall be Jerry A.
Argovitz and Kevin M. Kean on behalf of KARSS, and ________________ , and
_______________ on behalf of LASS. Each Member shall have the right to remove,
replace, fill a vacancy or designate a temporary replacement for the Manager or
Managers elected by it, in the Member's sole and absolute discretion.

         Managers shall hold office for a term of one year from election, or
until the next Annual Meeting of Members. Subject to Section 1(d) of the Letter
Agreement, actions of the Managers shall be by majority vote at meetings duly
called for purposes of taking action at which a quorum is present. A quorum at
any meeting of the Managers shall consist of three Managers if there are five
Managers or two Managers if there are four Managers, so long as (i) a
representative of each of KARSS and LASS are in attendance, and (ii) notice is
given as provided herein. Subject to Section 1(d) of the Letter Agreement, the
Managers may also act by unanimous written consent in lieu of a meeting.

         Meetings of the Managers shall be held no less often than quarterly
(one of which shall be the Annual Meeting of the Members) on dates established
therefor at each preceding Annual Meeting of the Managers. Special meetings of
the Managers shall be held from time to time as called by any of the Managers on
no less than seven (7) days' advance notice given in writing by the Manager
calling such meeting, which notice may be given by facsimile, Federal Express or
similar courier service, certified mail or personal delivery. Notices of
meetings shall be effective when sent, if sent by facsimile, or upon receipt, if
given by certified mail, overnight courier or personal delivery, in each case at
the address of each of the Managers on the books and records of the Company. The
Managers may participate in a meeting by means of conference telephone or
similar communications equipment by which all the members participating in the
meeting can hear each other at the same time. Such participation will constitute
presence in person at the meeting and waiver of any required notice.

4.2 MANAGEMENT AUTHORITY. Except as otherwise provided in this Agreement, all
management decisions of the Company (including, without limitation, any actions
or votes taken by or on behalf of the Company in respect of any equity interest
held by the Company in another entity) shall be made by the Managers, who shall
be responsible for the conduct of the business of the Company, subject to the
provisions of this Agreement and the Act. Subject to Section 1(d) of the Letter
Agreement, the Managers shall have all of the rights, powers, duties and
obligations of managers as provided in the Act, and as otherwise provided by
law, and any action taken by the Managers, not otherwise in violation of the Act
or this Agreement, shall constitute the act of and serve to bind the Company.


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         Without in any manner limiting the grant of authority to the Managers,
except as otherwise provided in this Agreement, the Managers shall have the
authority to manage the business and affairs of the Company, including, without
limitation, the power and authority to perform any and all of the following on
behalf of the Company:

         (a)  To acquire property from any Person;

         (b) To borrow money for the Company from banks and other lending
institutions, all on such terms as the Managers determine, and in connection
therewith, to hypothecate, grant security interests in and otherwise encumber
the assets of the Company to repay such borrowed sums, provided that the Project
Loan shall be subject to unanimous consent as provided in Section 4.11;

         (c) To purchase liability and other insurance to protect the Company's
property and business;

         (d) To hold and own real and personal property in the name of the
Company;

         (e) To invest Company funds in any investment determined appropriate by
the Managers;

         (f) To authorize any employee, officer or agent of the Company to
execute on behalf of the Company all instruments and documents, including,
without limitation, checks, drafts, notes and other negotiable instruments,
mortgages or deeds of trusts, financing statements and documents providing for
the acquisition, disposition or mortgage of property of the Company;

         (g) To employ accountants, legal counsel, managing agents or other
experts to perform services for the Company (whether or not affiliated or
connected with any Manager or a Member);

         (h) To make any and all determinations with respect to the manner in
which the Company votes any stock interest, partnership interest or other equity
interest held by the Company, on any matter on which the Company possesses a
right to vote; and

         (i) To do and perform all other acts as may be necessary or appropriate
to the conduct of the Company's business.

         Subject to the provisions of Sections 1(d) and 1(e) of the Letter
Agreement, LASS shall have primary responsibility for developing the Project,
including Project design, construction, financing and management of the Project.
KARSS shall have primary responsibility for community and Tribal relations.

4.3 LIMITATION ON LIABILITY: MANAGER COMPENSATION. A Manager shall perform his
duties as a Manager in good faith, in a manner he reasonably believes to be in
the best interest of the Company and the Members, and with such care as an
ordinarily prudent person in a like position would use under similar
circumstances. A person who so performs his duties shall not have any


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liability by reason of being or having been a Manager of the Company. The
Managers shall not be liable, responsible or accountable in damages or otherwise
to the Company or any Member for any action taken or failure to act on behalf of
the Company within the scope of authority conferred on the Managers under this
Agreement or the Act, except where the claim at issue is based on the fraud,
gross negligence or bad faith of the Managers. The Managers shall only receive
such compensation from the Company in consideration for performing their
management duties and responsibilities hereunder as the Members may approve from
time to time in writing. Notwithstanding the foregoing, any and all reasonable
expenses incurred by the Managers in connection with the operation or affairs of
the Company shall be reimbursed by the Company as appropriate.

4.4 MEMBER'S REPRESENTATIVE. Each Member that is not an individual will
designate one or more individuals to act as such Member's duly authorized
representative and agent for purposes of exercising such Member's vote on any
matter involving the Company requiring the approval or action of the Members.
Each Member that is not an individual may also designate one or more individuals
as an alternate in the event that the primary representative is unavailable to
act for any reason. A Member may change any such designation at any time upon
similar notice. The representatives of a Member will cast the vote of each
Member in accordance with such Member's Ownership Interest, as provided in this
Article.

4.5 MEMBERS' VOTING. Subject to the provisions of Section 1(d) of the Letter
Agreement, all decisions reserved by the Act or this Operating Agreement to the
Members will be made by the affirmative vote of Members owning more than 50% of
the Ownership Interests, unless the unanimous vote (under Section 4.11)
provisions apply or except as to any other matter the Members agree shall
require a unanimous vote or as otherwise specifically provided in this
Agreement. Any determination to be made by the Members will be made in each
Member's sole and absolute discretion.

4.6 NO RESIGNATION OR RETIREMENT. Except as provided in the Letter Agreement or
this Agreement, each Member agrees not to voluntarily resign or retire as a
Member in the Company. However, if such voluntary resignation or retirement
occurs in contravention of this Agreement and the Letter Agreement, the
withdrawing Member will, without further act, become a Transferee of such
Ownership Interest (with the limited rights of a Transferee as set forth in
Section 13.6). Any Member who resigns or retires from the Company in
contravention of this Agreement or the Letter Agreement (i) will be liable to
the Company and the other Members for proven monetary damages as provided in
Section 11.2 (but any such action or proposed action to resign or retire will
not be subject to any equitable action for injunctive relief or specific
performance) and (ii) will not be entitled to receive any distribution upon
resignation pursuant to Section 18-604 of the Act.

4.7 POWERS OF THE MANAGERS. Each Manager is an agent of the Company for the
purpose of conducting its business and affairs. The act of any Manager for
apparently carrying on in the usual way of the Company's business or affairs
binds the Company unless the Manager so acting has, in fact, no authority to act
for the Company in the particular matter and the person with


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whom such Manager is dealing has knowledge of such lack of authority. The act of
any Manager which is not apparently for the carrying on in the usual way of the
Company's business or affairs does not bind the Company unless authorized in
accordance with this Agreement. Without the Consent of all the Members, no
Member shall have authority to act on behalf of the Company.

4.8 SUBSTITUTE MEMBERS. A Transferee may be admitted as a substitute Member of
the Company only upon the affirmative written agreement of all of the Members
(excluding the Transferor Member), effective upon a date specified (which must
be on or after the effective date of the Transfer, as determined under Section
13.5). The transfer of an Ownership Interest, which results in fewer than two
continuing Members (including any Transferee admitted as a substitute Member),
will trigger an event of Withdrawal as provided in Article 11.

4.9 ADDITIONAL MEMBERS. Subject to Section 4.11, additional Members of the
Company may be admitted only upon the affirmative written agreement of all
Members, effective upon a date specified by all the Members.

4.10 OFFICERS. The Company, acting through the Managers, may appoint and remove
such officers as it determines to be necessary or desirable to carry out the
day-to-day management of the Company and the Managers may delegate such
authority to such officers as they deem appropriate, subject to the provisions
of this Agreement and the Act. The Company's officers may include a president,
one or more vice presidents, a secretary and a treasurer, as well as one or more
assistant vice presidents, secretaries and treasurers. Such officers may also
include a chief executive officer, chief operating officer and chief financial
officer. Appointment as an officer or agent of the Company will not, of itself
create any contract rights. The officers of the Company, acting in their
capacity as such, will be agents acting on behalf of the Company as principal.
No officer of the Company has the continuing exclusive authority to make
independent business decisions on behalf of the Company without the approval of
the Managers as set forth in this Article. The initial chief executive officer
of the Company shall be Kevin M. Kean.

4.11 UNANIMOUS VOTE. Notwithstanding anything to the contrary in this Agreement,
the following actions by the Company will require the unanimous vote of the
Managers and the affirmative vote of all the Members:

         (a)  A call for additional Capital Contributions by the Members;

         (b) The approval of the principal terms of the Project Loan or of any
refinancing thereof or the granting of a security interest in the cash flow of
the Company;

         (c) The appointment of the Chief Operating Officer or the Chief
Financial Officer of the Company or the appointment of a replacement for the
initial Chief Executive Officer of the Company;

         (d) The admission of an additional Member under Section 4.8 of this
Agreement;


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         (e) Any non pro-rata Distribution, except as provided in the Letter
Agreement or Section 6.1 of this Agreement;

         (f) The amendment of this Agreement, except as provided in Section 14.1
of this Agreement;

         (g) The merger of the Company with any other business entity as
provided by governing law;

         (h)  The sale of all or substantially all of the Company's assets;

         (i) The Dissolution of the Company, except as provided in Article 11 of
this Agreement; and

         (j) The agreement to have LACO materially encumber its balance sheet.

4.12 BUSINESS PURSUITS OF MEMBERS AND MANAGERS. Except as otherwise provided in
any other written agreement by which a Manager may be bound, the Managers may
engage in other business activities and the Managers shall be obligated by
reason of this Agreement to devote only as much of their time to the Company's
business as shall be reasonably required in light of the Company's business and
objectives and the responsibilities undertaken or assigned to the Managers.
Except as otherwise provided in this Agreement, the Letter Agreement or in any
other written agreement by which any Member or Manager may be bound, this
Agreement shall not preclude or limit in any respect the right of any Member or
Manager to engage in or invest in any business activity of any nature or
description, whether or not competitive with the business of the Company and a
Member or Manager shall have no obligation to offer any opportunity to the
Company. Any such activity may be engaged in independently or with other Members
or Managers. No Member shall have the right, by virtue of the Certificate, this
Agreement or the relationship created hereby, to any interest in such other
ventures or activities or to the income or proceeds derived therefrom. Except as
otherwise provided in this Agreement, the Letter Agreement or in any other
written agreement by which any Member or Manager may be bound, the pursuit of
such other ventures shall not be deemed wrongful or improper and any Member or
Manager shall have the right to participate in or to recommend to others any
such investment opportunity.

4.13 TRANSACTIONS WITH AFFILIATES. Any transactions between a Member or a
Manager or their respective Affiliates and the Company shall be on terms not
less favorable to the Company than the terms that would be available to the
Company from an unrelated party dealing at arms' length. Additionally, no Member
shall charge the Company for any expenditure which the Tribe or the Project has
agreed to pay or be charged under the Management Agreement or Development
Agreement. The parties acknowledge that the terms of the LASS Management
Agreement are acceptable and satisfy the terms of this Section 4.13.


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                   ARTICLE 5: ALLOCATION OF PROFITS AND LOSSES

5.1 PROFITS AND LOSSES. For each Fiscal Year, Profits or Losses of the Company
will be an amount equal to the Company's income or loss determined under the
accrual method of accounting, in accordance with generally accepted accounting
principles consistently applied.

5.2 GENERAL ALLOCATION RULE. Except as otherwise provided in (or until changed
pursuant to) this Agreement, the Profits or Losses of the Company, including
items of income, gain, loss and deduction for each Fiscal Year, will be
allocated to the Members in proportion to their respective Ownership Interests
as defined herein. Appropriate adjustment during the Fiscal Year of any change
in this allocation will be determined in accordance with Section 706 of the Code
and the Section 706 Regulation to take into account the varying interests of the
Members in the Company during such Fiscal Year, in the manner determined by the
Company.

5.3 EXCEPTION. Notwithstanding the general rule on allocation and for tax
accounting purposes only and not for financial statement purposes or any other
provision of this Operating Agreement, no cash shall be distributed to any
Member if the effect thereof would be to create a deficit in his Capital Account
balance or increase the deficit in his Capital Account below the sum of (1) the
amount (if any,) which he is required to contribute to the Company and (2) said
Member's share of gain which the Company would recognize upon a sale of its
property for an amount equal to the balance of the non-recourse debt encumbering
it, (the "Company's Minimum Gain") and such cash shall be retained by the
Company and shall be distributed to the Member at the earliest time or times
possible when such distributions will not cause such a deficit or increase such
a deficit in the distributee's Capital Account balance. Notwithstanding the
provisions of Section 5.2, the following allocations of net profits and net
losses and items thereof shall be made:

         (a) If in any taxable year there is a net decrease in the amount of the
Company's Minimum Gain, each Member shall be allocated items of the Company's
net profits for that year (and, if necessary, subsequent years) equal to that
Member's share of the net decrease in the Company's Minimum Gain (within the
meaning of Treasury Regulation Section 1.704-2(g)(2). The items to be so
allocated shall be determined in accordance with Treasury Regulation Section
1.704-2(j)). This Section 5.3 is intended to comply with the Minimum Gain
Chargeback requirement in Treasury Regulation Section 1.704-2 and shall be
interpreted consistently therewith.

         (b) If during any taxable year a Member unexpectedly receives any
adjustments, allocations or distributions described in Treasury Regulation
Section 1 .704-l(b)(2)(ii)(d)(4), (5), or (6), then items of net profits shall
be specially allocated to each Member in an amount and manner sufficient to
eliminate, to the extent required by Treasury Regulation Section 1. 704-(
1)(b)(2)(ii)(d), the deficit in the Capital Account of such Member as quickly as
possible, provided that an allocation pursuant to this Section 5.3 (b) shall be
made only if and to the extent that such Member has an adjusted Capital Account
deficit after all other allocations provided for in this Article 5 have been
tentatively made and as if this Section 5.3(b) were not in this


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Agreement. This Section 5.3(b) is intended to comply with the Qualified Income
Offset requirements in Treasury Regulation Section 1.704- 1(b)(2)(ii)(d) and
shall be interpreted consistently therewith.

         It is the intent of the Members that the allocations provided for in
this Operating Agreement have "substantial economic effect," as that term is
defined in Section 704(b) of the Code. Notwithstanding anything in this Section
5.3 to the contrary, nothing contained in this Section 5.3 shall serve to
restrict any distribution by the Company to any Member.

5.4 TAX ALLOCATIONS. Allocation of items of income, gain, loss and deduction of
the Company for federal income tax purposes for a Fiscal Year will be allocated,
as nearly as is practicable, in accordance with the manner in which such items
are reflected in the allocations of Profits and Losses among the Members for
such Fiscal Year. To the extent possible, principles identical to those that
apply to allocations for federal income tax purposes will apply for state and
local income tax purposes.

5.5 TRANSFER. Except as otherwise provided in Section 5.2, if an Ownership
Interest is transferred during any Fiscal Year (whether by Transfer or
liquidation of an Ownership Interest, or otherwise), the books of the Company
will be closed as of the effective date of Transfer. The Profits or Losses
attributed to the period from the first day of such Fiscal Year through the
effective date of Transfer will be allocated to the Transferor, and the Profits
or Losses attributed to the period commencing on the effective date of Transfer
will be allocated to the Transferee. In lieu of an interim closing of the books
of the Company and with the agreement of the Transferor and Transferee, the
Company may agree to allocate Profits and Losses for such Fiscal Year between
the Transferor and Transferee based on a daily proration of items for such
Fiscal Year or any other reasonable method of allocation (including an
allocation of extraordinary Company items, as determined by the Company, based
on when such items are recognized for federal income tax purposes).

5.6 CONTRIBUTED PROPERTY. All items of income, gain, loss and deduction with
respect to property contributed (or deemed contributed) to the Company will,
solely for tax purposes, be allocated among the Members as required by Section
704(c) of the Code so as to take into account the variation between the tax
basis of the property and its Fair Market Value at the time of contribution. For
example, if there is built-in gain with respect to contributed property, upon
the Company's sale of that property the pre-contribution taxable gain (as
subsequently adjusted under the Section 704(c) Regulations during the period
such property was held by the Company) would be allocated to the contributing
Member (and such pre-contribution gain would not again create a Capital Account
adjustment since the property was credited to Capital Account upon contribution
at its Fair Market Value). Except as limited by the following sentence, the
allocation of tax items with respect to Section 704(c) property to Members not
contributing such property will, to the extent possible, be equal to the
allocation of the corresponding book items made to such noncontributing Members
with respect to such property. If book allocations of cost recovery deductions
(such as depreciation or amortization) exceed the tax allocations of those items
so that the ceiling rule of the Section 704(c) Regulations applies, any curative
or remedial


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allocations of tax items will be made as the Company may determine. All tax
allocations made under this provision will be made in accordance with Section
704(c) of the Code and the Section 704(c) Regulations.

5.7 TAX CREDITS. Any tax credit, and any tax credit recapture, will be allocated
to the Members in the same ratio that the federal income tax basis of the asset
(to which such tax credit relates) is allocated to the Members under the Section
46 Regulations, and if no basis is allocated, in the same manner as Profits are
allocated to the Members under Section 5.2.

                      ARTICLE 6: PAYMENTS AND DISTRIBUTIONS

6.1 PAYMENTS AND DISTRIBUTIONS. Notwithstanding anything in this Agreement or
any other agreement or instrument or under the Act to the contrary, payments and
distributions from Cash Flow shall be made in the following order of priority:

         First, any monthly installment payments to the Company by the Tribe and
the Emterprise under the Interim Promissory Note shall be paid dollar-for-dollar
by the Company to LASS to pay first the interest and then the principal until
LASS is paid all principal and interest on the monthly installment payments due
under the Interim Promissory Note;

         Second, the Company shall pay the LASS Management Fee;

         Third, so long as the Interim Promissory Note remains unpaid, the
remaining cash available for distribution after establishment of reserves for
the Company's other expenses will be distributed to LASS until all principal and
interest under the Interim Promissory Note has been paid to LASS.

         Fourth, all remaining cash available for distribution, or proceeds from
the payment to the Company under the Interim Promissory Note, if LASS shall have
already received an amount equal to the total principal and interest due it
under the Interim Promissory Note, shall be distributed to the Members in
accordance with their respective Ownership Interest established in this
Agreement.

         Notwithstanding anything to the contrary above, the Company shall make
cash Distributions to the Members in amounts sufficient for the Members to pay
their Tax Liabilities (including any amounts necessary to pay the amount of Tax
Liabilities for prior periods for which inadequate amounts of Cash Flow were
available to meet the Member's Tax Liabilities) ("Tax Distributions"), provided
that there is Cash Flow to pay such amounts, which Tax Distributions shall be
made at or prior to the due date of the related Tax Liabilities. For this
purpose, "Tax Liabilities" means Federal or State income tax liabilities which
may be chargeable to any Member as a consequence of the Member's interest in the
Company, or, if such Member is not a taxpaying entity, each beneficial owner of
such Member who is a taxpaying entity (using the maximum income tax rate
applicable to such taxpaying entity) for each fiscal year of the Company not
previously used to offset taxable income of the Company shown on the information
returns of the Company as of the end of the fiscal year of the Company as to
which such


                                       12
<PAGE>   13

determination is being made.

6.2 NONPRORATA DISTRIBUTIONS. Except as provided in Section 6.1, the Members
intend that all Distributions will be made to the Members in proportion to their
Ownership Interests. Except as permitted in Section 6.1, in the event any
Distribution is not made in proportion to their Ownership Interests, any excess
Distribution to a Member will be treated as an advance or loan made by the
Company to such Member, payable to the Company with Interest and on demand.

6.3 PAYMENT. Any Distribution will be made to a Member only if such Person owns
an Ownership Interest on any record date established by the Company or, if none
is established, on the date of Distribution, as reflected on the books of the
Company.

6.4 WITHOLDING. If required by the Code or by state or local law, the Company
will withhold any required amount from Distributions to a Member for payment to
the appropriate taxing authority. Any amount so withheld from a Member will be
treated as a Distribution by the Company to such Person. Each Member agrees to
timely file any agreement that is required by any taxing authority in order to
avoid any withholding obligation that would otherwise be imposed on the Company.

6.5 DISTRIBUTION LIMITATION. Notwithstanding any other provision of this
Agreement, the Company shall not make any Distribution to the Members in
contravention of Section 18-607(a) of the Act.

                         ARTICLE 7: MEETINGS OF MEMBERS

7.1 ANNUAL MEETING. Unless the Company determines (whether by vote or otherwise)
that an annual meeting is not necessary or desirable, the annual meeting of the
Members will be held at a time and place determined by the Managers and by
Notice to all other Members. The purpose of the annual meeting is to review the
Company's operations for the preceding Fiscal Year and to transact such business
as may come before the meeting. The failure to hold any annual meeting has no
adverse effect on the continuance of the Company.

7.2 SPECIAL MEETINGS. Special meetings of the Members, for any purpose or
purposes, may be called by any Member or Members owning at least ten percent
(10%) of the Ownership Interests held by all Members by notice to all other
Members.

7.3 PLACE. The Members calling the meeting may designate any place as the place
of meeting for any meeting of the Members. If no designation is made, or if a
special meeting is otherwise called, the place of meeting will be the Company's
executive offices in California, or at a location agreed to by the Managers.

7.4 NOTICE. Notice of any annual meeting determined by resolution of the Members
or of any special meeting must be given not less than 5 days nor more than 30
days before the date of the meeting. Such notice must state the place, day, and
hour of the meeting and, in the case of a


                                       13
<PAGE>   14

special meeting, the purpose for which the meeting is called.

7.5 WAIVER OF NOTICE. Any Member may waive, in writing, any notice that is
required to be given to such Member, whether before or after the time stated in
such notice. Any Member who signs minutes of action (or written consent or
agreement) will be deemed to have waived any required notice with respect to
such action.

7.6 RECORD DATE. For the purpose of determining Members entitled to notice of or
to vote at any meeting of Members, the date on which notice of the meeting is
first given will be the record date for the determination of Members. Any such
determination of Members entitled to vote at any meeting of Members will apply
to any adjournment of a meeting.

7.7 QUORUM. A quorum at any meeting of Members shall consist of Members owning
more than 50% of the Ownership Interests held by all Members. Any meeting at
which a quorum is not present may adjourn the meeting to another place, day and
hour without further notice.

7.8 MANNER OF ACTING. Subject to the provisions of Section 4.1 herein, if a
quorum is present, the affirmative vote of Members as set forth in Article 4
will be the act of the Company.

7.9 PROXIES. At a meeting of the Members, a Member may vote in person or by
written proxy given to another Member. Such proxy must be signed by the Member
or by a duly authorized attorney-in-fact and filed with the Company before or at
the time of the meeting. No proxy will be valid after eleven months from the
date of its signing unless otherwise provided in the proxy. Attendance at the
meeting by the Member giving the proxy will revoke the proxy during the period
of attendance.

7.10 MEETING BY TELEPHONE. The Members may participate in a meeting by means of
conference telephone or similar communications equipment by which all Members
participating in the meeting can hear each other at the same time. Such
participation will constitute presence in person at the meeting and waiver of
any required notice.

7.11 ACTION WITHOUT A MEETING. Any action required or permitted to be taken at a
meeting of Members under this Article 7 may be taken without a meeting if the
action is evidenced by one or more written consents describing the action taken,
signed by Members owning total Ownership Interests sufficient for the particular
action as set forth in Article 4. Action so taken is effective when sufficient
Members approving the action have signed the consent, unless the consent
specifies a later effective date. Notice of the action must be provided to all
members.

                        ARTICLE 8: LIABILITY OF A MEMBER

8.1 LIMITED LIABILITY. No Member of the Company shall be individually liable for
the debts or liabilities of the Company.

8.2 LIABILITY TO COMPANY. Each Member is liable to the Company for any Capital
Contribution or Distribution that has been wrongfully or erroneously returned or
paid to such


                                       14
<PAGE>   15

Person in violation of the Act, the Certificate or this Agreement.

                           ARTICLE 9: INDEMNIFICATION

9.1 INDEMNIFICATION. The Company shall indemnify, defend and hold harmless any
Person who was or is a party (or is threatened to be made a party) to any
Proceeding by reason of the fact that such Person is or was a Member, or agent
or representative thereof, or a Manager, officer, employee or agent of the
Company, to the fullest extent provided or permitted by the Act. Any such
indemnification will apply to any Liability actually and reasonably incurred in
connection with the defense or settlement of the Proceeding.

9.2 EXPENSE ADVANCEMENT. With respect to the expenses actually and reasonably
incurred by a current or former Member or agent or representative thereof or by
a current or former Manager, officer, employee or agent of the Company who is a
party or is threatened to be made a party to a Proceeding, the Company shall
provide funds to such Person in advance of the final disposition of the
Proceeding if the Person agrees in writing to repay the advance if it is
subsequently determined that such Person was not entitled to indemnification.

9.3 INSURANCE. The indemnification provisions of this Article do not limit a
Person's right to recover under any insurance policy or other financial
arrangement by the Company (including any self-insurance, trust fund, letter of
credit, guaranty or surety). If, with respect to any Liability, any Person
receives an insurance or other indemnification payment which, together with any
indemnification payment made by the Company, exceeds the amount of such
Liability, then such Person will immediately repay such excess to the Company.

                      ARTICLE 10: ACCOUNTING AND REPORTING

10.1 FISCAL YEAR. For income tax and accounting purposes, the Fiscal Year of the
Company will end on the closest Sunday of the calendar year (unless otherwise
required by the Code).

10.2 ACCOUNTING METHOD. For accounting purposes, the Company will use generally
accepted accounting principles.

10.3 TAX ELECTIONS. The Company will have the authority to make such tax
elections, and to revoke any such election, as the Company may from time to time
determine.

10.4 RETURNS. The Company will cause the preparation and timely filing of all
tax returns required to be filed by the Company pursuant to the Code, as well as
all other tax returns required in each jurisdiction in which the Company does
business.

10.5 REPORTS. The Company will furnish a Profit or Loss statement and a balance
sheet to each Member within a reasonable time after the end of each fiscal
quarter. The Company books will be closed at the end of each Fiscal Year and
audited financial statements prepared showing the financial condition of the
Company and its Profits or Losses from operations. Copies of these


                                       15
<PAGE>   16

statements will be given to each Member. In addition, as soon as is practicable
after the close of each Fiscal Year (and in any event within 90 days following
the end of each Fiscal Year), the Company will provide each Member with all
necessary tax reporting information.

10.6 BOOKS AND RECORDS. The records of the Company will be kept at the Company's
business office in Minnesota, and will be available for inspection and copying
by any Member at such Person's expense, during ordinary business hours.

10.7 INFORMATION. Any Member has the right to inspect and copy the Company books
and records as provided in Section 10.6 and to have a formal accounting of
Company affairs whenever circumstances render it just and reasonable. In
addition, subject to reasonable standards as established by the Company from
time to time, and upon reasonable demand for any purpose reasonably related to
the Member's interest as a Member, any Member has the right to obtain from the
Company correct and complete information relating to the state of the Company's
business and its financial condition.

10.8 BANKING. The Company may establish one or more bank or financial accounts
and safe deposit boxes. The Company may authorize one or more individuals to
sign checks on and withdraw funds from such bank or financial accounts and to
have access to such safe deposit boxes, and may place such limitations and
restrictions on such authority as the Company deems advisable.

10.9 TAX MATTERS PARTNER. Until further action by the Company, LASS is
designated as the tax matters partner under Section 6231(a) (7) of the Code. The
tax matters partner will be responsible for notifying all Members of ongoing
proceedings, both administrative and judicial, and will represent the Company
throughout any such proceeding. The Members will furnish the tax matters partner
with such information as it may reasonably request to provide the Internal
Revenue Service with sufficient information to allow proper notice to the
Members. If an administrative proceeding with respect to a partnership item
under the Code has begun, and the tax matters partner so requests, each Member
will notify the tax matters partner of its treatment of any partnership item on
its federal income tax return, if any, which is inconsistent with the treatment
of that item on the partnership return for the Company. Any settlement agreement
with the Internal Revenue Service will be binding upon the Members only as
provided in the Code. The tax matters partner will not bind any other Member to
any extension of the statute of limitations or to a settlement agreement without
such Member's written consent. Any Member who enters into a settlement agreement
with respect to any partnership item will notify the other Members of such
settlement agreement and its terms within 30 days from the date of settlement.
If the tax matters partner does not file a petition for readjustment of the
partnership items in the Tax Court, Federal District Court or Claims Court
within the 90 day period following a notice of a final partnership
administrative adjustment, any notice partner or 5-percent group (as such terms
are defined in the Code) may institute such action within the following 60 days.
The tax matters partner will timely notify the other Members in writing of its
decision. Any notice partner or 5 percent group will notify any other Member of
its filing of any petition for readjustment.


                                       16
<PAGE>   17

10.10 NO PARTNERSHIP. The classification of the Company as a partnership will
apply only for federal (and, as appropriate, state and local) income tax
purposes. This characterization, solely, for tax purposes, does not create or
imply a general partnership between the Members for state law or any other
purpose. Instead, the Members acknowledge the status of the Company as a limited
liability company formed under the Act.

                     ARTICLE 11: DISSOLUTION OF THE COMPANY

11.1 DISSOLUTION. Dissolution of the Company will occur upon the happening of
any of the following events:

         (a)  By operation of law; or

         (b) By unanimous agreement of the Members.

11.2 EVENTS OF WITHDRAWAL. An event of Withdrawal of a Member occurs when any
Member Transfers all of such Member's Ownership Interest (which Transfer is
treated as a resignation), including a Transfer of LASS's Ownership Interest
pursuant to Section 3 of the Letter Agreement.

         Within 30 days following the happening of any event of Withdrawal with
respect to a Member, such Member must give notice of the date and the nature of
such event to the Company. Any Member failing to give such notice will be liable
in damages for the consequences of such failure as provided in Section 4.6 of
this Agreement. Upon the occurrence of an event of Withdrawal with respect to a
Member, such Member will cease to have voting rights under Article 4, and such
Member's Ownership Interest will be deemed transferred to such Member's
Transferee or other successor in interest, if any (which Person, unless already
a Member in such capacity, will have only the limited rights of a Transferee as
set forth in Section 13.6, unless and until admitted as a substitute Member) or,
if there is no Transferee or successor in interest, such withdrawing Member
shall, without further action, become a Transferee of such Member's Interest
with the limited rights of a Transferee as set forth in Section 13.6.

11.3 CONTINUATION. In the event of Withdrawal of a Member, the Company will be
continued if, within 90 days following such event, there is an affirmative
written agreement of a Majority In Interest of all the remaining Members to
continue the Company's business as a limited liability company under the Act and
this Agreement. Any Transferee admitted as a substitute Member will be treated
as a remaining Member. If the business of the Company is so continued, an event
of Withdrawal of one or more Members will not cause the Dissolution of the
Company. If the business of the Company is so continued, with respect to any
Member as to which an event of Withdrawal has occurred, such Member or such
Member's Transferee or other successor-in-interest (as the case may be) will,
without further act, become a Transferee of such Ownership Interest (with the
limited rights of a Transferee as set forth in Section 13.6, unless and until
admitted as a substitute Member). If the Company is not continued as above
provided, the Company will be treated as dissolved as of the end of such 90-day
period.


                                       17
<PAGE>   18

                             ARTICLE 12: LIQUIDATION

12.1 LIQUIDATION. Upon Dissolution of the Company, the Company will immediately
proceed to wind up its affairs and liquidate. The Managers will appoint a
liquidating trustee. The winding up and Liquidation of the Company will be
accomplished in a businesslike manner as determined by the liquidating trustee
pursuant to the Act and this Article 12. A reasonable time will be allowed for
the orderly Liquidation of the Company and the discharge of liabilities to
creditors so as to enable the Company to provide for any losses attendant upon
Liquidation. Any gain or loss on disposition of any Company assets in
Liquidation will be allocated to Members and credited or charged to Capital
Accounts in accordance with the provisions of Articles 3 and 5. Any liquidating
trustee is entitled to reasonable compensation for services actually performed,
and may contract for such assistance in the liquidation process as such Person
deems necessary. Until the filing of articles of dissolution as provided in
Section 12.6, the liquidating trustee may settle and close the Company's
business, prosecute and defend suits, dispose of its property, discharge or make
provision for its liabilities, and make distributions in accordance with the
priorities set forth in Section 12.2.

12.2 PRIORITY OF PAYMENT. The assets of the Company will be distributed in
Liquidation of the Company in the following order:

         (a) First, to creditors, including Members and Managers who are
creditors, to the extent otherwise permitted by law, in satisfaction of
liabilities of the Company (whether by payment or the making of reasonable
provision for payment thereof) other than liabilities for which reasonable
provision for payment has been made and liabilities for Distributions to Members
and former Members under Section 18-601 or Section 18-604 of the Act;

         (b) Second, except as otherwise provided in this Agreement, to Members
and former Members in satisfaction of liabilities for Distributions under
Section 18-601 or Section 18-604 of the Act;

         (c) Third, to any Member for any other loans or debts owing to such
Member by the Company which have not been paid pursuant to (a) or (b) above;

         (d) Fourth, to all Members in proportion to their Capital Account
balances to the extent allowable under Section 5.3 until their Capital Account
balances are reduced to zero; and,

         (e) Fifth, the balance, if any, to all Members in accordance with their
respective Membership Interests.

12.3 DISTRIBUTION TO MEMBERS. Distributions in Liquidation due to the Members
may be made by either or a combination of the following methods: selling the
Company assets and distributing the net proceeds, or by distributing the Company
assets to the Members at their net Fair Market Value in kind. Any liquidating
Distribution in kind to the Members may be made


                                       18
<PAGE>   19

either by a pro-rata Distribution of undivided interests or, upon the
affirmative vote of all Members, by non pro-rata Distribution of specific assets
at Fair Market Value on the effective date of Distribution. Any Distribution in
kind may be made subject to, or require assumption of, liabilities to which such
property may be subject, but in the case of any non pro-rata Distribution only
upon the express written agreement of the Member receiving the Distribution.
Each Member hereby agrees to save and hold harmless the other Members from such
Member's share of any and all such liabilities which are taken subject to or
assumed. Appropriate and customary prorations and adjustments shall be made
incident to any Distribution in kind. The Members will look solely to the assets
of the Company for the return of their Capital Contributions, and if the assets
of the Company remaining after the payment or discharge of the debts and
liabilities of the Company are insufficient to return such contributions, they
will have no recourse against any other Member.

12.4 NO RESTORATION OBLIGATION. Except as otherwise specifically provided in
Article 8, nothing contained in this Agreement imposes on any Member an
obligation to make a Capital Contribution in order to restore a deficit Capital
Account upon Liquidation of the Company. Furthermore, each Member will look
solely to the assets of the Company for the return of such Member's Capital
Contribution and Capital Account.

12.5 LIQUIDATING REPORTS. A report will be submitted with each liquidating
distribution to Members, showing the collections, disbursements and
distributions during the period which is subsequent to any previous report. A
final report, showing cumulative collections, disbursements and distributions,
will be submitted upon completion of the liquidation process.

12.6 ARTICLES OF DISSOLUTION. Upon Dissolution of the Company and the completion
of the winding up of its business, the Company will file articles of dissolution
(to cancel its Certificate) with the Delaware Secretary of State pursuant to the
Act. At such time, the Company will also file an application for withdrawal of
its certificate of authority in any jurisdiction where it is then qualified to
do business.

                        ARTICLE 13: TRANSFER RESTRICTIONS

13.1 GENERAL RESTRICTION. No Member may Transfer all or any part of its
Ownership Interest in any manner whatsoever except: (a) to a Permitted
Transferee as set forth in Section 13.3 or (b) after full compliance with the
right of first refusal set forth in Section 13.4, and in either case only if the
requirements of Section 13.5 have also been satisfied. Any other Transfer of all
or any part of an Ownership Interest is null and void, and of no effect. For
purposes of this Article 13, a Transfer of the Ownership Interest held by KARSS
shall be deemed to occur upon any change in Control of KARSS other than to a
Permitted Transferee pursuant to Section 13.3. Any Member who makes a permitted
Transfer of all of such Member's Ownership Interest will be treated as resigning
from the Company on the effective date of such Transfer. Any Member who makes a
permitted Transfer of part (but not all) of such Member's Ownership Interest
will continue as a Member (with respect to the interest retained), and such
partial Transfer will not constitute an


                                       19
<PAGE>   20

event of Withdrawal of such Member. The rights and obligations of any resigning
Member or of any Transferee of an Ownership Interest will be governed by the
other provisions of this Agreement.

13.2 NO MEMBER RIGHTS. No Member has the right or power to confer upon any
Transferee the attributes of a Member in the Company. The Transferee of all or
any part of an Ownership Interest by operation of law does not, by virtue of
such Transfer, succeed to any rights as a Member in the Company.

13.3 PERMITTED TRANSFEREE. Subject to the requirements set forth in Section
13.5, a Person may Transfer all or any part of such Person's Ownership Interest:

         (a)  To an Affiliate of such Person,

         (b)  To another Member,

         (c)  To the Company,

         (d)  To a Person approved by all the Members; or,

         (e) In the form of a pledge or the granting of a security interest to
another Person or a foreclosure or sale in lieu of foreclosure in connection
with the granting of any such pledge or security interest as described in
Section 13.7.

13.4 RIGHT OF FIRST REFUSAL. Prior to any proposed Transfer of all or any part
of an Ownership Interest, other than to a Permitted Transferee pursuant to
Section 13.3, the Transferor must obtain a Third Party Offer. The Third Party
Offer must not be subject to unstated conditions or contingencies or be part of
a larger transaction such that the price for the Ownership Interest stated in
such Third Party Offer does not accurately reflect the Fair Market Value
(reduced by the amount of associated liabilities) of such Ownership Interest.
The Third Party Offer must contain a description of all of the consideration,
material terms and conditions of the proposed Transfer. The Transferor will give
notice of the Third Party Offer to the Company and all the Members exclusive of
Members who have not been admitted as substitute Members pursuant to Section 4.6
(the "Other Members") other than the Transferor, together with a written offer
to sell the Ownership Interest (which is the subject of the Third Party Offer)
to the Company and the other Members on the same price and terms as the Third
Party Offer as provided herein. The Company may accept such offer by the
Transferor, in whole but not in part, by giving notice to the Transferor within
30 days after notice of such offer. Unless otherwise agreed, the closing of such
sale will be held at the Company's principal office in California on a date to
be specified by the Company which is not later than 60 days after the date of
the Company's notice of acceptance. At the closing, the Company will deliver the
consideration in accordance with the terms of the Third Party Offer, and the
Transferor will by appropriate documents assign to the Company the Ownership
Interest to be sold, free and clear of all liens, claims and encumbrances.
Subject to Section 13.5, if the Company has not accepted the Third Party Offer
and closed the purchase in


                                       20
<PAGE>   21

accordance with this Section 13.4, the Other Members shall have the right, on a
pro rata basis in accordance with the ratio of their Ownership Interests, to
purchase, in whole but not in part, the Ownership Interest of the Transferor in
accordance with the terms of the Third Party Offer by written notice to the
Transferor within 30 days after the expiration of the thirty-day period for the
Company's acceptance. If all of the other Members reject the offer or if the
offer is not closed in accordance with this Section 13.4, the Transferor will be
free for a period of 60 days after the last day for such acceptance to sell all,
but not less than all, of such Ownership Interest so offered, but only to the
Third Party for a price and on terms no more favorable to the Third Party than
the Third Party Offer. If such Ownership Interest is not so sold within such
60-day period (or within any extensions of such period agreed to in writing by
the Company), all rights to sell such Ownership Interest pursuant to such Third
Party Offer (without making another offer to the Company pursuant to this
Section 13.4) will terminate and the provisions of this Article will continue to
apply to any proposed future Transfer.

13.5 GENERAL CONDITIONS ON TRANSFERS. No Transfer of an Ownership Interest will
be effective unless all of the conditions set forth below are satisfied:

         (a) Unless waived by the Company, the Transferor signs and delivers to
the Company an undertaking in form and substance satisfactory to the Company to
pay all reasonable expenses incurred by the Company in connection with the
Transfer (including, but not limited to, reasonable fees of counsel and
accountants and the costs to be incurred with any additional accounting required
in connection with the Transfer, and the cost and fees attributable to
preparing, filing and recording such amendments to the organizational documents
or filings as may be required by law);

         (b) Unless waived by the Company, the Transferor delivers to the
Company an opinion of counsel for the Transferor satisfactory in form and
substance to the Company to the effect that the Transfer of the Ownership
Interest is in compliance with the applicable federal and state securities laws,
and a statement of the Transferee in form and substance satisfactory to the
Company making appropriate representations and warranties in respect to
compliance with the applicable federal and state securities laws and as to any
other matter reasonably required by the Company;

         (c) Unless waived by the Company, the Company receives an opinion from
its counsel that (i) the Transfer does not cause the Company to lose its
classification as a partnership for federal income tax purposes, and (ii) the
Transfer, together with all other Transfers within the preceding twelve months,
does not cause a termination of the Company for federal income tax purposes;

         (d) The Transferor signs and delivers to the Company a copy of the
assignment of the Ownership Interest to the Transferee;

         (e) The Transferee signs and delivers to the Company its agreement to
be bound by this Agreement; and


                                       21
<PAGE>   22

         (f) The Transfer is in compliance with the other provisions of this
Article.

         Notwithstanding the above, only the last two requirements will apply to
a Transfer by operation of law. Except as the Company and the Transferee may
otherwise agree, the Transfer of an Ownership Interest will be effective as of
12:01 a.m. (Eastern Standard Time) on the first day of the month following the
month in which all of the above conditions have been satisfied. Upon the
effective date, Appendix I will be deemed amended to reflect the new Ownership
Interests.

         Notwithstanding anything to the contrary expressed or implied in this
Agreement: (i) the Transfer, pledge or other disposition of any direct or
indirect interest in the Company is subject to applicable State and Federal
laws, regulations, requirements, limitations and decisions that regulate or
pertain to gaming and, except; (ii) for Transfers to Permitted Transferees, the
Transfer of any direct or indirect interest in the Company shall be subject to
approval by the Tribe; and (iii) the merger or consolidation of Lakes Jamul,
Inc. with or into another Person or a change in Control of Lakes Gaming, Inc.
shall not constitute a Transfer of Lakes Gaming, Inc.'s interest in the Company
for any purpose.

13.6 RIGHTS OF TRANSFEREES. Any Transferee of an Ownership Interest will, on the
effective date of the Transfer, have only those rights of an assignee as
specified in the Act and this Agreement unless and until such Transferee is
admitted as a substitute Member. This provision limiting the rights of a
Transferee will not apply if such Transferee is already a Member; provided that,
any Member who resigns or retires from the Company in contravention of Section
4.6 will have only the rights of an assignee as specified in the Act and this
Agreement. Any Transferee of all or any part of an Ownership Interest who is not
admitted as a substitute Member in accordance with this Agreement has no right
(a) to participate or interfere in the management or administration of the
Company's business or affairs or to elect or appoint any Managers, (b) to vote
or agree on any matter affecting the Company or any Member, (c) to require any
information on account of Company transactions, or (d) to inspect the Company's
books and records. The only right of a Transferee of all or any part of an
Ownership Interest who is not admitted as a substitute Member in accordance with
this Agreement is to receive the allocations and Distributions to which the
Transferor was entitled (to the extent of the Ownership Interest transferred)
and to receive required tax reporting information. However, each Transferee of
all or any part of an Ownership Interest (including both immediate and remote
Transferees) will be subject to all of the obligations, restrictions and other
terms contained in this Agreement as if such Transferee were a Member. To the
extent of any Ownership Interest transferred, the Transferor Member does not
possess any right or power as a Member and may not exercise any such right or
power directly or indirectly on behalf of the Transferee. The Members
acknowledge that these provisions may differ from the rights of an assignee as
set forth in the Act, and the Members agree that they intend, to that extent, to
vary those provisions by this Agreement.

13.7 SECURITY INTEREST. The pledge or granting of a security interest, lien or
other


                                       22
<PAGE>   23

encumbrance in or against all or any part of a Member's Ownership Interest does
not cause the Member to cease to be a Member with voting rights or constitute an
event of Withdrawal. Upon foreclosure or sale in lieu of foreclosure of any such
secured interest, the secured party will be entitled to receive the allocations
and Distributions as to which a security interest has been granted by such
Member. In no event will any secured party be entitled to exercise any rights
under this Agreement, and such secured party may look only to such Member for
the enforcement of any of its rights as a creditor. In no event will the Company
have any liability or obligation to any Person by reason of the Company's
payment of a Distribution to any secured party as long as the Company makes such
payment in reliance upon written instructions from the Member to whom such
Distributions would be payable. Any secured party will be entitled, with respect
to the security interest granted, only to the Distributions to which the
assigning Member would be entitled under this Agreement, and only if, as and
when such Distribution is made by the Company. Neither the Company nor any
Member will owe any fiduciary duty of any nature to a secured party. Reference
to any secured party includes any assignee or successor-in-interest of such
Person.

13.8 REGULATORY COMPLIANCE RESTRICTIONS. Notwithstanding anything to the
contrary in this Agreement or elsewhere, the following provisions shall apply.

         Each Member acknowledges that as a result of the transactions
contemplated by this Agreement, the other Member and its Affiliates may be
subject to licensing and other regulatory review and approval procedures
("Regulatory Review"), by any governmental or quasi-governmental agency which is
authorized or empowered to regulate the gaming operations of such Member and its
Affiliates ("Regulatory Authority") in the jurisdictions in which such Member
and its Affiliates conduct or propose to conduct gaming activities. Each Member
agrees to cooperate fully and to cause its Affiliates to cooperate fully with
the representatives of all such Regulatory Authorities in making applications,
supplying information, providing reports, attending licensing and other
hearings, and otherwise cooperating with and complying with the requirements of
all such Regulatory Authorities so as not to interfere with the other Member's
or its Affiliates' ability to develop new business, including the Project, or to
continue to conduct its existing business.

In the event a Member reasonably determines based upon communications with a
Regulatory Authority that the other Member or any of its Affiliates (an
"Unsuitable Member") is likely to be determined unsuitable by such Regulatory
Authority and as a result the Unsuitable Member may not be permitted to engage
or to continue to engage in a gaming activity, including the Project,
(collectively a "Licensing Problem"), then, within the lesser of 150 days'
notice of such event from the other Member to the Unsuitable Member or the
applicable period prescribed by the appropriate Regulatory Authority (the "Cure
Period"), the Unsuitable Member shall eliminate the Licensing Problem to the
reasonable satisfaction of the other Member or transfer its rights and
obligations hereunder and its Ownership Interest to a Person reasonably
acceptable to the other Member, who does not have a Licensing Problem, and such
Person shall be accepted as a Member of the Company for all purposes. Any such
transfer shall be subject to the terms and conditions contained in Section 13.5
hereof.


                                       23
<PAGE>   24

         In the event such transfer does not occur or the Licensing Problem is
not eliminated within the Cure Period, the Unsuitable Member shall immediately
convey its Ownership Interest under this Agreement to the other Member or an
Affiliate designated by the other Member for an amount and upon terms mutually
agreed to by the parties.

         Subject to the provisions of Section 1(g) of the Letter Agreement, each
of the Members will bear its respective costs and expenses in connection with
any applications, permits or licenses that may be required by the respective
Members in connection with the Project.

                         ARTICLE 14: GENERAL PROVISIONS

14.1 AMENDMENT. This Agreement may be amended by the unanimous written agreement
of the Members. Any amendment will become effective upon such approval, unless
otherwise provided. Notice of any proposed amendment must be given at least 5
days in advance of the meeting at which the amendment will be considered (unless
the approval is evidenced by duly signed minutes of action). Any duly adopted
amendment to this Agreement is binding upon, and inures to the benefit of, each
Person who holds an Ownership Interest at the time of such amendment.
Notwithstanding any other provision of this Agreement, with respect to any
Transferee not admitted as a substitute Member, no amendment to Section 5.2
(relating to the general allocation rule for allocation of Profits or Losses),
Section 12.2 (relating to Distributions in Liquidation) and Section 14.1
(relating to amendment of this Agreement) will be effective, nor will such
Person be required to make any Capital Contribution, without such Person's
written consent.

14.2 UNREGISTERED INTERESTS. Each Member (a) acknowledges that the Ownership
Interests are being offered and sold without registration under the Securities
Act of 1933, as amended, or under similar provisions of state law, (b)
represents and warrants that such Person is an accredited investor as defined
for federal securities laws purposes, (c) represents and warrants that it is
acquiring an Ownership Interest for such Person's own account, for investment,
and with no view to the distribution of the Ownership Interest, and (d) agrees
not to Transfer, or to attempt to Transfer, all or any part of its Ownership
Interest without registration under the Securities Act of 1933, as amended, and
any applicable state securities laws, unless the Transfer is exempt from such
registration requirements.

14.3 WAIVER OF PARTITION RIGHT. Each Member waives and renounces any right that
such Person may have prior to Dissolution and Liquidation to institute or
maintain any action for partition with respect to any real property owned by the
Company.

14.4 WAIVERS GENERALLY. No course of dealing will be deemed to amend or
discharge any provision of this Agreement. No delay in the exercise of any right
will operate as a waiver of such right. No single or partial exercise of any
right will preclude its further exercise. A waiver of any right on any one
occasion will not be construed as a bar to, or waiver of, any such right on any
other occasion.


                                       24
<PAGE>   25

14.5 EQUITABLE RELIEF. If any Person proposes to Transfer all or any part of
such Person's Ownership Interest in violation of the terms of this Agreement,
the Company or any Member may apply to any court of competent jurisdiction for
an injunctive order prohibiting such proposed Transfer except upon compliance
with the terms of this Agreement, and the Company or any Member may institute
and maintain any action or proceeding against the Person proposing to make such
Transfer to compel the specific performance of this Agreement. Any attempted
Transfer in violation of this Agreement is null and void, and of no force and
effect. The Person against whom such action or proceeding is brought waives the
claim or defense that an adequate remedy at law exists, and such Person will not
urge in any such action or proceeding the claim or defense that such remedy at
law exists.

14.6 REMEDIES FOR BREACH. The rights and remedies of the Members set forth in
this Agreement are neither mutually exclusive nor exclusive of any right or
remedy provided by law, in equity or otherwise. The Members agree that all legal
remedies (such as monetary damages) as well as all equitable remedies (such as
specific performance) will be available for any breach or threatened breach of
any provision of this Agreement.

14.7 ORIGINAL. This Agreement is signed in two original documents that are to be
delivered to each initial Member. A photocopy of this Agreement, as signed, will
be delivered to each substitute or additional Member, and each such photocopy
will be deemed to be an original document.

14.8 NOTICES. Any notices (including any communication or delivery) required or
permitted under this Agreement shall be in writing; may be given by facsimile,
Federal Express or similar courier service, certified mail or personal delivery;
and shall be addressed as follows:

If to LASS:                   Lakes Shingle Springs, Inc.
                              Attention: Lyle Berman
                              130 Cheshire Lane
                              Minnetonka, Minnesota 55305
                              Telephone: (612) 449-7001
                              Fax: (612) 449-7064


With a copy to:               Doug Twait, Esq.
                              Johnson Hamilton Quigley Twait & Foley, PLC
                              West 1450 First National Bank Building
                              St. Paul, Minnesota 55101
                              Telephone:  (651) 602-6262
                              Fax:  (651) 602-9976


If to KARSS:                  Kean Argovitz Resorts-Shingle Springs, Inc.
                              Attention: Kevin M. Kean
                              11999 Katy Frwy., Suite 322


                                       25
<PAGE>   26

                              Houston, Texas  77079
                              Telephone:  (281) 597-9960
                              Fax:  (281) 597-8480

With a Copy to:               Darryl M. Burman, Esq.
                              DiCecco, Fant & Burman, L.L.P.
                              1900 West Loop South, Suite 1100
                              Houston, Texas 77027
                              Telephone: (713) 961-3366
                              Fax:  (713) 961-3938

         Notices shall be effective when sent, if sent by facsimile, or upon
receipt, if given by overnight courier, certified mail or personal delivery. Any
Member may change such Person's address by notice to the Company and each other
Member.

14.9 COSTS. If the Company or any Member retains counsel for the purpose of
enforcing or preventing the breach or any threatened breach of any provision of
this Agreement or for any other remedy relating to it, then each party shall
bear its own costs and expenses, including attorney's fees.

14.10 INDEMNIFICATION. Each Member hereby indemnifies and agrees to hold
harmless the Company and each other Member from any liability, cost or expense
arising from or related to any act or failure to act of such Member which is in
violation of this Agreement.

14.11 PARTIAL INVALIDITY. Wherever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law. However, if for any reason any one or more of the provisions of this
Agreement are held to be invalid, illegal or unenforceable in any respect, such
action will not affect any other provision of this Agreement. In such event,
this Agreement will be construed as if such invalid, illegal or unenforceable
provision had never been contained in it.

14.12 ENTIRE AGREEMENT. This Agreement, together with the Letter Agreement,
Development Agreement, Tribe Management Agreement, Assignment and Assumption
Agreement, and the LASS Management Agreement, contains the entire agreement and
understanding of the Members with respect to its subject matter, and it
supersedes all prior written and oral agreements. No amendment of this Agreement
will be effective for any purpose unless it is made in accordance with Section
14.1.

14.13 BENEFIT. The obligations of each Member will inure solely to the benefit
of the other Members and the Company and their permitted successors and assigns,
without conferring on any other Person any rights of enforcement or other
rights.

14.14 BINDING EFFECT. This Agreement is binding upon, and inures to the benefit
of, the Members and their permitted successors and assigns; provided that, any
Transferee will have only the rights specified in Section 13.6 unless admitted
as a substitute Member in accordance


                                       26
<PAGE>   27

with this Agreement.

14.15 FURTHER ASSURANCES. Each Member agrees, without further consideration, to
sign and deliver such other documents of further assurance as may reasonably be
necessary to effectuate the provisions of this Agreement.

14.16 HEADINGS. Article and section titles have been inserted for convenience of
reference only. They are not intended to affect the meaning or interpretation of
this Agreement.

14.17 TERMS. Terms used with initial capital letters will have the meanings
specified, applicable to both singular and plural forms, for all purposes of
this Agreement. All pronouns (and any variation) will be deemed to refer to the
masculine, feminine or neuter, as the identity of the Person may require. The
singular or plural include the other, as the context requires or permits. The
word "include" (and any variation) is used in an illustrative sense rather than
a limiting sense.

14.18 GOVERNING LAW; CONFLICTS. This Agreement will be governed by, and
construed in accordance with, the laws of the State of Delaware (except to the
extent preempted by any federal law or the gaming laws of any State or
governmental agency having jurisdiction over the affairs of the Company or any
Member). Any conflict or apparent conflict between this Agreement and the Act
will be resolved in favor of this Agreement except as otherwise required by the
Act. The Members and the Company have entered into the Letter Agreement, which
contains certain provisions as to the affairs of the Company and the conduct of
its business and which, for purposes of the Act, shall be considered, together
with this Agreement, as an "operating agreement" of the Company; provided that
in the event of any conflict between the terms of the Letter Agreement and this
Agreement, the terms of the Letter Agreement shall control.

14.19 REPRESENTATIONS. Each Member represents and warrants to each other Member
that, as of the signing of this Agreement:

         (a) Such Member is duly organized, validly existing and in good
standing as a corporation or company under the laws of the jurisdiction where it
purports to be organized, and is a United States Person;

         (b) Such Member has full power and authority to enter into and perform
this Agreement and the Letter Agreement;

         (c) All actions necessary to authorize the signing and delivery of this
Agreement and the Letter Agreement, and the performance of their respective
obligations under each of them, have been duly taken;

         (d) This Agreement and the Letter Agreement have been duly signed and
delivered by a duly authorized officer or other representative of such Member,
and constitutes the legal, valid and binding obligation of such Member
enforceable in accordance with its terms (except as such


                                       27
<PAGE>   28

enforceability may be affected by applicable bankruptcy, insolvency or other
similar laws effecting creditors' rights generally, and except that the
availability of equitable remedies is subject to judicial discretion);

         (e) No consent or approval of any other Person is required in
connection with the signing, delivery and performance of this Agreement or the
Letter Agreement by such Member; and

         (f) The signing, delivery and performance of this Agreement and the
Letter Agreement do not violate the organizational documents of such Member, or
any agreement to which such Member is a party or by which such Member is bound.

14.20 CONFIDENTIALITY. Subject to the next sentence, the Members will use their
respective best efforts to keep all matters pertaining to the Project
confidential except as required by law, or to the extent necessary to complete
the Project or to carry on their other businesses and comply with requirements
applicable to them. A Member may make such announcements, file such documents
(including this Agreement) with the Securities and Exchange Commission, and
other regulatory authorities, and otherwise take such actions to comply with the
requirements of federal and state securities laws as it deems appropriate. To
the extent reasonably practicable, each Member will provide the other with the
portion of any such announcement or filing that refers to this Agreement and the
transactions contemplated by it no later than concurrently with releasing or
filing the same.

                         ARTICLE 15: DISPUTE RESOLUTION

15.1 DISPUTES. Except as to any disputes for which injunctive relief may be
available, in the event a dispute of any kind arises in connection with this
Agreement or the Letter Agreement (including any dispute concerning the
construction, performance or breach of either agreement), the parties to the
dispute (who may be any combination of the Company and any one or more of the
Members) will attempt to resolve the dispute as set forth in Section 15.2 before
proceeding to arbitration as provided in Section 15.3. All documents, discovery
and other information related to any such dispute, and the attempts to resolve
or arbitrate such dispute, will be kept confidential to the fullest extent
possible. This Article shall not apply to disputes arising under the LASS
Management Agreement.

15.2 NEGOTIATION. If a dispute arises, any party to the dispute will give notice
to each other party. After notice has been given, the parties in good faith will
attempt to negotiate or mediate a resolution of the dispute.

15.3 APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California. Any action shall be
commenced in California Superior Court. If any of the terms and provisions
hereof shall be held invalid or unenforceable for any reason, such validity or
unenforceability shall in no event affect any of the other terms or provisions
hereof, all such other terms and provisions to be held valid and enforceable to
the


                                       28
<PAGE>   29

fullest extent permitted by law.

IN WITNESS WHEREOF, the initial Members have signed this Operating Agreement of
Lakes KAR- Shingle Springs, L.L.C. as of the date first set forth above.


                                       LAKES SHINGLE SPRINGS, INC.
                                       a Minnesota corporation


                                       By: /s/ Timothy Cope
                                          -----------------------------
                                       Name:   Timothy Cope
                                            ---------------------------
                                       Title: Executive Vice President
                                             --------------------------



                                       KEAN ARGOVITZ RESORTS-
                                       SHINGLE SPRINGS, L.L.C.
                                       a Nevada limited liability company


                                       By: /s/ Kevin M. Kean
                                          -----------------------------
                                       Name:   Kevin M. Kean
                                            ---------------------------
                                       Title: President
                                             --------------------------




                                   APPENDIX I



<TABLE>
<CAPTION>
MEMBER                                        OWNERSHIP INTEREST                 INITIAL CONTRIBUTION
------                                        ------------------                 --------------------
<S>                                           <C>                                <C>
Kean Argovitz Resorts-                               40%                                $500
Shingle Springs, L.L.C.
Lakes Shingle Springs, Inc.                          60%                                $500
</TABLE>


                                       29
<PAGE>   30


APPENDIX II

                                   DEFINITIONS

        In addition to the terms that are expressly defined in the Operating
Agreement, the following terms shall have the following meanings:

ACT:                                The Delaware Limited Liability Company Act,
                                    as amended from


                                       30
<PAGE>   31

                                    time to time.

ANNUAL BUDGET:                      The Operating Budget and Annual Plan, as
                           provided and defined in the Tribe Management
                           Agreement.

AFFILIATE:                          An "Affiliate" of a Person means a Person
                           directly or indirectly controlling, controlled by or
                           under common control with such Person. For this
                           purpose and for purposes of the use of the term
                           "Control" in this Agreement, Control means the
                           possession, direct or indirect, of the power to
                           direct or cause the direction of the management and
                           policies of a Person, whether through the ownership
                           of voting securities, by contract or otherwise.

AGREEMENT:                          This Operating Agreement, as amended from
                           time to time.

CAPITAL ACCOUNT:                    The book value capital account maintained
                           under Section 3.6.

CAPITAL CONTRIBUTION:               The aggregate amount of cash and the Fair
                           Market Value of property (less the amount of
                           indebtedness, if any, of such Member which is assumed
                           by the Company and/or the amount of indebtedness, if
                           any, to which such property is subject, as of the
                           date of contribution, without regard to the
                           provisions of Code Section 7701(g)), or services
                           rendered or a promissory note or other obligation to
                           contribute cash or property or to perform services,
                           which a Person contributes to the Company in his
                           capacity as a Member.

CAPITAL TRANSACTION:                Any sale, exchange, condemnation (including
                           any eminent domain or similar transaction), casualty,
                           financing, refinancing or other disposition with
                           respect to any real or personal property owned by the
                           Company which is not in the ordinary course of
                           business.

CASH FLOW:                          For any period, the amount by which (a) the
                           gross cash receipts of the Company from any source
                           for such period (including, but not limited to,
                           Capital Contributions, loans, repayments of monies
                           advanced and payments of principal or interest with
                           respect to the Interim Promissory Note or the Project
                           Loan, distributions received by the Company in
                           respect of any stock, partnership interest or other
                           equity interest owned by the Company, and proceeds
                           from the sale, financing, refinancing or other
                           disposition of all or any portion of the Company
                           property), exceed (b) the sum of (i) the aggregate
                           cash disbursements for such period (including, but
                           not limited to, the Company administrative costs,
                           fees paid by the Company under the LASS Management
                           Agreement, principal and interest payable on the
                           Company debt to non-Members and capital
                           expenditures), and (ii) amounts previously set aside
                           as reserves as determined by the


                                       31
<PAGE>   32

                           Managers in their discretion.

CODE:                               The Internal Revenue Code of 1986, as
                                    amended from time to time (including
                                    corresponding provisions of subsequent
                                    revenue laws).

COMPANY:                            LAKES KAR Shingle Springs, L.L.C., as formed
                                    under the Certificate and as operating under
                                    this Agreement.

DEVELOPMENT LOAN:                   A loan from LACO to the Company as provided
                           and defined in the Letter Agreement.

DEVELOPMENT PLAN:                   The plan for the development of the Project,
                           as adopted by the Company.

DISSOLUTION:                        The dissolution of the Company as provided
                           in Section 11.1.

DISTRIBUTION:                       A distribution of money or other property
                           made by the Company with respect to an Ownership
                           Interest.

EQUITY ADVANCE:                     A commitment from LACO to loan or contribute
                           capital to the Company, in an amount of 25% of the
                           Project Loan not to exceed $25,000,000.00 as provided
                           and defined in the Letter Agreement.

FAIR MARKET VALUE:                  As to any property, the price at which a
                           willing seller would sell and a willing buyer would
                           buy such property having full knowledge of the
                           relevant facts, in an arm's-length transaction
                           without time constraints, and without being under any
                           compulsion to buy or sell, or the value otherwise
                           agreed by the Members to be the Fair Market Value.

FISCAL YEAR:                        The fiscal and taxable year of the Company
                           as determined under this Agreement, including both
                           12-month and short taxable years.

INITIAL OWNERSHIP:                  The relative Ownership Interest of the
                           Members existing upon the execution of this Agreement
                           entitling the holders thereof to all the benefits of
                           ownership in the Company, but which Ownership
                           Interests may be changed from time to time as set
                           forth in this Agreement.

INTEREST:                           The Prime Rate as reported, at the time such
                           rate is to be calculated, by the Chase Manhattan
                           Bank, N.A., or any successor, plus two percent (2 %).

KARSS:                              Kean Argovitz Resorts-Shingle Springs,
                           L.L.C., a Nevada limited liability company, and its
                           Permitted Transferees (provided that any Transferee
                           will become a substitute Member only in accordance
                           with the


                                       32
<PAGE>   33

                           Agreement).

KARSS                               ADVANCES: The sum of $585,000 expended by
                           KARSS with respect to the Project as of the date of
                           this Agreement, as provided and defined in Section
                           5(c) of the Letter Agreement.

KARSS LOAN:                         A loan of $970,000.00 from LACO to KARSS, as
                           provided and defined in the Letter Agreement.

LASS:                               Lakes Shingle springs, Inc. a Minnesota
                           corporation, and its Permitted Transferees (provided
                           that any Transferee will become a substitute Member
                           only in accordance with the Agreement).

LIABILITY:                          The obligation to pay any judgment,
                            settlement, penalty, fine or expense (including
                            reasonable attorneys' fees, experts' expenses and
                            court costs) incurred with respect to any
                            Proceeding.

LIQUIDATION:                        The process of terminating the Company and
                           winding up its business under Article 12 after its
                           Dissolution.

LOSSES:                             The Company's net loss (including
                           deductions) for any Fiscal Year, determined under
                           Section 5.1. MAJORITY IN INTEREST: More than 50% of
                           the Ownership Interests.

MANAGER:                            Those Persons designated or appointed as
                           Managers pursuant to this Agreement, and any other
                           Person who becomes a successor or additional Manager
                           of the Company pursuant to this Agreement.

MEMBER:                              A person who is an initial Member of the
                           Company, or who is subsequently admitted as a
                           substitute or an additional Member as provided in
                           this Agreement.

NET SALES CASH:                     Cash receipts of the Company from a Capital
                           Transaction, less payment of fees or expenses related
                           to the Capital Transaction.

NOTICE:                             Written notice (including any communication
                           or delivery), actually given pursuant to Section
                           14.8.

OWNERSHIP INTEREST:                 With respect to each Person owning an
                           interest in the Company, all of the interests of such
                           Person in the Company (including, without limitation,
                           an interest in Profits and Losses of the Company, the
                           right to receive Distributions, a Capital Account
                           interest, and all other rights and obligations of
                           such Person under this Agreement), expressed as a
                           percentage (carried to the nearest one-thousandth of
                           a percent, if other than an even percentage), as
                           initially set forth in Section 1.2


                                       33
<PAGE>   34

                           and as subsequently changed in accordance with this
                           Agreement.

PERMITTED TRANSFEREE:               A person described in Section 13.3 to whom
                           an Ownership Interest may be transferred without
                           compliance with a right of first refusal.

PERSON:                             An individual, corporation, trust,
                           partnership, limited liability company, limited
                           liability association, unincorporated organization,
                           association or other entity.

PROCEEDING:                         Any threatened, pending or completed claim,
                           action, suit or proceeding, whether formal or
                           informal, and whether civil, administrative,
                           investigative or criminal.

PROFITS:                            The Company's net profit (including income
                           and gains) for any Fiscal Year, determined under
                           Section 5.1.

PROJECT LOAN:                       A loan of in the principal amount of up to
                           $60 Million from a financial institution or
                           institutions, as provided and defined in the Letter
                           Agreement.

REGULATIONS:                        The Treasury Regulations (including
                           temporary regulations) promulgated under the Code, as
                           amended from time to time (including corresponding
                           provisions of succeeding regulations).

TAX LIABILITY:                      A Member's tax liability as defined in
                           Section 9(b) of the Letter Agreement.

THIRD PARTY:                        With respect to any Member, a Person other
                           than an Affiliate.

THIRD PARTY OFFER:                  A bonafide, non-collusive, binding,
                           arm's-length written offer from a Third Party stated
                           in terms of U.S. dollars.

TRANSFER:                           A sale, exchange, assignment or other
                           disposition, whether voluntary or by operation of
                           law.

TRANSFEREE:                         A person to whom an Ownership Interest is
                           transferred.

TRANSFEROR:                         A person who transfers an Ownership
                           Interest.

WITHDRAWAL:                         The occurrence of an event with respect to a
                           Member which terminates membership in the Company, as
                           provided in Section 11.2.


                                       34