Document:

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                                                                   EXHIBIT 10.67

                          PLEDGE AND SECURITY AGREEMENT

     This Agreement dated as of the 8th day of July, 1999 by and between Lakes
Gaming, Inc. (the "Pledgor" or "Lakes"), and the Pokagon Band of Potawatomi
Indians ("Secured Party" or the "Band")

                                   WITNESSETH:

     WHEREAS, the Band and Lakes entered into a Development Agreement (the
"Development Agreement") and a Management Agreement (the "Management Agreement";
together with the Development Agreement, the "Agreements"), both dated as of
July 8, 1999, pursuant to which Lakes will assist the Band in developing,
financing and managing a Class III gaming facility in the State of Michigan; and

     WHEREAS, pursuant to ss. 8.2 of the Development Agreement Lakes has agreed
to pay certain funds into an account (as defined in the Development Agreement,
the "Account") subject to the Band's perfected security interest, which Account
shall serve as (i) collateral for liquidated or other damages payable by Lakes
to the Band as provided in the Agreements, and (ii) a funding mechanism for
Lakes' obligation to pay certain fees pursuant to the Development Agreement and
to make advances under the Transition Loan, the Non-Gaming Land Acquisition Line
of Credit and the Lakes Development Loan; and

     WHEREAS, Lakes and the Band have entered into an Account Control Agreement
(the "Control Agreement") with Firstar Trust Company ("Bank") of near or even
date to perfect the Band's security interest in the Account;

     NOW THEREFORE, in consideration of one dollar and other consideration, the
receipt and sufficiency of which is acknowledged, the parties agree as follows:

     1. Definitions.

     a. "Secured Obligations" means the obligations of Lakes to the Band under
or relating to the Agreements.

     b. Terms defined in the Control Agreement not otherwise defined herein have
the same meaning herein as therein.

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     2. Transfer of Pledged Collateral.

     a. The Pledgor hereby pledges and grants to the Secured Party a valid lien
on and security interest in Pledgor's right, title and interest in and to the
Account and all cash, securities, securities entitlements, financial assets and
other property in the Account (which, with any additional securities or
collateral pledged hereunder, any replacements, substitutions, extensions, stock
dividends, renewals or additions to such collateral and any dividends, interest
or other income thereon and the proceeds of all of the foregoing, are
hereinafter referred to collectively as the "Pledged Collateral"), as security
for the Secured Obligations, all as the same may be amended from time to time,
including any payments due pursuant to any amendments or modifications thereto,
extensions and renewals thereof or substitutions therefor; and any and all other
obligations or agreements of the Pledgor to the Secured Party outstanding from
time to time, whether now existing or hereafter arising.

     b. Pledgor warrants that the security interest granted hereunder
constitutes and shall remain a validly perfected first lien on the Pledged
Collateral.

     3. Agreement not to Sell, Pledge, Encumber, Etc.

     a. The Pledgor hereby covenants and agrees that it will not sell, convey,
transfer or otherwise dispose of any of the Pledged Collateral, nor create,
incur or permit to exist any pledge, mortgage, lien, charge, encumbrance or any
security interest whatsoever with respect to any of the Pledged Collateral or
the proceeds thereof, other than the liens on and security interest in the
Pledged Collateral created hereunder.

     b. In case any dividend shall be declared on any of the Pledged Collateral
from time to time, or any share of stock or fraction thereof shall be issued
pursuant to any stock split involving any of the Pledged Collateral, or any
distribution of capital shall be made on any of the Pledged Collateral, the
cash, shares or other property so distributed shall constitute Pledged
Collateral hereunder and be delivered to the Secured Party to be held as
collateral security for the Secured Obligations.

     c. The Pledgor represents and warrants that there are no restrictions on
the transferability of the Pledged Collateral to the Secured Party, that there
are no restrictions as to or with respect to the foreclosure, transfer or
disposition thereof by the Secured Party, and that any securities held in the
account shall have been duly registered under applicable securities laws.

     4. Additional Warranties, Representations, Covenants, Etc.

     a. Pledgor hereby covenants that the Pledged Collateral is duly and validly
pledged to the Secured Party and warrants that it will defend the Secured
Party's right, title and security interest in and to the Pledged Collateral
against the claims and demands of all persons whomsoever. Pledgor represents and
warrants to the Secured Party that the Pledgor has good

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title to all the Pledged Collateral, free and clear of all claims, mortgages,
pledges, liens, security interests and other encumbrances of every nature.

     b. Pledgor agrees that a default by Pledgor under the Control Agreement
shall be a default under all Secured Obligations, and that all collateral
securing any Secured Obligation to Secured Party shall secure all other
obligations of Pledgor to Secured Party.

     c. Pledgor hereby covenants that this Agreement and the Control Agreement
are valid and binding on it, are enforceable in accordance with its terms, and
create a validly perfected first lien and security interest in the Pledged
Collateral.

     d. Pledgor covenants that it will execute and deliver to Secured Party such
other instruments, certificates, stock powers and other documents as are
necessary or convenient to enable Secured Party to exercise its rights under
this Agreement and otherwise carry out the intent of this Agreement. Pledgor
grants Secured Party an irrevocable power of attorney coupled with an interest
to execute in its stead and on its behalf any such instruments, certificates,
stock powers and other documents as are needed to exercise its rights as to the
Pledged Collateral upon the occurrence of an Event of Default hereunder.

     e. Pledgor agrees that investments in the Account shall at all times be
consistent with the provisions of ss. 8.2 of the Development Agreement.

     5. Transfer of Pledged Collateral Upon Event of Default.

     In case there shall exist an Event of Default (as hereinafter defined), the
Secured Party may cause all or any of the Pledged Collateral to be transferred
into its name or into the name of its nominee or nominees in accordance with the
Control Agreement, and Bank and any broker or other securities intermediary
having custody or control of the Pledged Collateral shall honor any such request
from Secured Party.

     6. Events of Default; Remedies.

     (a) If any one or more of the following events (herein called "Events of
Default") shall occur:

          i.   A Manager Event of Default or Lakes Event of Default shall occur
               under the Secured Obligations; or

          ii.  Bank terminates the Control Agreement without the appointment of
               a successor securities intermediary in accordance with ss. 10
               unless the Band has refused to consent to the successor, in which
               case all property in the Account shall be deposited with the
               Clerk of the United States District Court for the Western
               District of Michigan, Southern Division, subject to

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               the lien and security interest of the Band, and shall be subject
               to interpleader in that Court.

          iii. Pledgor violates any provision of the Control Agreement; or

          iv.  The Pledgor shall fail duly to perform, observe or comply with
               any provision of this Agreement which default is not cured within
               30 days following written notice of default, or Pledgor breaches
               any material warranty or representation made hereunder;

then, upon the occurrence of any such Event of Default, the Secured Party shall
have all rights and remedies of a secured party under the Minnesota Uniform
Commercial Code or other applicable law and shall, in addition to such rights
and remedies, have the right, in its absolute discretion, at any time or times
thereafter to direct Bank or any other financial intermediary in accordance with
the Control Agreement to sell or transfer any and all Pledged Collateral and
deliver the proceeds thereof to Secured Party for application to the Secured
Obligations.

(b) The Secured Party will give Pledgor at least five (5) days prior written
notice by registered or certified mail at the address of the Pledgor as set
forth above (or at such other address or addresses as the Pledgor shall specify
in writing to the Secured Party from time to time) of (i) time and place of any
public sale thereof, (ii) the time after which any private sale or any other
intended disposition of Pledged Collateral is to be made, or (iii) the time
after which Secured Party may, in accordance with the Control Agreement, deliver
entitlement orders to Bank or any other Financial intermediary with regard to
the Pledged Collateral. Any such notice shall be deemed to meet the requirements
hereunder or under any applicable law (including without limitation the
Minnesota Uniform Commercial Code) that reasonable notification be given of the
time and place of any such sale or disposition. Such notice may be given without
any demand of performance or any other demand, all such demands being expressly
waived by the Pledgor. All such sales shall be at such commercially reasonable
price or prices as Secured Party shall deem fit, and for cash or for credit or
for future delivery (without Secured Party assuming any responsibility for any
credit or risk). At any such sale or sales the Secured Party may purchase any or
all of the Pledged Collateral to be sold thereat upon such terms as the Secured
Party may deem appropriate. Upon any such sale or sales of the Pledged
Collateral, said purchase shall be held by the purchaser absolutely free from
any equity of redemption or any similar rights, all such equity of redemption or
any similar rights being hereby expressly waived and released by the Pledgor. In
the event any consent, approval or authorization of any governmental agency will
be necessary to effectuate any such sale or sales, the Pledgor shall execute all
such applications or other instruments as may be required.

c. The proceeds of any such sale or sales, together with any other additional
collateral security at the time received and held hereunder, shall be received
and applied: first, to the payment of all costs and expenses of such sale,
including reasonable attorneys fees; second, to the payment of the Secured
Obligations; and any surplus thereafter remaining shall be paid to the

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Pledgor or to whomever may be legally entitled thereto.

d.   The Secured Party shall be entitled at its option after an Event
of Default to exercise the voting power with respect to the Pledged Collateral,
if applicable; to receive and retain, as collateral security for the Secured
Obligations, any and all dividends, distributions at any time and from time to
time declared or made upon any of the Pledged Collateral and to exercise any and
all rights of payment, conversion, exchange, subscription or any other rights,
privileges or options pertaining to the Pledged Collateral as if the Secured
Party were the absolute owner thereof, including without limitation the right to
exchange, at its discretion, any and all Pledged Collateral upon the merger,
consolidation, reorganization, recapitalization, or other readjustment of any
other issuer or maker of Pledged Collateral, or, upon the exercise of any such
right, privilege or option pertaining to the Pledged Collateral, and, in
connection therewith, to deposit and deliver any and all of the Pledged
Collateral with any committee, depositary, agent, registrar or other designated
agency upon such terms and conditions as the Secured Party shall determine, or
without liability except to account for property actually received.

e.   After an Event of Default, any expenses incurred by the Secured Party in
exercising any of the foregoing rights and remedies or in the enforcement or
administration of this Security Agreement, the Control Agreement or the
Agreements, or for the protection of the Secured Party's security interest in
the Pledged Collateral, or in connection with the priority thereof, including
without limitation all taxes, charges, liens and assessments against the Pledged
Collateral, and all reasonable attorney's fees, shall be payable by Pledgor,
shall be deemed advances necessary to protect the security, shall be added to
the Secured Obligations, and shall bear interest at the Band Interest Rate.

7.   Rights and Remedies are Cumulative.

     No course of dealing between the Pledgor and the Secured Party nor any
failure to exercise, nor any delay in exercising, on the part of the Secured
Party, any right, power or privilege hereunder or under the Secured Obligations,
shall operate as a waiver thereof, nor shall any single or partial exercise of
any rights, power or privilege constitute or be deemed to constitute any such
waiver. The rights and remedies herein provided and provided under the Secured
Obligations and under the Control Agreement are cumulative and are in addition
to, and not exclusive of, any rights or remedies provided by law, including,
without limitation, the rights and remedies of a secured party under the
Minnesota Uniform Commercial Code.

8.   Notices.

     Except as otherwise provided herein, notice to or demand upon the Pledgor
or the Secured Party shall be deemed to have been sufficiently given or served
for all purposes thereof if mailed by certified or registered mail, postage
prepaid, to the following addresses:

                  if to Secured Party:

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                  Pokagon Band of Potawatomi Indians
                  53237 Townhall Road
                  Dowagiac, MI 49047
                  Attn: Chairman, Tribal Council

                  with a copy to:

                  S. Eric Marshall, Esq.
                  1318 Mishawaka Avenue
                  South Bend, Indiana 46615

                  and to:

                  Daniel Amory, Esq.
                  Drummond Woodsum & MacMahon
                  P.O. Box 9781
                  Portland, ME 04104-5081

                  and to:

                  Robert Gips, Esq.
                  Gips and Associates
                  71 Myrtle Avenue, Suite 2000
                  South Portland, ME 04106

                  If to Pledgor:

                  Lakes Gaming, Inc.
                  130 Cheshire Lane
                  Minnetonka, MN 55305
                  Telecopy: 612-449-9353

                  with a copy to:

                  Douglas S. Twait, Esq.
                  Johnson Hamilton Quigley Twait & Foley, PLC
                  First National Bank Building
                  Suite W1450
                  Saint Paul, MN 55101-1314

or to such other address as the party to whom such notice is directed may have
designated in writing to the other parties hereto.

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     9. Waiver of Presentment, Demand, Notice, Etc.

     The Pledgor hereby waives notice of acceptance of this Agreement as well as
presentment, demand, payment, notice of dishonor or protest and all other
notices of any kind in connection with the Secured Obligations except as
expressly provided in this Agreement, the Control Agreement or the Agreements.

     10. Reinstatement.

     This Agreement shall continue to be effective or be reinstated, as the case
may be, if at any time any amount received by the Secured Party in payment of
the Secured Obligations is rescinded or may otherwise be restored or returned
upon the insolvency, receivership or bankruptcy of the Pledgor. It is the
intention of the parties hereto that this Agreement shall remain in full force
and effect until all of the Secured Obligations are fully and indefeasibly paid
and satisfied.

     11. Resignation of Bank under Control Agreement.

     If Bank gives notice that it will terminate the Control Agreement, Pledgor
may designate a successor financial intermediary under the Control Agreement,
which designation shall be subject to Secured Party's reasonable consent.
Pledgor and Secured Party shall execute a replacement Control Agreement on
substantially the same terms with the successor financial intermediary.

     12. Termination

     Secured Party agrees to terminate the Control Agreement and this Agreement
upon the earlier of (a) the Commencement Date, provided that a Manager Event of
Default has not occurred and is not continuing under the Agreements as of such
date; (b) termination of the Agreements in accordance with their terms, and
payment to the Band of all amounts that may be due to it on such termination; or
(c) entry of a Final Order directing such termination.

     13. Band's Waiver of Sovereign Immunity and Consent to Suit. The Band
expressly waives its sovereign immunity from suit for the purpose of permitting
or compelling arbitration in disputes under or relating to this Agreement, and
consents to be sued in a Court for the purpose of compelling arbitration or
enforcing any arbitration award or judgment arising out of this Agreement;
provided that such consent is limited to enforcement of awards or judgments
relating to the Band's interest in the Account. If the United States District
Court lacks jurisdiction, the Band consents to be sued in the Michigan State
Court system for the same limited purposes. The Band waives any requirement of
exhaustion of tribal remedies. Without in any way limiting the generality of the
foregoing, the Band expressly authorizes any governmental authorities who have
the right and duty under applicable law to take any action authorized or ordered
by any such court, to give effect to any judgment entered; provided,

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however, that in no instance shall enforcement of any kind whatsoever be allowed
against any assets of the Band other than the Band's interest in the Account.

     14. Arbitration.

     All disputes under or relating to this Agreement shall be subject to
arbitration in accordance with Article 14 of the Development Agreement.

     15. Miscellaneous

     a.   This Agreement and the Account will be governed by the internal laws
          of the State of Minnesota. Bank and Lakes may not change the law
          governing the Account without Band's express written agreement.

     b.   This Agreement may be modified only by a written amendment signed by
          all the parties hereto, and no waiver of any provision hereof shall be
          effective unless expressed in a writing signed by the party to be
          charged.

     c.   The rights and remedies conferred upon the parties hereto shall be
          cumulative, and the exercise or waiver of any such right or remedy
          shall not preclude or inhibit the exercise of any additional rights or
          remedies. The waiver of any right or remedy hereunder shall not
          preclude the subsequent exercise of such right or remedy.

     d.   The headings contained in this Agreement are for convenience of
          reference only and shall have no effect on the interpretation or
          operation hereof.

     e.   This Agreement may be executed in any number of counterparts, each of
          which when so executed and delivered shall be deemed to be an original
          and all of which taken together shall constitute one and the same
          instrument.

     f.   To the extent a provision of this Agreement is unenforceable, this
          Agreement will be construed as if the unenforceable provision were
          omitted.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as a
sealed instrument as of the date first above written.

THE POKAGON BAND OF POTAWATOMI                                LAKES GAMING, INC.

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INDIANS

By: /s/ John Miller                       By: /s/ Timothy J. Cope
   -----------------------------             ---------------------------------
Its: Council Chairman                      Its: Chief Financial Officer

By: /s/ Kevin Daugherty
   ------------------------------
Its: Secretary

                                       9<PAGE>   1
                                                                   Exhibit 10.68

                             MEMORANDUM OF AGREEMENT

                                    REGARDING

                               GAMING DEVELOPMENT

                                       AND

                                   MANAGEMENT

                                   AGREEMENTS

                                     BETWEEN

                              JAMUL INDIAN VILLAGE
                          A FEDERALLY RECOGNIZED TRIBE

                                       AND

                            LAKES KAR-CALIFORNIA, LLC
                      A DELAWARE LIMITED LIABILITY COMPANY

                            DATED: FEBRUARY 15, 2000

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         THIS MEMORANDUM OF AGREEMENT, is made and entered into this Fifteenth
day of February 15, 2000 by and between the Jamul Indian Village, a federally
recognized Indian tribe (hereinafter referred to as "the Tribe"), located in the
State of California with tribal offices located at P.O. Box 612 14191 Hwy 94
#16, Jamul, California 91935 and Lakes KAR- California, LLC, a Delaware limited
liability company (hereinafter referred to as "Developer" or "Manager"), whose
business office is located at 130 Cheshire Lane, Minnetonka, MN 55305.

                                    RECITALS

         A. The Tribe is a federally recognized Indian tribe eligible for the
special programs and services provided by the United States to Indians because
of their status as Indians and is recognized as possessing powers of
self-government.

         B. The United States government holds lands in the State of California
in trust for the benefit of the Tribe ("Tribal Lands") over which the Tribe
possesses sovereign governmental powers, and the Tribe intends to acquire other
lands contiguous to its Tribal Lands, to be held also in trust for the Tribe by
the federal government and over which the Tribe will possess sovereign
governmental powers.

         C. In compliance with the Indian Gaming Regulatory Act of 1988, P.L.
100-497, 25 U.S.C. ss.2701 et seq. as it may from time to time be amended, the
Tribal Council of the Tribe will enact a tribal ordinance regulating the
operation of gaming activities on Tribal Lands (hereinafter referred to as the
"Gaming Control Ordinance"), creating the Jamul Gaming Control Board, and
authorizing Class II and Class III gaming on its Tribal Lands subject to the
provisions of the Gaming Control Ordinance and a Tribal-State Compact.

         D. The Tribe is committed to the use of gaming activities to provide
employment and improve the social, economic, education, and health needs of its
members; to increase the revenues of the Tribe; and to enhance the Tribe's
economic self-sufficiency and self-determination.

         E. The Tribe presently lacks the resources to develop and operate a
gaming facility and enterprise on its own and desires to retain the services of
a developer and manager with knowledge and experience in the gaming industry to
secure financing, develop, manage and operate Class II and Class III gaming
facilities and related resort facilities on property acquired for the project or
held in trust for the Tribe by the United States.

         F. The Developer/Manager has represented to the Tribe that it has the
managerial and financial capacity to provide and secure financing for the funds
necessary to develop and construct the Facility, as defined herein, and to
commence operation of the Enterprise, as defined herein; and Developer/Manager
agrees to assist the Tribe in obtaining the capital investment necessary to the
development of gaming facilities, and provide the management expertise necessary
to the conducting of successful tribal gaming operations.

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         G. Kean Argovitz Resorts-Jamul L.L.C. ("KAR-Jamul") entered into
Development and Management Agreements with the Jamul Indian Village (the
"Tribe") dated February, 1999 (the "Development and Management Agreements"),
pursuant to which KAR-Jamul was to develop and manage a gaming facility and
certain related facilities to be owned by the Tribe. Lakes Gaming, Inc. and
KAR-Jamul entered into an agreement under which they agreed to form
Developer/Manager to assume the rights and obligations of KAR-Jamul in
connection with the Development and Management Agreements. KAR-Jamul has
assigned its rights and obligations under the Development and Management
Agreements to Developer/Manager pursuant to the terms of an Assignment and
Assumption Agreement.

         H. The Tribe has consented to the assignment of the Development and
Management Agreements to Developer/Manager by KAR-Jamul and to
Developer/Manager's assumption of KAR-Jamul's rights and responsibilities under
the Development and Management Agreements.

         I. In accordance with Developer/Manager's assumption of KAR-Jamul's
rights and responsibilities under the Development and Management Agreements, the
Tribe desires to grant to Developer/Manager the exclusive right and obligation
to develop, manage, operate and maintain the Facility and Enterprise as
described in this Memorandum of Agreement, which is intended by the parties
hereto to supercede and replace the Development and Management Agreements.

         J. This Memorandum of Agreement constitutes two separate and distinct
agreements, a Development Agreement and a Management Agreement. The Development
Agreement will commence on the date that this Memorandum of Agreement is
executed by the parties and shall continue until Class II gaming and Class III
Gaming commences at the Facility (the "Commencement Date"). The Management
Agreement shall become effective when all the necessary approvals listed in
Section 3.19 of this Memorandum of Agreement are received (the "Effective Date")
and shall continue for a term of five (5) years from the Commencement Date, or
as otherwise provided in this Memorandum of Agreement.

         K. The Tribe and Developer/Manager desire to enter into agreements
whereby the preliminary Facility design and development work (but not the
Facility construction or Enterprise operation) may proceed prior to receipt of
necessary regulatory approvals.

         L. The Tribe and Developer/Manager desire to take all steps reasonably
possible prior to the receipt of the necessary regulatory approvals: (i) to
obtain a preliminary commitment for financing of the Facility, (ii) to select
and develop the site for the Facility, (iii) to design the Facility, and (iv) to
enter into contracts to construct and equip the Facility so that the Facility
can be opened to the public as soon as possible after the receipt of all
necessary regulatory approvals.

         M. Developer/Manager desires to advance to the Tribe, subject to the
terms and conditions of the Transition Loan described herein, sums sufficient to
finance performance of the preliminary development work described immediately
above and for other purposes. The Tribe and Developer/Manager agree that all
sums previously advanced to the Tribe by KAR-Jamul

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under the superceded Development and Management Agreements shall constitute
advances by Developer/Manager to the Tribe hereunder, be credited to
Developer/Manager's obligations hereunder, and shall be subject to the terms of
the Transition Loan herein.

         O. The Tribe has selected Developer/Manager, and the Developer/Manager
has agreed, to assist the Tribe in obtaining permanent financing for the
Project, subject to the terms and conditions of the Facility Loan described
herein, and to furnish technical experience and expertise for the development
and design of the Project, and for contracting for the construction, furnishing
and equipping of the Project.

         P. This Memorandum of Agreement is entered into pursuant 25 U.S.C.
ss.81 and to the Indian Gaming Regulatory Act of 1988, P.L. 100-497, 25 U.S.C.
ss.2701 et seq. (the "IGRA") as that statute may be amended. All gaming
conducted at the Facility will at all times comply with the IGRA, applicable
tribal law and the Tribal-State Compact. Any dispute regarding this Memorandum
of Agreement between the parties is understood to have arisen under IGRA and
other applicable federal law.

         NOW, THEREFORE, in consideration of the hereinafter mutual promises and
covenants, and for other good and valuable consideration as set forth herein,
the receipt and sufficiency of which are expressly acknowledged, the Tribe and
Developer/Manager agree as follows:

                                    ARTICLE 1
                                   DEFINITIONS

         As they are used in this Memorandum of Agreement, the terms listed
below shall have the meaning assigned to them in this Article:

         1.1 "Approved Construction Budget" means the budget prepared in the
manner set forth in Section 2.2(b) in connection with the development and
construction of the Facility, which has been approved by Developer and the
Tribe.

         1.2 "BIA" means the United States Department of Interior Bureau of
Indian Affairs.

         1.3 "Class II Gaming" means games as defined in 25 U.S.C ss. 2703 (7)
(A), as such law may be amended and as defined by the National Indian Gaming
Commission in 25 C.F.R. ss. 502.3 and amendments thereto, but only to the extent
such games are authorized by tribal ordinance and licensed by the Gaming Control
Board.

         1.4 "Class III Gaming" means all gaming that is not Class I or Class II
Gaming as defined in the IGRA, including, but not limited to, the forms of
gaming listed as Class III games by the National Indian Gaming Commission in 25
C.F.R. ss. 502.4 and amendments thereto, but only to the extent such gaming is
allowed by the Tribal-State Compact, tribal ordinance, and licensed by the
Gaming Control Board.

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         1.5 "Commencement Date" means the first day upon which the Facility is
open to the public to engage in gaming activities, as determined pursuant to
Section 3.19.

         1.6 "Completion" means the completion of the Facility, or portions
thereof, in substantial accordance with the Plans and Specifications, as
evidenced by a completion certificate from the Architect that the Facility, or
portions thereof, have been substantially completed in accordance with the Plans
and Specifications.

         1.7 "Construction Contract" means the contract between the Tribe and
the General Contractor described in Section 2.4(b).

         1.8 "Costs of Construction" means all costs incurred by the Tribe or
Developer pursuant to this Memorandum of Agreement in the estimated amount in
the aggregate to develop, construct and complete the Facility, including,
without limitation, labor, materials, all furniture, fixtures and equipment
(including gaming equipment) necessary for the opening of the Facility to the
public, builder's risk insurance, surveys, permits, interest on the Facility
Loan or transition Loan incurred prior to the opening of the Facility to the
public, payment and performance bonds, architectural plans and services, and a
resort feasibility study, but excluding Initial Costs of Operation. The final
amount of costs to be included in the Costs of Construction shall be determined
by mutual agreement of the parties and shall be documented in the Approved
Construction Budget.

         1.9 "Costs of Gaming Operation" means all fees imposed by the Gaming
Control Board based upon the Enterprise's gross receipts from operation of Class
II and Class III Gaming at the Facility, fees imposed upon the Enterprise by the
National Indian Gaming Commission based upon its gross receipts from Class II
and Class III Gaming, any contributions and license/regulatory fee
reimbursements payable to the State pursuant to the Tribal-State Compact, the
amount required by the Tribal-State Compact to fund or support programs for the
treatment and assistance of compulsive gamblers and for the prevention of
compulsive gambling, license or other fees for background investigations upon
"key employees" and "primary management officials" as defined in 25 C.F.R. ss.
502.14 and ss. 502.19, depreciation applicable to the portion of the Facility in
which the Enterprise operates Class II and Class III Gaming and depreciable
items located therein, costs of administration, hiring, firing and training
employees working in or for the Enterprise's Class II and Class III Gaming
activities, compensation and benefits to such employees, and total
gaming-related costs, fees and expenses, including, without limitation,
materials, supplies, inventory, utilities, repairs, maintenance, insurance,
bonding, marketing, advertising, annual audits, accounting, legal or other
professional and consulting services, security or guard services, and such other
costs, expenses or fees necessarily, customarily and reasonably incurred in the
operation of the Enterprise's Class II and Class III Gaming, including Initial
Costs of Operation that are expenses and not recorded on the books of the
Enterprise as assets relating to Class II and Class III Gaming, and reasonable
and necessary travel expenses incurred subsequent to execution of this
Memorandum of Agreement for officers and employees of Manager and authorized
representatives of the Tribe; provided, however, that "Costs of Gaming
Operation" shall specifically not include any license fees or costs of Manager
or its employees; or management fees paid hereunder to Manager.

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         1.11 "Costs of Incidental Operations" means all expenses and costs
incurred in operating the hotel, restaurants, food and beverage service, office
space, swimming pool, fitness center, childcare, kids arcade, golf course and
other areas comprising the Facility in which the Enterprise conducts neither
Class II Gaming nor Class III Gaming, including, without limitation,
depreciation applicable to such non-gaming facilities, all employment costs
relating to non-gaming employees working in or for the facilities, non-gaming
supplies and materials, insurance and other non-gaming costs reasonably and
customarily incurred in operation of such portion of the Enterprise in which
neither Class II nor Class III Gaming may be conducted.

         1.12 "Design Agreement" means the contract between the Tribe and the
Architect described in Section 2.2(a).

         1.13 "Development Agreement" shall mean that portion of this Memorandum
of Agreement that deals with the development and construction of the Facility.
The Development Agreement shall commence on the date this Memorandum of
Agreement and shall continue until the Commencement Date.

         1.14 "Developer" means Lakes KAR-California, LLC, a Delaware limited
liability company with its business office located at 130 Cheshire Lane,
Minnetonka, MN 55305.

         1.15 "Effective Date" means the effective date of the Management
Agreement portion of this Memorandum of Agreement as determined pursuant to
Section 3.19.

         1.16 "Enterprise" means the business enterprise of the Tribe created to
engage in Class II and Class III Gaming at the Facility, and which shall include
any other lawful commercial activity allowed in the Facility including, but not
limited to, operating and managing office space, kids arcade, child care
facility, hotel with swimming pool and golf course, restaurant, RV park, retail
stores, entertainment facilities, or the sale of fuel, food, beverages, alcohol,
tobacco, gifts, and souvenirs.

         1.17 "Facility" means the permanent buildings, structures and
improvements located on the Gaming Site and all fixtures, furnishings and
equipment attached to, forming a part of, or necessary for the operation of the
Enterprise.

         1.18 "Facility Loan" means the loan arranged by Developer for the
Tribe, as borrower, in an aggregate principal amount not to exceed one hundred
fifty million dollars ($150,000,000) for Initial Costs of Operation and for
Costs of Construction, which Facility Loan shall be further evidenced by the
Facility Note and other loan documentation as further defined herein.

         1.19 "Facility Note" means the promissory note evidencing the Facility
Loan in a form to be agreed to by the parties.

         1.20 "Fiscal Year" means the accounting year used for the operation of
the Enterprise as agreed upon by Manager and the Tribe.

                                       6

<PAGE>   7

         1.21 "Furnishings and Equipment" shall mean all furniture, furnishings
and equipment required for the operation of the Enterprise in accordance with
the standards set forth in this Memorandum of Agreement, including, without
limitation:

                  (i)   cashier, money sorting and money counting equipment,
         surveillance and communication equipment, and security equipment;

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

         equipment and other gaming equipment;

                  (iii) office furnishings and equipment;

                  (iv)  specialized equipment necessary for the operation of any
         portion of the Enterprise for accessory purposes, including equipment
         for kitchens, laundries, dry cleaning, cocktail lounges, restaurants,
         public rooms, commercial and parking spaces, and recreational
         facilities; and

                   (v)  hotel equipment (to the extent a hotel is included in
         the Enterprise);

                  (vi)  all other furnishings and equipment hereafter located
         and installed in or about the Facility which are used in the operation
         of the Enterprise in accordance with the standards set forth in this
         Memorandum of Agreement.

         1.22 "Gaming Control Board" means the Jamul Gaming Control Board
created by Jamul Gaming Control Ordinance No. as such ordinance now exists or
may in the future be amended, with authority to license and regulate gaming
activities on Tribal Lands and which is a subordinate governmental entity of the
Tribe and is entitled to all sovereign governmental immunity of the Tribe; which
ordinance was approved by the NIGC on .

         1.23 "Gaming Site" shall mean any parcel(s) of Tribal Lands in
California identified by the Tribe, after approval by Developer/Manager, as
suitable for development of the Facility and operation of the Enterprise which
is in trust, contiguous to a trust parcel or which meets the requirements of
United States of America to be accepted in trust for the Tribe for Class II and
Class III Gaming purposes.

         1.24 "General Contractor" shall mean the person or entity selected by
the Tribe and approved by Developer pursuant to Section 2.4 to construct the
Facility.

         1.25 "Governmental Authorities" means the United States federal
government, the BIA, the State, the State Gaming Agency, the Tribal Council, the
National Indian Gaming Commission, the Gaming Control Board, and any court,
agency, department, commission, board, bureau or instrumentality, or any of them
to the extent each has legal jurisdiction over the Class II and Class III Gaming
activities, Tribal Lands, the construction and operation of the Facility and
Enterprise thereon, or Developer/Manager's performance under this Memorandum of

                                       7
<PAGE>   8

Agreement.

         1.26 "Gross Gaming Revenues" means the Enterprise's total revenue from
Class II Gaming and Class III Gaming activities.

         1.27 "Gross Incidental Revenues" means the Enterprise's total receipts
from the sale of food, beverages, souvenirs and any other goods and services
supplied for non-Class II and Class III Gaming activities that are incidental to
the operation of the Enterprise.

         1.28 "Gross Total Revenues" means the total of Gross Gaming Revenues
and Gross Incidental Revenues of the Enterprise.

         1.29 "IGRA" means the Indian Gaming Regulatory Act of 1988, P.L.
100-497, as codified at 25 U.S.C. ss.ss. 2701 et. seq. , as such may be amended
from time to time.

         1.30 "Initial Costs of Operation" means all Costs of Operation advanced
to the Tribe pursuant to Section 2.8 and 6.2, prior to the opening of the
Facility to the public, including, but not limited to, advance payments or
deposits to providers of goods and services, cash for bankrolls and slot
hoppers, pre-opening payroll, cash for payment of prizes, legal, licensing,
marketing, employee hiring and training, and all costs associated with grand
opening events and any "fun" nights held prior to the public opening of the
Facility. Initial Costs of Operation shall also include any costs incurred by
either party in obtaining regulatory approval of this Memorandum of Agreement,
but not those costs incurred by the parties, prior to execution, in negotiating
this Memorandum of Agreement.

         1.31 "Interim Promissory Note" means the promissory note evidencing the
Transition Loan in a form to be agreed to by the parties attached hereto as
Exhibit F.

         1.32 "Legal Requirements" means any and all present and future
judicial, administrative, and tribal rulings or decisions, and any and all
present and future federal, state, local and tribal laws, ordinances, rules,
regulations, permits, licenses and certificates, in any way applicable to the
Tribe, Developer/Manager, the Tribal Lands, the Gaming Site, the Facility, and
the Enterprise, including without limitation, the IGRA, the Tribal-State
Compact, and the Tribe's Gaming Control Ordinance.

         1.33 "Limited Recourse" means that the Facility Loan and Transition
Loan advances, and all liabilities of the Tribe related to this Memorandum of
Agreement, the Facility Loan or Facility Note, the Interim Promissory Note, any
UCC financing Statements and their applicable documentation, the Facility, or
the Enterprise contemplated by this Memorandum of Agreement, and any related
awards, judgments or decrees, shall be payable solely out of undistributed
future Net Total Revenues of the Enterprise and shall be a limited recourse
obligation of the Tribe, with no recourse to tribal assets other than such
undistributed future Net Total Revenues (except as to a security interest in the
Furnishings and Equipment purchased with Facility Loan or Transition Loan
proceeds or other purchase money agreements, and (ii) the mortgage or deed of
trust on the Gaming Site prior to its transfer into trust). In no event shall
Developer/Manager or any lender

                                       8
<PAGE>   9

or other claimant have recourse to (a) the physical property of the Facility
(other than Furnishings and Equipment subject to the security interest securing
the Facility Loan or Transition Loan or other purchase money agreements), (b)
Net Total Revenue distributions already made to the Tribe, (c) assets of the
Tribe purchased with its Net Total Revenue distributions, (d) revenues or assets
of any other gaming facility owned or operated by the Tribe, or (e) any other
asset of the Tribe (other than the mortgage or deed of trust on the Gaming Site
prior to its transfer into trust, and such undistributed future Net Total
Revenues of the Enterprise).

         1.34 "Manager" means Lakes KAR-California, LLC, a Delaware limited
liability company with its business office is located at 130 Cheshire Lane,
Minnetonka, MN 55305.

         1.35 "Management Agreement" shall mean the portion of this Memorandum
of Agreement that deals with the management of the Facility and the Enterprise.
The commencement date of the Management Agreement shall be the Commencement Date
as set out in Section 3.19.

         1.36 "Memorandum of Agreement" means the two distinct agreements
contained in this document, the Development Agreement and the Management
Agreement, and all amendments hereto.

         1.37 "Minimum Guaranteed Monthly Payments" means the minimum monthly
amount payable to the Tribe, which amount shall be determined pursuant to
Section 6.3 hereof.

         1.38 "National Indian Gaming Commission"or "NIGC" means the commission
established pursuant to the IGRA.

         1.39 "Net Gaming Revenues" means Gross Gaming Revenues less (1) amounts
paid out as, or paid for, prizes; and (2) Costs of Gaming Operation, excluding
management fees, as defined herein and in 25 C.F.R. ss. 502.16.

         1.40 "Net Incidental Revenues" means Gross Incidental Revenues less
Costs of Incidental Operations.

         1.41 "Net Total Revenues" means the sum of Net Gaming Revenues plus Net
Incidental Revenues.

         1.42 "NIGC Approval" means (a) a determination by the NIGC that Manager
is suitable for licensing and (b) written approval by the NIGC Chairman of this
Memorandum of Agreement, including the Management Agreement herein.

         1.43 "Plans and Specifications" means the approved plans, drawings, and
specifications for the Facility pursuant to Section 2.2(b).

         1.44 "Project" means the scope of the development project contemplated
by this Memorandum of Agreement, established in the Design Agreement and
approved by the parties

                                       9
<PAGE>   10

pursuant to Section 2.2(a).

         1.45 "Property" means those parcels of Tribal Lands, agreed to by the
parties, upon which the Tribe will build the Facility, and which parcel is held
by the United States in trust for the Tribe, or will be placed in trust, and any
other land or rights-of-way acquired for development of the Project.

         1.46 "Resolution of Limited Waiver" refers to the limited waiver of
sovereign immunity to be adopted by the Tribe in the form required and
evidencing all approvals required pursuant to the Tribe's governing documents
and applicable law in the form approved by the parties, and attached hereto as
Exhibit C .

         1.47 "Request for Advance" means any request by the Tribe for funds to
pay for Project expenses incurred in connection with either approved Costs of
Construction or Initial Costs of Operation pursuant to either Sections 2.5(a) or
2.5(b).

         1.48 "Secretary" means the Secretary of the Interior of the United
States, or his appropriately designated representative/agent.

         1.49 "State" means the State of California.

         1.50 "Chairperson" means the chief executive officer of the Tribe.

         1.51 "Transition Loan" means the loan or advances made to the Tribe
directly by Developer/Manager pursuant to Section 2.3 evidenced by the Interim
Promissory Note.

         1.52 "Executive Committee" means the governing body of the Tribe.

         1.53 "Tribal Lands" means all lands presently and in the future held in
trust by the United States for the Tribe and all lands within the confines of
the Jamul Indian Reservation and to such lands as may be hereafter added
thereto.

         1.54 "Tribal-State Compact" means the agreement between the Tribe and
the State approved on , as published in the Federal Register, concerning Class
III Gaming and any amendments or other modifications thereto.

         1.55 "Tribe" means the Jamul Indian Village.

         1.56 "UCC Financing Statements" means UCC-1 financing statements naming
Tribe as debtor and naming the lender and Developer/Manager as secured parties,
in the form approved by the parties.

                                       10
<PAGE>   11

                        DEVELOPMENT AGREEMENT PROVISIONS

                                    ARTICLE 2
                GAMING SITE SELECTION; CONSTRUCTION AND FINANCING

         2.1      Gaming Site Selection.

                  (a) As soon as reasonably possible after signing this
Memorandum of Agreement, Developer shall recommend to the Tribal Council one or
more sites for constructing the Facility on Tribal Lands, including advice as to
the suitability of each site for the Facility. The Tribal Council shall then
select the Gaming Site, after approval by Developer.

                  (b) It is understood that acquisition of additional land may
be necessary to ensure the success of the Enterprise and to be used as the
Gaming Site. The Developer, through its designees, nominees or members,
presently holds or intends to hold interests in lands contiguous to the Tribal
Lands which the Tribe intends to acquire and add to its Tribal Lands ("Acquired
Tribal Lands", a legal description of which is attached hereto as Exhibit A), to
be held in trust for the Tribe by the United States, and over which the Tribe
will possess sovereign governmental powers. The Developer agrees to transfer its
interests in the Acquired Tribal Lands to the Tribe upon the Effective Date of
the Management Agreement portion of this Memorandum of Agreement, such transfer
to be without warranty or other recourse except as described below. All amounts
advanced by Developer to acquire its interest in the Acquired Tribal Lands
transferred to the Tribe, in an amount not to exceed $10,000,000 shall be
included as a Costs of Construction and reimbursed to Developer by the Tribe
from proceeds of the Facility Loan within thirty (30) days of the Tribe's
receipt of the loan proceeds; if the Facility Loan is not obtained by the Tribe
from a lender, then all amounts advanced by the Developer to acquire its
interest in the Acquired Tribal Lands shall be repaid subject to the terms of
the Transition Loan under Section 2.3 below.

         2.2      Architects, Studies, Plans and Specifications.

                  (a) As soon as reasonably possible after signing this
Memorandum of Agreement, the Tribe, based upon the recommendation and subject to
the approval of Developer, shall select an architect (the "Architect") for the
purpose of performing certain services in connection with the design and
construction of the Facility, including site development. The Tribe's agreement
with the Architect shall be in the form of a contract (the "Design Agreement")
approved by Developer and the Tribal Council. The scope of the project
contemplated by this Memorandum of Agreement (the "Project"), shall be stated
and established in the Design Agreement, and shall be subject to the mutual
approval of the parties. It is contemplated the scope of the Project will be
substantially as described on Exhibit B, subject to such changes as may be
necessary or appropriate taking into account competitive conditions, financing
and other

                                       11
<PAGE>   12

circumstances. The parties understand that market, Tribal-State Compact,
governmental or other conditions may change and it may be necessary to expand or
decrease the scope of the Project before construction is commenced. The Design
Agreement shall also provide for and establish appropriate design packages, each
pertaining to a discrete portion or phase of the Project. The Design Agreement
shall allow Developer the right and responsibility to supervise, direct, control
and administer the duties, activities and functions of the Architect and to
efficiently carry out its covenants and obligations under this Memorandum of
Agreement

                  (b) The Architect shall be responsible for creating the Plans
and Specifications and a budget for all Costs of Construction, both of which
shall be subject to the mutual approval of the Tribe and Developer prior to the
commencement of construction of the Facility. The Costs of Construction budget
shall not be exceeded unless mutually agreed otherwise in writing by the Tribe
and Developer, except Developer may in its discretion reallocate part or all of
the amount budgeted with respect to any line item to another line item and to
make such other modifications to the Approved Construction Budget as Developer
deems necessary or appropriate; provided any increase or decrease of more than
ten percent (10%) in the Approved Construction Budget requires the written
approval of the Tribe. The Architect shall also supervise the completion of all
construction, development and related activities undertaken pursuant to the
terms and conditions of the Construction Contract with the General Contractor.

                  (c) The Tribe, using funds advanced to it under the Facility
Loan or Transition Loan, shall provide funds necessary for the design,
construction and development of the Facility and Enterprise, including
architectural and engineering costs. The fee for the Architect's services shall:
(i) be agreed to by the Tribe and Developer; (ii) be advanced by Developer to
the Tribe; and (iii) be repaid by the Tribe to Developer according to the terms
of the Interim Promissory Note. Following Completion or in the event of a
termination of this Memorandum of Agreement, it is agreed between the parties
hereto that the Plans and Specifications and all other design documents shall be
owned by Tribe.

                  (d) The Facility shall be designed and constructed so as to
adequately protect the environment and the public health and safety. The design,
construction and maintenance of the Facility shall, except to the extent a
particular requirement or requirements may be waived in writing by the Tribal
Council, meet or exceed all reasonable minimum standards pertaining to the Tribe
and national, State and local building codes, fire codes and safety and traffic
requirements (but excluding planning, zoning and Gaming Site use laws,
ordinances, regulations and requirements), which would be imposed on the
Enterprise by existing State or federal statutes or regulations which would be
applicable if the Facility were located outside of the jurisdictional boundaries
of the Tribe, even though those requirements may not apply within the Tribe's
jurisdictional boundaries. To the extent that the Tribe has adopted or may in
the future adopt more stringent requirements, those requirements shall govern.
Nothing in this subsection shall grant to the State or any political subdivision
thereof any jurisdiction (including but not limited to, jurisdiction regarding
zoning or Gaming Site use) over the Facility or Enterprise or its development,
management and operation.

                  (e) Any costs incurred by the Tribe in connection with the
activities described in

                                       12
<PAGE>   13

Sections 2.1 or 2.2 may be financed in advance of the Tribe obtaining any
permanent financing of the Project by advances from Developer/Manager to the
Tribe, repayable under the Transition Loan on the terms and conditions described
in the Interim Promissory Note, in the form agreed by the parties.

         2.3      Pre-Construction Advances and Terms of Transition Loan.

                  (a) Developer agrees to make the following pre-construction
advances to the Tribe: (i) fifty thousand dollars ($50,000) upon execution of
this Memorandum of Agreement; (ii) forty thousand dollars ($40,000) each month
until the Effective Date of the Management Agreement portion of this Memorandum
of Agreement; (iii) one hundred thousand dollars ($100,000) each month from the
Effective Date until the Commencement Date or until the Memorandum of Agreement
is terminated or its term expires, whichever is sooner; and (iv) advances for
costs incurred in connection with the activities described in Sections 2.1 or
2.2. The Tribe and Developer/Manager agree that all sums previously advanced to
the Tribe by KAR-Jamul under the superceded Development and Management
Agreements shall constitute advances by Developer/Manager to the Tribe hereunder
and be subject to the terms of the Transition Loan herein

                  (b) The parties acknowledge that some Jamul tribal members
will have to be temporarily re-located during the construction of the Facility.
Should such tribal members have to be re-located prior to the Effective Date of
the Management Agreement, Developer agrees top advance funds (in an amount not
to exceed $       ) to cover the reasonable re-location costs of such members.
Upon the Effective Date, and upon the Tribe's receipt of the increased monthly
payments referenced in (a) above, these additional advance payments to the Tribe
shall terminate. Any amounts advanced hereunder shall be included in the
Transition Loan and repaid according to the terms thereof.

                  (c) The total amount of funds advanced to the Tribe directly
from Developer shall equal the total cost of the Transition Loan. The total
amount of the Transition Loan shall be in an amount not exceeding twenty million
dollars ($20,000,000). The Transition Loan shall accrue interest at the prime
interest rate of Chase Manhattan Bank plus two percent (2%), fixed from the date
the funds are advanced to the Tribe, with repayment of principal and interest to
be made in equal monthly installments over a term of one (1) year commencing on
the thirtieth (30th) day after the Commencement Date.

                  (d) The Transition Loan shall (i) be subject to all the terms
and conditions of this Memorandum of Agreement; (ii) be evidenced by the Interim
Promissory Note executed by Tribe, in the form agreed by the Tribe and
Developer; and (iii) be repaid solely as a Limited Recourse obligation of the
Tribe without any cross collateralization from other projects of Tribe and
without any other liability or guarantee on the part of the Tribe. Except for
the Minimum Guaranteed Monthly Payment to the Tribe and repayment of the
Facility Loan, repayment of the Transition Loan shall have first priority on any
Net Gaming and Net Incidental Revenues generated by the Enterprise. The Tribe
agrees to grant to Developer a security interest on any Net Gaming and Net
Incidental Revenues of the

                                       13
<PAGE>   14

Enterprise in order to secure repayment of the Interim Promissory Note. The
Tribe agrees not to encumber any of the assets of the Facility or the Enterprise
without the written consent of Developer, which consent will not be unreasonably
withheld; except that the Tribe shall have the right without the consent of
Developer to grant subordinate security interests in the Enterprise's revenues.
The Tribe agrees to enter into a limited, transactional waiver of sovereign
immunity and consent to jurisdiction and arbitration as to Developer and in
connection with the Transition Loan, as provided in the Resolution of Limited
Waiver.

                  (e) The Tribe shall retain the right to prepay the Transition
Loan, in whole or in part, without imposition of any prepayment penalty.

                  (f) It is the understanding of the parties that the Transition
Loan will be the sole responsibility of Tribe, will be a Limited Recourse
obligation of the Tribe, and will not be subject to any other guarantee or
obligation on the part of the Tribe.

         2.4      Construction.

                  (a) Developer shall arrange financing for the Costs of
Construction pursuant to Section 2.5.

                  (b) As soon as reasonably possible after the approval of the
Plans and Specifications and the budget for the Costs of Construction, the
Tribe, with the assistance of the Architect, shall enter into a contract with a
General Contractor pertaining to the construction of the Facility (the
"Construction Contract"), subject to the approval of such contract by Developer.
The General Contractor must (i) exhibit the financial capability to complete the
work, (ii) have the ability to obtain adequate payment and performance bonds and
builder's risk insurance in amounts requested by Developer and Tribe, (iii)
provide an acceptable bid, as mutually agreed upon by Tribe and Developer, (iv)
be capable of meeting the construction schedule and (v) construct quality
facilities. The General Contractor shall be responsible for providing, including
through subcontractors, all material, equipment and labor to construct and
initially equip the Facility as necessary in conformance with the Plans and
Specifications, including site development.

                  (c) The Construction Contract shall contain such provisions
for the protection of the Tribe and Developer as the parties deem appropriate,
and shall provide that construction of the Facility shall commence within thirty
days of the parties receiving NIGC Approval, following and subject to the
granting of all approvals necessary to commence construction and obtaining the
Facility Loan; and shall also provide that the General Contractor, and all its
subcontractors, shall exert its best efforts to complete construction within
such time as the Tribe and Developer agree, but which shall not exceed one year
following NIGC Approval. The General Contractor shall, at a minimum, warrant its
work to be performed free of defects and unworkmanlike labor for at least one
year after Completion or not less than the maximum period subsequent to
Completion customarily covered by the liability and errors and omissions
insurance policy a General Contractor would usually obtain in the State,
whichever is longer. The General Contractor shall also be required to obtain
before construction commences and maintain until

                                       14

<PAGE>   15

Completion a policy of insurance in an amount at least equal to the estimated
Cost of Construction of the Facility naming the Tribe as an additional insured;
said policy to be issued by an insurance company licensed by the State and
having an AM Best rating of A7 or better.

                  (d) Construction change orders to the Plans and Specifications
shall require written approval of the Architect, Tribe and Developer and a
representative of the Gaming Control Board if required by applicable law. It is
agreed that if completion of the construction, equipping and furnishing of the
Facility cannot be reasonably accomplished within the budget for Costs of
Construction to be agreed upon pursuant to Section 2.2(b) above, then, Tribe,
upon receiving advice from Developer and Architect, shall promptly determine
which components of the Facility shall be deleted or reduced in size, such that
the total expenditures for Costs of Construction shall not exceed the approved
budget.

                  (e) Developer reserves the right, as a Cost of Construction,
to inspect the Facility prior to the disbursement of each requested advance of
funds, and (i) approve the progress and the workmanship of the construction;
(ii) verify compliance with the Plans and Specifications; (iii) verify the
percentage of the Completion as set forth in requests for advance; and (iv)
satisfy itself that all work for which such advance is requested has been
performed and all materials for which such advance is requested are in place or,
as to stored materials, are owned by the Tribe and suitably safeguarded. Such
inspection will be performed in a timely manner and not unreasonably delay the
disbursement of any advance.

                  (f) Final acceptance of construction of the Facility shall not
occur until (i) evidence of Completion has been received and approved by Tribe,
(ii) a fully executed indemnity or release from liens is received from the
General Contractor and all subcontractors, (iii) any other documentation
reasonably requested by the Tribe, the Gaming Control Board or Developer is
received from the General Contractor and (iv) all approvals have been received
from all Governmental Authorities from which approvals are required.

                  (g) Developer, with the assistance of the Architect, shall
submit to the Tribal Council, for its review and approval, the specifications
for Furnishings and Equipment. Thereafter, Developer shall select and procure
vendors for purchase by the Tribe of Furnishings and Equipment required to
operate the Enterprise in conformity with such specifications. The cost of
Furnishings and Equipment shall be financed through the Facility Loan.
Alternatively, in the sole discretion of the Tribe, Developer may arrange for
the procurement of Furnishings and Equipment on lease terms consistent with the
terms provided as to the Facility Loan.

                  (h) The Tribe shall keep the Facility and Gaming Site free and
clear of all mechanic's and other liens resulting from the construction of the
Facility, which shall at all times remain the property of the Tribe. If such
lien is claimed or filed, it shall be the responsibility of the Enterprise to
discharge the lien within thirty days after receiving written notice of such
claim. The Tribe shall indemnify and hold harmless Developer/Manager for any
pre-existing conditions on the Gaming Site and for any other prior agreements
entered into by the Tribe with any persons or entities in connection with
development of the Facility and the Enterprise, including but not limited to,
Indian Gaming of America, Inc.

                                       15

<PAGE>   16

                  (i) The Tribe shall select an individual of its choice
knowledgeable inn construction practices to act as the Tribe's construction
monitor. The construction monitor shall be allowed access to all project
contracts, including plans, designs, and construction cost information. The
construction monitor shall inspect and approve each phase of construction,
including change orders, before each subsequent phase may be initiated. The
construction monitor shall inspect and shall not unreasonably withhold approvals
within twenty-four (24) hours of notification. The construction monitor shall be
compensated at a commercially reasonable rate to be agreed by the parties, and
the fees for such services shall be a pre-development cost of the Enterprise; to
be repaid under the Construction Loan herein and according to its terms thereof.

         2.5      Financing Obligation and Terms of Facility Loan.

                  (a) Commencing on the Effective Date of the Management
Agreement portion of this Memorandum of Agreement, and subject to satisfaction
of each of the conditions set forth in Section 2.6(a) below, Developer will,
upon Developer's approval of requests to advance funds ("Requests for Advance"),
either arrange for a lender to loan to the Tribe under the Facility Loan or
advance directly to the Tribe for the benefit of Tribe funds for the actual
Costs of Construction up to an aggregate of the Approved Construction Budget
approved by the parties. Such amounts loaned or advanced for Costs of
Construction shall be payable and accrue interest on terms as set forth in the
Facility Note, in the form agreed to by the Tribe and the lender or Developer.
All advances of Costs of Construction shall be recorded by Developer on a
schedule to be attached to the Facility Note.

                  (b) Commencing on the Effective Date of the Management
Agreement portion of this Memorandum of Agreement, and subject to satisfaction
of each of the conditions set forth in Section 2.6(b) below, Developer will
either arrange to have a lender loan the Tribe under the Facility Loan or
advance directly to the Tribe funds up to the amount of the approved budget to
finance the Initial Costs of Operation. All amounts loaned or advanced for
Initial Costs of Operation shall be payable and accrue interest on terms as set
forth in the Facility Note. All advances of Initial Costs of Operations shall be
recorded by Developer on a schedule to be attached to the Facility Note.

                  (c) The Costs of Construction and Initial Costs of Operation
shall equal the total cost of the Facility Loan. The total amount of the
Facility Loan, or advances if made directly by Developer, shall be in an amount
up to but not exceeding one hundred fifty million dollars ($150,000,000). The
Facility Loan, or total advances if made directly by Developer, shall accrue
interest at the prime interest rate of Chase Manhattan Bank plus two percent
(2%), fixed from the date the funds are advanced to the Tribe, with repayment of
principal and interest to be made in equal monthly installments over a term of
five (5) years commencing on the thirtieth (30th) day after the Commencement
Date, or seven (7) years if the Management Agreement portion of this memorandum
of Agreement is extended pursuant to Section 3.19 of this Memorandum of
Agreement.

                                       16

<PAGE>   17

                  (d) The Facility Loan, or total advances if made directly by
Developer, shall (i) be subject to all the terms and conditions of this
Memorandum of Agreement; (ii) be evidenced by the Facility Note executed by
Tribe; and (iii) be repaid solely as a Limited Recourse obligation of the Tribe
without any cross collateralization from other projects of Tribe and without any
other liability or guarantee on the part of the Tribe. Except for the Minimum
Guaranteed Monthly Payment to the Tribe, repayment of the Facility Loan, or
total advances if made directly by Developer, shall have first priority on any
Net Gaming and Net Incidental Revenues generated by the Enterprise. The Tribe
agrees to grant to the lender, or to Developer to the extent Developer makes
advances directly to the Tribe, a security interest on any Net Gaming and Net
Incidental Revenues of the Enterprise in order to secure repayment of the
Facility Note. The Tribe agrees not to encumber any of the assets of the
Facility or the Enterprise without the written consent of Developer and the
holder of the Facility Loan, which consent will not be unreasonably withheld;
except that the Tribe shall have the right without the consent of Developer and
such holder to grant subordinate security interests in the Enterprise's
revenues. The Tribe agrees to enter into a limited, transactional waiver of
sovereign immunity and consent to jurisdiction and arbitration as to the holder
of the Facility Loan, or to Developer to the extent Developer makes advances
directly to the Tribe, as provided in the Resolution of Limited Waiver.

                  (e) The Tribe shall retain the right to prepay the Facility
Loan, or total advances if made directly by Developer, in whole or in part,
without imposition of any prepayment penalty.

                  (f) It is the understanding of the parties that the Facility
Loan, or total advances if made directly by Developer, will be the sole
responsibility of Tribe, will be a Limited Recourse obligation of the Tribe, and
will not be subject to any other guarantee or obligation on the part of the
Tribe.

         2.6      Conditions Precedent to Facility Loan.

                  (a) The obligation of Developer to arrange for the issuance of
the Facility Loan to the Tribe, or to make direct advances to the Tribe, for the
initial or any subsequent advance of Costs of Construction pursuant to Section
2.5(a) above is subject to the following conditions:

                           (i)  The Facility Loan and related Facility Note, UCC
                  Financing Statements or other related documentation required
                  shall be dated and duly executed and delivered by the Tribe
                  and shall have been approved by the BIA or National Indian
                  Gaming Commission if required by applicable law.

                           (ii) The Management Agreement portion of this
                  Memorandum of Agreement shall have become effective pursuant
                  to Section 3.19 and Developer shall have received an opinion
                  of counsel for the Tribe concerning the enforceability of this
                  Memorandum of Agreement and the Facility Note against

                                       17
<PAGE>   18

                  the Tribe and the authority of the Tribe to execute this
                  Memorandum of Agreement and the Facility Note.

                           (iii)  Developer shall have received and approved the
                  Plans and Specifications, the budget for the Costs of
                  Construction, and the executed Construction Contract in
                  accordance with Sections 2.2 and 2.4.

                           (iv)   Developer shall have received evidence that
                  the Gaming Site is held in trust by the United States of
                  America, as trustee for the Tribe.

                           (v)    Developer shall have received and approved
                  evidence of the bonds and insurance required of the General
                  Contractor pursuant to Section 2.4(b).

                           (vi)   Tribe shall have furnished to Developer a
                  survey of the Gaming Site prepared by a BIA approved land
                  surveyor, which survey shall locate all property lines,
                  existing access ways, building setback lines and easements
                  affecting the Gaming Site identified by book and page of
                  recording, where applicable, water, electric and sewer lines,
                  and other physical matters, including encroachments, if any,
                  affecting the title and use of the Gaming Site. The survey
                  shall set forth the exact legal description of the Gaming
                  Site. Tribe further agrees to furnish to Developer a copy of
                  the recorded plat, if any, applicable to the Gaming Site. All
                  surveys required hereunder shall contain a certificate in
                  favor of, and in form and substance satisfactory to,
                  Developer.

                           (vii)  Developer shall have received satisfactory
                  evidence that all permits or other authorizations, including,
                  and without limitation, the building permit(s), required by
                  any applicable Governmental Authority to authorize
                  construction of the Facility have been issued and are in full
                  force and effect. If all permits are not available prior to
                  the closing of the Facility Loan, it shall be within
                  Developer's discretion to arrange for the advance by a lender
                  of such sums under the Facility Loan for work for which all
                  applicable permits have been received. At Developer's option,
                  the Tribe shall furnish Developer reasonable evidence that all
                  other permits required in order to construct the Facility in
                  accordance with the Plans and Specifications, and within the
                  Approved Construction Budget, will be available when
                  necessary.

                           (viii) Developer shall have received satisfactory
                  evidence of the availability of adequate water, electricity,
                  telephone, sanitary sewer, and, if applicable, storm sewer
                  service to the Facility to be provided as part of the Costs of
                  Construction or otherwise as agreed to by the parties.

                           (ix)   All representations and warranties of the
                  Tribe shall be true and correct, this Memorandum of Agreement
                  shall remain in effect, and the Tribe shall not be in default
                  under this Memorandum of Agreement on the date of each
                  advance.

                                       18

<PAGE>   19

                           (x)    There shall be no pending or threatened
                  litigation, claim or dispute which, in Developer 's good faith
                  judgment, might materially adversely affect the ability of the
                  Tribe to timely perform its obligations under this Memorandum
                  of Agreement, including, without limitation, a ruling that the
                  Tribal-State Compact is void for purposes of the IGRA.
                  Developer acknowledges, however, that prior lawsuits have ben
                  filed by certain tribal members claiming to represent the
                  Tribe. Developer does not foresee future actions of this
                  nature to materially affect the ability of the Tribe to
                  perform. Further, Tribe shall not be the subject of any
                  pending or threatened bankruptcy, insolvency, reorganization
                  or similar proceedings which, in Developer 's good faith
                  judgment, would materially adversely affect the security for
                  the Facility Loan or the Tribe's ability to perform its
                  obligations under this Memorandum of Agreement or the Facility
                  Note.

                           (xi)   Developer shall have received satisfactory
                  evidence that the Gaming Site is free from environmental
                  contamination of any nature whatsoever or any other
                  environmental condition that would require any remediation
                  pursuant to any applicable Legal Requirement.

                  (b) The obligation of the Developer to arrange for a lender to
make the initial or any subsequent advances for Initial Costs of Operation, or
to make such advances directly to the Tribe, is subject to the conditions
precedent set forth above in subparagraphs 2.6(a) (i), (ii), (ix), (x) and (xi).

         2.7      Advances for Costs of Construction. Nothing herein contained
shall obligate Developer to arrange for a lender to advance the Costs of
Construction, or make advances directly to the Tribe, for payment of any item
not included in or in an amount in excess of the Approved Construction Budget.

                  (a) Subject to the provisions of Section 2.7 (c) relating to
retainage, Developer shall arrange for a lender to make advances, or make
advances directly, to the Tribe for materials purchased by the Tribe and stored
on or off the Gaming Site but not yet incorporated into the Facility only if
Tribe provides evidence satisfactory to Developer that such stored materials are
protected against theft and damage.

                  (b) Unless it otherwise agrees, Developer shall not be
required to arrange for a lender to make advances, or make advances directly to
the Tribe, for Costs of Construction under the Facility Note more often than
once monthly. Advances for Costs of Construction will be made based upon the
progress of construction as verified by Requests for Advance approved and
certified by the Architect.

                  (c) Subject to the provisions of the Construction Contract
entered into between Tribe and the General Contractor, Developer may retain from
each advance for payment of Costs of Construction to the General Contractor an
amount equal to ten percent

                                       19
<PAGE>   20

(10%) (or other lower retainage as may be agreed upon by Developer and set forth
in the Construction Contract with the General Contractor) of the amount of each
Request for Advance.

                  (d) Developer shall not be obligated to arrange for a lender
to make the final advance, or make the final advance directly to the Tribe, for
Costs of Construction until the following conditions have been satisfied: (i)
all conditions stated in this Section 2.7 and Section 2.4(f) shall have been
satisfied; and (ii) Developer shall have received the following: 1) evidence
that all work requiring inspection by any Governmental Authorities having
jurisdiction over the Facility has been inspected and approved by such
authorities and that all other required certificates and approvals have been
issued; 2) an as-built survey showing the Gaming Site, the Facility, including,
without limitation, the building, parking areas (including parking spaces
designated as regular, compact or handicapped spaces), walkways, driveways,
access ways to public streets, signs, and any encroachments; and 3) a
certificate from the Architect to the effect that the Facility (including
landscaping and on-site and any off-site improvements) have been completed
substantially in accordance with the Plans and Specifications and that direct
connection has been made to all appropriate utility facilities.

         2.8  Advances for Initial Costs of Operation. Advances under the
Facility Note for Initial Costs of Operation will be arranged by Developer with
a lender, or made directly by Developer to the Tribe, upon written request by
the Tribe within the budget for Initial Costs of Operation approved pursuant to
Section 6.1(b) and if supported by invoices or other documentation as Developer
may reasonably require. Any Initial Cost of Operation exceeding the sum of One
Hundred and Twenty Five Thousand Dollars ($125,000) shall require the signed
consent of the Tribe. In addition, Developer is hereby authorized to make direct
payments for Initial Costs of Operation incurred by Developer/Manager in its
role as agent for the Tribe, subject to the accounting and record keeping
provisions of Section 3.4(d), and the above dollar limitation. Developer shall
provide the Tribe with monthly reports of all advances for Initial Costs of
Operation that shall compare actual advances with the budget for Initial Costs
of Operation prepared pursuant to Section 6.1(b).

         2.9  Title to Facility. The Facility shall be the sole and exclusive
property of the Tribe, subject to no liens or encumbrances except for any liens
in favor of the lender and Developer granted herein or others permitted herein.

         2.10 No Liens. During the term of this Memorandum of Agreement, neither
the Tribe nor Developer shall act in any way whatsoever, either directly or
indirectly, to cause any other party to lease or to become a lienholder of the
Gaming Site, Facility or the Enterprise, except as expressly agreed to by the
parties or permitted herein.

         2.11 Limited Waiver of Sovereign Immunity. By this Memorandum of
Agreement, the Tribe does not waive, limit, or modify its sovereign immunity
from unconsented suit except as provided in the Resolution of Limited Waiver.
The Tribe understands that its agreement to adopt an enforceable Resolution of
Limited Waiver is a material inducement to the Developer's execution of this
Memorandum of Agreement and is a condition precedent to any of the respective
obligations of the parties under this Memorandum of Agreement. The Tribe further

                                       20
<PAGE>   21

agrees that it will not amend or alter or in any way lessen the rights of the
lender or Developer as set forth in the Resolution of Limited Waiver, which is
attached hereto as Exhibit C and incorporated here by reference. This Section
2.11 shall survive the termination of this Memorandum of Agreement, regardless
of the reason for the termination.

         2.12 Exclusivity. During the term of this Memorandum of Agreement, the
Tribe shall have an exclusive relationship with Developer regarding all Class II
and Class III Gaming and Incidental Operations development on Tribal Lands, and
the development of the Facility and the Enterprise.  Except for the restrictions
in Section 10.21, nothing herein shall be deemed to restrict Developer's gaming
activities related to commercial or Indian gaming.

         2.13 Independent Agreement. The objective of the Tribe and Developer in
entering into and performing this Development Agreement of this Memorandum of
Agreement is to provide a legally enforceable procedure and agreement pursuant
to which Developer will make certain advances and loans to the Tribe for the
development of the Facility prior to the approval of the Management Agreement by
the NIGC and the obtaining of any other necessary approvals so that the Project
can commence operation as soon as possible; and to set forth the rights and
obligations of the parties if approval of the Management Agreement by the NIGC
does not occur or if the Project is unable to be developed for any other reason.
This Development Agreement is intended to be a legally enforceable agreement,
independent of the Management Agreement, which shall enter into effect when
executed and delivered by the parties, and be enforceable between the parties
regardless of whether or not this Memorandum of Agreement or the Management
Agreement is approved by the Chairman of the NIGC.

         2.14 Term of Development Agreement. The Development Agreement portion
of this Memorandum of Agreement shall become effective upon execution by both
the Tribe and Developer. Unless sooner terminated as provided in this Memorandum
of Agreement, the term of the Development Agreement shall run from its execution
date until the earlier of either (i) the Commencement Date; or (ii) five (5)
years after February 26, 1999.

                         MANAGEMENT AGREEMENT PROVISIONS

                                    ARTICLE 3
                          AUTHORITY AND DUTY OF MANAGER

         3.1 Appointment as Agent. Subject to the terms and conditions of this
Memorandum of Agreement, the Tribe hereby appoints Manager to act as the
exclusive agent for the Tribe for all matters related to the Facility and the
Enterprise during the term of the Management Agreement. Manager's agency
responsibilities shall include, among other things, maintenance and improvement
of the Facility, management and operation of the Enterprise's Class II and Class
III Gaming activities within the Facility, and all other revenue producing
activities that are conducted by the Enterprise, such as the sale of food and
beverages in the Facility. Manager accepts such appointment as the Tribe's
exclusive agent for the term of this Memorandum of

                                       21
<PAGE>   22

Agreement. Subject to the provisions of this Memorandum of Agreement and
specifically the restrictions in this Article 3, Manager shall have, and the
Tribe does hereby grant to Manager, the power and authority as agent for the
Tribe, to exercise the rights of the Tribe under and to execute, modify, or
amend any contracts, including, without limitation, purchase orders, leases,
contracts for services, including utilities, and maintenance and repair
services, relating to the operation of the Facility and the Enterprise except
for contracts or compacts with the State which shall remain the authority of the
Tribe. Notwithstanding the preceding, the Tribe shall be required to approve in
writing all contracts for the retention of attorneys and certified public
accounts, and all contracts entered into with any affiliate company of Manager.
The duties and authorities of Manager shall be subject in all events to receipt
of all necessary licenses, consents or approvals from the Gaming Control Board.

         3.2  Limitations. Manager shall have no authority to waive or impair
the Tribe's sovereign immunity. Except as stated herein, Manager shall have no
authority as the Tribe's agent under this Memorandum of Agreement without the
prior written approval of the Tribe (not to be unreasonably withheld): (a) to
incur costs which are materially in excess of the expenditures to be agreed upon
in the capital expenditure budget pursuant to Section 6.1(c) herein; (b) to
sell, encumber or otherwise dispose of any personal property or equipment
located in the Facility, except for inventory sold in the regular course of
business and other items which must be replaced due to age, obsolescence, or
wear and tear; (c) to purchase any goods or services from Manager or any of
Manager's affiliated companies as a Cost of Gaming or Incidental Operations or
Cost of Construction. Except as specifically authorized in this Article 3,
Manager shall not hold itself out to any third party as the agent or
representative of the Tribe.

         3.3  Manager's Authority and Responsibility.
              (a) Manager shall conduct and direct all business and affairs in
connection with the day-to-day operation, management and maintenance of the
Enterprise and the Facility, including the establishment of operating days and
hours. It is the parties' intention that the Enterprise be open 24 hours daily,
seven days a week. Manager is hereby granted the necessary power and authority
to act, through the Enterprise's general manager, in order to fulfill all of its
responsibilities under this Agreement. Nothing herein grants or is intended to
grant Manager a titled interest to the Facility or to the Enterprise. Manager
hereby accepts such retention and engagement. The Tribe shall have the sole
proprietary interest in and ultimate responsibility for the conduct of all Class
II and Class III Gaming conducted by the Enterprise, subject to the rights and
responsibilities of Manager under this Agreement.

              (b) In managing, operating, maintaining and repairing the
Enterprise and the Facility under this Memorandum of Agreement, Manager's duties
shall include, without limitation, the following: (i) Manager shall use
reasonable measures for the orderly physical administration, management, and
operation of the Enterprise and the Facility, including without limitation
cleaning, painting, decorating, plumbing, carpeting, grounds care and such other
maintenance and repair work as is reasonably necessary; (ii) Manager shall
comply with all duly enacted statutes, regulations and ordinances of the Tribe;
and (iii) Manager shall comply with all applicable provisions of the Internal
Revenue Code including, but not limited to, the prompt filing of any cash
transaction reports and W-2G reports that may be required by the Internal

                                       22

<PAGE>   23

Revenue Service of the United States or under the Tribal-State Compact.

                  3.4 Compliance with Laws.

                  (a) Manager shall comply with all terms and conditions of the
Tribal-State Compact, the Gaming Control Ordinance, IGRA and any gaming
regulations, the violation of which would materially impair the conduct of
gaming permitted to be conducted under IGRA by the Enterprise. Without limiting
the foregoing, Manager shall also supply the NIGC with all information necessary
to comply with the National Environmental Policy Act, as it may be amended from
time to time, and comply with the NIGC's regulations relating thereto. Manager
shall also comply with requirements concerning the reporting and withholding of
taxes with respect to the winnings from gaming operations pursuant to this
Memorandum of Agreement. The Tribe agrees to cooperate with Manager and to aid
Manager in its compliance with the foregoing laws, regulations and requirements.

                  (b) The parties shall use their best efforts to obtain all
necessary approvals of Governmental Authorities of this Memorandum of Agreement.

         3.5      Security. Manager shall provide for appropriate security  for
the operation of the Enterprise. All aspects of Facility security shall be the
responsibility of Manager. Upon agreement of the Tribe and Manager, any security
officer may be bonded and insured in an amount commensurate with his or her
enforcement duties and obligations. The cost of any charge for security and
increased public safety services will be a Costs of Gaming or Incidental
Operations, as appropriate.

         3.6      Accounting, Financial Records, and Audits.

                  (a) Manager shall maintain full and accurate records and books
of account for operations of gaming activities and related operations managed by
Manager. Such records shall be maintained at Manager's office located within the
Facility and shall be made available for inspection and verification at all
reasonable times, including during hours of operation, as required by the
Tribal-State Compact, the Tribal Council or its designated representative, the
Gaming Control Board or IGRA. Inspection or verification by the Governmental
Authorities shall be coordinated through the Gaming Control Board.

                  (b) Subject to the approval of the Tribal Council and the
Gaming Control Board, which approvals shall not be unreasonably withheld and
which should occur within three months of commencement of the construction of
the Facility, Manager shall establish and maintain such approved accounting
systems and procedures that shall: (i) include procedures for internal
accounting controls; (ii) permit the preparation of financial statements in
accordance with generally accepted accounting principles; (iii) be susceptible
to audit; and (iv) provide for the allocation of operating expenses or overhead
expenses among the Tribe, the Enterprise and Manager, or any other user of
shared facilities or services. Supporting records and the agreed upon accounting
system shall be sufficiently detailed to permit the calculation and payment of
Manager's fee hereunder and to permit the performance of any fee or contribution
computations

                                       23

<PAGE>   24

required under IGRA, the Tribal-State Compact and other applicable laws or
regulations.

                  (c) Net Gaming Revenues, Net Incidental Revenues, and Net
Total Revenues will be calculated for purposes of distribution monthly in
accordance with Section 6.5.

                  (d) All records shall be maintained so as to permit the
preparation of financial statements in accordance with generally accepted
accounting principles consistently applied and in accordance with procedures to
be mutually agreed upon by the parties. Manager shall, as a Costs of Gaming
Operations, furnish to the Tribe, and the Gaming Control Board, monthly
financial reports in accordance with Section 6.4. Such reports shall provide
reasonable detail as requested by the Tribe, and the Gaming Control Board with
respect to revenues and expenses of each profit center of the Enterprise. In
addition, all gaming operations conducted within the Facility shall be subject
to special outside annual audits, which the Gaming Control Board may cause to be
conducted, and all contracts or subcontracts for supplies, services or
concessions for a contract amount in excess of $25,000 annually relating to
gaming activities within Facility shall be subject to audits which the Gaming
Control Board may cause to conducted by an independent certified public
accountant selected and approved by the Gaming Control Board. The audits will be
scheduled at times agreed upon by the Gaming Control Board and Manager. The cost
of such audits and audit reports (including the annual audit under Section 6.6)
shall constitute Costs of Gaming Operation. The Manager shall make any reports
or presentations to the Tribal Council as are requested by the Tribe.

         3.7      Cash Monitoring. As a Cost of Construction, Manager shall
install a video surveillance system and computerized systems for monitoring the
Gross Gaming Revenues on a daily basis. Manager will promulgate, and all parties
and their respective employees, agents, and representatives will obey
operational policies consistent with the Gaming Control Ordinance respecting the
handling of cash, security systems, and access to cash cage, counting rooms, and
other places where cash is kept and handled. The Tribe and the Gaming Control
Board and their authorized representatives shall have the right to monitor and
investigate systems for cash management implemented by Manager in order to
prevent any skimming of receipts or losses of the proceeds and to verify daily
Gross Gaming Revenues, Gross Incidental Revenues, and Gross Total Revenues.

          3.8     Bank Accounts, Reserve Funds and Permitted Investments.

                  (a) Gross Gaming and Incidental Revenues shall be deposited
daily into one or more segregated bank accounts established in one or more
commercial banks, of the Tribe's choice, organized under the laws of the United
States of America or any state thereof provided such bank is a member of the
Federal Deposit Insurance Corporation. The accounts must indicate the custodial
nature of the accounts. The signature of an authorized representative of Manager
shall be the only signature required to make withdrawals (by check or otherwise)
from such accounts, provided that the monies withdrawn are to be used only for
the purposes set forth herein, and provided further that if the amount of any
single withdrawal exceeds Two Hundred and Fifty Thousand Dollars ($250,000)
(excluding payout and prizes and transfers to any designated payroll accounts,
taxes, purchases of currency and budget items already approved),

                                       24

<PAGE>   25

then the signature of the Tribe's designated representative will also be
required.

                  (b) Surplus funds deposited in such account may be invested by
Manager in the following permitted investments: (i) a money market mutual fund
registered under the Investment Company Act of 1940 that invests exclusively in
(1) marketable direct obligations issued or unconditionally guaranteed by the
United State Government or issued by an agency thereof and backed by the full
faith and credit of the United States, (2) commercial paper having, at the time
of acquisition, a rating of A-1 or P-1 or better from either Standard & Poor's
Corporation or Moody's Investors Service, Inc., respectively; or (ii) other
investments as may be directed by Manager with the prior written consent of
Tribe.

                  (c) In accordance with the terms and conditions for opening
bank accounts and investment of funds contained herein, Manager may, with the
approval of the Tribe, establish other segregated banking accounts for business
purposes.

         3.9      Enforcement of Rights.

                  (a) During the term of this Memorandum of Agreement, except as
otherwise provided in Section 3.9 (b), the Tribe and Manager shall mutually
agree with respect to the handling of the defense, prosecution or settlement of
civil disputes with third parties relating to gaming and other management
activities conducted or contracts executed by Manager, as agent for the Tribe.
The parties will assist and cooperate with each other with respect to such
third-party claims and disputes. All uninsured liabilities incurred or expenses
incurred by the Tribe and Manager or any of the employees, officers or directors
of any party in defending such claims by third parties or prosecuting claims
against third parties shall be considered either Costs of Gaming Operation or
Costs of Incidental Operations, depending upon the circumstances and nature of
the claim, except with respect to claims and liabilities resulting from criminal
misconduct, which shall be governed by Article 8.

                  (b) All claims brought against the Tribe or Manager or any of
the employees, officers or directors of any party arising out of or relating to
gaming or other operations conducted pursuant to this Memorandum of Agreement
that may be settled and released for a total settlement amount of less than
Seventy-Five Thousand Dollars ($75,000) may be paid and settled by Manager in
accordance with Manager's good faith business judgment.

         3.10     Fire and Safety Services. Manager shall be responsible for
obtaining adequate coverage for fire and safety services and may, in its
discretion, have such services provided on a contractual basis by the local Fire
and Police Departments. The costs of any fire and safety protection services
shall be appropriately allocated between Costs of Gaming Operation and Costs of
Incidental Operations, and, if provided by a Department of the Tribe, shall not
exceed the actual cost to the Tribe of providing such services.

         3.11     Timely Payment of Costs of Gaming and Incidental Operations.
Manager shall be responsible for paying Costs of Gaming Operation and Costs of
Incidental Operations from the bank account(s) established pursuant to Section
3.8 so as to avoid any late-payment penalties,

                                       25
<PAGE>   26

except those incurred as a result of good faith payment disputes.

         3.12 Acquisition of Gaming and Other Equipment.

                  (a) All gaming equipment shall be acquired by Manager, as
agent for the Tribe, from Gaming Control Board licensed distributors and
manufacturers. Unless previously approved by the Tribe in a separate budget, all
purchases exceeding One Hundred and Twenty-Five Thousand Dollars ($125,000)
shall require the written approval of the Tribe.

                  (b) All acquisitions of new equipment after the public opening
of the Facility shall be purchased by Manager as agent for the Tribe on a cash
on delivery basis, unless otherwise agreed by the Tribe.

         3.13 Hours of Operation. Unless otherwise agreed by the parties, the
facility and Enterprise shall be operated for the maximum days per week and
hours per day, subject to any restrictions in the IGRA and the Tribal-State
Compact.

         3.14 Access to Operations. Manager shall provide immediate access by
appropriate officials of the Gaming Control Board and the Tribe's designated
representative to the gaming operation, including all books and records in
addition to those listed in the access requirements set forth in Sections 3.6
and 3.7.
         3.15 Increased Public Safety Services. The parties agree that increased
actual costs of law enforcement and police protection services required as a
result of the Class II and Class III Gaming in the Facility shall be paid as
Costs of Gaming Operation.

         3.16 Advertising. Manager shall contract for and place advertising,
subject to prior approval of the general concepts of the advertising by the
Tribe. Advertising costs will be included in the operating budgets prepared in
accordance with Article 6.

         3.17 Certain Meetings. The Tribe shall appoint a Gaming Committee
consisting of two or three individuals. One of the Members shall serve as
financial monitor and shall be afforded timely access to all financial records
concerning the Enterprise. This Gaming Committee shall provide a means through
which Manager can regularly communicate with the Tribe concerning issues or
problems that require, or may require, Tribal approval or input. If a required
approval is obtained from this Gaming Committee, no additional approval is
necessary from the Tribe. The General Manager, or his representative, as
mutually agreed by the parties, shall meet with the Gaming Committee at least
once very two weeks. At such meetings manager shall provide progress reports and
the most current financial information. The general policies of the Enterprise
concerning employment, working conditions, employee training, expenditures,
construction improvements, procurement, marketing, and similar business matters
shall be discussed. The Gaming Committee may make proposals regarding these
policies, but shall not interfere in the day-to-day operation of the Enterprise.
Manager shall meet and confer in good faith with the Gaming Committee concerning
matters raised by the Committee and concerning what remedial action, if any,
shall be necessary. Unless agreement on such action or decision may be withheld
in the sole discretion of Manager or the Tribe, such disagreement shall be

                                       26

<PAGE>   27

subject to the dispute resolution procedures in Article 11.

         3.18 Maintenance. Manager will cause the Facility to be repaired and
maintained and operated in a clean, good and orderly condition. Repairs and
maintenance will be paid as Costs of Gaming Operation if related to the gaming
operations of the Enterprise, or as Costs of Incidental Operation if related to
the other operations of the Enterprise.

         3.19 Term. Notwithstanding the date of signature of the parties hereto,
the Management Agreement portion of this Memorandum of Agreement shall become
effective upon the last of the following events to occur: (i) written approval
of the Tribe's Gaming Control Ordinance, this Memorandum of Agreement, the
executed Facility Loan and related Facility Note, UCC Financing Statements, and
the Resolution of Limited Waiver and issuance of final agency decision by the
chairman of the National Indian Gaming Commission and/or, as applicable, the
BIA; (ii) approval by the Secretary and publication in the federal register of
the Tribal-State Compact; or (iii) issuance by the Gaming Control Board of all
applicable license(s) required by IGRA, the Tribe's Gaming Control Ordinance or
the Tribal-State Compact to Manager ("Effective Date"). The Commencement Date
shall be the first day upon which the Facility is open to the public to engage
in gaming activities. Unless sooner terminated as provided in this Memorandum of
Agreement, the Management Agreement portion of this Memorandum of Agreement
shall run for a period of five (5) years from the Commencement Date; provided
further that, because the capital investment required and the income projections
for development of the Facility and Enterprise beyond the scope initially
planned will require additional time beyond five (5) years, the term of the
Management Agreement portion of this Memorandum of Agreement may be extended an
additional two (2) years at the option of Manager provided that Manger has
completed all of the following: (a) is successful in providing additional land
to the Tribe in excess of Three Million Dollars ($3,000,000), (b) develops a
gaming facility and related amenities with a cost in excess of Sixty Million
Dollars ($60,000,000), (c) resolves the dispute between the Tribe and IGA
relating to the Facility and Enterprise; or alternatively, Manager completes all
of the following within the original five (5) year term: (i) 120,000 square feet
of building space, (ii) one thousand seven hundred (1,700) compacted Class III
gaming devices and 40 table games (assuming allowed by Tribal-State Compact),
(iii) 2,000 parking spaces, (iv) speciality restaurant, (v) food buffet
restaurant, (vi) 24 hour coffee shop, (vii) snack bar, (viii) retail area, (ix)
multi-purpose entertainment room, (x) meeting rooms, (xi) child care center,
(xii) video arcade facility, (xiii) administrative offices, (xiv) hotel with an
indoor pool, (xv) RV park, and (xvi) convenience store/gas station. The
extension shall be automatic unless the Tribe notifies the Manager in writing at
least six (6) months in advance of the expiration of the original term that the
Manager has yet to satisfy performance hereunder.

         3.20 Surveillance. Manager shall provide for appropriate surveillance
for the operation of the Enterprise. All areas and resources of the surveillance
department shall be fully accessible to the Jamul Gaming Control Board upon
official request of the Board. Pursuant to an official request, the Board may
require the surveillance department to cooperate in all investigations, to turn
over any and all video and audio recordings, to turn over any and all operations
logs, and any other documents kept in the normal course of business by that
department, and to permit the

                                       27
<PAGE>   28

Board to visually monitor any facet of the gaming operations.

                                    ARTICLE 4
                                PERSONNEL MATTERS

         4.1 Employees. All employees involved with operation of the
Enterprise's Class II and Class III Gaming activities and related activities
throughout the Facility subject to management by Manager under this Management
Agreement shall be employees of the Tribe. Subject to the applicable
requirements in the Tribal-State Compact, the employment relationship shall be
governed by Tribe substantive law, subject to the Tribe's reasonable Indian
preference policies, and all matters will be subject to dispute resolution
procedures in the manner described in this Memorandum of Agreement. Manager
shall be solely responsible for the hiring, training, promoting, and firing of
all such employees except for the general manager as agreed to by the Tribe and
Manager, whose employment, advancement and termination shall be subject to
approval of the Tribe, such approval not to be unreasonably withheld. Manager
shall develop a policy and procedure in conjunction with the Tribe, to implement
an executive development program for employees who are members of the Tribe
whereby Tribe members will be prepared through training and education to assume
key management positions within the gaming and non-gaming operations of the
Enterprise. All salaries, wages, employee insurance, worker compensation
premiums, employment taxes, government exactions of any kind related to
employment, benefits, and overhead related to the hiring, supervising, and
discharge of employees, will be Costs of Gaming Operations or Costs of
Incidental Operations, as appropriate.

         4.2 Enterprise Employee Policies. Manager shall prepare a draft of
personnel policies and procedures (the "Enterprise Employee Policies"),
including a job classification system with salary levels and scales, which
policies and procedures shall be subject to approval by the Tribal Council. The
Enterprise Employee Policies shall include a grievance procedure in order to
establish fair and uniform standards for the Enterprise employees, which will
include procedures for the resolution of disputes between Manager and Enterprise
employees. Manager shall be responsible for administering the Enterprise
Employee Policies. Any revisions to the Enterprise Employee Policies shall not
be effective unless they are approved by the Tribal Council. All such actions
shall comply with applicable tribal law, subject to the applicable requirements
in the Tribal-State Compact.

         4.3 Employee Background Checks. A background investigation shall be
conducted by the Gaming Control Board in compliance with all Legal Requirements,
to the extent applicable, on each applicant for employment as soon as reasonably
practicable. No individual whose prior activities, criminal record, if any, or
reputation, habits and associations are known to pose a threat to the public
interest, the effective regulation of Class II or Class III Gaming, or to the
gaming licenses of Manager, or to create or enhance the dangers of unsuitable,
unfair, or illegal practices and methods and activities in the conduct of
Enterprise gaming activities, shall knowingly be employed by Manager or the
Tribe. The background investigation procedures employed by the Gaming Control
Board shall be formulated in consultation with Manager and shall satisfy all
regulatory requirements independently applicable to Manager. Any cost associated
with obtaining such background investigations shall constitute an Cost of Gaming

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<PAGE>   29

Operation.

         4.4 Indian Preference. Manager shall adhere in regard to recruitment,
employment, reduction in force, promotion, training and related employment
actions to a publicly announced policy and practice of Indian Preference as
approved by the Tribe.

         4.5 Conflict of Interest.

                  (a) Manager covenants that it will not unduly interfere with,
or attempt to influence the internal affairs or government decisions of the
Tribe for its gain or advantage.

                  (b) Manager hereby certifies that no payments have been made
or will be made in the future by Manager to any Tribe official, member of the
Tribal Council, relative of any tribal official or tribal government employee
for the purpose of obtaining any special privilege, gain, advantage or
consideration for Manager, except for the fees payable to the Gaming Control
Board and amounts payable to the Tribe pursuant to this Memorandum of Agreement.
However, nothing in this provision shall prohibit Manager from making
contributions to community organizations within the Tribe or to the Tribe for
the purpose of funding community activities.

                  (c) No member of the Gaming Control Board, or any tribal court
official may be employed by Manager or be a "Party in Interest" as defined in
Section 9.1 (a) herein with respect to this Memorandum of Agreement or a gaming
equipment agreement or have any direct or indirect financial interest in the
gaming to be operated pursuant to this Memorandum of Agreement. Members of the
Tribal Council and their relatives shall be eligible for employment at the
Facility and Enterprise and to enter contracts for the provision of goods or
services for the Facility and Enterprise.

                  (d) Manager further agrees to comply with all conflict of
interest rules set forth in regulations or ordinances of the Tribe.

         4.6 Participation in Tribe Functions. Manager acknowledges that
personnel who are members of the Tribe have cultural and religious
responsibilities to perform in regard to Tribe rituals and similar activities.
Manager will schedule working hours and take other actions, with the assistance
and advice of the Tribe, to accommodate Tribe members in performing these
responsibilities without affecting their employment status or position.

                                    ARTICLE 5
                                    INSURANCE

         5.1 Duty to Maintain. Manager shall maintain during the course of this
Memorandum of Agreement, appropriately allocated as a Cost of Gaming Operation
or a Cost of Incidental Operations, insurance coverages in forms and amounts
that will adequately protect the Tribe and Manager, but in no case less than the
amounts set forth in this Article, or as required by the Tribal-State Compact.

                                       29

<PAGE>   30

         5.2 Workers' Compensation. Manager shall maintain adequate workers'
compensation insurance in accordance with all applicable laws, including
employer's liability insurance, in the amounts agreed to by the Manager and
Tribe, or as required by the Tribal-State Compact.

         5.3 Commercial General Liability. Manager shall maintain commercial
general liability insurance covering operations of the Enterprise, including
blanket contractual liability coverage, broad form property liability coverage,
and personal injury coverage in the amount of $1,000,000 per person/$3,000,000
per occurrence for bodily injury and $1,000,000 per person/$3,000,000 per
occurrence for property damage, or as required by the Tribal-State Compact or
Gaming Control Board.

         5.4 Automobile. Manager shall maintain comprehensive automobile
liability insurance covering operations of the Enterprise, including all owned,
hired and non-owned automobiles, trucks, buses, trailers, motorcycles or other
equipment licensed for highway use with limits and coverage approved by the
Manager and Tribe.

         5.5 Tribe and Manager to be Insured. Insurance set forth in Sections
5.3 and 5.4 shall name the Tribe and Manager as insureds, and such policies
shall be endorsed to prohibit the insurer from raising tribal sovereign immunity
as a defense to the payment of claim by the insurer.

         5.6 Property Insurance. Manager shall also, acting a agent for the
Tribe, procure replacement value casualty and extended hazard insurance in
appropriate coverage amounts which shall insure the Facility and any fixtures,
improvements and contents located therein against lost or damage by fire, theft
and vandalism. All such casualty insurance proceeds shall be applied to the
immediate replacement of the applicable Facility part or fixture, improvements
or contents therein unless the parties agree otherwise. Such casualty insurance
policy or policies shall name the Tribe and Manager as insureds.

         5.7 Fidelity Bond. Manager shall maintain fidelity bonds on such
employees and in such amounts as Manager and Tribe shall deem reasonable.

         5.8 Unemployment Insurance. Manager, acting as agent for the Tribe,
shall maintain adequate unemployment compensation/disability insurance with
respect to the Enterprise employees in compliance with the Tribal-State Compact.

         5.9 Evidence of Insurance. Prior to the opening of the Facility to the
public and commencing operations of the Enterprise, Manager shall supply to the
Tribe and any necessary Governmental Authorities copies of the insurance
policies applicable to the Facility or Enterprise operations as required by this
Article.

                                    ARTICLE 6

                                       30

<PAGE>   31

                     BUDGETS, COMPENSATION AND REIMBURSEMENT

         6.1      Projections and Budgets.

                  (a) The parties have used their best efforts to project
expected revenues and expenses for the first three (3) years of operation of the
Enterprise, and the projections attached hereto as Exhibit D represent the
parties' mutual expectations.

                  (b) Manager shall prepare a budget for the Initial Costs of
Operation and submit such budget to the Tribe within one hundred twenty (120)
days of execution of this Memorandum of Agreement. Manager shall also prepare an
initial operating budget and submit the same to the Tribe for approval by the
Tribal Council at least ninety (90) days prior to the opening of Facility to the
public and commencement of the Enterprise's Class II and Class III Gaming.
Annual operating budgets shall be submitted by Manager to the Tribe thereafter
by no later than thirty (30) days prior to the commencement of the Fiscal Year.
The proposed initial operating budget and each subsequent annual operating
budget shall be subject to approval or disapproval within thirty (30) days of
submission to the Tribe, such approval not to be unreasonably withheld. The
parties recognize that mutually agreeable adjustments may be made to previously
approved operating budgets from time to time during any Fiscal Year, to reflect
the impact of unforeseen circumstances, financial constraints, or other events.
Manager agrees to keep the Tribe informed regarding any items of revenue or
expense that are reasonably anticipated to cause a material change to the
operating budget previously approved by the Tribe, and to obtain written
approval from the Tribe for any budget increase or decrease of more than ten
percent (10%) from the previously approved budget.

                  (c) Manager shall prepare an annual capital expenditure budget
and submit such budget to the Tribe at least ninety (90) days prior to the
opening of the Facility to the public and commencement of the Enterprise's Class
II and Class III Gaming. Annual capital expenditure budgets shall be submitted
by Manager to the Tribe thereafter by no later than thirty (30) days prior to
the commencement of the Fiscal Year. The proposed capital expenditure budgets
shall be subject to approval or disapproval within thirty (30) days of
submission to the Tribe for approval, such approval not to be unreasonably
withheld. The parties recognize that mutually agreeable adjustments may be made
to previously approved capital expenditure budgets from time to time during any
budget year, to reflect the impact of unforeseen circumstances, financial
constraints, or other events. Manager agrees to keep the Tribe informed and
obtain Tribe's approval regarding any projects or expenditures that are
reasonably anticipated to cause a material change to the capital expenditure
budget previously approved by the Tribe, and to obtain written approval from the
Tribe for any budget increase or decrease of more than ten percent (10%) from
the previously approved budget.

         6.2 Advances for Initial Costs of Operation. The initial operating
budget for the Facility and the Enterprise shall contain an amount approved by
Manager and the Tribe which Developer/Manager agrees to arrange for a lender to
advance, or advance directly to the Tribe, for Initial Costs of Operation as a
component of the Facility Loan in accordance with Section 2.5 of this Memorandum
of Agreement.

                                       31

<PAGE>   32

         6.3      Minimum Guaranteed Monthly Payments.

                  (a) During the term of this Management Agreement, the
Enterprise shall, subject to the provisions of Section 6.3(b) below, pay the
Tribe One Million Dollars ($1,000,000) per month on a cumulative Fiscal Year
basis (the "Minimum Guaranteed Monthly Payment"), beginning on the Commencement
Date and continuing for the remainder of the Term. The Minimum Guaranteed
Monthly Payment assumes that the Tribe will operate one thousand seven hundred
(1,700) compacted gaming devices. In the event the number of permitted and
operated compacted Class III gaming devices is less than one thousand seven
hundred (1,700), the Minimum Guaranteed Monthly Payment shall be prorated down
based upon the actual number of permitted and operated Class III gaming devices.
However, in the event the number of permitted and operated compacted gaming
devices is less that one thousand seven hundred (1,700), the Minimum Guaranteed
Monthly Payment shall not be less than Six Hundred Thousand Dollars ($600,000).
The Minimum Guaranteed Monthly Payment shall be payable to the Tribe in arrears
on the twenty first (21st) day of each calendar month following the month in
which the Commencement Date occurs, which payment shall have priority over the
Management Fee and retirement of development and construction costs. If the
Commencement Date is a date other than the first day of a calendar month, the
first payment will be prorated from the Commencement Date to the end of the
month. Manager agrees to use Urban Systems, Marquette Partners, or other
mutually agreeable companies, to conduct a feasibility study concerning the
number of compacted Class III gaming devices that can be operated by the
Enterprise at the Facility under existing market conditions. In the event the
feasibility study concludes that the 1700 compacted gaming devices are feasible,
Manager agrees to open the Facility with at least that number of devices
(assuming this is permitted by the Tribal-State Compact and this number of
gaming devices are available pursuant thereto).

                  (b) Minimum Guaranteed Monthly Payments shall be charged
against the Tribe's monthly distributable share of Net Total Revenues under
Section 6.5; provided, however, that if the Net Total Revenues in a given month
are less than $1,000,000, Manager shall advance the funds necessary to
compensate for the deficiency from its own funds; and provided further that
Manager's obligation to make such payment shall be reduced to the extent that
the Tribe has received or receives distributions from Net Total Revenues during
that Fiscal Year, on a cumulative basis, exceeding the Minimum Guaranteed
Monthly Payments required under this Section 6.3. For example, if (a) the Fiscal
Year commences on January 1 and (b) the Tribe receives distributions in January,
February, and March totaling $5,000,000, receives no distributions in April, May
and June, and receives $2,000,000 in July; then Manager would not be required to
make payments from its own funds in April and May; would be required to pay the
Tribe $1,000,000 in June; and would be permitted to recoup $1,000,000 of the
June payment out of the payment that the Tribe would otherwise receive in July.
Manager shall not otherwise be entitled to reimbursement from the Enterprise or
the Tribe for payments it makes from its own funds on account of Minimum
Guaranteed Monthly Payments. However, no Minimum Guaranteed Monthly Payments
shall be required with respect to any months (or portions thereof) that Class II
or Class III Gaming is suspended or terminated at the Facility, provided that
the reason or cause of such suspension or termination is beyond the control of
Manager. Further, no

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<PAGE>   33

Minimum Guaranteed Monthly Payments shall accrue subsequent to termination of
this Memorandum of Agreement.

         6.4 Daily and Monthly Statements. Manager shall furnish to the Tribe's
designated representative statements identifying for each day the Gross Gaming
Revenues attributable to the Enterprise's Class II and Class III Gaming on each
day that such reports are normally available. Within fifteen (15) days after the
end of each calendar month, Manager shall provide a verifiable financial report
to the Tribe and the Gaming Control Board covering the preceding month and
identifying Gross Gaming Revenues, Gross Incidental Revenues, Gross Total
Revenues, Costs of Gaming Operation, Costs of Incidental Operations, Net Gaming
Revenues, Net Incidental Revenues, and Net Total Revenues, the amount in excess
of Minimum Guaranteed Monthly Payments to be repaid pursuant to the Facility
Note and the amount computed in accordance with Section 6.5 hereof, to be
distributed to each of the parties hereunder.

         6.5 Distribution of Net Total Revenues.

                  (a) All Net Total Revenues shall be disbursed on a monthly
basis as set forth below, paid on the twentieth day of each calendar month for
the preceding month.

                  (b) As compensation for Manager's services, Manager shall
receive thirty percent (30%) of Net Total Revenues for the prior calendar month,
and Tribe shall receive seventy percent (70%) of Net Total Revenues for such
prior calendar month.

                  (c) Manager, on behalf of the Enterprise, is responsible for
making the Net Total Revenues disbursements to the appropriate party.

         6.6 Annual Audit. With respect to each Fiscal Year, Manager shall cause
an audit to be conducted by a nationally recognized certified public accounting
firm approved by the parties, and on or before one hundred twenty (120) days
after the end of such year, such accounting firm shall issue a report setting
forth the Gross Gaming Revenues, Gross Incidental Revenues, Gross Total
Revenues, the actual Costs of Gaming Operation, Costs of Incidental Operations,
Net Gaming Revenues, Net Incidental Revenues, and the actual Net Total Revenues
in each case with respect to the preceding Fiscal Year (or portion of the year
in the case of the first year) to be approved at an annual meeting to be held at
a location mutually agreed upon by the parties. In addition, upon termination of
this Memorandum of Agreement in accordance with its terms, such accounting firm
shall conduct an audit, and on or before ninety (90) days after the termination
date, shall issue a report setting forth the same information as is required in
the annual report, in each case with respect to the portion of the Fiscal Year
ending on the termination date. If the Net Total Revenues or other amounts paid
to the Tribe or Manager in accordance with Section 6.5 (b) above for relevant
period are different from the amount which should have been paid to such party
based on the report prepared by the accounting firm and based upon the
provisions of this Memorandum of Agreement, then to the extent either party
received an overpayment, it shall repay and deposit the amount of such
overpayment into the bank account referenced in Section 3.8 (a) within
twenty-five (25) days of the receipt by such party of the accountant's report,
and to the extent either party received an underpayment, it shall receive a
distribution from the bank

                                       33

<PAGE>   34

account referenced in Section 3.8 (a) of the amount of such underpayment within
ten (10) days of the receipt by such party of the accountant's report. Manager
may make adjustment to future payments to correct a discrepancy if required
distributions are not made.

         6.7 Advances for Working Capital. Where amounts in bank accounts
established pursuant to Section 3.8 are insufficient to meet Costs of Gaming or
Incidental Operation, then Manager reserves the right, in its sole discretion,
to make advances as necessary to pay Costs of Gaming or Incidental Operation and
to immediately repay itself for such advances from Gross Total Revenues.

         6.8 Development and Construction Cost Recoupment. The maximum dollar
amount for recoupment of development and construction costs for the Facility and
Enterprise shall be the total amount of the sums advanced by the lender or
Developer/Manager to the Tribe pursuant to the Transition Loan under Section 2.3
and the Facility Loan under Section 2.5 herein.

         6.9 Loan Audits. At least ninety (90) days prior to the opening of the
Facility and commencement of the Enterprise's Class II and Class III Gaming, an
audit shall be commenced by an accounting firm mutually agreeable to the parties
in order to confirm the proper expenditure of all funds under the Facility Loan
and Transition Loan. The Loan Audit shall be completed within ninety (90) days.
All funds found to be properly expended shall be repaid to Manager in accordance
with the terms of the loans. The cost of the Loan Audit shall be a Cost of
Gaming Operation.

                          PROVISIONS APPLICABLE TO BOTH
                    THE DEVELOPMENT AND MANAGEMENT AGREEMENTS

                                    ARTICLE 7
                                   TERMINATION

         7.1 Termination for Cause.

                  (a) Either party may terminate this Memorandum of Agreement if
the other party commits or allows to be committed a Material Breach (as
hereinafter defined) of this Memorandum of Agreement and fails to cure or to
take steps to substantially cure such breach within thirty (30) calendar days
after receipt of a written notice from the non-breaching party identifying the
nature of the Material Breach and its intention to terminate this Memorandum of
Agreement. Termination is not an exclusive remedy for breach, and the
non-breaching party shall be entitled to other rights and remedies as may be
available. For purposes of this Memorandum of Agreement, a "Material Breach" is
any of the following circumstances: (i) failure of Manager to provide the Tribe
with the monthly Minimum Guaranteed Monthly Payments pursuant to Section 6.3,
(ii) material failure of either party to perform in accordance with this
Memorandum of Agreement for reasons not excused under Section 10.6 (Force
Majeure), (iii) if any of Manager's employees are found guilty of theft,
embezzlement or crime of moral turpitude by a final judgment of a court of
competent jurisdiction and if, after knowledge

                                       34

<PAGE>   35

of such final judgment, Manager does not remove such employee from connection
with Class II or Class III Gaming operations of the Enterprise, (iv) default
under the Facility Note or the Transition Note by the Tribe, (v) any
representation or warranty made pursuant to Section 10.11 or 10.12 proves to be
knowingly false or erroneous in any material way when made, or (vi) failure of
Manager to provide the Tribe with the payments pursuant to Section 2.3.

                  (b) Notwithstanding any provision to the contrary herein, the
parties agree that, for so long as the Tribe owes any amounts under the Facility
Note or Transition Note, the Tribe agrees that it will not terminate this
Memorandum of Agreement without cause.

         7.2 Mutual Consent. This Memorandum of Agreement may be terminated at
any time upon the mutual written consent and approval of the parties.

         7.3 Involuntary Termination Due to Changes in Law or Tribal-State
Compact. The parties hereby agree to use their best efforts to conduct Class II
and Class III Gaming activities in accordance with this Memorandum of Agreement
and to ensure that such activities and this Memorandum of Agreement conform to
and comply with all applicable laws and the Tribal-State Compact. The Tribe
agrees that, except as may be required by federal law, the Tribe will not enact
or pass any new ordinances subsequent to the execution of this Memorandum of
Agreement that would materially impair the rights of Developer/Manager under
this Memorandum of Agreement. The Tribe will not enact any tax ordinance that
will put the Facility or the Enterprise, or any portion thereof, at a
competitive disadvantage with businesses in the same or like industries. In the
event of any change in state or federal laws that results in a final
determination by the Secretary, the National Indian Gaming Commission, or a
court of competent jurisdiction that this Memorandum of Agreement is unlawful,
the Tribe and Developer/Manager shall use their best efforts to amend this
Memorandum of Agreement in a mutually satisfactory manner which will comply with
the change in applicable laws and not materially change the rights, duties and
obligations of the parties hereunder. In the event such amendment is not
practical, performance of this Memorandum of Agreement shall be automatically
suspended effective upon the date that performance of this Memorandum of
Agreement becomes unlawful, and either party shall have the right to terminate
such suspended Memorandum of Agreement (except the Notes and Security
Provisions, as defined in Section 7.4 (a)) upon written notice to the other
party).

         7.4 Ownership of Assets and Repayment of Notes on Termination.

                  (a) Upon termination, except in connection with
Developer/Manager's and lender's security interest in the Net Total Revenues of
the Enterprise pursuant to the Tribe's Limited Recourse obligations under the
Facility Note and Interim Promissory Note (if not yet satisfied), the Tribe will
retain full ownership of the Facility, Plans and Specifications therefor, and
the Enterprise and its assets; and Manager will have no rights to the Enterprise
and its assets or the Facility (or any equipment, books and records, materials
or furnishings therein that were purchased with Costs of Gaming or Incidental
Operations or Costs of Construction). In the event of any termination (whether
voluntary or involuntary), the Tribe shall continue to have the obligation to
pay unpaid principal and interest and other amounts due under either the
Facility

                                       35

<PAGE>   36

Note or Interim Promissory Note executed in connection herewith. Any and all
obligations and provisions contained in this Memorandum of Agreement concerning
repayment of the Facility Note or Interim Promissory Note, and the security
therefor (collectively, the "Notes and Security Provisions"), shall survive
termination of this Memorandum of Agreement.

                  (b) Subject to the provisions of Section 7.1 (b), in the event
of termination of this Memorandum of Agreement for any reason prior to the full
repayment to Developer/Manager of any amounts owed to it by the Tribe under
either the Facility Note or Interim Promissory Note, the Tribe shall, as
promptly as reasonably possible, appoint a person or entity to manage the
Facility and operate the Enterprise (the "Replacement") and use its best efforts
to obtain approvals of all required Governmental Authorities for such
Replacement. The Tribe agrees to keep full and accurate financial records of
operations of the Enterprise by such Replacement and to allow Developer/Manager
to audit such records at reasonable times prior to full repayment to
Developer/Manager of any amounts owed to it by the Tribe under either the
Facility Note or Interim Promissory Note and that Tribe's compliance with this
paragraph shall not preclude the Developer/Manager from exercising any of its
other rights and remedies hereunder, including, without limitation, rights under
the Facility Note or Interim Promissory Note.

         7.5 Notice of Termination. In the event of termination pursuant to this
Article, the Tribe shall provide notice of the termination to the Secretary or
other appropriate Governmental Authorities within ten (10) days after the
termination.

                  7.6 Cessation of Class II or Class III Gaming at the Facility.

                  (a) If, during the term of this Memorandum of Agreement, Class
II or Class III Gaming cannot be lawfully conducted at the Facility by reason of
the application of any legislation or court or administrative agency order or
decree adopted or issued by a governmental entity having the authority to do so,
Developer/Manager shall, within 60 days after such legislation, order or decree
becomes effective, elect to:

                           (i) retain Developer/Manager's interest in this
                  Memorandum of Agreement and suspend Gaming operations until
                  such date, if any, during the term of this Memorandum of
                  Agreement on which Class II or Class III Gaming at the
                  Facility becomes lawful; or

                           (ii) retain Developer/Manager's interest in this
                  Memorandum of Agreement, suspend Class II or Class III Gaming
                  operations until such date, if any, during the term of this
                  Memorandum of Agreement on which Class II or Class III Gaming
                  at the Facility becomes lawful, and with the prior approval of
                  the Tribe, which approval shall not be unreasonably withheld,
                  use the Facility for any other lawful purpose pursuant to a
                  use agreement containing terms reasonably acceptable to
                  Developer/Manager and the Tribe; or

                           (iii) terminate Class II or Class III Gaming
                  operations and terminate this

                                       36
<PAGE>   37

                  Memorandum of Agreement.

                  Developer/Manager shall give the Tribe written notice of
         Developer/Manager's election within such 60-day period.

                  (b) If Developer/Manager elects to retain its interest in this
Memorandum of Agreement under Section 7.6 (a)(i) or (ii) above,
Developer/Manager shall have the right (but not the obligation) to commence
Class II or Class III Gaming operations within sixty (60) days after the date on
which Class II or Class III Gaming becomes lawful. Developer/Manager may
exercise such right by giving the Tribe written notice of such exercise within
thirty (30) days after the date on which Class II or Class III Gaming becomes
lawful. Any reasonable payment to any third party made during the period during
which Class II or Class III Gaming is unlawful to preserve or eliminate any
leasehold or purchase contract rights of the Facility shall be paid by
Developer/Manager as Costs of Gaming Operation or Cost of Incidental Operations
and reimbursed after Class II or Class III Gaming is recommenced.

                  (c) If Developer/Manager elects to terminate this Memorandum
of Agreement under this Section 7.6, the provisions of Section 7.4 above shall
apply.
                  (d) If, during the term of this Memorandum of Agreement, the
Facility is damaged by casualty or other occurrence to the extent, as reasonably
determined by Developer/Manager, that Class II or Class III Gaming cannot be
conducted at the Facility, Developer/Manager shall, within sixty (60) days after
such casualty or occurrence, elect to:

                           (i) retain Developer/Manager's interest in this
                  Memorandum of Agreement pending repair or reconstruction of
                  the Facility, suspend Class II or Class III Gaming operations
                  pending the repair or reconstruction of the Facility, and
                  arrange for such repair or reconstruction in the manner
                  described in this Section 7.6; or

                           (ii) terminate Class II or Class III Gaming
                  operations and terminate this Memorandum of Agreement.

                  Developer/Manager shall give the Tribe and Tribe written
notice of Developer/Manager's election within such sixty (60) day period.

                  (e) If Developer/Manager elects to retain its interest in this
Memorandum of Agreement under Section 7.6(d)(i) above, Developer/Manager shall
promptly verify the amount of insurance proceeds available to pay the cost of
repair or reconstruction. Developer/Manager is hereby granted the authority to
submit, adjust and settle, on behalf of the Tribe, all insurance claims
associated with the casualty or occurrence; provided, however, that
Developer/Manager shall obtain the Tribe's prior written consent (which consent
shall not be unreasonably withheld) to any settlement. Developer/Manager shall
provide copies of all settlement documents to the Tribe.

         7.8      Renewal Option.

                                       37

<PAGE>   38

                   The parties by mutual agreement may decide to renew or extend
the Management Agreement of this Memorandum of Agreement. Any such renewal or
extension shall become effective upon approval by the NIGC and appropriate
licensing by the Gaming Control Board.

                                    ARTICLE 8
                              RELEASE AND INDEMNITY

         8.1 Third-Party Claims. Except for Section 2.4(h), neither party shall
be entitled to recover from, and expressly releases, the other party, its
agents, officers and employees, from or for any third-party damages, claims,
causes of action, losses and/or expenses of whatever kind or nature, except
claims resulting from its own gross negligence or willful or criminal
misconduct, including attorneys' fees and expenses incurred in defending such
claims in connection with the lawful operation of the Facility and Enterprise in
accordance with the terms of this Memorandum of Agreement, and such claims,
damages, losses or expenses shall be considered either Costs of Gaming Operation
or Costs of Incidental Operations, depending on the circumstances and nature of
the claim, payable from the bank account established pursuant to Section 3.8(a).

         8.2 Indemnity from Developer/Manager. Notwithstanding Section 8.1,
Developer/Manager shall indemnify and hold the Tribe harmless against any and
all damages, claims, losses or expenses of whatever kind or nature, including
reasonable attorneys' fees resulting from the criminal misconduct of
Developer/Manager, its officers and directors in connection with
Developer/Manager's performance of this Memorandum of Agreement, and no such
damages, losses or expenses shall be paid from the bank accounts established
pursuant to Section 3.6 (a), nor shall such losses or expenses be considered
Costs of Gaming or Incidental Operations.

         8.3 Indemnity from Tribe. Notwithstanding Section 8.1, Tribe shall
indemnify and hold Manager harmless against any and all damages, claims, losses
or expenses of whatever kind or nature, including reasonable attorneys' fees
resulting from the criminal misconduct of the Tribe, its officers, directors, or
tribal government employees, in connection with the Tribe's performance of this
Memorandum of Agreement, and no such damages, losses or expenses shall be paid
from the bank accounts established pursuant to Section 3.8(a), nor shall such
losses or expenses be considered Costs of Gaming or Incidental Operations.

         8.4 Indemnity Against Unauthorized Debt and Liabilities. The parties
expressly agree that neither this Memorandum of Agreement nor its performance
creates or implies a partnership between the parties or authorizes either party
to act as agent for the other except to the extent expressly provided herein.
Developer/Manager hereby agrees to indemnify and hold the Tribe harmless from
any third-party claims, actions and liabilities, including reasonable attorneys'
fees on account of obligations or debts of Developer/Manager that
Developer/Manager is not authorized to undertake as agent for the Tribe pursuant
to the terms of this Memorandum of Agreement. The Tribe likewise agrees to
indemnify and hold Developer/Manager harmless from any third-party claims,
actions and liabilities on account of any of the separate obligations or debts
of the Tribe that are not authorized Costs of Gaming or Incidental Operations or
Costs of Construction pursuant to this Memorandum of Agreement.

                                       38
<PAGE>   39

                                    ARTICLE 9
                               PARTIES IN INTEREST

         9.1      Payment of Fees and Submission of Information for Background
Investigations. Upon execution of this Memorandum of Agreement,
Developer/Manager shall pay from its own funds the fees required by federal and
Tribe regulations for background investigations for the "Parties in Interest" as
defined herein, and it shall submit the information required by this Section in
duplicate to the National Indian Gaming Commission and the Gaming Control Board
and update such information at any time that changes occur in prior submissions
so as to allow complete background investigations. However, in no event shall
the cost of background investigations under this Section relating to Gaming
Control Board regulations exceed twenty-Five Thousand Dollars ($25,000), without
the mutual written consent of the parties.

                  (a) As used in this Section 9.1, the term, "Parties in
Interest" includes any person or entity with a financial interest in, or having
management responsibility for, this Memorandum of Agreement or for which
background investigations are required by 25 C.F.R. Part 537, and any amendments
thereto.

                  (b) Manager shall require sufficient information and
identification from each "Party in Interest" to perform a background
investigation for the purpose of determining the suitability of such persons for
employment in a gaming operation, including, at a minimum, the information
required by the National Indian Gaming Commission as set forth in 25 C.F.R. Part
537.

                  (c) Without limiting the foregoing, Manager shall obtain a
current set of fingerprints on each person for whom background investigations
are required by the Gaming Control Board and the National Indian Gaming
Commission, using forms supplied by the National Indian Gaming Commission and/or
the Gaming Control Board, which shall be referred to the Federal Bureau of
Investigation (FBI) Fingerprint Identification Division or other law enforcement
agency designated by the Gaming Control Board.

                  (d) The parties hereby certify that a listing of all "Parties
in Interest" as defined in Section 9.1 (a) above is set forth in Exhibit E
hereto. All such "Parties in Interest", as such listing shall be supplemented
from time to time, shall be required to furnish the information required by this
Section 9.1 prior to obtaining such interest. All necessary Governmental
Authorities must approve any change in the "Parties in Interest". Any change of
a person listed in Exhibit E shall not constitute a change in persons with a
financial interest in or management responsibility for a management contract.

         9.2      Removal; Divestiture. Should the Gaming Control Board or the
National Indian Gaming Commission, in a final non-appealable decision, find that
any person with a "direct or

                                       39

<PAGE>   40

indirect financial interest" in this Memorandum of Agreement (as defined in 25
C.F.R. ss. 502.17, and any amendments thereto) whose prior activities, criminal
record, if any, or reputation, habits, and associations pose a threat to the
public interest, or the tribal interest, or the effective regulation of gaming,
or create or enhance the dangers of unsuitable, unfair, or illegal practices and
methods and activities in the conduct of gaming or the carrying on of related
business and financial arrangements, and should either agency notify Manager or
the Tribe of such finding, then Manager shall require such individual to divest
his or her interest in this Memorandum of Agreement and remove such person from
all association with operations under this Memorandum of Agreement within ten
(10) business days of receipt of such notice. In addition, if any person with
"direct or indirect financial interest" in this Memorandum of Agreement (as
defined in 25 C.F.R. ss. 502.17, and any amendments thereto) (a) has been or is
subsequently convicted of a felony relating to gaming, (b) knowingly or
willfully provided materially false statements to the Tribe, the Gaming Control
Board or the National Indian Gaming Commission, or refused to respond to
questions from either of such agencies, or (c) attempts to unduly interfere or
unduly influence for his or her gain or advantage any decision or process of
tribal government relating to Class II or Class III Gaming and if Manager
becomes aware of such conflicts or prohibited actions, then Manager shall notify
Tribe of such event and within seventy-two (72) hours cause such person to
divest his or her interest in Manager.

                                   ARTICLE 10
                                  MISCELLANEOUS

         10.1 Assignment and Subcontractors. The rights and obligations under
this Memorandum of Agreement shall not be assigned or subcontracted by any party
without the prior written consent of the other party and without first obtaining
prior approval by the National Indian Gaming Commission or the BIA, if
applicable, and any other necessary regulatory approvals. However, the Tribe
reserves the right to assign its rights and obligations under this Memorandum of
Agreement to a tribally chartered entity or an IRA section 17 corporation that
it wholly owns and controls and the Manager reserves the right to assign its
rights and obligations under this Memorandum of Agreement to a wholly owned
subsidiary. Other than as expressly provided herein, any attempted assignment or
subcontracting without such consent and approval shall be void. Approval of any
assignment or subcontract to any new party must be preceded by a complete
background investigation of the new party as required by Section 9.1. Subject to
the preceding requirements, this Memorandum of Agreement shall be binding upon
and shall inure to the benefit of the parties and their respective successors
and assigns.

         10.2 Change of Control in Ownership Interest; Severability.
Developer/Manager is a Delaware limited liability company whose members are
Lakes Jamul, Inc. and Kean Argovitz Resorts- Jamul, LLC. In the event that
either of Developer/Manager's members, as an entity, either: (i) has its gaming
license withdrawn or fails to obtain a gaming license, each after exhaustion of
all available administrative and other legal due process, and fails to cure the
condition causing the license withdrawal or failure to obtain a license within
the time frames contained in Section 7.1; or (ii) notifies the other member of
its desire to withdraw from participation in this Memorandum of Agreement; or
(iii) for any other reason is disassociated from participation in this
Memorandum of Agreement; then the Tribe agrees that the

                                       40
<PAGE>   41

participation of that member of Developer/Manager in this Memorandum of
Agreement shall cease and the remaining member of Developer/Manager shall assume
all rights and obligations pursuant to this Memorandum of Agreement. Any Change
of Control (as defined herein) in Developer/Manager shall require prior written
consent of the Tribe and be subject to Legal Requirements, or this Memorandum of
Agreement shall be terminated. For purposes of this Memorandum of Agreement, a
"Change of Control" means the acquisition by any person or affiliated group of
persons not presently members of Developer/Manager of beneficial ownership of
51% or more of membership interest in Developer/Manager.

         10.3 Notices. Any notice, consent or any other communication permitted
or required by this Memorandum of Agreement shall be in writing and shall be
effective on the date sent and shall be delivered by personal service, via
telecopier with reasonable evidence of transmission, express delivery or by
certified or registered mail, postage prepaid, return receipt requested, and,
until written notice of a new address or addresses is given, shall be addressed
as follows:

         If to the Tribe:

                            Jamul Indian Village
                            P.O. Box 612
                            14191 Hwy 94 #16
                            Jamul, CA 91935
                            Attention: Mr. Kenneth Meza, Tribal Chair

         With a copy to:
                            Eugene R. Madrigal
                            28581 Front Street, Suite 208
                            Temecula, CA 92590

         If to the Manager  Lakes-KAR California, LLC
                            130 Cheshire Lane
                            Minnetonka, MN 55303-1062
                            Attention: Mr. Timothy Cope

                            With a copy to:  Kean Argovitz Resorts-Jamul, L.L.C.
                            11999 Katy Frwy., Suite 3 22
                            Houston, TX 77079
                            Attn.:  Kevin M. Kean

                                    and
                            Douglas S. Twait, Esq.
                            Johnson Hamilton Quigley Twait & Foley PLC
                            W1450 First National bank Building
                            332 Minnesota Street
                            St. Paul, MN 55101-1314

        Copies of any notices shall be given to the Gaming Control Board.

                                       41

<PAGE>   42

         10.4 Amendments. This Memorandum of Agreement may be amended only by
written instrument duly executed by all of the parties hereto and with any and
all necessary regulatory approvals previously obtained.

         10.5 Counterparts. This Memorandum of Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same agreement.

         10.6 Force Majeure. No party shall be in default in performance due
hereunder if such failure or performance is due to causes beyond its reasonable
control, including acts of God, war, fires, floods, or accidents causing damage
to or destruction of the Facility or property necessary to operate the Facility,
or any other causes, contingencies, or circumstances not subject to its
reasonable control which prevent or hinder performance of this Memorandum of
Agreement.

         10.7 Time is Material. The Parties agree that the time and schedule
requirements set forth in this Memorandum of Agreement are material terms of
this Memorandum of Agreement.

         10.8 Further Assurances. The parties hereto agree to do all acts and
deliver necessary documents as shall from time to time be reasonably required to
carry out the terms and provisions of this Memorandum of Agreement.

         10.9 Severability. In the event that any provision of this Memorandum
of Agreement is, by final order of a court of competent jurisdiction or
Government Authority, held to be illegal or void, the validity of the remaining
portions of the Memorandum of Agreement shall be enforced as if the Memorandum
of Agreement did not contain such illegal or void clauses or provisions, and the
parties shall use their best efforts to negotiate an amendment to this
Memorandum of Agreement which will comply with the judicial order and maintain
the originally contemplated rights, duties and obligations of the parties
hereunder.

         10.10 Sovereign Immunity. Nothing in this Memorandum of Agreement shall
be deemed or construed to constitute a waiver of sovereign immunity of the Tribe
and the only applicable waivers of sovereign immunity shall be those expressly
provided and executed by the Tribe's duly authorized representative and
substantially conforming to the form as approved by the parties. The parties
agree that they will not amend or alter the Resolution of Limited Waiver which
will in any way lessen the rights of any party as set forth in the Resolution of
Limited Waiver. The Resolution of Limited Waiver is attached hereto as Exhibit C
and incorporated herein by reference.

         10.11 Representations and Warranties of Developer/Manager. The
Developer/Manager hereby represents and warrants as follows:

                  (a) This Memorandum of Agreement has been duly executed and
         delivered by Developer/Manager and, when approved by necessary
         Governmental Authorities as set forth (where applicable), will
         constitute a valid and binding obligation, enforceable

                                       42

<PAGE>   43

         against Developer/Manager in accordance with its terms.

                  (b) The execution and delivery of this Memorandum of
         Agreement, the performance by Developer/Manager of its obligations
         hereunder and the consummation by Developer/Manager of the transactions
         contemplated hereby will not violate any contract or agreement to which
         Developer/Manager or any of its affiliated companies is a party or any
         law, regulation, rule or ordinance or any order, judgment or decree of
         any federal, state, tribal or local court or require any regulatory
         approval beyond those contemplated herein.

                  (c) Developer/Manager has the full legal right, power and
         authority and has taken all action necessary to enter into this
         Memorandum of Agreement, to perform its obligations hereunder, and to
         consummate all other transactions contemplated by this Memorandum of
         Agreement.

         10.12 Representations and Warranties of Tribe. The Tribe hereby
represent and warrant as follows:

                  (a) The Tribe is duly organized Indian tribe under the
         Constitution of the Tribe and laws of the United States.

                  (b) The Tribe has full legal right, power and authority under
         the laws for the Tribe and has taken all official Tribal Council action
         necessary (i) to enter into this Memorandum of Agreement and authorize
         the Tribe to execute and deliver the Facility Loan documentation,
         Facility Note and Interim Promissory Note, (ii) to perform its
         obligations hereunder, and (iii) to consummate all other transactions
         contemplated by this Memorandum of Agreement.

                  (c) This Memorandum of Agreement, the Facility Loan
         documentation and Facility Note, the Interim Promissory Note and
         related documentation, if required, when executed and delivered by
         Tribe and approved by necessary Governmental Authorities, including the
         Tribe, will constitute a valid and binding obligation, enforceable
         against Tribe in accordance with their terms.

                  (f). The execution and delivery of this Memorandum of
         Agreement, the Facility Loan documentation and Facility Note, the
         Interim Promissory Note and related documentation, if required, the
         performance by Tribe of its obligations hereunder and the consummation
         by Tribe of the transactions contemplated hereby will not violate any
         contract or agreement to which Tribe is a party, law, regulation, rule
         or ordinance or any order judgment or decree of any federal, state,
         tribal or local court, or require any approval by Governmental
         Authorities beyond those contemplated herein..

         10.13 Governing Law. This Memorandum of Agreement has been negotiated,
made and executed at the Tribe's office located in the State of California and
shall be construed in accordance with the laws of the State of California,
without regard to its conflict of laws

                                       43
<PAGE>   44

provisions, and applicable Tribe and federal laws.

         10.14 Entire Agreement. This Memorandum of Agreement, including all
exhibits, represents the entire agreement between the parties and supersedes all
prior agreements relating to the subject matter of Class II and Class III Gaming
at the Facility and management of the Enterprise.

         10.15 Representatives of Tribe. The Tribal Council shall furnish to
Developer/Manager a list of the authorized representatives who are empowered to
act on behalf of the Tribe for the purposes of this Memorandum of Agreement and
the Tribe shall keep such list current.

         10.16  Limitations of Liability.

                  (a) Developer/Manager expressly agrees that the Tribe's total
aggregate liability for damages for breach of the Memorandum of Agreement shall
be limited in accordance with the Resolution of Limited Waiver attached hereto
as Exhibit C and incorporated herein by reference. The Tribe shall bear no
liability for further damages.

                  (b) The Tribe expressly agrees that the Developer/Manager's
total aggregate liability for damages for breach of the Memorandum of Agreement
be limited to $      ; provided, however, that the limitation contained in this
Section 10.16(b) shall not be construed to relieve Developer/Manager of its
obligations to distribute to the Tribe the Tribe's share of undistributed Net
Total Revenues determined in accordance with Section 6.5.

         10.17 Approvals. Unless otherwise provided herein, all approvals or
consents required by either party hereunder shall not be unreasonably withheld
or delayed, unless otherwise provided herein. Approval by the Tribal Council or
its duly authorized representative shall be deemed to constitute approval by the
Tribe and approval by the Chief Executive Officer of the Developer/Manager shall
be deemed to constitute approval by the Developer/Manager.

         10.18 Best Efforts. Developer/Manager and the Tribe shall use their
best efforts to perform and fulfill their obligations under this Memorandum of
Agreement in the manner required by this Memorandum of Agreement.

         10.19 Request for NIGC Approval. The parties specifically request that
the NIGC, or the Secretary where appropriate, approve the Agreements herein.

         10.20 Non-disclosure. The parties agree not to divulge to third parties
the terms of this Memorandum of Agreement or any other proprietary or
confidential information exchanged between the parties pursuant to this
Memorandum of Agreement, unless (i) the information is required to be disclosed
pursuant to judicial or Legal Requirements, (ii) the information is at the time
of disclosure already in the public domain, or (iii) to the extent required in
order to obtain financing. This prohibition shall not apply to disclosures by
either party to their attorneys, accountants, or other professional advisers. In
situations where disclosure of the terms of this Memorandum of Agreement to
regulatory, governmental or judicial entities is required by law or

                                       44
<PAGE>   45

regulations, the parties will make reasonable efforts to secure confidential
treatment of the terms of this Memorandum of Agreement by such entities. The
parties agree to consult with each other and cooperate regarding any press
releases regarding this Memorandum of Agreement and the relationships described
herein.

         10.21 Non-Competition. Developer/Manager agrees that it will not manage
any facility where Class II or Class III Gaming is conducted in the State of
California with any other entity or Tribe within any area south of the city
limits of Escondido without the prior approval of Tribe. The Tribe agrees that
it will not solicit or enter into any negotiations or agreements with any person
or company with respect to any Class II or Class II Gaming conducted upon Tribal
Lands within the State of California Tribe within any area south of the city
limits of Escondido without the prior approval of Developer/Manager.

         10.22 Other Business Opportunities. Developer/Manager agrees that, in
an effort to develop a long-lasting business relationship with the Tribe,
Developer/Manager will make its best efforts to present appropriate business and
investment opportunities to the Tribe.

         10.23 Use of Trade Marks and Trade Names. To assure that the Tribe can
continue operation of the Facility and Enterprise without disruption in the
event that this Memorandum of Agreement is terminated or not renewed,
Developer/Manager agrees that it will not use any trade mark or trade name to
identify any portion of the Facility or Enterprise or services offered within
the Facility or Enterprise unless such trade mark or trade name is registered in
the name of the Tribe.

                                   ARTICLE 11
                               DISPUTE RESOLUTION

         11.1 Disputes Between the Enterprise and Patrons. Disputes that arise
between the Enterprise and any patron of the Facility shall be resolved in
accordance with the Tribal-State Compact and tribal ordinances, if applicable.

         11.2 Disputes Between the Enterprise and Enterprise Employees. The
Tribe and Manager shall jointly develop an employee dispute resolution policy
and the Manager shall implement and administer the employee dispute resolution
policy after its adoption.

         11.3 Disputes Between the Tribe and the Developer/Manager. Disputes
between the Tribe Developer/Manager with respect to this Memorandum of Agreement
or the Interim Promissory Note, or a party's performance hereunder, shall be
resolved by the following dispute resolution process:.

                  (a) The parties shall first meet and confer in a good faith
attempt to resolve the dispute through negotiations not later than 10 calendar
days after receipt of written notice of the dispute, unless both parties agree
in writing to an extension of time.

                  (b) If the dispute is not resolved to the satisfaction of the
parties within 30

                                       45
<PAGE>   46

calendar days after the first meeting in Section 11.3(a) above, then any claim,
controversy or dispute arising out of or relating to this Memorandum of
Agreement or the Interim Promissory Note, or any alleged default hereunder or
breach of any provisions hereof shall be submitted to binding arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association in effect at the time of submission. Judgment on any arbitration
award may be entered in any court having jurisdiction over the parties pursuant
to the Resolution of Limited Waiver attached hereto as Exhibit C and
incorporated herein by reference.

                  (c) Unless the parties hereto otherwise agree in writing prior
of the submission of such claim, controversy or dispute to arbitration,
arbitration proceedings under this Article 11 shall be held in San Diego,
California.

                  (d) Either party may, at any time prior to the selection of an
arbitrator or arbitrators, require that the arbitrator or arbitrators selected
be an attorney or attorneys licensed to practice law in the United States and
that the attorneys have experience in Indian gaming regulatory and development
issues.

                  (e) Unless the parties hereto otherwise agree in writing, any
matter to be arbitrated shall be submitted to a panel of three arbitrators. One
arbitrator shall be selected by the Tribe, one arbitrator shall be selected by
Developer/Manager and the third arbitrator shall be selected by mutual agreement
of the two arbitrators selected by the parties hereto.

                  (f) The arbitration award shall be in writing signed by each
of the arbitrators, and shall state the basis for the award.

                  (g) Except to the extent such enforcement will be inconsistent
with a specific provision of this Memorandum of Agreement, arbitration awards
made pursuant to this Article 11 shall be enforceable under Title 9 of the
United States Code and any applicable tribal or state law governing the
enforcement of arbitration awards.

                  (h) In addition to any basis for appeal of an arbitration
award stated in Title 9 of the United States Code or any applicable tribal or
state law governing the enforcement of arbitration awards, either party hereto
may appeal an arbitration award on the basis that the arbitrator or arbitrators
incorrectly decided a question of law in making the award.

                  (i) Either Party hereto shall have the right to seek and
obtain a court order from a court having jurisdiction over the parties requiring
that the circumstances specified in the order be maintained pending completion
of the arbitration proceeding.

         IN WITNESS WHEREOF, the parties hereto have executed this Memorandum of
Agreement.

                                         Jamul Indian Village

                                       46
<PAGE>   47

                                         Lakes KAR-California, LLC

                                         By: /s/ Kevin M. Kean
                                             -----------------------------------

                                         Its: President
                                             -----------------------------------

    By:  /s/ Kenneth A. Meza
        ----------------------------
    Its: Chairman
        ----------------------------

    By:  /s/ Carlene A. Chamberlain      As to the Management Agreement
        ----------------------------     As to the Development Agreement, if
    Its: Vice-Chairman                   applicable
        ----------------------------     Approved pursuant to 25 U.S.C. ss.2711
                                         Approval pursuant to 25 U.S.C. ss.81
    By:  /s/ William Mesa
        ----------------------------     National Indian Gaming Commission
    Its: Council Member                  Secretary of the Interior
        ----------------------------
                                         By:
                                                     -----------------------
    By: /s/ Adolph Thing
        ----------------------------     Print Name: -----------------------
    Its: Council Member
        ----------------------------     Its Chairman:
                                         Title:
    By: /s/ Erica M. Pinto                     -----------------------------
        ----------------------------
    Its: Council Member
        ----------------------------

    By:  /s/ Julia Lotta
        ----------------------------
    Its: Secretary/Treasurer
        ----------------------------

                                       47

<PAGE>   48

<TABLE>
<CAPTION>

                                LIST OF EXHIBITS

<S>               <C>
Exhibit A         Legal Description of Acquired Tribal Lands

Exhibit B         Initial Scope of Development Project

Exhibit C         Resolution of Limited Waiver of Immunity from Suit

Exhibit D         Three (3) Year Revenue and Expense Projection

Exhibit E         List of Manager's "Parties in Interest"

Exhibit F         Interim Promissory Note
</TABLE>

                                       48

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