Document:

<PAGE>   1

                                 PROMISSORY NOTE
                       (Corning Project Development Loan)

$9,200,000.00                                     Minneapolis, Minnesota
                                                  Dated as of October 12, 2000

         FOR VALUE RECEIVED, PACIFIC COAST GAMING--CORNING, LLC, a Minnesota
limited liability company ("Maker"), promises to pay to the order of LAKES
CORNING, LLC, a Minnesota limited liability company ("Lender"), in the United
States of America, in immediately available funds, at such place as the Holder
hereof may from time to time designate, or in the absence of such designation,
at the office of the Lender, 130 Cheshire Lane, Minnetonka, Minnesota 55305, the
principal sum of Nine Million Two Hundred Thousand and 00/100 Dollars
($9,200,000.00), or the aggregate unpaid principal amount of all advances made
to Maker with respect to the "Project Development Loan" subject and pursuant to
the terms of Sections 2 and 3 (which are hereby incorporated in all respects) of
the Participation Agreement (as hereinafter defined, plus interest thereon from
the date of such advances, in like money, in accordance with the following terms
and provisions:

         1.   MRD Gaming, LLC, a Nevada limited liability company ("MRD"), and
Lakes Gaming and Resorts, LLC, a Minnesota limited liability company ("Lakes"),
previously entered into that certain Acquisition and Participation Agreement
dated as of August 7, 2000, as amended October 11, 2000 and as assigned by Lakes
to the Lender pursuant to that certain Assignment Agreement dated October 11,
2000 (the "Participation Agreement"), providing for certain transactions
including Project Development Loans. Capitalized terms used herein and not
defined shall have the meanings given them in the Participation Agreement.

         2.   This Note evidences the advances by the Lender to Maker of the
Project Development Loan, the proceeds of which are to be used by the Maker for
project development costs of the Paskenta Project . This Note has been issued
pursuant to and entitled to all of the terms, rights and benefits provided under
the Participation Agreement. In addition to each of the terms and conditions of
Sections 2, 3 and 13 of the Participation Agreement, Lender may also suspend the
making of any advances under this Note or with respect to the Project
Development Loan upon the occurrence of any Event of Default (as defined herein)
or the occurrence of any event, circumstance or condition which with the giving
of notice or the passage of time or both would constitute an Event of Default.

         3.   Simple interest on the unpaid principal balance of this Note shall
accrue at the per annum rate of 1% over the "High Wall Street Journal Prime
Lending Rate" as defined in the money rate section of the Wall Street Journal
("Prime rate"), compounded annually on the anniversary date of this Note if not
paid earlier. Interest on such loan shall accrue only on funds actually advanced
by Lender to Maker beginning when such funds are advanced. The interest rate
shall be adjusted monthly, based upon the Prime Rate on the first business day
of each month; and that interest rate shall apply to all loan balances and
advances unpaid during that month.

                                       1

<PAGE>   2

After the occurrence and during the continuance of an Event of Default (as
hereinafter defined), the principal indebtedness evidenced by this Note shall
bear interest at the floating rate of two percent (2.0%) per annum greater than
the otherwise applicable rate. Interest shall be computed for the actual number
of days elapsed on the basis of a year consisting of 365 days. It is intended
that the rate of interest hereon shall never exceed the maximum rate, if any,
which may be legally charged on the loan evidenced by this Note ("Maximum
Rate"), and if the provisions for interest contained in this Note would result
in a rate higher than the Maximum Rate, interest shall nevertheless be limited
to the Maximum Rate and any amounts which may be paid toward interest in excess
of the Maximum Rate shall be applied to the reduction of principal, or, at the
lawfully exercised option of the Lender, returned to Maker.

         4.   Subject to the terms of Section 7 hereof, the principal balance of
this Note, together with accrued interest thereon shall be due and payable as
and when required under the terms of the Participation Agreement; provided
however that in any event this Note shall mature and the principal balance
hereof (together with accrued interest hereon) shall be due and payable in full
on the sixty (60) month anniversary of the date that the gaming facility to be
located at the Paskenta Project first opens for gaming to the general public.

         5.   Maker hereby authorizes Lender to endorse on the Schedule of
Advances annexed to this Note all advances made to the Maker and all payments of
principal amounts in respect of such advances, which endorsements shall, in the
absence of material error, be conclusive as to the outstanding principal amount
of all advances; provided, however, that the failure to make such notation with
respect to any advance or payments shall not limit or otherwise affect the
obligations of Maker.

         6.   This Note is secured by a Security Agreement of even date herewith
(the "Collateral Document") given by Maker for the benefit of the Lender hereof
encumbering Maker's assets as provided therein. This Note and the Collateral
Document and any other documents or instruments evidencing or securing this
Note, together with the Participation Agreement are collectively referred to
herein as the "Loan Documents."

              7.   The occurrence of any of the following events and the
         expiration of any applicable cure periods set forth herein shall each
         be referred to herein as an "Event of Default": (a) any default in the
         payment of any principal, interest or any other sums when due
         hereunder, or in the performance of any covenant or agreement
         hereunder, referenced herein or otherwise related hereto, or in any
         other document, agreement or instrument now or hereafter executed or
         entered into by Maker with or for the benefit of Lender or any
         subsequent holder of this Note (collectively, the "Loan Documents"),
         (b) any MRD Event of Default (as defined in the Participation
         Agreement), (c) Maker shall admit in writing its or his inability to
         pay its or his debts as they mature, or make an assignment for the
         benefit of creditors, or Maker shall apply for or consent to the
         appointment of any receiver, trustee, or similar officer for it or him
         or for all or any substantial part of its or his property; or such
         receiver, trustee or similar officer shall be appointed without the
         application or consent of Maker, or Maker shall institute (by

                                       2

<PAGE>   3

         petition, application, answer, consent or otherwise) any bankruptcy,
         insolvency, reorganization, arrangement, readjustment of debt,
         dissolution, liquidation or similar proceeding relating to it or him
         under the laws of any jurisdiction; or any such proceeding shall be
         instituted (by petition, application or otherwise) against Maker (each
         being referred to herein as a "Bankruptcy Event of Default"); or (d)
         any judgment, writ, warrant of attachment or execution or similar
         process shall be issued or levied upon Maker or against a substantial
         part of the property of Maker.

         Upon the occurrence of an Event of Default and at any other time
permitted by the terms of the Participation Agreement, including, without
limitation, Section 13 thereof, the outstanding principal amount of this Note,
any interest accrued thereon from time to time, and any other sums then
remaining unpaid hereunder, at the option of the Lender and without notice,
shall become immediately due and payable. Failure to exercise any such option
shall not constitute a waiver of the right to exercise the same at a later time
or in the event of any subsequent Event of Default.

         If (i) default shall occur in the payment of any sums due on this Note
or any Loan Documents, Maker shall have a period of fifteen (15) days after
written notice from the Lender to the undersigned to make the payment that is
due together with any accrued interest and any amounts due under Section 9
hereof, or (ii) a Bankruptcy Event of Default shall occur in connection with an
involuntary bankruptcy filing and so long as the Maker is diligently contesting
the same, Maker shall have a period of sixty (60) days to obtain the dismissal
of the same, or (iii) if an Event of Default other than non-payment or a
Bankruptcy Event of Default shall occur, Maker shall have a period of thirty
(30) days after written notice from the Lender to the undersigned to cure any
default that can be cured within thirty (30) days, or a reasonable period of
time not to exceed ninety (90) days after written notice by Lender to Maker to
cure a default not reasonably capable of cure within thirty (30) days (provided
Maker diligently commences and continues a course of action to so cure);
provided however that the foregoing shall not in any event prevent the Lender
from exercising its rights and remedies under the Loan Documents to the extent
it deems reasonably necessary to protect or preserve any collateral or the
Lender's rights therein.

         8. Maker, all endorsers and guarantors hereby waive to the fullest
extent permitted by law presentment, demand, protest, notice of protest, notice
of dishonor and notice of any other kind in connection with this Note.

         9. Maker agrees to pay all costs and out-of-pocket expenses (including,
but not limited to, reasonable attorneys' fees and expenses) incurred by Lender
in connection with the collection or enforcement of this Note or any other Loan
Documents.

         10. Reserved.

         11. The parties hereto intend and believe that each provision of this
Note comports with all applicable local, state and federal laws and judicial
decisions. However, if any provision or

                                       3

<PAGE>   4

provisions, or if any portion of any provision or provisions of this Note or the
other Loan Documents is found by a court of law to be in violation of any
applicable local, state or federal ordinance, statute law, administrative or
judicial decision, or public policy, and if such court should declare such
portion, provision or provisions of this Note or other Loan Documents to be
illegal, invalid, unlawful, void or unenforceable as written, then it is the
intent of all parties hereto that such portion, provision or provisions shall be
given force to the fullest possible extent that it or they are legal, valid and
enforceable, that the remainder of this Note and other Loan Documents shall be
construed as if such illegal, invalid, unlawful, void or unenforceable portion,
provision or provisions were not contained herein, and that the rights,
obligations and interest of Maker and Holder hereof under the remainder of this
Note shall continue in full force and effect.

         12.   Time is hereby declared to be of the essence of this Note and of
every part hereof.

         13.   This Note shall inure to the benefit of and shall be binding on
the parties hereto and their respective successors and assigns; provided,
however, that the Maker shall not be entitled to assign its rights or
obligations under this Note without the prior written consent of the Lender. Any
reference to the Lender shall be deemed to include and apply to every subsequent
Holder of this Note.

         14.   Except for disputes requiring injunctive relief, all disputes,
controversies or claims arising out of or relating to this Note, the Collateral
Documents, the Participation Agreement and any other Loan Documents shall be
settled by mediation and/or binding arbitration in accordance with Sections 21
and 22 of the Participation Agreement; provided however that the foregoing shall
not in any event prevent the Lender after the occurrence of an Event of Default
from exercising any rights or remedies necessary for the protection and
preservation of any collateral under the Collateral Documents.

         15.   Maker shall have the right to prepay this Note without penalty or
premium.

         16.   THE VALIDITY OF THIS NOTE, ITS CONSTRUCTION, INTERPRETATION, AND
ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HERETO SHALL BE DETERMINED UNDER,
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
MINNESOTA. THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE
AND FEDERAL COURTS LOCATED IN THE COUNTY OF HENNEPIN, STATE OF MINNESOTA OR, AT
THE SOLE OPTION OF THE LENDER, IN ANY OTHER COURT IN WHICH THE LENDER SHALL
INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER
JURISDICTION OVER THE MATTER IN CONTROVERSY. MAKER WAIVES, TO THE EXTENT
PERMITTED UNDER APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF
FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS
BROUGHT IN ACCORDANCE WITH THIS SECTION 16.

         17.   Any notices  required  hereunder  shall be given in accordance
with the applicable terms of the Loan Documents.

         [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]

                                       4

<PAGE>   5

         IN WITNESS WHEREOF, Maker has caused this Note to be executed and
delivered as of the date first above written.

                                           MAKER:

                                           PACIFIC COAST GAMING--CORNING, LLC

                                           By:  /s/ Matthew R. Daly
                                               --------------------

                                           Name: Matthew R. Daly

                                           Title: Manager/Member

STATE OF        NV      )
           -------
                        ) ss.
COUNTY OF    Clark      )
           -------

     Subscribed and sworn to before me this 12th day of October, 2000, by
Matthew R. Daly the manager and a member of Pacific Coast Gaming - Corning, LLC,
a Minnesota limited liability company, for and on behalf of such company.

                                              /s/ Donna Lynn Wittman
                                             -----------------------
                                             Notary Public<PAGE>   1

                                 PROMISSORY NOTE
                      (Cloverdale Project Development Loan)

$12,184,263.00                                      Minneapolis, Minnesota
                                                    Dated as of October 12, 2000

         FOR VALUE RECEIVED, PACIFIC COAST GAMING--SANTA ROSA, LLC, a Minnesota
limited liability company ("Maker"), promises to pay to the order of LAKES
CLOVERDALE, LLC, a Minnesota limited liability company ("Lender"), in the United
States of America, in immediately available funds, at such place as the Holder
hereof may from time to time designate, or in the absence of such designation,
at the office of the Lender, 130 Cheshire Lane, Minnetonka, Minnesota 55305, the
principal sum of Twelve Million One Hundred Eighty-Four Thousand Two Hundred
Sixty-Three and 00/100 Dollars ($12,184,263.00), or the aggregate unpaid
principal amount of all advances made to Maker with respect to the "Project
Development Loan" subject and pursuant to the terms of Sections 2 and 3 (which
are hereby incorporated in all respects) of the Participation Agreement (as
hereinafter defined, plus interest thereon from the date of such advances, in
like money, in accordance with the following terms and provisions:

         1. MRD Gaming, LLC, a Nevada limited liability company ("MRD"), and
Lakes Gaming and Resorts, LLC, a Minnesota limited liability company ("Lakes"),
previously entered into that certain Acquisition and Participation Agreement
dated as of August 7, 2000, as amended October 12, 2000 and as assigned by Lakes
to the Lender pursuant to that certain Assignment Agreement dated October 12,
2000 (the "Participation Agreement"), providing for certain transactions
including, but not limited to Project Development Loans. Capitalized terms used
herein and not defined shall have the meanings given them in the Participation
Agreement.

         2. This Note evidences the advances by the Lender to Maker of the
Project Development Loan, the proceeds of which are to be used by the Maker for
project development costs of the Cloverdale Project. This Note has been issued
pursuant to and entitled to all of the terms, rights and benefits provided under
the Participation Agreement. In addition to each of the terms and conditions of
Sections 2, 3 and 13 of the Participation Agreement, Lender may also suspend the
making of any advances under this Note or with respect to the Project
Development Loan upon the occurrence of any Event of Default (as defined herein)
or the occurrence of any event, circumstance or condition which with the giving
of notice or the passage of time or both would constitute an Event of Default.

         3. Simple interest on the principal balance of this Note shall accrue
at the per annum rate of 1% over the "High Wall Street Journal Prime Lending
Rate" as defined in the money rate section of the Wall Street Journal ("Prime
Rate"), compounded annually on the anniversary date of this Note if not paid
earlier. Interest on such loan shall accrue only on funds actually advanced by
Lender to Maker beginning when such funds are advanced. The interest rate shall
be adjusted monthly, based upon the Prime Rate on the first business day of each
month;

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<PAGE>   2
and that interest rate shall apply to all loan balances and advances unpaid
during that month. After the occurrence and during the continuance of an Event
of Default (as hereinafter defined), the principal indebtedness evidenced by
this Note shall bear interest at the floating rate of two percent (2.0%) per
annum greater than the otherwise applicable rate. Interest shall be computed for
the actual number of days elapsed on the basis of a year consisting of 365 days.
It is intended that the rate of interest hereon shall never exceed the maximum
rate, if any, which may be legally charged on the loan evidenced by this Note
("Maximum Rate"), and if the provisions for interest contained in this Note
would result in a rate higher than the Maximum Rate, interest shall nevertheless
be limited to the Maximum Rate and any amounts which may be paid toward interest
in excess of the Maximum Rate shall be applied to the reduction of principal,
or, at the lawfully exercised option of the Lender, returned to Maker.

         4. Subject to the terms of Section 7 hereof, the principal balance of
this Note, together with accrued interest thereon shall be due and payable as
and when required under the terms of the Participation Agreement; provided
however that in any event this Note shall mature and the principal balance
hereof (together with accrued interest hereon) shall be due and payable in full
on the sixty (60) month anniversary of the date that the gaming facility to be
located at the Cloverdale Project first opens for gaming to the general public.

         5. Maker hereby authorizes Lender to endorse on the Schedule of
Advances annexed to this Note all advances made to the Maker and all payments of
principal amounts in respect of such advances, which endorsements shall, in the
absence of material error, be conclusive as to the outstanding principal amount
of all advances; provided, however, that the failure to make such notation with
respect to any advance or payments shall not limit or otherwise affect the
obligations of Maker.

         6. This Note is secured by a Security Agreement of even date herewith
(the "Collateral Document") given by Maker for the benefit of the Lender hereof
encumbering Maker's assets as provided therein. This Note and the Collateral
Document and any other documents or instruments evidencing or securing this
Note, together with the Participation Agreement are collectively referred to
herein as the "Loan Documents."

                  7. The occurrence of any of the following events and the
         expiration of any applicable cure periods set forth herein shall each
         be referred to herein as an "Event of Default": (a) any default in the
         payment of any principal, interest or any other sums when due
         hereunder, or in the performance of any covenant or agreement
         hereunder, referenced herein or otherwise related hereto, or in any
         other document, agreement or instrument now or hereafter executed or
         entered into by Maker with or for the benefit of Lender or any
         subsequent holder of this Note (collectively, the "Loan Documents"),
         (b) any MRD Event of Default (as defined in the Participation
         Agreement), (c) Maker shall admit in writing its or his inability to
         pay its or his debts as they mature, or make an assignment for the
         benefit of creditors, or Maker shall apply for or consent to the
         appointment of any receiver, trustee, or similar officer for it or him
         or for all or any substantial part of its or his property; or such
         receiver, trustee or similar officer shall be

                                       2
<PAGE>   3

         appointed without the application or consent of Maker, or Maker shall
         institute (by petition, application, answer, consent or otherwise) any
         bankruptcy, insolvency, reorganization, arrangement, readjustment of
         debt, dissolution, liquidation or similar proceeding relating to it or
         him under the laws of any jurisdiction; or any such proceeding shall be
         instituted (by petition, application or otherwise) against Maker (each
         being referred to herein as a "Bankruptcy Event of Default"); or (d)
         any judgment, writ, warrant of attachment or execution or similar
         process shall be issued or levied upon Maker or against a substantial
         part of the property of Maker.

         Upon the occurrence of an Event of Default and at any other time
permitted by the terms of the Participation Agreement, including, without
limitation, Section 13 thereof, the outstanding principal amount of this Note,
any interest accrued thereon from time to time, and any other sums then
remaining unpaid hereunder, at the option of the Lender and without notice,
shall become immediately due and payable. Failure to exercise any such option
shall not constitute a waiver of the right to exercise the same at a later time
or in the event of any subsequent Event of Default.

         If (i) default shall occur in the payment of any sums due on this Note
or any Loan Documents, Maker shall have a period of fifteen (15) days after
written notice from the Lender to the undersigned to make the payment that is
due together with any accrued interest and any amounts due under Section 9
hereof, or (ii) a Bankruptcy Event of Default shall occur in connection with an
involuntary bankruptcy filing and so long as the Maker is diligently contesting
the same, Maker shall have a period of sixty (60) days to obtain the dismissal
of the same, or (iii) if an Event of Default other than non-payment or a
Bankruptcy Event of Default shall occur, Maker shall have a period of thirty
(30) days after written notice from the Lender to the undersigned to cure any
default that can be cured within thirty (30) days, or a reasonable period of
time not to exceed ninety (90) days after written notice by Lender to Maker to
cure a default not reasonably capable of cure within thirty (30) days (provided
Maker diligently commences and continues a course of action to so cure);
provided however that the foregoing shall not in any event prevent the Lender
from exercising its rights and remedies under the Loan Documents to the extent
it deems reasonably necessary to protect or preserve any collateral or the
Lender's rights therein.

         8. Maker, endorsers and guarantors hereby waive to the fullest extent
permitted by law presentment, demand, protest, notice of protest, notice of
dishonor and notice of any other kind in connection with this Note.

         9. Maker agrees to pay all costs and out-of-pocket expenses (including,
but not limited to, reasonable attorneys' fees and expenses) incurred by Lender
in connection with the collection or enforcement of this Note or any other Loan
Documents.

         10. Reserved.

         11. The parties hereto intend and believe that each provision of this
Note comports with

                                       3
<PAGE>   4
all applicable local, state and federal laws and judicial decisions. However, if
any provision or provisions, or if any portion of any provision or provisions of
this Note or the other Loan Documents is found by a court of law to be in
violation of any applicable local, state or federal ordinance, statute law,
administrative or judicial decision, or public policy, and if such court should
declare such portion, provision or provisions of this Note or other Loan
Documents to be illegal, invalid, unlawful, void or unenforceable as written,
then it is the intent of all parties hereto that such portion, provision or
provisions shall be given force to the fullest possible extent that it or they
are legal, valid and enforceable, that the remainder of this Note and other Loan
Documents shall be construed as if such illegal, invalid, unlawful, void or
unenforceable portion, provision or provisions were not contained herein, and
that the rights, obligations and interest of Maker and Holder hereof under the
remainder of this Note shall continue in full force and effect.

         12. Time is hereby declared to be of the essence of this Note and of
every part hereof.

         13. This Note shall inure to the benefit of and shall be binding on the
parties hereto and their respective successors and assigns; provided, however,
that the Maker shall not be entitled to assign its rights or obligations under
this Note without the prior written consent of the Lender. Any reference to the
Lender shall be deemed to include and apply to every subsequent Holder of this
Note.

         14. Except for disputes requiring injunctive relief, all disputes,
controversies or claims arising out of or relating to this Note, the Collateral
Documents, the Participation Agreement and any other Loan Documents shall be
settled by mediation and/or binding arbitration in accordance with Sections 21
and 22 of the Participation Agreement; provided however that the foregoing shall
not in any event prevent the Lender after the occurrence of an Event of Default
from exercising any rights or remedies necessary for the protection and
preservation of any collateral under the Collateral Documents.

         15. Maker shall have the right to prepay this Note without penalty or
premium.

         16. THE VALIDITY OF THIS NOTE, ITS CONSTRUCTION, INTERPRETATION, AND
ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HERETO SHALL BE DETERMINED UNDER,
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
MINNESOTA. THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE
AND FEDERAL COURTS LOCATED IN THE COUNTY OF HENNEPIN, STATE OF MINNESOTA OR, AT
THE SOLE OPTION OF THE LENDER, IN ANY OTHER COURT IN WHICH THE LENDER SHALL
INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER
JURISDICTION OVER THE MATTER IN CONTROVERSY. MAKER WAIVES, TO THE EXTENT
PERMITTED UNDER APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF
FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS
BROUGHT IN ACCORDANCE WITH THIS SECTION 16.

         17. Any notices required hereunder shall be given in accordance with
the applicable terms of the Loan Documents.

        [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]

                                       4
<PAGE>   5

         IN WITNESS WHEREOF, Maker has caused this Note to be executed and
delivered as of the date first above written.

                                     MAKER:

                                     PACIFIC COAST GAMING--SANTA
                                     ROSA, LLC

                                     By:  /s/ Matthew R. Daly
                                         ---------------------

                                     Name: Matthew R. Daly

                                     Title: Manager/Member

STATE OF         NV        )
          -----------------
                           ) ss.
COUNTY OF       Clark      )
          -----------------

         Subscribed and sworn to before me this 12th day of October, 2000, by
Matthew R. Daly the manager and a member of Pacific Coast Gaming - Santa Rosa,
LLC, a Minnesota limited liability company, for and on behalf of such company.

                                     Donna Lynn Wittman
                                     -------------------
                                     Notary Public

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