Sample Business Contracts

Loan and Security Agreement - Lakes California Land Development Inc., Lakes Entertainment Inc., Lakes Shingle Springs Inc., Lakes Jamul Inc., Lakes KAR Shingle Springs LLC, Lakes Kean Argovitz Resorts-California LLC and Kevin M. Kean

Sponsored Links

                           LOAN AND SECURITY AGREEMENT

DATE:      January 30, 2003

           130 Cheshire Lane
           Minnetonka, MN 55305                                ("Secured Party")

           130 Cheshire Lane
           Minnetonka, MN 55305                                ("Secured Party")

           130 Cheshire Lane
           Minnetonka, MN 55305                                ("Secured Party")

           LAKES JAMUL, INC.
           130 Cheshire Lane
           Minnetonka, MN 55305                                ("Secured Party")

           130 Cheshire Lane
           Minnetonka, MN 55305                                ("Secured Party")

           130 Cheshire Lane
           Minnetonka, MN 55305                                ("Secured Party")

           KEVIN M. KEAN
           210 E. Flamingo Rd. #101
           Las Vegas, NV 89109-4707
           Social Security Number:     -  -                           ("Debtor")

                                R E C I T A L S:

      WHEREAS, on the date hereof, Lakes Shingle Springs, Inc., Lakes
Entertainment, Inc., Lakes KAR Shingle Springs, L.L.C. and the Debtor have
entered into that certain Consent and Agreement to Buyout and Release (the
"Shingles Springs Buyout Agreement"); and

      WHEREAS, on the date hereof, Lakes Entertainment, Inc., Lakes Jamul, Inc.,
and Lakes Kean Argovitz Resorts-California, L.L.C. and the Debtor have entered
into that certain Consent and Agreement to Buyout and Release (the "Jamul Buyout
Agreement"); and


      WHEREAS, in connection with entering into the Jamul Buyout Agreement,
Lakes California Land Development, Inc. ("Lakes California") has agreed to
provide certain loans to the Debtor which shall be secured by the rights and
payments to be received by the Debtor under each of the Jamul Buyout Agreement
and the Shingle Springs Buyout Agreement (collectively, the "Buyout Agreements")
and any additional documents and agreements to be entered into as contemplated
thereby, all pursuant to the terms and conditions set forth herein and in the
Buyout Agreements;

      WHEREAS, the Debtor and Jerry A. Argovitz ("Argovitz") are the sole
members of Land Baron West, LLC, a California limited liability company ("Land
Baron"); and Land Baron and the Lakes California are the sole members of 2022
Ranch, LLC, a California limited liability company ("2022 Ranch"), the principal
purpose and the formation of which entity was to acquire a 2022 acre parcel of
unimproved real property in San Diego County, California known as the "Honey
Springs Ranch" (the "Property") to hold for resale or exchange; and in
connection with the acquisition of the Property, 2022 Ranch executed that
certain Promissory Note dated as of May 9, 2000 and made payable to the order of
Home Springs Ranch, LLC in the original principal amount of $4,000,000 (the
"Honey Springs Note");

      WHEREAS, under the terms of the Operating Agreement dated effective as of
May 4, 2000 (date of filing of the Articles of 2022 Ranch) between Land Baron
and Lakes California, such parties each agreed under Section 2 of such Operating
Agreement to contribute cash on a fifty/fifty (50/50) basis to 2022 Ranch as may
be necessary to timely pay the interest and principal on the Note, plus property
tax and other incidental costs and expenses of owning the Property; and pursuant
to the organizational agreements of Land Baron, Argovitz and Debtor have agreed
to contribute such cash on a fifty/fifty (50/50) basis to Land Baron as may be
necessary to permit Land Baron to fund its obligations with respect to the Honey
Springs Note and the Property described above;

      WHEREAS, part of the loan to be provided hereunder is to be used to fund
the Debtor's obligations to make the contributions to Land Baron for funding the
balloon payment on the Honey Springs Note when due (the "Honey Springs

                              A G R E E M E N T S:

      NOW THEREFORE, IN CONSIDERATION of one dollar and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:

      1.    Loan and Note. From time to time and subject to the terms and
conditions set forth herein, Lakes California agrees to make advances to the
Debtor up to but not in excess of One Million Two Hundred Fifty Thousand Dollars
($1,250,000) (the "Loan"), which Loan and advances thereof shall be evidenced by
that certain Promissory Note of even date herewith executed by the Debtor and
payable to the order of Lakes California (as heretofore and hereafter amended,
supplemented or renewed from time to time, the "Note"). The Loan shall be a
multiple advance loan but shall not be a revolving loan. Notwithstanding the
foregoing, the Debtor's right to obtain advances under the Loan shall be subject
to the following limitations:


            (a)   Debtor may obtain advances of up to Two Hundred Fifty Thousand
Dollars ($250,000) upon written request to Secured Party, the proceeds of which
may be used for any purpose in the sole discretion of the Debtor; and

            (b)   The balance of remaining available advances under the Loan
equal to One Million Dollars ($1,000,000) shall be reserved and may be obtained
upon request by the Debtor only (a) if Lakes California has decided to and has
funded its share of the Honey Springs Obligation (i.e. the balloon payment on
the Honey Springs Note) when the same becomes due, and (b) for the purpose of
paying the Debtor's share of such Honey Springs Obligation (i.e. the balloon
payment on the Honey Springs Note); and the Debtor further agrees that if Lakes
California has funded its share thereof but the Debtor has not paid its share of
the Honey Springs Obligation when the same becomes due, Lakes California may, at
its option and sole discretion, make an advance on the Loan to pay the same
without further notice to or consent of the Debtor.

      Outstanding principal under the Note shall accrue interest and principal
and interest shall be repaid each in accordance with the terms and provisions
set forth in the Note. In addition to any other remedies of Lakes California
provided herein, upon the occurrence of any event, circumstance or condition
constituting an Event of Default, Lakes California may at any time
(notwithstanding any notice requirements or grace/cure periods under this or
other agreements between the Debtor and the Bank) immediately suspend its
obligation, if any, to make additional advances to the Debtor.

      Each time the Debtor desires to obtain a Loan advance, such request shall
be in writing (which may be by telecopy) or by telephone promptly confirmed in
writing, and must be given so as to be received by Lakes California not later
than 11:00 a.m., Minneapolis time, on the date of the requested advance. Each
request for an advance shall specify (i) the borrowing date (which shall be a
day (other than a Saturday, Sunday or legal holiday in the State of Minnesota)
on which state banks are permitted to be open in Minneapolis, Minnesota) and
(ii) the amount of such advance. Subject to the terms hereof, the amount of the
requested advance will be available to the Debtor in immediately available funds
not later than two (2) business days after the date requested. At the time of
making a request for any advance, Lakes California may require as a condition to
such advance that the Debtor provide copies of any documents, invoices and other
information supporting any costs to be paid by such advance.

      Lakes California shall record in its records the date and amount of each
advance of the Loan, and each repayment thereof. The aggregate unpaid principal
and interest amounts so recorded shall be presumptive evidence thereof as owing
and unpaid by the Debtor absent manifest error. Failure to so record any such
amount or any error in so recording any such amount shall not, however, limit or
otherwise affect the obligations of the Debtor to repay such principal and

      2.    Grant of Security Interest and Collateral. In order to secure
payment of all of the Debtor's debts, liabilities, obligations, covenants,
warranties, and duties to each Secured Party under and pursuant to the Note,
this Agreement, the Kean Residential Loan Obligations (as defined in the Buyout
Agreements), the Buyout Agreements, each "Consulting Agreement" (as


respectively defined in the Buyout Agreements), to the extent assumed by Debtor,
each of the KARSS Note and the KAR Note (as respectively defined in the Buyout
Agreements) and any other agreements, documents and/or instruments now or
hereafter executed by the Debtor in favor of any Secured Party in connection
therewith or related thereto (as heretofore and hereafter amended, collectively,
the "Loan Documents"), each whether now or hereafter existing or incurred,
whether liquidated or unliquidated, whether absolute or contingent, and
including principal, interest, collection costs and expenses (including, without
limitation, reasonable attorneys' fees) and other charges related to any of the
foregoing (collectively referred to herein as the "Secured Obligations"), Debtor
hereby grants each Secured Party a security interest (the "Security Interest")
in the following property each whether now owned or hereafter acquired
(collectively the "Collateral"):

            (a)   Membership Rights and Rights to Payment: Each and every right
      of Debtor to the Membership Rights and the Rights to Payment (as each of
      such terms are hereinafter defined), whether such interest or right to
      payment now exists or hereafter arises, whether such interest or right to
      payment is or is not already earned by performance, and howsoever such
      interest or right to payment may be evidenced, together with all other
      rights and interests (including all liens and security interests) which
      Debtor may at any time have by law or agreement against any account debtor
      or other obligor obligated to make any such payment or against any of the
      property of such account debtor or other obligor;

together with all substitutions and replacements for any of the foregoing
property and any and all profits, income, dividends, distributions, instruments,
other rights and general intangibles and proceeds of or arising from any and all
of the foregoing property. As used herein the following terms have the following

            (i)   The term "Membership Interests" shall mean the now existing or
hereafter acquired membership or other equity interests of the Debtor in each of
Land Baron, Lakes KAR Shingle Springs, L.L.C., a Delaware limited liability
company, Lakes Shingle Springs, Inc., a Minnesota corporation, Lakes Kean
Argovitz Resorts - California L.L.C., a Delaware limited liability company,
Lakes Jamul, Inc., a Minnesota corporation and any other entity which may now or
hereafter own or hold a management contract, consulting agreement or similar
agreement with either the Shingle Springs Band of Miwok Indians or the Jamul
Indian Village, together with all substitution or replacement rights and
interests given in exchange therefore.

            (ii)  The term "Rights to Payment" shall mean each and all of the
contract rights and rights to payment of the Debtor arising under each of the
Buyout Agreements, the "Consulting Agreements" (as respectively defined in the
Buyout Agreements) and under or arising from any consulting, broker or other
agreement involving (1) either Kevin Kean or any affiliate of Kean in which he
directly or indirectly owns an ownership interest or is a director, officer,
employee or agent, and (2) either or both of the Shingle Springs Band of Miwok
Indians and/or the Jamul Indian Village or with any Secured Party, together with
all substitutions, replacements and amendments thereto, each whether now
existing or hereafter arising.


      2.    Representations, Warranties and Agreements. Debtor represents,
warrants and agrees with each secured party that:

            (a)   Debtor has full power and authority to execute and deliver
      this Agreement, to perform Debtor's obligations hereunder and to subject
      the Collateral to the Security Interest and no consent, authorization or
      approval of any other person or entity is necessary with respect thereto
      or to grant each Secured Party a first perfected security interest in the
      Collateral. Debtor's social security number is the number shown at the
      beginning of this Agreement.

            (b)   The Loan and Collateral will be used primarily for business

            (c)   Debtor's principal residence is located at the address shown
      at the beginning of this Agreement. Debtor's records concerning its
      accounts and contract rights are kept at such address. Debtor will give at
      least 30 days advance written notice to Secured Party of any change in
      Debtor's principal residence. At reasonable times, the Secured Party may
      examine the Collateral and the Debtor's records pertaining to it, wherever
      located, and make copies of such records at the Debtor's expense; and the
      Debtor shall assist the Secured Party in so doing.

            (d)   Debtor has (or will have at the time Debtor acquires rights in
      Collateral hereafter arising) and will maintain absolute title to each
      item of Collateral free and clear of all security interests, liens and
      encumbrances, except the Security Interest, and will defend the Collateral
      against all claims or demands of all persons other than Secured Party and
      security interests, liens and encumbrances so existing of record on the
      date of this Agreement.

            (e)   Debtor will not lease, sell or otherwise transfer or dispose
      of the Collateral or any interest therein except with the prior written
      consent of the Secured Party.

            (f)   Debtor will not agree to any modification, amendment or
      cancellation of any Collateral without Secured Party's prior written
      consent, and will not subordinate any such right to payment to claims of
      other creditors of such account debtor or other obligor.

            (g)   Debtor will promptly pay all taxes and other governmental
      charges levied or assessed upon or against any Collateral or upon or
      against the creation, perfection or continuance of the Security Interest.

            (h)   Debtor will promptly notify Secured Party of any material loss
      of or to any Collateral or of any adverse change in the prospect of
      payment of any material sums due on or under any instrument, chattel
      paper, account or contract right constituting Collateral or of any
      material adverse change in the Debtor's condition (financial or

            (i)   Debtor will if Secured Party at any time so requests (whether
      the request is made before or after the occurrence of an Event of
      Default), promptly deliver to Secured


      Party any payment obligations, instrument, document or chattel paper
      constituting Collateral, duly endorsed or assigned by Debtor to Secured

            (j)   Debtor will from time to time execute or cause to be executed
      such financing statements, control and other agreements as Secured Party
      may reasonably deem required to be filed or obtained from any party in
      order to perfect the Security Interest and obtain "control" of any
      Collateral under the Uniform Commercial Code.

            (k)   Debtor will pay when due or reimburse Secured Party on demand
      for all costs of collection of the Secured Obligations and all other
      out-of-pocket expenses (including in each case all reasonable attorneys'
      fees) incurred by Secured Party in connection with the creation,
      perfection, satisfaction or enforcement of the Security Interest or the
      execution or creation, continuance or enforcement of this Security
      Agreement, the Note or any other Loan Documents.

            (l)   Debtor will execute, deliver or endorse any and all
      instruments, documents, assignments, security agreements and other
      agreements and writings which Secured Party may at any time reasonably
      request in order to secure, protect, perfect or enforce the Security
      Interest and Secured Party's rights and priorities under this Security

            (m)   Debtor will not use or keep any Collateral, or permit it to be
      used or kept, for any unlawful purpose or in violation of any federal,
      state or local law, statute or ordinance.

            (n)   Debtor will cause to be executed and delivered such
      intercreditor or subordination agreements as may be requested from time to
      time by and in form and substance acceptable to Secured Party from any
      other creditors holding a security interest or other liens in and to any
      Collateral as of the date of this Agreement or that may have a lien senior
      in priority to the Security Interest of the Secured Party and agrees to at
      all times comply with and not to take any action which would be in
      violation of any of the terms and conditions set forth in such agreements.

            (o)   The Debtor will (i) maintain accounting records in accordance
      with generally recognized and accepted principles of accounting
      consistently applied throughout the accounting periods involved; (ii)
      provide the Secured Party with such information concerning its business
      affairs and financial condition as the Secured Party may reasonably

            (p)   Each representation and warranty set forth in this Section 2
      or elsewhere in this Agreement or any other Loan Documents shall be deemed
      to be restated and reaffirmed by the Debtor to the Secured Party on and as
      of the date of each advance under this Agreement.

If Debtor at any time fails to perform or observe any agreement contained in
Sections 2(d) through 2(l), immediately upon the occurrence of such failure,
without notice or lapse of time,


Secured Party may (but need not) perform or observe such agreement on behalf and
in the name, place and stead of Debtor (or, at Secured Party's option, in
Secured Party's own name) and may (but need not) take any and all other actions
which Secured Party may reasonably deem necessary to cure or correct such
failure (including, without limitation, the payment of taxes, the satisfaction
of security interests, liens, or encumbrances, the performance of obligations
under contracts or agreements with account debtors or other obligors, the
procurement and maintenance of insurance, the execution of financing statements,
the endorsement of instruments, or any other applicable Collateral); and, except
to the extent that the effect of such payment would be to render any loan or
forbearance of money usurious or otherwise illegal under any applicable law,
Debtor shall thereupon pay Secured Party on demand the amount of all moneys
expended and all costs and expenses (including reasonable attorneys' fees)
incurred by Secured Party in connection with or as a result of Secured Party's
performing or observing such agreements or taking such actions, together with
interest thereon from the date expended or incurred by Secured Party at the rate
applicable to the Note. To facilitate the performance or observance by Secured
Party of such agreements of Debtor, Debtor hereby irrevocably appoints (which
appointment is coupled with an interest) Secured Party, or its delegate, as the
attorney-in-fact of Debtor with the right (but not the duty) from time to time
to create, prepare, complete, execute, deliver, endorse or file, in the name and
on behalf of Debtor, any and all instruments, documents, financing statements,
applications for insurance and other agreements and writings required to be
obtained, executed, delivered or endorsed by Debtor under this Section 2.

      3.    Events of Default. The occurrence of any Event of Default, as
defined in the Note, shall constitute an Event of Default hereunder.

      4.    Remedies Upon Event of Default. Upon the occurrence of an Event of
Default and at any time thereafter until such Event of Default is cured, each
Secured Party may terminate and/or suspend its obligation, if any, to make
additional advances to the Debtor and/or to declare the outstanding unpaid
principal balance of the Note, the accrued and unpaid interest thereon and all
other Secured Obligations of the Debtor to each Secured Party to be due and
payable in full, whereupon all such obligations shall immediately become due and
payable in each case without presentation, demand, protest or further notice of
any kind, all of which are hereby absolutely and forever waived, notwithstanding
anything to the contrary contained herein or in any other applicable documents.
Upon the occurrence of any Act of Bankruptcy (as such term is defined in the
Note), then the unpaid principal balance of the Note, together with all interest
accrued thereon and all other Secured Obligations shall thereupon be immediately
due and payable, all without presentation, demand, protest or notice of any
kind, all of which are hereby waived, and notwithstanding anything to the
contrary contained herein or in any other applicable documents. In addition to
the remedies for default set forth in the Note, this Agreement or any other Loan
Documents, the Secured Party upon the occurrence of an Event of Default shall
have all other rights and remedies for default provided by the Uniform
Commercial Code, as well as any other applicable law and this Agreement,
specified herein are cumulative and are not exclusive of any rights or remedies
which the Secured Party would otherwise have. With respect to such rights and


      (a)   Assembling Collateral; Storage; Use of the Debtor Name/Other
            Property. The Secured Party may require the Debtor to assemble the
            Collateral and to make it available to the Secured Party at any
            convenient place designated by the Secured Party. The Debtor
            recognizes that the Secured Party will not have an adequate remedy
            in Law if this obligation is breached and accordingly, Debtor's
            obligation to assemble the Collateral shall be specifically
            enforceable. The Secured Party shall have the right to take
            immediate possession of said Collateral, and to exercise all voting
            rights with respect to the Collateral. Further, the Debtor releases
            the Secured Party from obtaining a bond or surety with respect to
            any repossession and/or disposition of the Collateral.

      (b)   Notice of Disposition. Written notice, when required by law, sent to
            any address of the Debtor in this Agreement, at least ten (10)
            calendar days (counting the day of sending) before the date of a
            proposed disposition of the Collateral is reasonable notice.
            Notification to account debtors by the Secured Party shall not be
            deemed a disposition of the Collateral.

      (c)   Possession of Collateral/Commercial Reasonableness. The Secured
            Party shall not, at any time, be obligated to either take or retain
            possession or control of the Collateral. With respect to Collateral
            in the possession or control of the Secured Party, the Debtor and
            the Secured Party agree that as a standard for determining
            commercial reasonableness, the Secured Party need not liquidate,
            correct, sell or otherwise dispose of any of the Collateral if the
            Secured Party believes, in good faith, that disposition of the
            Collateral would not be commercially reasonable, would subject the
            Secured Party to third-party claims or liability, that other
            potential purchasers could be attracted or that a better price could
            be obtained if the Secured Party held the Collateral for up to one
            year or longer as may be appropriate in any circumstance, and the
            Secured Party shall not then be deemed to have retained the
            Collateral in satisfaction of the Obligations. Furthermore, the
            Secured Party may sell the Collateral on credit (and reduce the
            Obligations only when payment is received from the buyer), at
            wholesale and/or with or without an agent or broker, and the Secured
            Party need not complete, process or repair the Collateral prior to

      (d)   Waiver by the Secured Party. The Secured Party may permit the Debtor
            to attempt to remedy any default without waiving its rights and
            remedies hereunder, and the Secured Party may waive any default
            without waiving any other subsequent or prior default by the Debtor.
            Furthermore, delay on the part of the Secured Party in exercising
            any right, power or privilege hereunder or at law shall not operate
            as a waiver thereof, nor shall any single or partial exercise of
            such right, power or privilege preclude other exercise thereof or
            the exercise of any other right, power or privilege. No waiver or
            suspension shall be deemed to have occurred unless the Secured Party
            has expressly agreed in writing specifying such waiver or


      (e)   Collateral Preservation. The Secured Party shall use reasonable care
            in the custody and preservation of any Collateral in its physical
            possession but in determining such standard of reasonable care, the
            Debtor expressly acknowledges that the Secured Party has no duty to:
            (i) insure the Collateral against hazards; (ii) ensure that the
            Collateral will not cause damage to property or injury to third
            parties; (iii) protect it from seizure, theft or conversion by third
            parties, third parties' claims or acts of God; (iv) give to the
            Debtor any notices received by the Secured Party regarding the
            Collateral; (v) perfect or continue perfection of any security
            interest in favor of the Debtor, (vi) perform any services, complete
            any work-in-process or take any other action in connection with the
            management or maintenance of the Collateral; or (vii) sue or
            otherwise effect collection upon any accounts even if the Secured
            Party shall have made a demand for payment upon individual account
            debtors. Notwithstanding any failure by the Secured Party to use
            reasonable care in preserving the Collateral, the Debtor agrees that
            the Secured Party shall not be liable for consequential or special
            damages arising therefrom.

      5.    Other Personal Property. If at the time Secured Party takes
possession of any tangible Collateral, any goods, papers or other properties of
Debtor, not affixed to or constituting a part of such Collateral, are located or
to be found upon or within such Collateral, Debtor agrees to notify Secured
Party in writing of that fact, describing the property so located or to be
found, within 7 calendar days after the date on which Secured Party took
possession. Unless and until Secured Party receives such notice from Debtor,
Secured Party shall not be responsible or liable to Debtor for any action taken
or omitted by or on behalf of Secured Party with respect to such property
without actual knowledge of the existence of any such property or without actual
knowledge of the fact that it was located or to be found upon such Collateral.

      6.    Amendment; Waivers. This Agreement can be waived, modified, amended,
terminated or discharged, and the Security Interest can be released, only
explicitly in a writing signed by Secured Party and Debtor. A waiver shall be
effective only in the specific instance and for the specific purpose given. Mere
delay or failure to act shall not preclude the exercise or enforcement of any of
Secured Party's rights or remedies.

      7.    Notices. All notices to be given to Debtor shall be deemed
sufficiently given if mailed by registered or certified mail, postage prepaid,
or delivered to Debtor at Debtor's address set forth above or at the most recent
address shown on Secured Party's records or by telex or facsimile.

      8.    Miscellaneous. The rights, options, powers and remedies granted in
this Agreement shall extend to the Secured Party and to its successors and
assigns, and shall be binding upon the Debtor and its successors and assigns and
shall be applicable hereto and to all renewals and/or extensions hereof. This
Agreement shall take effect when signed by Debtor and delivered to Secured
Party, and Debtor waives notice of Secured Party's acceptance hereof. Secured
Party may execute this Agreement if appropriate for the purpose of filing, but
the failure of Secured Party to execute this Agreement shall not affect or
impair the validity or effectiveness of this Agreement. This Agreement may be
executed by the parties hereto in several counterparts


and by facsimile and each such counterpart shall be deemed to be an original and
all of which shall constitute together but one in the same agreement. None of
the provisions of this Agreement shall inure to the benefit of any person or
entity other than the parties hereto. This Agreement shall not be construed to
create a partnership or joint venture between the Debtor and the Secured Party.
This Agreement shall be governed by and construed in accordance with Minnesota
law without regard to conflicts of law principles.



      10.   DISPUTE RESOLUTION/ARBITRATION. Notwithstanding the foregoing, the
parties hereby agree that, in connection with any dispute hereunder, the parties
will negotiate in good faith for up to twenty days. If they are unable to
resolve the dispute in such period, then either party may demand and such
dispute shall be submitted to and resolve by binding arbitration in accordance
with the following terms:

            (a)   Governing Rules. Any arbitration proceeding will (i) proceed
      in a location in Minneapolis Minnesota selected by the American
      Arbitration Association ("AAA"); (ii) be governed by the Federal
      Arbitration Act (Title 9 of the United States Code), notwithstanding any
      conflicting choice of law provision in any of the documents between the
      parties; and (iii) be conducted by the AAA, or such other administrator as
      the parties shall mutually agree upon, in accordance with the AAA's
      commercial dispute resolution procedures. Any party who fails or refuses
      to submit to arbitration following a demand by any other party shall bear
      all costs and expenses incurred by such other party in compelling
      arbitration of any dispute. The arbitration requirement does not limit the
      right of any party to obtain provisional or ancillary remedies such as
      replevin, injunctive relief,


      attachment or the appointment of a receiver or the exercise of any
      foreclosure or self-help remedies, before during or after the pendency of
      any arbitration proceeding.

            (b)   Arbitrator Powers. The arbitrator will determine whether or
      not an issue is arbitratable and will give effect to the statutes of
      limitation in determining any claim. In any arbitration proceeding the
      arbitrator will decide (by documents only or with a hearing at the
      arbitrator's discretion) any pre-hearing motions which are similar to
      motions to dismiss for failure to state a claim or motions for summary
      adjudication. The arbitrator may grant any remedy or relief that a court
      of such state could order or grant within the scope hereof and such
      ancillary relief as is necessary to make effective any award. The
      arbitrator shall also have the power to award recovery of all costs and
      fees, to impose sanctions and to take such other action as the arbitrator
      deems necessary to the same extent a judge could pursuant to the Federal
      Rules of Civil Procedure, the Minnesota Rules of Civil Procedure or other
      applicable law. Judgment upon the award rendered by the arbitrator may be
      entered in any court having jurisdiction. The institution and maintenance
      of an action for judicial relief or pursuit of a provisional or ancillary
      remedy shall not constitute a waiver of the right of any party, including
      the plaintiff, to submit the controversy or claim to arbitration if any
      other party contests such action for judicial relief.

            (c)   Miscellaneous. The arbitrator shall award all costs and
      expenses of the arbitration proceeding. To the maximum extent practicable,
      the AAA, the arbitrators and the parties shall take all action required to
      conclude any arbitration proceeding within 180 days of the filing of the
      dispute with the AAA. No arbitrator or other party to an arbitration
      proceeding may disclose the existence, content or results thereof, except
      for disclosures of information by a party required in the ordinary course
      of its business or by applicable law or regulation. If more than one
      agreement for arbitration by or between the parties potentially applies to
      a dispute, the arbitration provision most directly related to the
      documents between the parties or the subject matter of the dispute shall
      control. This arbitration provision shall survive termination, amendment
      or expiration of any of the documents or any relationship between the

         [The remainder of this page has intentionally been left blank.]

                          (THE SIGNATURE PAGE FOLLOWS.)


      THE PARTIES have executed this Loan and Security Agreement the day and
year first above written.


                    By: /s/ Timothy J. Cope
                        Timothy J. Cope
                        Its: CFO

                    LAKES SHINGLES SPRINGS, INC.

                    By: /s/ Timothy J. Cope
                        Timothy J. Cope
                        Its: CFO

                    LAKES JAMUL, INC.

                    By: /s/ Timothy J. Cope
                        Timothy J. Cope
                        Its: CFO

                    LAKES CALIFORNIA LAND
                    DEVELOPMENT, INC.

                    By: /s/ Timothy J. Cope
                        Timothy J. Cope
                        Its: CFO

                    LAKES KAR-SHINGLE SPRINGS, L.L.C.
                    By:  Lakes Shingle Springs, Inc.
                    Its: Member

                    By: /s/ Timothy J. Cope
                        Timothy J. Cope
                        Its: Chief Financial Officer

                    LAKES KAR-SHINGLE SPRINGS, L.L.C.
                    By:  Lakes Shingle Springs, Inc.
                    Its: Member

                    By: /s/ Timothy J. Cope
                        Timothy J. Cope
                        Its: Chief Financial Officer

DEBTOR:             KEVIN M. KEAN

                    /s/ Kevin M. Kean