SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934

Filed by the registrant [X]

Filed by a party other than the registrant [ ]

Check the appropriate box:

[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))

[X] Definitive proxy statement

[ ] Definitive additional materials

[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Lakes Entertainment, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of filing fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.

(1) Title of each class of securities to which transaction applies:

- --------------------------------------------------------------------------------

(2) Aggregate number of securities to which transaction applies:

- --------------------------------------------------------------------------------

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):

- --------------------------------------------------------------------------------

(4) Proposed maximum aggregate value of transaction:

- --------------------------------------------------------------------------------

(5) Total fee paid:

- --------------------------------------------------------------------------------

[ ] Fee paid previously with preliminary materials.

- --------------------------------------------------------------------------------

[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.

(1) Amount previously paid:

- --------------------------------------------------------------------------------

(2) Form, Schedule or Registration Statement no.:

- --------------------------------------------------------------------------------

(3) Filing Party:

- --------------------------------------------------------------------------------

(4) Date Filed:

- --------------------------------------------------------------------------------

[LAKES GAMING LOGO]

130 CHESHIRE LANE
MINNETONKA, MINNESOTA 55305

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JUNE 2, 2003

TO THE SHAREHOLDERS OF LAKES ENTERTAINMENT, INC.:

Please take notice that the Annual Meeting of Shareholders of Lakes
Entertainment, Inc. will be held, pursuant to due call by the Board of Directors
of the Company, at the Doubletree Park Place Hotel, 1500 Park Place Boulevard,
Minneapolis, Minnesota 55416 at 3:00 p.m. local time on Monday, June 2, 2003, or
at any adjournment or adjournments thereof, for the purpose of considering and
taking appropriate action with respect to the following:

1. To elect five directors;

2. To ratify the appointment of Deloitte & Touche LLP as independent
auditors of the Company for 2003;

3. To consider and vote upon a shareholder proposal seeking to grant full
voting rights to shares of the Lakes Entertainment, Inc. common stock
held by Mr. Lyle Berman, pursuant to the Minnesota Control Share
Acquisition Act; and

4. To transact any other business as may properly come before the meeting
or any adjournments thereof.

Pursuant to due action of the Board of Directors, shareholders of record on
April 7, 2003, will be entitled to vote at the meeting or any adjournments
thereof.

A PROXY FOR THIS MEETING IS ENCLOSED HEREWITH. WE REQUEST THAT YOU FILL IN
AND SIGN THE PROXY, WHICH IS SOLICITED BY THE BOARD OF DIRECTORS, AND MAIL IT
PROMPTLY IN THE ENCLOSED ENVELOPE.

By Order of the Board of Directors

LAKES ENTERTAINMENT, INC.

/s/ Timothy J. Cope
Timothy J. Cope,
Executive Vice President, Chief
Financial Officer
and Secretary
May 1, 2003

LAKES ENTERTAINMENT, INC.
130 CHESHIRE LANE
MINNETONKA, MINNESOTA 55305

PROXY STATEMENT

ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
JUNE 2, 2003

This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Lakes Entertainment, Inc. ("Lakes
Entertainment" or the "Company") to be used at the annual meeting of
shareholders of the Company to be held at the Doubletree Park Place Hotel, 1500
Park Place Boulevard, Minneapolis, Minnesota 55416 at 3:00 p.m. local time on
Monday, June 2, 2003.

The approximate date on which this Proxy Statement and the accompanying
proxy were first sent or given to shareholders was May 1, 2003. Each shareholder
who signs and returns a proxy in the form enclosed with this Proxy Statement may
revoke the same at any time prior to its use by giving notice of such revocation
to the Company in writing, in open meeting or by executing and delivering a new
proxy to the Secretary of the Company. Unless so revoked, the shares represented
by each proxy will be voted at the annual meeting and at any adjournments
thereof. Presence at the annual meeting of a shareholder who has signed a proxy
does not alone revoke that proxy. Only shareholders of record at the close of
business on April 7, 2003 (the "Record Date") will be entitled to vote at the
annual meeting or any adjournments thereof. All shares which are entitled to
vote and are represented at the annual meeting by properly executed proxies
received prior to or at the annual meeting and not revoked will be voted at the
annual meeting in accordance with the instructions indicated on such proxies.

VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF

The Company has outstanding one class of voting securities, common stock,
$0.01 par value, of which 10,638,320 shares were issued and outstanding as of
the close of business on the Record Date. Each share of common stock is entitled
to one vote on all matters put to a vote of shareholders.

The following table sets forth, as of the Record Date, certain information
regarding the beneficial ownership of the Company's shares of common stock by
(i) all persons known by the Company to be the owner (or deemed to be the owner
pursuant to the rules and regulations of the SEC), of record or beneficially, of
more than 5% of the outstanding common stock of the Company, (ii) each of the
directors and nominees for election to the Board of Directors of the Company,
(iii) each Named Executive Officer named in the Summary Compensation Table, and
(iv) all directors and executive officers as a group, in each case based upon
beneficial ownership reporting of Lakes Entertainment common stock as of such
date. Except as otherwise indicated, the address of each shareholder is 130
Cheshire Lane, Minnetonka, Minnesota 55305, and each shareholder has sole voting
and investment power with respect to the shares beneficially owned.

<Table>
<Caption>
SHARES OF LAKES
COMMON STOCK PERCENTAGE OF COMMON
NAME AND ADDRESS BENEFICIALLY OWNED STOCK OUTSTANDING
- ---------------- ------------------ --------------------

Lyle Berman(1)............................................ 2,444,962 21.3
Timothy J. Cope(2)........................................ 199,500 1.8
Joseph Galvin(3).......................................... 169,250 1.6
Morris Goldfarb(4)........................................ 43,330 *
Ronald J. Kramer(5)....................................... 23,500 *
Neil I. Sell(6)........................................... 928,949 8.7
All Lakes Entertainment Directors and Executive Officers
as a Group (6 people including the foregoing)(7)........ 3,809,990 31.9
FMR Corp. ................................................ 1,056,200(8) 9.9
82 Devonshire Street
Boston, MA 02109
Waveland International, Ltd............................... 569,900(9) 5.36
227 W. Monroe, Suite 4800
Chicago Illinois, IL 60606
</Table>

- ---------------

* Less than one percent.

(1) Includes 20,625 shares beneficially owned by Mr. Berman's spouse, 11,403
shares held by Berman Consulting Corporation, a corporation wholly owned by
Mr. Berman, and 161,500 shares owned by Mr. Berman through a Berman
Consulting Corporation profit sharing plan. Also includes options to
purchase 650,000 shares and a 200,000 share option held by Berman Consulting
Corporation as security for a loan transaction.

(2) Includes options to purchase 194,500 shares.

(3) Includes options to purchase 169,250 shares.

(4) Includes options to purchase 36,625 shares.

(5) Includes options to purchase 23,500 shares.

(6) Includes an aggregate of 893,000 shares held by four irrevocable trusts for
the benefit of Lyle Berman's children with respect to which Mr. Sell has
shared voting and dispositive powers as a co-trustee. Mr. Sell has
disclaimed beneficial ownership of such shares. Also includes options to
purchase 31,750 shares.

(7) Includes shares held by corporations controlled by such officers and
directors, shares held by the spouses of such officers and directors and
shares held by trusts of which such officers and directors are trustees.
Also includes options to purchase 1,305,625 shares.

(8) Based solely upon the most recent Schedule 13G on file with the Securities
and Exchange Commission. FMR Corp. does not have sole voting power with
respect to any of such shares but has sole dispositive power with respect to
all 1,056,200 shares.

(9) Based solely upon the most recent Schedule 13G on file with the Securities
and Exchange Commission. Includes 14,000 shares owned by an account for
which Waveland Capital Management, L.P. (and Clincher Capital Corporation as
general partner of Waveland Capital Management, L.P.) serves as investment
adviser. The reporting person has sole voting and dispositive power with
respect to 555,900 shares. Waveland Capital Management, L.P. (and Clincher
Capital Corporation) has sole voting and dispositive power with respect to
14,000 shares.

The foregoing footnotes are provided for informational purposes only and
each person disclaims beneficial ownership of shares owned by any member of his
or her family or held in trust for any other person, including family members.

PROPOSAL FOR ELECTION OF DIRECTORS
(PROPOSAL ONE)

The Board of Directors has nominated the following individuals to stand for
election to serve as directors of the Company, to hold office until the next
Annual Meeting of Shareholders, or until his successor is elected and qualified.
The five persons listed below are now serving as the current directors of the
Company, and each has consented to serve as a director if elected. In accordance
with the procedures set forth in Lakes' Bylaws, Lakes has previously fixed the
number of members constituting its Board of Directors at eight. The vacancies on
the Board of Directors result from the previous resignation or retirement of
three directors in previous years. The Board of Directors is currently seeking
qualified candidates to serve as directors; however, no such candidates have
been identified to date and no nominees have been named in this proxy statement
to fill the vacancies. Notwithstanding the existing vacancies on the Board of
Directors, proxies cannot be voted for more than five individuals, which number
represents the number of nominees named by the Board of Directors.

<Table>
<Caption>
NAME AND AGE OF
DIRECTOR AND/OR PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE DIRECTOR
NOMINEE FOR PAST FIVE YEARS AND DIRECTORSHIPS OF PUBLIC COMPANIES SINCE
- --------------- --------------------------------------------------------- --------

Lyle Berman Chairman of the Board and Chief Executive Officer of Lakes
Age 61 since June 1998, President of Lakes since November 1999, and 1998
Chairman of the Board of Directors of Grand Casinos, Inc.
("Grand") from October 1991 through December of 1998. Mr.
Berman is also a director of G-III Apparel Group Ltd.
("G-III") and Wilsons The Leather Experts Inc. ("Wilsons").
Mr. Berman served as Chief Executive Officer of Rainforest
Cafe, Inc. from February 1993 until December 2000.
Timothy J. Cope Executive Vice President, Chief Financial Officer, Secretary
Age 51 and a director of Lakes since June 1998. Mr. Cope also 1998
serves as President of Lakes KAR-Shingle Springs, LLC and
Lakes Kean Argovitz Resorts -- California, LLC, each of
which is a wholly-owned subsidiary of Lakes. Mr. Cope served
as Chief Financial Officer of Grand from January 20, 1994
through December of 1998, and served as Executive Vice
President of Grand from April of 1997 through December of
1998. Mr. Cope also served as a director of Grand from
February 1998 through December 1998.
Morris Goldfarb Director of Lakes since June 1998. Mr. Goldfarb is a
Age 52 director, the President and Chief Executive Officer of 1998
G-III. Mr. Goldfarb has served as either the President or
Vice President of G-III and its predecessors since their
formation in 1974.
Ronald J. Kramer Director of Lakes since June 1998. Mr. Kramer is President
Age 44 and a Director of Wynn Resorts, Limited and has been 1998
employed in that capacity since October 2002. Mr. Kramer
served as President of Wynn Resorts Holdings from April 2002
through October 2002. Mr. Kramer previously served as a
Managing Director at the investment banking firm of Dresdner
Kleinwort Wasserstein beginning in July 1999. From February
1986 to July 1999, Mr. Kramer was the Chairman of the Board
and Chief Executive Officer of Ladenburg Thalmann Group
Inc., an investment banking firm that provided investment
banking services to Grand. Mr. Kramer is also a Director of
Griffon Corporation, New Valley Corporation and TMP
Worldwide Inc.
Neil I. Sell Director of Lakes since June 1998. Since 1968, Mr. Sell has
Age 61 been engaged in the practice of law in Minneapolis, 1998
Minnesota with the firm of Maslon Edelman Borman & Brand,
LLP, which has rendered legal services to Grand and Lakes.
</Table>

PROXIES AND VOTING -- PROPOSAL ONE

Assuming that a quorum is present for the election of directors (which
requires the presence in person or by proxy of at least a majority of the
outstanding shares entitled to vote on such matter), the affirmative vote of the
holders of a majority of the outstanding shares of common stock of the Company
present and entitled to vote on the election of directors is required for
election to the Board of Directors for each of the five nominees

named above. A shareholder who abstains with respect to the election of
directors is considered to be present and entitled to vote on the election of
directors at the meeting, and is in effect casting a negative vote, but a
shareholder (including a broker) who does not give authority to a proxy to vote,
or withholds authority to vote, on the election of directors, shall not be
considered present and entitled to vote on the election of directors.

All shares represented by proxies will be voted FOR the election of the
foregoing nominees unless a contrary choice is specified. If any nominee should
withdraw or otherwise become unavailable for reasons not presently known, the
proxies which would have otherwise been voted for such nominee will be voted for
such substitute nominee as may be selected by the Board of Directors.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR ALL OF THE
NOMINEES LISTED ABOVE.

SUMMARY COMPENSATION TABLE

The following table sets forth the cash and non-cash compensation awarded
to or earned by each of the Chief Executive Officer of the Company and the two
other most highly compensated executive officers who served as executive
officers of the Company whose salary and bonus during the fiscal year ended
December 29, 2002 exceeded $100,000 (the "Named Executive Officers").

EXECUTIVE COMPENSATION

<Table>
<Caption>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
-------------------------------------------- SECURITIES
NAME AND OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($) COMPENSATION($)(2) OPTIONS(#) COMPENSATION($)(3)
- ------------------ ---- ------------ -------- ------------------ ------------ ------------------

Lyle Berman.......... 2002 400,000 -- 101,024 -- 10,707
Chairman, Chief 2001 400,000 200,000 -- -- 9,507
Executive Officer & 2000 375,000 50,000 -- -- 5,630
President
Timothy J. Cope...... 2002 250,000 50,000 -- -- 8,813
Chief Financial 2001 250,000 125,000 -- -- 7,469
Officer, Executive 2000 241,667 75,000 -- -- 7,469
Vice President and
Secretary
Joseph Galvin........ 2002 225,000 -- -- -- 9,775
Chief Operating 2001 225,000 112,500 -- -- 8,575
Officer 2000 218,750 75,000 -- -- 8,575
</Table>

- ---------------

(1) Includes cash compensation deferred at the election of the executive officer
under the terms of the Company's 401(k) Savings Incentive Plan.

(2) Amounts shown in this column represent the value of personal use of the
Company's corporate jet based upon the Standard Industry Fare Level (SIFL)
rates as published by the United States Department of Transportation for the
six month period from July 1, 2002 to December 31, 2002.

(3) Amounts shown in this column represent matching contributions by the Company
under the Company's 401(k) Savings Incentive Plan and payment by the Company
of term life insurance premiums.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES

The following table summarizes information with respect to options held by
the executive officers named in the Summary Compensation Table, and the value of
the options held by such persons at the end of fiscal 2002.

<Table>
<Caption>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FY-END(#) AT FY-END(1)($)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ----------- ------------- ----------- -------------

Lyle Berman............ -- N/A 550,000 200,000 -- --
Timothy J. Cope........ -- N/A 154,500 80,000 -- --
Joseph Galvin.......... -- N/A 149,250 80,000 -- --
</Table>

- ---------------

(1) The closing sale price of the Company's common stock on December 27, 2002,
the last trading day prior to the end of the Company's fiscal year, was
$5.50.

EMPLOYMENT AGREEMENTS

Effective February 21, 2002, Lakes Entertainment entered into an executive
employment agreement for an indefinite term with each of Timothy J. Cope, Lakes'
Chief Financial Officer, Executive Vice President and Secretary, and Joseph
Galvin, Lakes' Chief Operating Officer, each subject to early termination by
either Lakes Entertainment or the executive for any reason or no reason, with or
without cause. The employment agreements provide for annual base salaries of
$250,000 and $225,000 to Messrs. Cope and Galvin, respectively, or such higher
amount as determined by Lakes. In addition, Lakes Entertainment pays each
executive an additional $600 per month to cover travel and other expenses and
provide the executives with customary benefits. The employment agreements
provide that if Lakes Entertainment terminates either executive without "cause"
or if either executive resigns for "good reason", such executive will continue
to receive his base salary and the two-year average of his average of his
bonus/incentive compensation for a period of twelve months. If such termination
occurs within two years following a "change of control" of Lakes Entertainment,
as defined in the employment agreements, the executive will instead be entitled
to a lump-sum severance payment equal to two times his "annual compensation",
which is defined as his annual base salary and bonus/incentive compensation plus
insurance costs, 401k matching contributions and certain other benefits. In
either case, all options to purchase shares of Lakes Entertainment common stock
held by the executive at the time of his termination will immediately vest in
their entirety and remain exercisable for a period of two years thereafter. The
employment agreements provide that neither executive will compete with Lakes
Entertainment for two years after the termination of his employment with Lakes
Entertainment.

No other executive officer of Lakes Entertainment has an employment
agreement with Lakes Entertainment.

DIRECTOR COMPENSATION

Each director of Lakes Entertainment who is not otherwise employed by Lakes
Entertainment or one of its subsidiaries (a "Non-Employee Director") received an
annual fee of $12,500 until January 1, 2003, at which time such annual fee was
increased to $24,000. Lakes Entertainment also pays each Non-Employee Director a
fee of $1,000 for each meeting of the Board of Directors attended and $1,000 for
each committee meeting of the Board of Directors attended. Beginning in 2003,
the Company also pays the Chairman of the Audit Committee an additional annual
fee of $3,000 for serving in such capacity.

In addition, the Lakes Entertainment 1998 Director Stock Option Plan (the
"Lakes Director Plan") provides that each Non-Employee Director who was in
office at the Company's inception, and each subsequent Non-Employee Director at
the time of his or her initial election to the Board of Directors, receives a
non-qualified stock option to purchase up to 12,500 shares of Lakes
Entertainment common stock at an option exercise price equal to 100% of the fair
market value of the shares on such grant date. Each option

under the Lakes Director Plan will have a ten-year term and will generally
become exercisable in five equal installments commencing on the first
anniversary of the grant date.

In addition to the initial option grants, Non-Employee Directors may be
granted, at the discretion of the Board of Directors, additional options to
purchase Lakes Entertainment common stock. Such options shall contain such terms
and provisions as the Board of Directors determines at the time of the grant.
Lakes Entertainment did not make any such additional grants in fiscal 2002.

EXECUTIVE OFFICERS OF LAKES ENTERTAINMENT

Set forth below is certain required information with respect to the
executive officers of Lakes Entertainment.

<Table>
<Caption>
NAME AGE POSITION(S) WITH LAKES ENTERTAINMENT
- ---- --- ------------------------------------

Lyle Berman................. 61 See "Proposal for Election of Directors" -- above.
Timothy J. Cope............. 51 See "Proposal for Election of Directors" -- above.
Joseph Galvin............... 64 Chief Operating Officer of Lakes since January 1999 and
Chief Administrative Officer of Grand from November 1996
through December 1998, and prior thereto, Vice President of
Security of Grand.
</Table>

EQUITY COMPENSATION PLAN INFORMATION

The Company maintains the 1998 Stock Option and Compensation Plan (the
"Employee Plan") and the 1998 Director Stock Option Plan (the "Director Plan"),
which are approved to grant up to an aggregate of 2.5 million shares and 0.2
million shares of common stock, respectively. The Employee Plan is designed to
integrate compensation of the Company's executives (including officers and
directors but excluding directors who are not also full-time employees of the
Company) with the long-term interests of the Company and its shareholders and to
assist in the retention of executives and other key personnel. Under the
Director Plan, the Company may issue equity awards to members of the Company's
Board of Directors who are not also employees of the Company or any Company
subsidiaries. The Employee Plan and the Director Plan have each been approved by
the Company's shareholders.

In connection with the establishment of the Company as a public corporation
via a distribution of the Company's common stock to the then shareholders of
Grand Casinos, Inc. (the "Distribution"), the Company issued options to purchase
its common stock to the holders of then-outstanding options to purchase common
stock of Grand Casinos. These Distribution-related options were treated as
awards granted outside of the Employee Plan and the Directors Plan, and the
Company did not seek shareholder approval for the Distribution-related option
grants apart from the approval obtained from the shareholders of Grand Casinos
for the overall public distribution of the Company's common stock.

The following table sets forth certain information as of December 29, 2002
with respect to the Employee Plan, the Director Plan and options related to the
distribution:

<Table>
<Caption>
NUMBER OF
SECURITIES
REMAINING
AVAILABLE FOR
NUMBER OF FUTURE ISSUANCES
SECURITIES TO BE UNDER EQUITY
ISSUED UPON WEIGHTED-AVERAGE COMPENSATION
EXERCISE OF EXERCISE PRICE OF PLANS (EXCLUDING
OUTSTANDING OPTIONS OUTSTANDING OPTIONS SECURITIES REFLECTED
PLAN CATEGORY (A) (B) IN COLUMN (A))
- ------------- ------------------- ------------------- --------------------

Equity Compensation Plans Approved By
Security Holders:
1998 Stock Option and Compensation
Plan................................. 1,698,600 $ 8.39 801,400
1998 Director Stock Option Plan......... 135,000 $ 7.96 65,000
--------- ------ -------
Total................................... 1,833,600 $ 8.36 866,400
Equity Compensation Plans Not Approved By
Security Holders:
Distribution-related Stock Options...... 650,028 $10.91 --
--------- ------ -------
TOTAL..................................... 2,483,628 $ 9.03 866,400
========= ====== =======
</Table>

STOCK PERFORMANCE GRAPH

The Securities and Exchange Commission requires that Lakes Entertainment
include in this Proxy Statement a line-graph presentation comparing cumulative
shareholders' returns (based on appreciation of the market price of Lakes
Entertainment common stock) on an indexed basis since the time Lakes
Entertainment common stock became registered under Section 12 of the Exchange
Act with (i) the cumulative total return of a broad equity market index,
assuming reinvestment of dividends, that includes companies whose equity
securities are traded on the NASDAQ National Market or are of comparable market
capitalizations and (ii) the cumulative total return, assuming reinvestment of
dividends, of issuers with similar market capitalizations. The following
presentation compares Lakes Entertainment common stock price during the period
from January 4, 1999, to December 31, 2002, to the NASDAQ Stock Market and the
Russell 2000 Index.

Lakes Entertainment does not feel that it can reasonably identify a peer
group and there is no published industry or line-of-business index that provides
a meaningful comparison of shareholder returns. Therefore, Lakes Entertainment
has elected to use the Russell 2000 Index in compiling its stock performance
graph because it believes the Russell 2000 Index provides a better comparison of
shareholder returns for companies with market capitalizations similar to that of
Lakes Entertainment.

The presentation assumes that the value of an investment in each of Lakes'
common stock, the NASDAQ Stock Market and the Russell 2000 index was $100 on
January 4, 1999, and that dividends paid were reinvested in the same security.

COMPARISON OF 4 YEAR CUMULATIVE TOTAL
RETURN* AMONG LAKES ENTERTAINMENT, INC., THE
NASDAQ STOCK MARKET (U.S.) INDEX
AND THE RUSSELL 2000 INDEX

[PERFORMANCE GRAPH]
<Table>
<Caption>
Cumulative Total Return
1/4/99 3/99 6/99 9/99 12/99 3/00 6/00 9/00 12/00

Lakes Entertainment,
Inc. 100.00 97.76 130.60 114.93 94.78 94.78 105.97 102.99 111.94
Nasdaq Stock Market
(U.S.) 100.00 111.45 121.91 124.94 184.67 207.32 180.27 165.88 111.08
Russell 2000 100.00 94.72 109.45 102.53 121.44 130.05 125.13 126.51 117.77

<Caption>
Cumulative Total Return
3/01 6/01 9/01 12/01

Lakes Entertainment,
Inc. 111.20 88.36 66.27 74.03
Nasdaq Stock Market
(U.S.) 82.91 97.72 67.80 88.14
Russell 2000 110.11 125.85 99.68 120.70
</Table>

* $100 Invested on 1/4/99 in stock or index -- including reinvestment of
dividends.
Fiscal year ending December 29, 2002 or December 31, 2002, as applicable.

PROPOSAL TO RATIFY THE APPOINTMENT OF
INDEPENDENT AUDITORS
(PROPOSAL TWO)

The Board of Directors and management of Lakes Entertainment are committed
to the quality, integrity and transparency of the Company's financial reports.
Independent auditors play an important part in the Company's system of financial
control. Deloitte & Touche LLP has performed this function since July 31, 2002,
when it replaced Arthur Andersen LLP as the Company's independent auditor.
Arthur Andersen had previously served the Company and Grand Casinos, Inc., as
its predecessor, in such capacity since May 1995. The Board of Directors and
management of Lakes Entertainment have been satisfied with the quality,
integrity and professionalism of Deloitte & Touche's audit team.

In accordance with the duties set forth in its written charter, the Audit
Committee of the Company's Board of Directors has appointed Deloitte & Touche as
independent auditors of the Company for the 2003 fiscal year. Although it is not
required to do so, the Audit Committee and the full Board of Directors wishes to
submit the appointment of Deloitte & Touche for shareholder ratification at the
annual meeting. Representatives of Deloitte & Touche are expected to be present
at the annual meeting to answer your questions and to make a statement if they
desire to do so.

If the shareholders do not ratify the appointment of Deloitte & Touche, the
Audit Committee may reconsider its selection, but is not required to do so.
Notwithstanding the proposed ratification of the appointment of Deloitte &
Touche by the shareholders, the Audit Committee, in its discretion, may direct
the appointment of new independent auditors at any time during the year without
notice to, or the consent of, the shareholders, if the Audit Committee
determines that such a change would be in the best interests of the Company and
its shareholders.

PROXIES AND VOTING -- PROPOSAL TWO

Assuming that a quorum is present for ratification of the appointment of
independent auditors (which requires the presence in person or by proxy of at
least a majority of the outstanding shares entitled to vote on such matter), the
affirmative vote of the holders of a majority of the outstanding shares of
common stock of the Company present and entitled to vote on the ratification of
the appointment of independent auditors is required to ratify the appointment of
Deloitte & Touche LLP as independent auditors of the Company for the 2003 fiscal
year. A shareholder who abstains with respect to the ratification of Deloitte &
Touche LLP's appointment is considered to be present and entitled to vote on
such ratification at the meeting, and is in effect casting a negative vote, but
a shareholder (including a broker) who does not give authority to a proxy to
vote, or withholds authority to vote, on the ratification of Deloitte & Touche
LLP's appointment, shall not be considered present and entitled to vote on this
matter.

All shares represented by proxies will be voted FOR the ratification of
Deloitte & Touche LLP's appointment as independent auditors of the Company for
the 2003 fiscal year unless a contrary choice is specified.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
RATIFICATION OF THE APPOINTMENT OF AUDITORS.

SHAREHOLDER PROPOSAL TO GRANT
VOTING RIGHTS UNDER
MINNESOTA CONTROL SHARE ACQUISITION ACT
(PROPOSAL 3)

SUMMARY OF SHAREHOLDER PROPOSAL

As discussed in detail below, Lyle Berman's current beneficial ownership in
Lakes exceeds 20% of Lakes' outstanding shares of common stock. Under Minnesota
law, shareholders of Minnesota public corporations whose beneficial ownership
surpasses 20%, 33 1/3% or 50% may be prohibited from voting their shares in
excess of such percentages without shareholder approval. Mr. Berman has
submitted a shareholder-sponsored proposal to be considered at the annual
meeting asking Lakes' shareholders to grant him voting rights with respect to
shares representing beneficial ownership in excess of 20% and up to 33 1/3% of
Lakes. The Board of Directors believes that it is in Lakes' best interest to
approve this proposal.

BACKGROUND TO CONTROL SHARE ACQUISITION ACT

Section 302A.671 of the Minnesota Business Corporation Act, and related
definitions (the "Control Share Acquisition Act") can operate to restrict the
voting power of stock held by a shareholder if the stock is acquired in a
"control share acquisition" (as defined) and exceeds a certain percentage voting
threshold. There are three percentage thresholds of outstanding voting power
under the Control Share Acquisition Act: (i) at least 20% but less than 33 1/3%;
(ii) at least 33 1/3% but less than or equal to 50%; and (iii) over 50%.

For example, if an "acquiring person" (as defined) acquires stock in a
control share acquisition that results in the total beneficial ownership of the
acquiring person equaling or exceeding the 20% threshold, the acquiring person
may only exercise voting power with respect to the number of shares that
represents less than 20% of the outstanding voting power of that company. The
Control Share Acquisition Act removes the voting power from the number of shares
acquired in a control share acquisition that is in excess of the 20% threshold.
The voting power is restored only if approved by the required vote of that
company's shareholders.

The acquiring person may request that a resolution be put before the
shareholders to authorize the restoration of voting rights for the shares
acquired in excess of the threshold. In addition, the acquiring person must file
an information statement with the company for inclusion in its proxy statement
materials. If the shareholders approve the restoration of voting power, the
acquiring person will obtain full voting rights with respect to the shares
acquired in excess of the threshold and full voting rights with respect to any
additional shares that may be acquired by the acquiring person up to the next
threshold. For example, an acquiring person who seeks and obtains approval of
the shareholders to vote all shares in excess of the 20% threshold, may only
exercise voting rights with respect to shares acquired up to the 33 1/3%
threshold; if the acquiring person's beneficial ownership through a control
share acquisition exceeds 33 1/3% of the outstanding voting power, the shares
acquired in such control share acquisition in excess of the 33 1/3% threshold
will become non-voting unless voting power is restored by the shareholders. A
COPY OF THE CONTROL SHARE ACQUISITION ACT IS INCLUDED AS APPENDIX A ATTACHED TO
THE PROXY STATEMENT.

In compliance with the Control Share Acquisition Act, Mr. Lyle Berman,
Chairman of the Company's Board of Directors and the Company's President and
Chief Executive Officer, has submitted an information statement and requested
that the Company seek shareholder approval of the above resolution at the Annual
Meeting. A COPY OF THE INFORMATION STATEMENT SUBMITTED BY MR. BERMAN IS INCLUDED
AS APPENDIX B ATTACHED

TO THIS PROXY STATEMENT. Shareholders are encouraged to read the information
statement prior to executing their proxy. The following background information
is derived in part from the Information Statement:

INFORMATION ON MR. BERMAN'S OWNERSHIP OF COMMON STOCK OF THE COMPANY(1)

Mr. Berman has been a shareholder of the Company since its inception. Prior
to December 8, 2000, Mr. Berman beneficially owned, directly or indirectly,
2,074,661 shares of the Company's common stock, representing 18.22% of the total
voting power of the Company. Mr. Berman had direct ownership over 1,881,133 of
these shares (including 750,000 shares that were issuable upon exercise of
options). Mr. Berman also had indirect ownership over 193,528 shares of Common
Stock. Of these indirectly-owned shares, (i) 20,625 shares were held by Mr.
Berman's spouse; (ii) 11,403 shares were held by Berman Consulting Corp., a
Minnesota corporation wholly-owned by Mr. Berman; and (iii) 161,500 shares were
held by Berman Consulting Corp.'s profit sharing plan.

On December 8, 2000, Mr. Berman directly purchased 270,300 shares of the
Company's common stock, which acquisition constituted a "control share
acquisition" under the Control Share Acquisition Act because pursuant to his
acquisition, Mr. Berman increased his aggregate beneficial ownership percentage
in the Company from 18.22% to 20.59%. As a result of the control share
acquisition, Mr. Berman acquired voting power in the election of directors that,
except for the application of the Control Share Acquisition Act, would be in the
20% to 33 1/3% range of voting percentage.

Mr. Berman has subsequently increased his beneficial ownership to 21.96% in
a separate transaction, as provided below. On or about January 4, 2001, Berman
Consulting Corp. loaned $1,600,000 to Stanley M. Taube pursuant to a convertible
promissory note. As part of the loan transaction, Mr. Taube pledged 200,000
shares of the Common Stock as security for his payment obligations under the
convertible promissory note. Pursuant to the terms of the convertible promissory
note, Berman Consulting Corp. has the right, at its option, at any time on or
after November 1, 2002, to take legal title to the pledged shares in full
satisfaction of Mr. Taube's payment obligations under the convertible promissory
note. As a result, Mr. Berman acquired indirect beneficial ownership of such
shares on or about January 4, 2001, thereby increasing his aggregate beneficial
ownership percentage in the Company from 20.59% to 21.96%.

Of the 2,544,961 shares beneficially owned by Mr. Berman, 417,298 shares
have no voting rights unless the resolution set forth above is approved by the
requisite votes of the shareholders at the Annual Meeting.

PROPOSED RESOLUTION

At the annual meeting, shareholders will be asked to consider and vote on
the following proposed resolution:

"RESOLVED, that pursuant to Section 302A.671, Subd. 4a of the Minnesota
Business Corporation Act, full voting rights are hereby granted to all shares of
common stock, par value $.01 per share, of Lakes Entertainment, Inc. that are,
or hereafter become, beneficially owned by Lyle Berman or any person or entity
affiliated with Lyle Berman, regardless of whether such shares were or are
acquired in a "control share acquisition," as defined in Section 302A.011, Subd.
38 of the Minnesota Business Corporation Act, or otherwise; provided that, so
long as the provisions of Section 302A.671 of the Minnesota Business Corporation
Act continue to apply to Lakes Entertainment, Inc., in no event shall Lyle
Berman be granted voting rights with respect to shares beneficially owned by him
or any person or entity affiliated with him that exceed 33 1/3% of the
outstanding common stock of Lakes Entertainment, Inc. without a separate vote of
shareholders."

- ---------------

(1) In accordance with the definition of "beneficial ownership" in the Minnesota
Business Corporation Act, the beneficial ownership of Mr. Berman disclosed in
this proposal includes all shares which Mr. Berman has the right to acquire.
This beneficial ownership calculation differs from the calculation used above in
the Section entitled "Voting Securities and Principal Holders Thereof," which
includes only those shares that Mr. Berman has that right to acquire within the
next 60 days and is consistent with the federal securities law requirements.
11

Approval of this resolution would enable Mr. Berman to vote all shares of
common stock that he currently holds, directly or indirectly, and any
subsequently acquired shares up to an aggregate of 33 1/3% of the outstanding
voting power of the Company.

VOTE REQUIRED -- PROPOSAL THREE

The above proposal must receive the following affirmative votes to be
approved:

(1) The affirmative vote, whether in person or by proxy, of the
holders of a majority of all the outstanding common stock; and

(2) The affirmative vote, whether in person or by proxy, of the
holders of a majority of all the outstanding common stock, excluding
"interested shares" as that term is defined in the Minnesota Statutes.

Under Minnesota Statutes, "interested shares" include shares owned by the
acquiring person (i.e., Mr. Berman), by officers of the Company or by any
employee of the Company who is also a director of the Company. As of the Record
Date, (i) 10,638,320 shares of common stock were outstanding and entitled to
vote at the Annual Meeting; and (ii) 1,599,961 shares of common stock were
considered "interested shares," including 1,594,961 shares beneficially owned by
Mr. Berman (which represents all issued and outstanding shares
beneficially-owned by Mr. Berman) and 5,000 shares owned by other officers of
the Company. See "Security Ownership of Certain Beneficial Owners and
Management."

RECOMMENDATION OF THE BOARD OF DIRECTORS

The Board of Directors recommends that the shareholders vote FOR approval
of the resolution to grant Mr. Berman full voting rights with respect to shares
of the Lakes Entertainment common stock held by Mr. Berman pursuant to the
Control Share Acquisition Act. Although Mr. Berman has not expressed an
intention to acquire additional shares of Lakes' stock at a particular time or
at all, the Board believes that a failure to approve the proposal may discourage
Mr. Berman from acquiring additional shares in the future. Further, Mr. Berman
may divest a portion of his shares in the future to ensure that all of his
shares have voting rights. Therefore, the failure to approve the proposal might
eliminate a potential buyer for the common stock or might cause Mr. Berman to
sell a portion of his holdings at a time when such sales might have an adverse
effect on the market for the Company's common stock. The Board believes approval
of this proposal is in the best interests of the Company.

OTHER MATTERS

BOARD OF DIRECTORS AND COMMITTEES

Board of Directors

The Board of Directors held five meetings during the fiscal year ended
December 29, 2002, and took action by written action in lieu of a meeting two
times. The Board of Directors has an audit committee, a nominating committee and
a compensation committee.

Audit Committee of the Board of Directors

The Company's Audit Committee consists of Messrs. Ronald J. Kramer, Neil I.
Sell and Morris Goldfarb. The Audit Committee held six meetings during the
fiscal year ended December 29, 2002. The functions of the Audit Committee are
described under "Report of the Audit Committee" below.

The Audit Committee operates under a written charter adopted by the Board
of Directors. A COPY OF THE WRITTEN CHARTER, AS AMENDED TO DATE, IS ATTACHED AS
APPENDIX C TO THIS PROXY STATEMENT. Pursuant to the written charter, it is the
policy of the Audit Committee to review and pre-approve the performance of all
audit and non-audit accounting services to be performed by the Company's
independent auditors, other than certain de minimus exceptions permitted by
Section 202 of the Sarbanes-Oxley Act of 2002.

The Board of Directors has determined that each of the three Audit
Committee members is an "independent director", as such term is defined by
Section 4200(a)(13) of the National Association of Securities Dealers' listing
standards. The Board of Directors has also determined that each of the Audit
Committee members is able to read and understand fundamental financial
statements and that at least one member of the Audit Committee has past
employment experience in finance or accounting.

Nominating Committee of the Board of Directors

A Nominating Committee of the Board of Directors was established on April
22, 2003 and currently consists of Messrs. Goldfarb and Sell. The Nominating
Committee assists the full Board of Directors in the areas of director selection
and committee selection and rotation. The Nominating Committee will consider
shareholder nominations for directors. Shareholders who wish to nominate a
director candidate should contact Timothy J. Cope, Executive Vice President,
Chief Financial Officer and Secretary of Lakes Entertainment, Inc. at the
Company's corporate headquarters.

Compensation Committee of the Board of Directors

The Company's Compensation Committee consists of Messrs. Goldfarb and
Kramer. The Compensation Committee held one meeting during the fiscal year ended
December 29, 2002. The Compensation Committee reviews the Company's remuneration
policies and practices, makes recommendations to the Board in connection with
all compensation matters affecting the Company and administers the 1998 Stock
Option and Compensation Plan.

None of the Company's directors attended fewer than 75 percent of the
aggregate of (i) the total number of meetings of the Board during fiscal 2002,
and (ii) the total number of meetings held by all committees of the Board on
which he served.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Morris Goldfarb, a member of the Compensation Committee, is a director and
executive officer of G-III Apparel Group Ltd. Lyle Berman, a director and
executive officer of the Company, is also a director of G-III Apparel Group Ltd.

REPORT OF THE AUDIT COMMITTEE

The Company has established a three-member Audit Committee within the Board
of Directors that currently consists of Messrs. Ronald J. Kramer, Neil I. Sell
and Morris Goldfarb. The primary functions of the Audit Committee are (i) to
serve as an independent and objective party to monitor the Company's financial
reporting process and internal control system, (ii) to review and appraise the
audit efforts of the Company's independent accountants and internal audit
department, and (iii) to provide an open avenue of communication among the
independent accountants, financial and senior management, the internal audit
department, and the Board of Directors.

The Audit Committee has reviewed the Company's audited financial statements
for the last fiscal year and discussed them with management.

The Audit Committee has discussed with the independent auditors the matters
required to be discussed by Statement on Auditing Standards No. 61,
Communication with Audit Committees, as amended, by the Auditing Standards Board
of the American Institute of Certified Public Accountants.

The Audit Committee has received and reviewed the written disclosures and
the letter from the independent auditors required by independence Standard No.
1, Independence Discussions with Audit Committees, as amended, by the
Independence Standards Board, and has discussed with the auditors the auditors'
independence.

The Audit Committee, based on the review and discussions described above,
has recommended to the Board of Directors that the audited financial statements
be included in the Company's Annual Report on Form 10-K for the last fiscal
year.

MORRIS GOLDFARB
RONALD J. KRAMER
NEIL I. SELL

BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

Decisions on compensation of the Company's executives generally will be
made by the Compensation Committee. Each member of the Compensation Committee is
a Non-Employee Director. All decisions by the Compensation Committee relating to
the compensation of the Company's executive officers are reviewed by the full
Board. Pursuant to rules designed to enhance disclosure of the Company's
policies toward executive compensation, set forth below is a report prepared by
the Compensation Committee addressing the compensation policies for the Company
and its subsidiaries.

The Compensation Committee's executive compensation policies are designed
to provide competitive levels of compensation that integrate pay with the
Company's annual objectives and long-term goals, reward above-average corporate
performance, recognize individual initiative and achievements, and assist the
Company in attracting and retaining qualified executives. Executive compensation
will be set at levels that the Compensation Committee believes to be consistent
with others in the Company's industry.

There are three elements in the Company's executive compensation program,
all determined by individual and corporate performance.

- Base salary compensation

- Annual incentive compensation

- Stock options

Total compensation opportunities are competitive with those offered by
employers of comparable size, growth and profitability in the Company's
industry.

Base salary compensation is determined by the potential impact the
individual has on the Company, the skills and experiences required by the job,
and the performance and potential of the incumbent in the job.

The annualized base salary during fiscal 2002 for Lyle Berman, the
Company's Chief Executive Officer and Chairman of the Board, was $400,000. The
amount of Mr. Berman's compensation resulted from the Committee's assessment of
the Company's performance and business development during fiscal 2002. The
Committee believes that Mr. Berman's salary is competitive with executives in
other industry-related companies of similar size. The Committee considered
criteria similar to that considered for Mr. Berman when determining the
annualized base salaries for the other Named Executive Officers. None of the
Named Executive Officers received an increase in base salary in fiscal 2002.

Annual incentive compensation for executives of the Company is based
primarily on corporate earnings and growth as measured by the Company's EBITDA
(Earnings Before Interest, Taxes, Depreciation and Amortization) results and
goals and the Company's positioning for future results, but also includes an
overall assessment by the Compensation Committee of executive management's
individual and collective performance, as well as market conditions. Mr. Berman
did not receive an incentive compensation award in fiscal 2002. Of the Named
Executive Officers, only Timothy J. Cope received an incentive bonus for fiscal
2002, based on individual performance.

Awards of stock options under the 1998 Stock Option and Compensation Plan
(the "Employee Plan") are designed to integrate compensation of the Company's
executives with the long-term interests of the Company and its shareholders and
assist in the retention of executives. The 1998 Plan also permits the Committee
to grant stock options to key personnel. Options become exercisable based upon
criteria established by the Company. During fiscal 2002, the Compensation
Committee did not grant options to the executive officers. The Committee granted
84,000 options pursuant to the 1998 Plan to new employees hired by the Company
during fiscal 2002.

While the value realizable from exercisable options is dependent upon the
extent to which the Company's performance is reflected in the market price of
the Company's common stock at any particular point in time, the decision as to
whether such value will be realized in any particular year is determined by each
individual executive and not by the Compensation Committee. Accordingly, when
the Committee recommends that an option be granted to an executive, that
recommendation does not take into account any gains realized that year by that
executive as a result of his or her individual decision to exercise an option
granted in a previous year.

The Compensation Committee does not anticipate that any of the compensation
payable to executive officers of the Company in the coming year will exceed the
limits and deductibilities set forth in section 162(m) of the Internal Revenue
Code of 1986, as amended, (the "Code"). The Compensation Committee has not
established a policy regarding compensation in excess of these limits, but will
continue to monitor this issue.

MORRIS GOLDFARB
RONALD J. KRAMER

INDEPENDENT AUDITORS

CHANGE IN INDEPENDENT AUDITORS

On July 31, 2002, upon the recommendation and approval of its Board of
Directors and its Audit Committee, Lakes Entertainment dismissed Arthur Andersen
LLP as the Company's independent auditors. On the same date, the Company engaged
Deloitte & Touche LLP to serve as the Company's independent auditors.

Arthur Andersen's reports on the Company's consolidated financial
statements for each of the fiscal years ended December 31, 2000 and December 30,
2001 did not contain an adverse opinion or disclaimer of opinion, nor were they
qualified or modified as to uncertainty, audit scope or accounting principles.
During the fiscal years ended December 31, 2000 and December 30, 2001 and
subsequently through the date of its dismissal, there were no disagreements with
Arthur Andersen on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure which, if not resolved to
Arthur Andersen's satisfaction, would have caused them to make reference to the
subject matter in connection with their report on the Company's consolidated
financial statements for such years.

Except as provided in the following paragraph, during the fiscal years
ended December 31, 2000 and December 30, 2001 and subsequently through the date
of Deloitte & Touche's engagement, the Company did not consult Deloitte & Touche
with respect to the application of accounting principles to a specified
transaction, either completed or proposed, or the type of audit opinion that
might be rendered on the Company's consolidated financial statements, or any
other matters or reportable events described under Item 304(a)(2)(i) and (ii) of
Regulation S-K.

In connection with Deloitte & Touche's completion of its new client
acceptance procedures in July 2002, and prior to Deloitte & Touche's engagement
as the Company's auditors, the Company consulted with Deloitte & Touche
regarding the application of accounting principles to the Company's sale of land
held for development in Las Vegas, Nevada. This transaction was accounted for as
a sale in the Company's financial statements for the year ended December 30,
2001.

The Company's management subsequently determined that the transaction did
not qualify for treatment as a sale under the requirements of Statement of
Financial Accounting Standards No. 66, Accounting for Sales of Real Estate and
that the transaction should have been accounted for under the deposit method of
accounting. Deloitte & Touche orally advised the Company that, based on the
facts, circumstances, and assumptions presented to Deloitte & Touche by the
Company, it concurred with the Company's determination on this matter. The
Company attempted but was unable to consult with Arthur Andersen regarding this
matter. In September 2002, the Company filed an amendment to its Annual Report
on Form 10-K for the year ended December 30, 2001, and amendments to two
subsequent Quarterly Reports on Form 10-Q, restating its financial statements to
adopt the deposit method of accounting for the transaction.

The Company provided Arthur Andersen with a copy of the foregoing
disclosures and requested Arthur Andersen to provide a letter indicating its
agreement or disagreement with the above disclosures. The Company was unable to
obtain this letter from Arthur Andersen.

FEES BILLED TO COMPANY BY ITS INDEPENDENT AUDITORS

The following table presents fees for professional audit and other services
rendered by Deloitte & Touche LLP and Arthur Andersen LLP, as applicable, during
fiscal 2002 and fiscal 2001.

<Table>
<Caption>
FEES FOR 2002 FEES FOR 2001
----------------------------------- -----------------------------------
DELOITTE & TOUCHE ARTHUR ANDERSEN DELOITTE & TOUCHE ARTHUR ANDERSEN
----------------- --------------- ----------------- ---------------

Audit Fees.............. $125,000 $ 21,010 -- $124,972
Audit-Related Fees(1)... -- -- -- --
Tax Fees(2)............. $ 94,700 $123,775 -- $240,315
All Other Fees(3)....... -- -- $23,124 --
-------- -------- ------- --------
Total Fees.............. $219,700 $144,785 $23,124 $365,287
======== ======== ======= ========
</Table>

- ---------------

(1) Audit-Related Fees consist principally of assurance and related services
that are reasonably related to the performance of the audit or review of the
Company's financial statements but not reported under the caption Audit Fees
above.

(2) Tax Fees consist of fees for tax compliance, tax advice, and tax planning.

(3) All Other Fees in fiscal 2001 consisted of fees paid on behalf of Grand
Casinos, Inc. for special advisory services rendered to Grand Casinos in
connection with legal proceedings for which Lakes was required to provide
indemnification.

The Audit Committee of the Board of Directors has reviewed the fees billed
by Deloitte & Touche LLP during fiscal year 2002 and, after consideration, has
determined that the receipt of these fees by Deloitte & Touche LLP is compatible
with Deloitte & Touche LLP's maintaining its independence.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

NEW HORIZON KIDS QUEST, INC.

Pursuant to an indemnification agreement entered into in December 1998 by
and between Lakes Entertainment and Mr. Berman, Lakes Entertainment agreed to
indemnify Mr. Berman for any damages incurred by Mr. Berman arising out of his
acts and omissions as a director of New Horizon Kids Quest, a company in which
Lakes Entertainment held an ownership interest and on which Mr. Berman served as
a director until June 2001.

PARK PLACE ENTERTAINMENT CORPORATION

Lyle Berman entered into an employment agreement with Park Place as of
January 1, 1999 (the "Park Place Employment Agreement") pursuant to which he
serves as a part-time employee of Park Place. The agreement was for an initial
term of 4 years, which ended as of January 1, 2003, at which time the agreement
was automatically renewed for a one-year term. The agreement will continue to be
renewed for additional one-year terms until terminated by either party on thirty
(30) days' written notice to the other party. Mr. Berman received compensation
during 2002 of Ten Thousand Dollars ($10,000) and will receive compensation in
2003 of an amount not less than Ten Thousand Dollars ($10,000.00). In connection
with his execution of the Park Place Employment Agreement, Mr. Berman received
stock options to purchase an aggregate of four hundred thousand (400,000) shares
of Park Place common stock at a per share exercise price of Six Dollars and
Sixty-Seven cents ($6.67), which options became 100% vested on January 1, 2003.
The Park Place Employment Agreement also contains a noncompetition covenant
under which Mr. Berman is prohibited, subject to certain exceptions, from
participating in the ownership, management or control of any business that is
engaged in a gaming enterprise that competes or would compete with Park Place.
Additionally, Mr. Berman must present any gaming opportunities and projects to
Park Place in the first instance. If Park Place determines not to pursue any
venture or opportunity presented by Mr. Berman, only then may that opportunity
be presented to and pursued by Lakes Entertainment. The following exceptions are
not subject to Mr. Berman's noncompetition agreement: (i) the management of
Indian owned casinos and related amenities; (ii) the development of the Polo
Plaza project in Las Vegas, NV; and (iii) Internet, cable television or other
electronic media-based gaming enterprises. The terms of Mr. Berman's employment
with Park Place may substantially limit the number and scope of opportunities
that Lakes will be able consider and pursue.

LOANS TO VIATICARE FINANCIAL SERVICES, LLC; LIVING BENEFITS FINANCIAL SERVICES,
LLC

During 2000 and 2001, Lakes made a total of $4.0 million in unsecured loans
to ViatiCare Financial Services, LLC ("ViatiCare"), which has since been
acquired by Living Benefits Financial Services, LLC ("Living Benefits"). In
connection with the Living Benefits' acquisition of Viaticare, Living Benefits
provided an unsecured guarantee of ViatiCare's obligations to Lakes. In March
2001, the Board of Directors of Lakes determined not to make further loans to
ViatiCare. Due to the determination of Lakes' management that repayment of the
$4.0 million loan was not likely to occur, Lakes recorded a $4.0 million reserve
in the financial results for the quarter ended June 30, 2002.

Subsequent to Lakes' decision not to make further loans to ViatiCare, Mr.
Berman and LB Acquisitions LLC, a limited liability company wholly-owned by Mr.
Berman, have made loans or other advances to Living Benefits from time to time
totaling approximately $7.43 million. As an incentive to make an initial $5.6
million loan, LB Acquisitions was granted a 9 percent voting interest in Living
Benefits and was given an option (the "LB Option") to convert the $5.6 million
loan balance into an additional 46 percent of the voting interest in Living
Benefits. To secure the repayment of the LB Acquisitions loans, which become due
commencing in 2005, Living Benefits granted LB Acquisitions a security interest
in its personal property, including the right of Living Benefits to receive
payments from profits on life insurance policies acquired by Living Benefits on
or after June 15, 2001. LB Acquisitions made an additional loan of approximately
$400,000 to Living Benefits in May 2002. On July 1, 2002, Mr. Berman advanced an
additional $763,000 to Living Benefits in exchange for a portion of Living
Benefits' rights in 50% of a trust holding the distribution rights from certain
life insurance policies (the "Trust"), which Mr. Berman later transferred to LB
Acquisitions. As
17

an inducement for this further advance, Living Benefits agreed to amend the LB
Option to permit the exercise thereof by LB Acquisitions for $1.00 rather than
requiring LB Acquisitions to convert $5.6 million of its loan amounts. Between
October 2002 and February 2003, Mr. Berman and LB Acquisitions made additional
loans to Living Benefits totaling approximately $350,000 and acquired
approximately $230,000 in existing debt previously held by other investors.

On April 7, 2003, Living Benefits transferred its entire interest in the
Trust (which constitutes the substantial majority of Living Benefits' assets) to
LB Acquisitions in exchange for the forgiveness by LB Acquisitions of $6.9
million of Living Benefits' debt obligations. Formal transfer to LB Acquisitions
of certificates evidencing the Trust interests is subject to the consent of the
third party holding the remaining 50% Trust interest.

LEGAL SERVICES

Neil I. Sell is a partner in the law firm of Maslon Edelman Borman & Brand,
LLP, which renders legal services to Lakes from time to time.

SECTION 16(A) BENEFICIAL REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "SEC") and the NASDAQ National Market. Officers, directors and greater than
ten percent shareholders are required by SEC regulation to furnish the Company
with copies of all Section 16(a) forms they file.

Based solely upon a review of the copies of such forms furnished to the
Company, or written representations that no Form 5(s) were required, the Company
believes that during the fiscal year ended December 29, 2002, all Section 16(a)
filing requirements applicable to its officers, directors and greater than
ten-percent beneficial owners were satisfied.

PROPOSALS OF SHAREHOLDERS

Shareholder proposals sought to be included in the Proxy Statement for the
2004 annual meeting of shareholders must be received by the Company at its
principal executive offices on or before January 1, 2004.

DISCRETIONARY PROXY VOTING AUTHORITY/
UNTIMELY STOCKHOLDER PROPOSALS

Rule 14a-4 promulgated under the Securities and Exchange Act of 1934
governs the Company's use of its discretionary proxy voting authority with
respect to a shareholder proposal that the shareholder has not sought to include
in the Company's proxy statement. The Rule provides that if a proponent of a
proposal fails to notify the company at least 45 days prior to the month and day
of mailing of the prior year's proxy statement, management proxies will be
allowed to use their discretionary voting authority when the proposal is raised
at the meeting, without any discussion of the matter.

With respect to the Company's 2004 annual meeting of shareholders, if the
Company is not provided notice of a shareholder proposal, which the shareholder
has not previously sought to include in the Company's proxy statement, by March
17, 2004, the management proxies will be allowed to use their discretionary
authority as outlined above.

SOLICITATION

The Company will bear the cost of preparing, assembling and mailing the
proxy, proxy statement and other material that may be sent to the shareholders
in connection with this solicitation. Brokerage houses and other custodians,
nominees and fiduciaries may be requested to forward soliciting material to the
beneficial

owners of stock, in which case they will be reimbursed by the Company for their
expenses in doing so. Proxies are being solicited primarily by mail, but, in
addition, officers and regular employees of the Company may solicit proxies
personally, by telephone, by telegram or by special letter.

The Board of Directors does not intend to present to the meeting any other
matter not referred to above and does not presently know of any matters that may
be presented to the meeting by others. However, if other matters come before the
meeting, it is the intent of the persons named in the enclosed proxy to vote the
proxy in accordance with their best judgment.

By Order of the Board of Directors

LAKES ENTERTAINMENT, INC.

[/s/ Tiimothy J. Cope]
Timothy J. Cope,
Executive Vice President, Chief
Financial Officer
and Secretary

APPENDIX A

MINNESOTA CONTROL SHARE ACQUISITION ACT

SECTION 302A.671 CONTROL SHARE ACQUISITIONS.

SUBDIVISION 1. APPLICATION. (a) Unless otherwise expressly provided in the
articles or in bylaws approved by the shareholders of an issuing public
corporation, this section applies to a control share acquisition. A
shareholder's proposal to amend the corporation's articles or bylaws to cause
this section to be inapplicable to the corporation requires the vote set forth
in subdivision 4a, paragraph (b), in order for it to be effective, unless it is
approved by a committee of the board comprised solely of directors who:

(1) are neither officers nor employees of, nor were during the five
years preceding the formation of the committee officers or employees of,
the corporation or a related organization;

(2) are neither acquiring persons nor affiliates or associates of an
acquiring person;

(3) were not nominated for election as directors by an acquiring
person or an affiliate or associate of an acquiring person; and

(4) were directors at the time an acquiring person became an acquiring
person or were nominated, elected, or recommended for election as directors
by a majority of those directors.

(b) The shares of an issuing public corporation acquired by an acquiring
person in a control share acquisition that exceed the threshold of voting power
of any of the ranges specified in subdivision 2, paragraph (d), shall have only
the voting rights as shall be accorded to them pursuant to subdivision 4a.

SUBD. 2. INFORMATION STATEMENT. An acquiring person shall deliver to the
issuing public corporation at its principal executive office an information
statement containing all of the following:

(a) the identity and background of the acquiring person, including the
identity and background of each member of any partnership, limited
partnership, syndicate, or other group constituting the acquiring person,
and the identity and background of each affiliate and associate of the
acquiring person, including the identity and background of each affiliate
and associate of each member of such partnership, syndicate, or other
group; provided, however, that with respect to a limited partnership, the
information need only be given with respect to a partner who is denominated
or functions as a general partner and each affiliate and associate of the
general partner;

(b) a reference that the information statement is made under this
section;

(c) the number and class or series of shares of the issuing public
corporation beneficially owned, directly or indirectly, before the control
share acquisition by each of the persons identified pursuant to paragraph
(a);

(d) the number and class or series of shares of the issuing public
corporation acquired or proposed to be acquired pursuant to the control
share acquisition by each of the persons identified pursuant to paragraph
(a) and specification of which of the following ranges of voting power in
the election of directors that, except for this section, resulted or would
result from consummation of the control share acquisition:

(1) at least 20 percent but less than 33 1/3 percent;

(2) at least 33 1/3 percent but less than or equal to 50 percent;

(3) over 50 percent; and

(e) the terms of the control share acquisition or proposed control
share acquisition, including, but not limited to, the source of funds or
other consideration and the material terms of the financial arrangements
for the control share acquisition; plans or proposals of the acquiring
person (including plans or proposals under consideration) to (1) liquidate
or dissolve the issuing public corporation, (2) sell all or

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a substantial part of its assets, or merge it or exchange its shares with
any other person, (3) change the location of its principal place of
business or its principal executive office or of a material portion of its
business activities, (4) change materially its management or policies of
employment, (5) change materially its charitable or community contributions
or its policies, programs, or practices relating thereto, (6) change
materially its relationship with suppliers or customers or the communities
in which it operates, or (7) make any other material change in its
business, corporate structure, management or personnel; and other objective
facts as would be substantially likely to affect the decision of a
shareholder with respect to voting on the control share acquisition.

If any material change occurs in the facts set forth in the information
statement, including but not limited to any material increase or decrease in the
number of shares of the issuing public corporation acquired or proposed to be
acquired by the persons identified pursuant to paragraph (a), the acquiring
person shall promptly deliver to the issuing public corporation at its principal
executive office an amendment to the information statement containing
information relating to the material change. An increase or decrease or proposed
increase or decrease equal, in the aggregate for all persons identified pursuant
to paragraph (a), to one percent or more of the total number of outstanding
shares of any class or series of the issuing public corporation shall be deemed
"material" for purposes of this paragraph; an increase or decrease or proposed
increase or decrease of less than this amount may be material, depending upon
the facts and circumstances.

SUBD. 3. MEETING OF SHAREHOLDERS. If the acquiring person so requests in
writing at the time of delivery of an information statement pursuant to
subdivision 2, and has made, or has made a bona fide written offer to make, a
control share acquisition and gives a written undertaking to pay or reimburse
the issuing public corporation's expenses of a special meeting, except the
expenses of the issuing public corporation in opposing according voting rights
with respect to shares acquired or to be acquired in the control share
acquisition, within ten days after receipt by the issuing public corporation of
the information statement, a special meeting of the shareholders of the issuing
public corporation shall be called pursuant to section 302A.433, subdivision 1,
for the sole purpose of considering the voting rights to be accorded to shares
referred to in subdivision 1, paragraph (b), acquired or to be acquired pursuant
to the control share acquisition. The special meeting shall be held no later
than 55 days after receipt of the information statement and written undertaking
to pay or reimburse the issuing public corporation's expenses of the special
meeting, unless the acquiring person agrees to a later date. If the acquiring
person so requests in writing at the time of delivery of the information
statement, (1) the special meeting shall not be held sooner than 30 days after
receipt by the issuing public corporation of the information statement and (2)
the record date for the meeting must be at least 30 days prior to the date of
the meeting. If no request for a special meeting is made, consideration of the
voting rights to be accorded to shares referred to in subdivision 1, paragraph
(b), acquired or to be acquired pursuant to the control share acquisition shall
be presented at the next special or annual meeting of the shareholders of which
notice has not been given, unless prior thereto the matter of the voting rights
becomes moot. The issuing public corporation is not required to have the voting
rights to be accorded to shares acquired or to be acquired according to a
control share acquisition considered at the next special or annual meeting of
the shareholders unless it has received the information statement and documents
required by subdivision 4 at least 55 days before the meeting. The notice of the
meeting shall at a minimum be accompanied by a copy of the information statement
(and a copy of any amendment to the information statement previously delivered
to the issuing public corporation) and a statement disclosing that the board of
the issuing public corporation recommends approval of, expresses no opinion and
is remaining neutral toward, recommends rejection of, or is unable to take a
position with respect to according voting rights to shares referred to in
subdivision 1, paragraph (b), acquired or to be acquired in the control share
acquisition. The notice of meeting shall be given at least ten days prior to the
meeting. Any amendments to the information statement received after mailing of
the notice of the meeting must be mailed promptly to the shareholders by the
issuing public corporation.

SUBD. 4. FINANCING. Notwithstanding anything to the contrary contained in
this chapter, no call of a special meeting of the shareholders of the issuing
public corporation shall be made pursuant to subdivision 3 and no consideration
of the voting rights to be accorded to shares referred to in subdivision 1,
paragraph (b), acquired or to be acquired pursuant to a control share
acquisition shall be presented at any special or annual meeting of the
shareholders of the issuing public corporation unless at the time of delivery of
the information

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statement pursuant to subdivision 2, the acquiring person shall have entered
into, and shall deliver to the issuing public corporation a copy or copies of, a
definitive financing agreement or definitive financing agreements, with one or
more responsible financial institutions or other entities having the necessary
financial capacity, for any financing of the control share acquisition not to be
provided by funds of the acquiring person. A financing agreement is not deemed
not definitive for purposes of this subdivision solely because it contains
conditions or contingencies customarily contained in term loan agreements with
financial institutions.

SUBD. 4A. VOTING RIGHTS. (a) Shares referred to in subdivision 1,
paragraph (b), acquired in a control share acquisition shall have the same
voting rights as other shares of the same class or series only if approved by
resolution of shareholders of the issuing public corporation at a special or
annual meeting of shareholders pursuant to subdivision 3.

(b) The resolution of shareholders must be approved by (1) the affirmative
vote of the holders of a majority of the voting power of all shares entitled to
vote including all shares held by the acquiring person, and (2) the affirmative
vote of the holders of a majority of the voting power of all shares entitled to
vote excluding all interested shares. A class or series of shares of the issuing
public corporation is entitled to vote separately as a class or series if any
provision of the control share acquisition would, if contained in a proposed
amendment to the articles, entitle the class or series to vote separately as a
class or series.

(c) To have the voting rights accorded by approval of a resolution of
shareholders, any proposed control share acquisition not consummated prior to
the time of the shareholder approval must be consummated within 180 days after
the shareholder approval.

(d) Any shares referred to in subdivision 1, paragraph (b), acquired in a
control share acquisition that do not have voting rights accorded to them by
approval of a resolution of shareholders shall regain their voting rights upon
transfer to a person other than the acquiring person or any affiliate or
associate of the acquiring person unless the acquisition of the shares by the
other person constitutes a control share acquisition, in which case the voting
rights of the shares are subject to the provisions of this section.

SUBD. 5. RIGHTS OF ACTION. An acquiring person, an issuing public
corporation, and shareholders of an issuing public corporation may sue at law or
in equity to enforce the provisions of this section and section 302A.449,
subdivision 7.

SUBD. 6. REDEMPTION. Unless otherwise expressly provided in the articles
or in bylaws approved by the shareholders of an issuing public corporation, the
issuing public corporation shall have the option to call for redemption all but
not less than all shares referred to in subdivision 1, paragraph (b), acquired
in a control share acquisition, at a redemption price equal to the market value
of the shares at the time the call for redemption is given, in the event (1) an
information statement has not been delivered to the issuing public corporation
by the acquiring person by the tenth day after the control share acquisition, or
(2) an information statement has been delivered but the shareholders have voted
not to accord voting rights to such shares pursuant to subdivision 4a, paragraph
(b). The call for redemption shall be given by the issuing public corporation
within 30 days after the event giving the issuing public corporation the option
to call the shares for redemption and the shares shall be redeemed within 60
days after the call is given.

SECTION 302A.011. DEFINITIONS.

SUBD. 37. ACQUIRING PERSON. "Acquiring person" means a person that makes
or proposes to make a control share acquisition. When two or more persons act as
a partnership, limited partnership, syndicate, or other group pursuant to any
written or oral agreement, arrangement, relationship, understanding, or
otherwise for the purposes of acquiring, owning, or voting shares of an issuing
public corporation, all members of the partnership, syndicate, or other group
constitute a "person."

"Acquiring person" does not include (a) a licensed broker/dealer or
licensed underwriter who (1) purchases shares of an issuing public corporation
solely for purposes of resale to the public and (2) is not acting in concert
with an acquiring person, or (b) a person who becomes entitled to exercise or
direct the exercise of a new range of voting power within any of the ranges
specified in section 302A.671, subdivision 2, paragraph (d), solely as a result
of a repurchase of shares by, or recapitalization of, the issuing public
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corporation or similar action unless (1) the repurchase, recapitalization, or
similar action was proposed by or on behalf of, or pursuant to any written or
oral agreement, arrangement, relationship, understanding, or otherwise with, the
person or any affiliate or associate of the person or (2) the person thereafter
acquires beneficial ownership, directly or indirectly, of outstanding shares
entitled to vote of the issuing public corporation and, immediately after the
acquisition, is entitled to exercise or direct the exercise of the same or a
higher range of voting power under section 302A.671, subdivision 2, paragraph
(d), as the person became entitled to exercise as a result of the repurchase,
recapitalization, or similar action.

SUBD. 38. CONTROL SHARE ACQUISITION. "Control share acquisition" means an
acquisition, directly or indirectly, by an acquiring person of beneficial
ownership of shares of an issuing public corporation that, except for section
302A.671, would, when added to all other shares of the issuing public
corporation beneficially owned by the acquiring person, entitle the acquiring
person, immediately after the acquisition, to exercise or direct the exercise of
a new range of voting power within any of the ranges specified in section
302A.671, subdivision 2, paragraph (d), but does not include any of the
following:

(a) an acquisition before, or pursuant to an agreement entered into
before, August 1, 1984;

(b) an acquisition by a donee pursuant to an inter vivos gift not made
to avoid section 302A.671 or by a distributee as defined in section
524.1-201, clause (10);

(d) an acquisition under sections 302A.601 to 302A.661, if the issuing
public corporation is a party to the transaction;

(e) an acquisition from the issuing public corporation;

(f) an acquisition for the benefit of others by a person acting in
good faith and not made to avoid section 302A.671, to the extent that the
person may not exercise or direct the exercise of the voting power or
disposition of the shares except upon the instruction of others;

(g) an acquisition pursuant to a savings, employee stock ownership, or
other employee benefit plan of the issuing public corporation or any of its
subsidiaries, or by a fiduciary of the plan acting in a fiduciary capacity
pursuant to the plan; or

(h) an acquisition subsequent to January 1, 1991, pursuant to an offer
to purchase for cash pursuant to a tender offer all shares of the voting
stock of the issuing public corporation:

(i) which has been approved by a majority vote of the members of a
committee comprised of the disinterested members of the board of the
issuing public corporation formed pursuant to section 302A.673,
subdivision 1, paragraph (d), before the commencement of, or the public
announcement of the intent to commence, the tender offer; and

(ii) pursuant to which the acquiring person will become the owner
of over 50 percent of the voting stock of the issuing public corporation
outstanding at the time of the transaction.

For purposes of this subdivision, shares beneficially owned by a plan
described in clause (g), or by a fiduciary of a plan described in clause (g)
pursuant to the plan, are not deemed to be beneficially owned by a person who is
a fiduciary of the plan.

SUBD. 39. ISSUING PUBLIC CORPORATION. "Issuing public corporation" means
either: (1) a publicly held corporation that has at least 50 shareholders; or
(2) any other corporation that has at least 100 shareholders, provided that if,
before January 1, 1998, a corporation that has at least 50 shareholders elects
to be an issuing public corporation by express amendment contained in the
articles or bylaws, including bylaws approved by the board, that corporation is
an issuing public corporation if it has at least 50 shareholders.

SUBD. 40. PUBLICLY HELD CORPORATION. "Publicly held corporation" means a
corporation that has a class of equity securities registered pursuant to section
12, or is subject to section 15(d), of the Securities Exchange Act of 1934.

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SUBD. 41. BENEFICIAL OWNER; BENEFICIAL OWNERSHIP. (a) "Beneficial owner,"
when used with respect to shares or other securities, includes, but is not
limited to, any person who, directly or indirectly through any written or oral
agreement, arrangement, relationship, understanding, or otherwise, has or shares
the power to vote, or direct the voting of, the shares or securities or has or
shares the power to dispose of, or direct the disposition of, the shares or
securities, except that:

(1) a person shall not be deemed the beneficial owner of shares or
securities tendered pursuant to a tender or exchange offer made by the
person or any of the person's affiliates or associates until the tendered
shares or securities are accepted for purchase or exchange; and

(2) a person shall not be deemed the beneficial owner of shares or
securities with respect to which the person has the power to vote or direct
the voting arising solely from a revocable proxy given in response to a
proxy solicitation required to be made and made in accordance with the
applicable rules and regulations under the Securities Exchange Act of 1934
and is not then reportable under that act on a Schedule 13D or comparable
report, or, if the corporation is not subject to the rules and regulations
under the Securities Exchange Act of 1934, would have been required to be
made and would not have been reportable if the corporation had been subject
to the rules and regulations.

(b) "Beneficial ownership" includes, but is not limited to, the right to
acquire shares or securities through the exercise of options, warrants, or
rights, or the conversion of convertible securities, or otherwise. The shares or
securities subject to the options, warrants, rights, or conversion privileges
held by a person shall be deemed to be outstanding for the purpose of computing
the percentage of outstanding shares or securities of the class or series owned
by the person, but shall not be deemed to be outstanding for the purpose of
computing the percentage of the class or series owned by any other person. A
person shall be deemed the beneficial owner of shares and securities
beneficially owned by any relative or spouse of the person or any relative of
the spouse, residing in the home of the person, any trust or estate in which the
person owns ten percent or more of the total beneficial interest or serves as
trustee or executor or in a similar fiduciary capacity, any corporation or
entity in which the person owns ten percent or more of the equity, and any
affiliate of the person.

(c) When two or more persons act or agree to act as a partnership, limited
partnership, syndicate, or other group for the purposes of acquiring, owning, or
voting shares or other securities of a corporation, all members of the
partnership, syndicate, or other group are deemed to constitute a "person" and
to have acquired beneficial ownership, as of the date they first so act or agree
to act together, of all shares or securities of the corporation beneficially
owned by the person.

SUBD. 42. INTERESTED SHARES. "Interested shares" means the shares of an
issuing public corporation beneficially owned by any of the following persons:
(1) the acquiring person; (2) any officer of the issuing public corporation; or
(3) any employee of the issuing public corporation who is also a director of the
issuing public corporation.

SUBD. 43. AFFILIATE. "Affiliate" means a person that directly or
indirectly controls, is controlled by, or is under common control with, a
specified person.

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APPENDIX B

Lyle Berman
c/o Lakes Entertainment, Inc.
130 Cheshire Lane
Minnetonka, Minnesota 55305

January 3, 2003

Board of Directors
Lakes Entertainment, Inc.
130 Cheshire Lane
Minnetonka, Minnesota 55305

Re: Information Statement under Control Share Acquisition Act, Minn. Stat.
Section 302A.671, Subd. 2.

Ladies and Gentlemen:

On December 8, 2000, Mr. Lyle Berman directly purchased 270,300 shares of
common stock, $.01 par value per share (the "Common Stock"), of Lakes
Entertainment, Inc. (the "Company"), thereby increasing his aggregate beneficial
ownership percentage in the Company from 18.22% to 20.59% (the "Control Share
Acquisition"). Mr. Berman has subsequently increased his beneficial ownership to
22.35% in a separate transaction. Mr. Berman is providing the information
contained herein to the Company in connection with the Company's annual meeting
of shareholders and the consideration by the shareholders of the Company of a
resolution to approve voting rights with respect to certain shares of common
stock held by Mr. Berman.

Pursuant to the Minnesota Statutes Section 302A.671 and related definitions
(the "Control Share Acquisition Act"), the following information relating to the
direct and indirect ownership of Common Stock by Mr. Lyle Berman is furnished to
the Company as an "information statement" under Section 302A.671, Subd. 2.

A. IDENTITY AND BACKGROUND.

Mr. Berman, through his direct and indirect ownership of the Company's
Common Stock, is an "acquiring person" as defined by the Control Share
Acquisition Act. Mr. Berman is the Chairman of the Board of Directors and the
Chief Executive Officer of the Company. Mr. Berman has direct ownership over
2,151,433 shares of the Company's Common Stock (including 750,000 shares
issuable upon exercise of options). Mr. Berman also has indirect ownership over
393,528 shares of Common Stock. Of such indirectly-owned shares, (i) 20,625
shares are held by Mr. Berman's spouse; (ii) 11,403 shares are held by Berman
Consulting Corp., a Minnesota corporation wholly-owned by Mr. Berman; (iii)
161,500 shares are held by Berman Consulting Corp.'s profit sharing plan; and
(iv) 200,000 may be acquired by Berman Consulting Corp. pursuant to a
convertible promissory note issued to Berman Consulting Corp. by Stanley M.
Taube (as discussed below). This beneficial ownership represents 21.96% of the
Lakes common stock as of November 8, 2002.

During the last five years, Mr. Berman has not been (i) convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors), or
(ii) party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.

B-1

The Company was incorporated in the State of Minnesota on June 18, 1998,
and is primarily engaged in the business of developing, constructing and
managing casinos and related hotel and entertainment facilities in emerging and
established gaming jurisdictions. Berman Consulting Corp. was incorporated in
the State of Minnesota on August 31, 1989.

B. REFERENCE TO STATUTORY SECTION.

This information statement is made pursuant to the requirements of the
Minnesota Control Share Acquisition Act contained in Section 302A.671 of the
Minnesota Business Corporation Act.

C. NUMBER AND CLASS OR SERIES OF SHARES OF LAKES ENTERTAINMENT, INC.
BENEFICIALLY OWNED, DIRECTLY OR INDIRECTLY, BEFORE THE CONTROL SHARE
ACQUISITION.

Prior to the consummation of the Control Share Acquisition, Mr. Berman
beneficially owned, directly or indirectly, 2,074,661 shares of the Company's
Common Stock. Based on 10,637,953 shares of Common Stock reported as outstanding
on November 8, 2000 in the Company's Form 10-Q for the quarter ended October 1,
2000, such direct and indirect beneficial ownership represented 18.22% of the
total issued and outstanding shares of the Company's Common Stock.

D. NUMBER AND CLASS OR SERIES OF SHARES OF THE COMPANY ACQUIRED PURSUANT TO THE
CONTROL SHARE ACQUISITION AND SPECIFICATION OF THE RANGE OF VOTING POWER IN
THE ELECTION OF DIRECTORS THAT, EXCEPT FOR SECTION 302A.671, RESULTS FROM THE
CONSUMMATION OF THE CONTROL SHARE ACQUISITION.

Immediately following the Control Share Acquisition, Mr. Berman
beneficially owned, directly or indirectly, 2,344,961 shares of the Company's
Common Stock. Based on 10,637,953 shares of Common Stock reported as outstanding
on November 8, 2000 in the Company's Form 10-Q for the quarter ended October 1,
2000, such direct and indirect ownership represented 20.59% of Lakes' Common
Stock. As a result of the Control Share Acquisition, Mr. Berman has voting power
in the election of directors that, except for the application of the Minnesota
Control Share Act, would be in the 20% to 33 1/3% range, within the meaning of
Section 302A.671, subd. 2(d) of the Minnesota Business Corporation Act.

E. TERMS OF THE CONTROL SHARE ACQUISITION.

On December 8, 2000, Mr. Berman directly purchased 270,300 shares of Common
Stock, which acquisition constituted a "control share acquisition" because
pursuant to such acquisition, Mr. Berman increased his aggregate beneficial
ownership percentage in the Company from 18.22% to 20.59%. Mr. Berman used
personal funds to obtain the shares of Common Stock in the Control Share
Acquisition.

Following the Control Share Acquisition, on or about January 4, 2001,
Berman Consulting Corp. loaned $1,600,000 to Stanley M. Taube pursuant to a
convertible promissory note. As part of the loan transaction, Mr. Taube pledged
200,000 shares of the Common Stock as security for his payment obligations under
the convertible promissory note. Pursuant to the terms of the convertible
promissory note, Berman Consulting Corp. has the right, at its option, at any
time on or after November 1, 2002, to take legal title to the pledged shares in
full satisfaction of Mr. Taube's payment obligations under the convertible
promissory note. As a result, Mr. Berman acquired indirect beneficial ownership
of such shares on or about January 4, 2001, thereby increasing his aggregate
beneficial ownership percentage in the Company 20.59% to 21.96%. This ownership
percentage is based on the outstanding shares as of November 8, 2002, as
disclosed in the Company's Quarterly Report on Form 10-Q for the quarter ended
September 29, 2002 and filed on November 13, 2002.

The shares of the Company's Common Stock beneficially owned by Mr. Berman
are held solely for investment purposes. Although Mr. Berman has not formulated
any definitive plan, he may from time to time acquire, or dispose of, Common
Stock and/or other securities of the Company if and when he deems it
appropriate. Mr. Berman may formulate other purposes, plans or proposals
relating to any of such securities of
B-2

the Company to the extent deemed advisable in light of market conditions,
investment policies and other factors. Except as indicated in this information
statement, Mr. Berman has no current plans or proposals to (1) liquidate or
dissolve the Company; (2) sell all or a substantial part of its assets or merge
it or exchange its shares with any other person; (3) change the location of its
principal place of business or its principal executive office or of a material
portion of its business activities; (4) change materially its management or
policies of employment; (5) change materially its charitable or community
contributions or its policies, programs, or practices relating thereto; (6)
change materially its relationship with suppliers or customers or the
communities in which it operates; or (7) make any other material change in its
business, corporate structure, management or personnel.

If any material change occurs in the facts set forth in this information
statement, Mr. Berman shall promptly deliver to the Company at its principal
executive office and amendment to this information statement containing
information relating to the material change.

Very truly yours,

Lyle Berman

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APPENDIX C

LAKES ENTERTAINMENT, INC.
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

CHARTER

I. PURPOSE.

The primary function of the Audit Committee (the "Committee") is to assist
the Board of Directors (the "Board") in fulfilling its oversight
responsibilities by reviewing: the financial reports and other financial
information provided by the Corporation to any governmental body or the public;
the Corporation's systems of internal controls regarding finance, accounting,
legal compliance and ethics that management and the Board have established; and
the Corporation's auditing, accounting and financial reporting processes
generally. Consistent with this function, the Committee should encourage
continuous improvement of, and should foster adherence to, the corporation's
policies, procedures and practices at all levels. The Committee's primary duties
and responsibilities are to:

- Serve as an independent and objective party to monitor the Corporation's
financial reporting process and internal control system.

- Review and appraise the audit performed by the Corporation's independent
accountants, who report directly to the Committee.

- Provide an open avenue of communication among the independent
accountants, financial and senior management and the Board.

The Committee will primarily fulfill these responsibilities by carrying out
the activities enumerated in Section IV of this Charter.

II. COMPOSITION.

The Committee shall be comprised of three or more directors as determined
by the Board, each of whom shall be independent directors (as defined by all
applicable rules and regulations of the Securities and Exchange Commission (the
"Commission"), Nasdaq and any other appropriate body), and free from any
relationship that, in the opinion of the Board, would interfere with the
exercise of his or her independent judgement as a member of the Committee. All
members of the Committee shall have a working familiarity with basic finance and
accounting practices, including being able to read and understand financial
statements, and at least one member of the Committee shall have accounting or
related financial management expertise. The Committee shall endeavor to have, as
one of its members, an individual who qualifies as an "audit committee financial
expert" in compliance with the criteria established by the Commission and other
relevant regulations at the time the regulations require disclosure of the
existence of an audit committee financial expert. The existence of such audit
committee financial expert, including his or her name and whether or not he or
she is independent, or the lack of an audit committee financial expert, shall be
disclosed in the Corporation's periodic filings as required by the Commission.

Committee members may enhance their familiarity with finance and accounting
by participating in educational programs conducted by the Corporation or an
outside consultant.

The members of the Committee shall be elected by the Board at the annual
organizational meeting of the Board and shall serve until the next annual
organizational meeting of the Board or until their successors have been duly
elected and qualified. Unless a Chair is elected by the full Board, the members
of the Committee may designate a Chair by majority vote of the full Committee
membership.

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III. MEETINGS.

The Committee shall meet at least two times annually, or more frequently as
circumstances dictate. As part of its job to foster open communication, the
Committee should meet at least annually with management and the independent
accountants in separate executive sessions to discuss any matters that the
Committee or each of these groups believe should be discussed privately.

IV. RESPONSIBILITIES AND DUTIES.

To fulfill its responsibilities and duties, the Committee is expected to:

1. Provide an open avenue of communication between the Corporation,
the independent accountants and the Board.

2. Review the Committee's charter at least annually and recommend to
the Board any necessary or desirable amendments as conditions may dictate.

3. Maintain sole authority and responsibility for hiring and firing
the independent accountants, and maintain direct responsibility for the
appointment, compensation, and oversight of the independent accountants'
work (including resolution of disagreements between management and the
auditor regarding financial reporting) for the purpose of preparing or
issuing an audit report or related work. The independent accountants shall
report directly to the Committee.

4. Assess the effectiveness of the Corporation's internal control
environment, and evaluate the need for an internal audit function; Discuss
with management any significant deficiencies in internal controls that have
been identifies by the Chief Executive Officer or Chief Financial Officer
which could adversely affect the Corporation's ability to record, process,
summarize or report financial data.

5. Confirm and assure the independence of the internal audit function
and the independent accountant, including considering whether the
independent accountant's performance of permissible non-audit services and
the compensations received for such services is compatible with the
independent accountant's independence.

6. Review and pre-approve the performance of all audit and non-audit
accounting services to be performed by the independent accountant (other
than with respect to de minimus exceptions permitted by the Sarbanes-Oxley
Act of 2002), to the extent such services are permitted under applicable
rules and regulation. By action of the Committee, the authority to grant
pre-approval may be delegated to one or more designated members of the
Committee who are independent members of the Board, with any such
pre-approval to be reported to the Committee at its next regularly
scheduled meeting. Approval of non-audit services shall be disclosed to
investor in the Corporation's periodic reports required by Section 13(a) of
the Securities Exchange Act of 1934, as amended.

7. Inquire of management and the independent accountants about
significant risks or exposures and assess the steps management has taken to
minimize such risk to the Corporation.

8. Consider, in consultation with the independent accountant, the
audit scope and plan of the independent accountant.

9. Consider and review with the independent accountant:

(a) The adequacy of the Corporation's internal controls, including
computerized information system controls and security.

(b) Any related significant findings and recommendations of the
independent accountant together with management's responses thereto.

C-2

10. Review the following items with management and the independent
accountant at the completion of the annual examination and recommend to the
Board whether the financial statements should be included in the Annual
Report on Form 10-K:

(a) The Corporation's annual financial statements and related
footnotes.

(b) The independent accountant's audit of the financial statements
and his or her report thereof.

(d) Any serious difficulties or disputes with management
encountered during the course of the audit.

(e) Other matters related to the conduct of the audit which are to
be communicated to the Committee under SAS numbers 61 and 90.

11. Review with management, and if appropriate, with the independent
accountants, the interim financial results that are filed with the
Commission or other regulators.

12. Review with management legal and regulatory matters that may have
a material impact on the financial statements, related company compliance
policies, and programs and reports received from regulators.

13. Review the Corporation's critical accounting policies and
estimates, all alternative treatments of financial information within GAAP
discussed between the independent accounts and management, and all other
material written communications between the independent accounts and
management.

14. Review the internal controls report prepared by management for
insertion into the annual report and the independent accountant's
attestation on the assertions of management that are contained in the
internal controls report.

15. Ensure there is a process for the confidential, anonymous
submission by the Corporation's employees of concerns regarding
questionable accounting and auditing matters.

16. Ensure procedures are established for the receipt, retention and
treatment of complaints received by the Corporation regarding accounting,
auditing, and internal accounting controls.

17. Review and approve (with the concurrence of a majority of the
disinterested members of the Board) any related party and affiliated party
transactions.

18. Report Committee actions to the Board with such recommendations as
the Committee may deem appropriate.

19. The Committee shall have the power to conduct or authorize
investigations into any matters within the Committee's scope of
responsibilities.

20. The Committee has the authority to engage and determine funding
for outside legal, accounting or other advisors and to obtain advice and
assistance from such outside advisors as deemed appropriate to perform its
duties and responsibilities.

21. The Committee will perform such other functions as assigned by
law, the Corporation's charter or bylaws or the Board.

C-3

[LAKES ENTERTAINMENT, INC. LOGO]

ANNUAL MEETING

Doubletree Park Place Hotel
1500 Park Place Boulevard
Minneapolis, Minnesota

JUNE 2, 2003
3:00 P.M.

LAKES ENTERTAINMENT, INC.
FOR ANNUAL MEETING OF SHAREHOLDERS -- JUNE 2, 2003 PROXY
- --------------------------------------------------------------------------------
The undersigned, a shareholder of Lakes Entertainment, Inc., hereby
appoints Lyle Berman and Timothy J. Cope, and each of them, as proxies, with
full power of substitution, to vote on behalf of the undersigned the number of
shares which the undersigned is then entitled to vote, at the Annual Meeting of
Shareholders of Lakes Entertainment, Inc. to be held at the Doubletree Park
Place Hotel, 1500 Park Place Boulevard, Minneapolis, Minnesota on June 2, 2003
at 3:00 p.m., and at any and all adjournments thereof, as specified below on the
matters referred to and in their discretion upon any other matters brought
before the meeting, with all the powers which the undersigned would possess if
personally present.

The undersigned hereby revokes all previous proxies relating to the shares
covered hereby and acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement relating to the Annual Meeting of Shareholders.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.

When properly executed, this proxy will be voted on the proposals set forth
herein as directed by the shareholder, but if no direction is made in the space
provided, this proxy will be voted FOR the election of all nominees for director
and FOR approval of the amendment to the articles of incorporation.

See reverse for voting instructions.

- Please detach here -

THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR ALL NOMINEES, AND
FOR RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS AND FOR THE GRANTING
OF FULL VOTING RIGHTS TO SHARES OF THE COMMON STOCK HELD BY MR. LYLE BERMAN.

1.Election of directors: 01 LYLE BERMAN 02 MORRIS GOLDFARB 03 RONALD KRAMER / / FOR all nominees / / WITHHOLD
04 NEIL I. SELL 05 TIMOTHY J. COPE (except as marked vote for all
to the contrary below) nominees listed

(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO --------------------------------
VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME IN THE BOX PROVIDED
TO THE RIGHT.) --------------------------------

2. To ratify the appointment of Deloitte & Touche LLP as independent auditors / / For / / Against / / Abstain
of the Company for 2003.

3. To grant full voting rights to shares of the Lakes Entertainment, Inc. / / For / / Against / / Abstain
common stock held by Mr. Lyle Berman, pursuant to the Minnesota Control
Share Acquisition Act.

4. Upon such other business as may properly come before the meeting or any
adjournments thereof.

THIS PROXY, WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN, WILL BE VOTED FOR ALL NOMINEES IN ITEM 1 FOR RATIFICATION OF
THE APPOINTMENT OF DELOITTE & TOUCHE, AND FOR THE GRANTING OF FULL VOTING RIGHTS
TO SHARES OF THE COMMON STOCK HELD BY MR. LYLE BERMAN.

Address Change? Mark Box Indicate changes below: / / Dated: __________, 2003

----------------------------------------

----------------------------------------
Signature(s) in Box

(Shareholder must sign exactly as the
name appears at left. When signed as a
corporate officer, executor,
administrator, trustee, guardian, etc.,
please give full title as such. Both
joint tenants must sign.)