XML 23 R9.htm IDEA: XBRL DOCUMENT v2.3.0.15
Convertible Note Receivable at Fair Value and Development Services and Management Agreement
9 Months Ended
Oct. 02, 2011
Convertible Note Receivable at Fair Value and Development Services and Management Agreement/Long-Term Assets Related to Indian Casino Projects - Notes and Interest Receivable and Notes Receivable at Fair Value [Abstract] 
Convertible Note Receivable at Fair Value and Development Services and Management Agreement

4. Convertible Note Receivable at Fair Value and Development Services and Management Agreement

On August 23, 2011, Lakes Florida Development, LLC, a wholly-owned subsidiary of Lakes, entered into an operating agreement with Dania Entertainment Center, LLC (“DEC”) for the management and redevelopment of the existing Dania Jai Alai fronton in Dania Beach, Florida (“the Casino”). DEC had previously entered into an asset purchase agreement to purchase the Dania Jai Alai fronton from Boyd Gaming Corporation (“Boyd Acquisition”). Lakes made an initial $4.0 million investment in the joint venture via a convertible promissory note which would automatically convert to equity on the closing of the Boyd Acquisition. The principal balance of the note bears interest at a fixed rate of two percent per annum.

On September 22, 2011, a lawsuit was filed by a third party against the city of Dania Beach, Florida alleging that the city of Dania Beach did not follow the proper process for approving the development agreement between DEC and the city of Dania Beach. On October 26, 2011, the Florida legislature introduced legislation proposing to permit full casino resorts in southern Florida. Due to these factors, and in addition to a deterioration of the credit market since entering into the operating agreement, DEC’s ability to obtain financing to close the Boyd Acquisition by the intended date of November 28, 2011 has been hindered. As a result, under the terms of Lakes’ existing agreement with DEC as discussed above, the conversion of the note receivable to equity will likely not occur by November 28, 2011. Therefore, the convertible note receivable was written down to zero as of October 2, 2011 and a loss on convertible note receivable of $4.0 million is included in the accompanying consolidated statement of earnings (loss) for the three and nine months ended October 2, 2011.

Also on August 23, 2011, Lakes Florida Casino Management, LLC, a wholly-owned subsidiary of Lakes, entered into a Development Services and Management Agreement (“Florida Management Agreement”) with DEC, wherein Lakes agrees to perform certain development and management services for the redevelopment and management of the Casino. The Florida Management Agreement may be terminated only upon mutual agreement, upon a material default by Lakes (as that term is defined in the Florida Management Agreement), or if Lakes does not invest an additional $6.0 million and the Boyd Acquisition closes. As compensation for its services under the Florida Management Agreement, for each fiscal year of the Casino’s operation, Lakes would be entitled to compensation equal to a monthly fee in the amount of two percent (2%) of total revenues, plus a monthly incentive fee equal to five (5%) percent of EBITDA. If the Boyd Acquisition does not close, Lakes would not manage the Casino under this agreement.