<PAGE>






                                                                   EXHIBIT 10.10

                      GENERAL CREDIT AND SECURITY AGREEMENT


         THIS AGREEMENT, dated as of the 3rd day of June, 1998, between First
American Bank, National Association, a national banking association, having its
mailing address and principal place of business at 633 South Concord Street,
South St. Paul, MN 55075 (herein called "Lender"), and Canterbury Park Holding
Corporation, a Minnesota corporation, having offices at 1100 Canterbury Road,
Shakopee, Minnesota 55379, (herein called "Borrower").



1.       AGREEMENT. This Agreement states the terms and conditions under which
Borrower may obtain certain loans from Lender.

2.       CERTAIN DEFINITIONS. For purposes of this Agreement, the following
terms shall have the following meanings:

                  "ADVANCE(S)" shall have the meaning provided in Paragraph
         4A(a).

                  "AFFILIATE" shall include, with respect to any party, any
         Person which directly or indirectly controls, is controlled by, or is
         under common control with such party and, in addition, in the case of
         Borrower, each officer, director or shareholder of Borrower, and each
         joint venturer and partner of Borrower.

                  "ASSIGNMENT OF RENTS" shall mean the Assignment of Leases and
         Rents to be made by the Borrower in favor of the Lender covering the
         Mortgaged Property and securing the Term Loan, as originally executed
         and as it may be amended, modified, supplemented, restated or replaced
         from time to time.

                  "BORROWER" shall have the meaning provided in the preamble
         hereto.

                  "BUSINESS DAY" shall mean any day on which commercial banks in
         Minneapolis, Minnesota are open for the transaction of business of the
         kind contemplated by this Agreement.

                  "CASH MANAGEMENT AGREEMENT" shall have the meaning provided in
         Paragraph 4A. (b).

                  "CHANGE OF CONTROL" shall mean the occurrence after the date
         of this Agreement of any event where: (a) Curtis A. Sampson, Randall D.
         Sampson and Dale Schenian shall cease to respectively own 35%, 5% and
         15% of the aggregate voting power of all classes of the Borrower's
         stock entitled to vote generally in the election of the Borrower's
         directors; or (b) Curtis A. Sampson, Randall D. Sampson and Dale
         Schenian, acting 

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         individually or in concert, shall cease to control the election of a
         majority of the Borrower's board of directors or the direction of the
         Borrower's management policies.

                  "CHATTEL PAPER" shall have the meaning ascribed to such term
         in Article 9 of the Commercial Code.

                  "CLOSING DATE" shall mean the day specified by Borrower on
         which all of the conditions precedent specified in Paragraphs 21 and 23
         shall have been satisfied; and, if the Term Loan is then being
         obtained, all of the conditions precedent specified in Paragraph 22
         shall also have been satisfied.

                  "COLLATERAL" shall have the meaning provided in Paragraph 3.

                  "COMMERCIAL CODE" shall mean the Uniform Commercial Code as
         enacted in the State of Minnesota, as amended from time to time.

                  "CONTINGENT OBLIGATIONS" shall mean, with respect to any
         Person, all of such Person's liabilities and obligations which are
         contingent upon and will not mature unless and until the occurrence of
         some event or circumstance and which are not included within the
         definition of Liabilities of such Person.

                  "DEFAULT" shall mean any event which, with the giving of
         notice or passage of time, or both, would constitute an Event of
         Default.

                  "DEFAULT RATE" shall mean a fluctuating rate per annum equal
         at all times to the sum of the Reference Rate PLUS 2.00% per annum.

                  "EQUIPMENT" shall have the meaning provided in Paragraph 3(c).

                  "ERISA" shall mean the Employee Retirement Income Security Act
         of 1974, as the same may from time to time be amended, and the rules
         and regulations promulgated thereunder by any governmental agency or
         authority, as from time to time in effect.

                  "ERISA AFFILIATE shall mean, with respect to any Person, any
         trade or business (whether or not incorporated) which is a member of a
         group of which such Person is a member and which is under common
         control within the meaning of Section 414 of the Code, as amended from
         time to time, and the regulations promulgated and rulings issued
         thereunder.

                  "ERISA EVENT" shall mean: (a) a Reportable Event described in
         Section 4043 of ERISA and the regulations issued thereunder (other than
         a Reportable Event not subject to the provision for 30-day notice to
         the PBGC under such regulations); (b) the 


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         withdrawal of Borrower or any ERISA Affiliate from a Plan during a plan
         year in which it was a "substantial employer" as defined in Section
         4001(a)(2) of ERISA; (c) the filing of a notice of intent to terminate
         a Plan or the treatment of a Plan amendment as a termination under
         Section 4041 of ERISA; (d) the institution of proceedings to terminate
         a Plan by the PBGC under Section 4042 of ERISA; or (e) any other event
         or condition that might reasonably be expected to constitute grounds
         under Section 4042 of ERISA for the termination of, or the appointment
         of a trustee to administer, any Plan.

                  "EVENT OF DEFAULT" shall have the meaning provided in
         Paragraph 20.

                  "GAAP" shall mean generally accepted accounting principles
         consistently applied and maintained throughout the period indicated and
         consistent with the audited financial statements delivered to Lender
         pursuant to Paragraph 15(h). Whenever any accounting term is used
         herein which is not otherwise defined, it shall be interpreted in
         accordance with GAAP.

                  "GENERAL INTANGIBLES" shall have the meaning provided in
         Paragraph 3(d).

                  "INDEMNITY" shall mean the Environmental and ADA Indemnity
         Agreement to be made by the Borrower in favor of the Lender, as
         originally executed and as amended, modified, restated or replaced from
         time to time.

                  "INDEPENDENT PUBLIC ACCOUNTANTS" shall mean Deloitte & Touche
         or any other firm of independent public accountants which is acceptable
         to Lender.

                  "INVENTORY" shall have the meaning provided in Paragraph 3(b).

                  "LETTERS OF CREDIT" shall have the meaning provided in Section
         2C(a).

                  "LETTER OF CREDIT APPLICATION(S)" shall have the meaning
         provided in Section 2C(b).

                  "LETTER OF CREDIT COMMISSION" shall have the meaning provided
         in Section 2.6(e).

                  "LETTER OF CREDIT COMMITMENT" shall mean, at any date, the
         maximum amount of Letter of Credit Obligations which may from time to
         time be outstanding hereunder and under the Letter of Credit
         Applications, being initially $150,000.00 and, as the context may
         require, the agreement of Lender to issue the Letters of Credit for the
         account of Borrower subject to the terms and conditions of this
         Agreement.

                  "LETTER OF CREDIT OBLIGATIONS" on any date shall mean the sum
         of: (a) the aggregate amount available to be drawn on the Letters of
         Credit on such date; PLUS (b) the 


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         aggregate amount owed by Borrower to Lender on such date as a result of
         draws on the Letters of Credit for which Borrower has not reimbursed
         Lender.

                  "LETTER OF CREDIT COMMITMENT TERMINATION DATE" shall mean the
         Revolving Credit Termination Date.

                  "LIABILITIES" of any Person shall mean those items which, in
         accordance with GAAP, appear as liabilities on a balance sheet.

                  "LOAN(S)" shall mean the Revolving Credit Loan and the Term
         Loan.

                  "LOAN DOCUMENT(S)" shall mean individually or collectively, as
         the case may be, this Agreement, the Notes, the Mortgage, the
         Assignment of Rents, the Indemnity Agreement, the Letter of Credit
         Applications and any and all other documents executed, delivered or
         referred to herein or therein, as originally executed and as amended,
         modified or supplemented from time to time.

                  "MATERIAL ADVERSE OCCURRENCE" shall mean any occurrence of
         whatsoever nature (including, without limitation, any adverse
         determination in any litigation, arbitration or governmental
         investigation or proceeding) which Lender shall determine, in its sole
         discretion, could adversely affect the present or prospective financial
         condition or operations of Borrower or impair the ability of Borrower
         to perform its obligations under this Agreement or any other Loan
         Document.

                  "MATURITY DATE" shall mean, with respect to: (a) the Revolving
         Credit Loan, the earliest of (i) March 31, 1999, or (ii) the date upon
         which the obligations are declared to be due and payable (or
         automatically become due and payable) upon the occurrence of an Event
         of Default as provided in Paragraph 20, or (iii) the date upon which
         this Agreement terminates as provided in Paragraph 24; or (b) the Term
         Loan, the earliest of (i) the day prior to the fifth annual anniversary
         date of the closing of the Term Loan or (ii) the date upon which the
         obligations are declared to be due and payable (or automatically become
         due and payable) upon the occurrence of an Event of Default as provided
         in Paragraph 20, or (iii) the date upon which this Agreement terminates
         as provided in Paragraph 24.

                  "MONTHLY PAYMENT DATE" shall mean the first day of each month.

                  "MORTGAGE" shall mean the Combination Mortgage, Security
         Agreement, Assignment of Leases and Rents and Fixture Financing
         Statement to be made by the Borrower in favor of the Bank covering the
         Mortgaged Property and securing the Term Loan, as originally executed
         and as amended, modified, supplemented, restated or replaced from time
         to time.


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                  "MORTGAGED PROPERTY" shall have the meaning provided in the
         Mortgage.

                  "MULTIEMPLOYER PLAN" shall mean a "multiemployer plan" as
         defined in Section 4001(a)(3) of ERISA to which Borrower is making or
         accruing an obligation to make contributions, or has within any of the
         preceding three plan years made or accrued an obligation to make
         contributions.

                  "NET INCOME" for any period shall mean net income for such
         period, determined in accordance with GAAP excluding, however, (i)
         extraordinary gains, and (ii) gains (whether or not extraordinary) from
         sales or other dispositions of assets other than the sale of Inventory
         in the ordinary course of Borrower's business.

                  "NOTE(S)" shall mean the Revolving Credit Note and the Term
         Note. "OBLIGATIONS" shall have the meaning provided in Paragraph 3.

                  "PBGC" shall mean the Pension Benefit Guaranty Corporation or
         any successor board, authority, agency, officer or official of the
         United States administering the principal functions assigned on the
         date hereof to the Pension Benefit Guaranty Corporation under ERISA.

                  "PARTICIPANT" shall mean each Person who purchases a
         participation interest from Lender in the obligations.

                  "PERSON" shall mean any natural person, corporation, firm,
         partnership, association, government, governmental agency or any other
         entity, whether acting in an individual, fiduciary or other capacity.

                  "PLAN" shall mean each employee benefit plan or other class of
         benefits covered by Title IV of ERISA, in either case whether now in
         existence or hereafter instituted, of Borrower or any of its
         Subsidiaries.

                  "QUARTERLY PAYMENT DATE" shall mean the last day of each
         March, June, September and December.

                  "RECEIVABLES" shall have the meaning provided in Paragraph
         3(a).

                  "REFERENCE RATE" shall mean the publicly announced base rate
         (or other publicly announced reference rate) charged by Bremer
         Financial Corporation; Borrower acknowledges that the Reference Rate
         may not be the lowest rate made available by Lender to its customers
         and that Lender may lend to its customers at rates that are at, above
         or below the Reference Rate.



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                  "REPORTABLE EVENT" shall have the meaning given to that term
         in Title IV of ERISA.

                  "REVOLVING CREDIT COMMITMENT" shall mean $2,250,000.00 and, as
         the context may require, the agreement of the Lender to make Advances
         to the Borrower up to the Revolving Credit Commitment subject to the
         terms and conditions of this Agreement.

                  "REVOLVING CREDIT LOAN" shall mean, at any date of
         determination, the aggregate outstanding principal amount of all
         Advances.

                  "REVOLVING CREDIT NOTE" shall mean promissory note in the form
         of EXHIBIT A attached hereto and made a part hereof made by Borrower
         payable to the order of Lender to evidence the Advances and each
         renewal, replacement or substitute note therefor.

                  "REVOLVING CREDIT TERMINATION DATE" shall mean the Maturity
         Date of the Revolving Credit Loan.

                  "SECURITY INTEREST" shall mean any lien, pledge, mortgage,
         encumbrance, charge or security interest of any kind whatsoever
         (including, without limitation, the lien or retained security title of
         a conditional vendor) whether arising under a security instrument or as
         a matter of law, judicial process or otherwise or the agreement by
         Borrower to grant any lien, security interest or pledge, mortgage or
         encumber any asset.

                  "SUBORDINATED DEBT" shall mean indebtedness of Borrower for
         borrowed money which is subordinated to the Obligations on terms
         satisfactory to Lender in its sole discretion.

                  "TANGIBLE NET WORTH" shall mean, at any date of determination,
         the difference between: (a) the total assets appearing on the
         Borrower's balance sheet at such date prepared in accordance with GAAP
         after deducting adequate reserves in each case where, in accordance
         with GAAP, a reserve is proper; and (b) the total liabilities appearing
         on such balance sheet (the "Total Liabilities"); EXCLUDING, HOWEVER,
         from the determination of total assets: (i) goodwill, organizational
         expenses, research and development expenses, trademarks, trade names,
         copyrights, patents, patent applications, licenses and rights in any
         thereof, covenants not to compete, training costs and other similar
         intangibles; (ii) all deferred charges or unamortized debt discount and
         expense other than deferred income taxes; (iii) securities which are
         not readily marketable; (iv) any write-up in the book value of any
         assets resulting from a re-evaluation thereof subsequent to the date of
         Borrower's annual financial statement described in Section 15(h); (v)
         amounts due from officers or Affiliates; and (vi) any asset acquired
         subsequent to the date of this Agreement which the Lender, in its
         reasonable business judgment, determines to be an intangible asset.


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                  "TERM LOAN" shall mean the loan described in Paragraph 4B.

                  "TERM LOAN COMMITMENT" shall mean $750,000.00 and, as the
         context may require, the agreement of the Lender to make the Term Loan
         subject to the terms and conditions of this Agreement.

                  "TERM LOAN COMMITMENT TERMINATION DATE" shall mean the earlier
         of: (a) March 31, 1999; or (b) the Maturity Date of the Term Loan.

                  "TERM NOTE" shall mean promissory note in the form of EXHIBIT
         B attached hereto and made a part hereof made by Borrower payable to
         the order of Lender to evidence the Term Loans and each renewal,
         replacement or substitute note therefor.

                  "TOTAL USAGE" shall mean, at any date of determination, the
         sum of the Revolving Credit Loan and the Letter of Credit Obligations.

         3. SECURITY. As security for all present and future sums loaned or
advanced by Lender to Borrower and for all other obligations now or hereafter
chargeable to Borrower's loan account hereunder, and all other obligations and
liabilities of any and every kind of Borrower to Lender, due or to become due,
direct or indirect, absolute or contingent, joint or several, howsoever created,
arising or evidenced, now existing or hereafter at any time created, arising or
incurred including, without limitation, the Loans and the Letter of Credit
Obligations (herein called "Obligations'), Borrower hereby grants to Lender a
security interest in and to the following property:

         (a) All Receivables of Borrower now owned or hereafter acquired or
         arising, together with all customer lists, original books and records,
         ledger and account cards, computer tapes, discs, printouts and records,
         whether now in existence or hereafter created. "Receivables" means all
         rights of Borrower to the payment of money, whether or not earned and
         howsoever evidenced or arising, including (without limitation) all
         present and future "Accounts", "Chattel Paper", "Instruments", and
         rights to payment which are "General Intangibles" (as those terms are
         used in the Commercial Code), all security therefor and all of
         Borrower's rights as an unpaid seller of goods (including rescission,
         replevin, reclamation and stopping in transit) and all of Borrower's
         rights to any goods represented by any of the foregoing including
         returned or repossessed goods;

         (b) All Inventory of Borrower, whether now owned or hereafter acquired
         and wherever located. "Inventory" includes all Goods (as defined in
         Article 9 of the Commercial Code) intended for sale or lease or to be
         furnished under contracts of service, all raw materials and work in
         process therefor, all finished goods thereof, all materials and
         supplies of every nature used or usable or consumed or consumable in
         connection with the manufacture, packing, shipping, advertising,
         selling, leasing or furnishing of 

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         such Goods, and all accessories thereto and all documents of title
         therefor evidencing the same;

         (c) All Equipment of Borrower, whether now owned or hereafter acquired
         and wherever located. "Equipment" includes all of Borrower's Goods
         other than Inventory, all replacements and substitutions therefor and
         all accessions thereto, and specifically includes, without limitation,
         all present and future machinery, equipment, vehicles, manufacturing
         equipment, shop equipment, office and record keeping equipment,
         furniture, fixtures, parts, tools and all other Goods (except
         Inventory) used or acquired for use by Borrower for any business or
         enterprise;

         (d) All General Intangibles (as defined in Article 9 of the Commercial
         Code) of Borrower, whether now owned or hereafter acquired, including
         (without limitation) all present and future purchase money security
         interests (more fully described in paragraph 16(j) below), domestic and
         foreign patents, patent applications, trademarks, trademark
         applications, copyrights, trade names, trade secrets, patent and
         trademark licenses (whether Borrower is licensor or licensee), shop
         drawings, engineering drawings, blueprints, specifications, parts
         lists, manuals, operating instructions, customer and supplier lists,
         licenses, permits, franchises, the right to use Borrower's corporate
         name and the goodwill of Borrower's business; and

         (e) All products and proceeds of any and all of the foregoing and all
         products and proceeds of any other Collateral (as hereinafter defined)
         including the proceeds of any insurance covering any of the Collateral.

All such Receivables, Inventory, Equipment, General Intangibles, products and
proceeds, together with all other assets and properties of Borrower in or on
which Lender is now or hereafter granted a security interest, mortgage, lien or
encumbrance pursuant to this Agreement or otherwise, are hereinafter sometimes
referred to as "Collateral".

         4.       TERMS OF LENDING; ETC. 
1. 
         4A.      ADVANCES.

                  (a) At the request of Borrower, Lender agrees, subject to the
         terms and conditions of this Agreement, to make loans (each such loan
         being herein sometimes called individually an "Advance" and
         collectively the "Advances") to Borrower from time to time on any
         Business Day during the period from the date hereof and ending on the
         Revolving Credit Termination Date; PROVIDED, HOWEVER, that Lender shall
         not be required to make any Advance if, after giving effect to such
         Advance, the Total Usage would exceed the Revolving Credit Commitment.
         The amount of each such Advance shall be charged to Borrower's loan
         account.


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                  (b) In order to obtain an Advance, Borrower shall give written
         or telephonic notice to Lender, by not later than 1:00 p.m.
         (Minneapolis time) on the date the requested Advance is to be made
         Lender, shall make such Advance by transferring the amount thereof in
         immediately available funds for credit to an account (other than a
         payroll account) of Borrower at Lender, as specified in such notice;
         PROVIDED, HOWEVER, that no request for an Advance shall be required if
         such Advance is to be made under that certain Execusweep-Loan Sweep
         Agreement dated as of June ___, 1998 (the "Cash Management Agreement")
         between Borrower and Lender and each such Advance shall deemed to have
         been requested by Borrower under this Agreement. At the request of
         Lender, Borrower shall confirm in writing any telephonic notice.

                  (c) The obligation of Lender to make Advances shall terminate
         on the Revolving Credit Termination Date.

                  (d) Borrower agrees that, on the Maturity Date of the
         Revolving Credit Loan, it will repay the entire outstanding principal
         balance of the Revolving Credit Loan together with accrued interest
         thereon and all accrued fees without presentment or demand for payment,
         notice of dishonor, protest or notice of protest, all of which are
         hereby waived.

                  (e) The Advances shall be evidenced by the Revolving Credit
         Note made by Borrower payable to the order of Lender; SUBJECT, HOWEVER,
         to the provisions of such Note to the effect that the principal amount
         payable thereunder at any time shall not exceed the then unpaid
         principal amount of the Revolving Credit Loan made by Lender. Borrower
         hereby irrevocably authorizes Lender to make or cause to be made, at or
         about the time of each Advance made by Lender, an appropriate notation
         on the records of Lender, reflecting the principal amount of such
         Advance, and Lender shall make or cause to be made, on or about the
         time of receipt of payment of any principal of the Revolving Credit
         Note, an appropriate notation on its records reflecting such payment.
         The aggregate amount of all Advances set forth on the records of Lender
         shall be rebuttable presumptive evidence of the principal amount owing
         and unpaid on the Revolving Credit Note.

         4B.      TERM LOAN

                  (a) At the request of Borrower made prior to the Term Loan
         Commitment Termination Date, Lender agrees, subject to the terms and
         conditions of this Agreement, to make a term loan (the "Term Loan") to
         Borrower in an amount up to the Term Loan Commitment.

                  (b) In order to obtain the Term Loan, Borrower shall give
         written or telephonic notice to Lender, by not later than close of
         Lender's business at least ten (10) 


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         Business Days prior to the date on which Borrower desires that the Term
         Loan be made. Such notice shall be accompanied by the documents
         described in Paragraph 22(j) and EXHIBIT D attached hereto. On the
         requested date but subject to the terms and conditions of this
         Agreement, Lender shall make the Term Loan by transferring the amount
         thereof in immediately available funds to the Title Company closing
         Borrower's acquisition of the Mortgaged Property.

                  (c) The obligation of Lender to make the Term Loan shall
         terminate on the Term Loan Commitment Termination Date.

                  (d) The Term Loan shall be evidenced by the Term Note made by
         Borrower payable to the order of Lender; SUBJECT, HOWEVER, to the
         provisions of such Note to the effect that the principal amount payable
         thereunder at any time shall not exceed the then unpaid principal
         amount of the Term Loan made by Lender. Borrower hereby irrevocably
         authorizes Lender to make or cause to be made, at or about the time on
         which the Term Loan is made by Lender, an appropriate notation on the
         records of Lender, reflecting the principal amount of the Term Loan,
         and Lender shall make or cause to be made, on or about the time of
         receipt of payment of any principal of the Term Note, an appropriate
         notation on its records reflecting such payment. The outstanding
         principal amount of the Term Loan set forth on the records of Lender
         shall be rebuttable presumptive evidence of the principal amount owing
         and unpaid on the Term Note.

         4C.      LETTERS OF CREDIT

                  (a) Subject to the terms and conditions of this Agreement,
         Lender agrees to issue stand-by letters of credit (the "Letters of
         Credit") from time to time on terms acceptable to Lender on any
         Business Day during the period from the date hereof and ending on the
         Letter of Credit Commitment Termination Date; PROVIDED, HOWEVER, that
         Lender shall not be required to issue any Letter of Credit if, after
         giving effect to such issuance, either: (i) the Total Usage would
         exceed the Revolving Credit Commitment; or (ii) the Letter of Credit
         Obligations would exceed the Letter of Credit Commitment.

                  (b) In order to obtain a Letter of Credit, Borrower shall
         appropriately complete, duly execute and deliver to Lender an
         application for a Letter of Credit in form acceptable to Lender (the
         "Letter of Credit Application(s)") by no later than the close of
         Lender's business at least five (5) Business Days prior to the date on
         which Borrower desires that the Letter of Credit be issued.
         Notwithstanding anything to the contrary set forth in this Agreement or
         any other Loan Document, no Letter of Credit shall have an expiry date
         later than the Letter of Credit Commitment Termination Date.

                  (c) The obligation of Lender to issue Letters of Credit shall
         terminate on the Letter of Credit Commitment Termination Date.



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                  (d) Borrower agrees to pay to Lender on demand: (i) the amount
         of each draft or other request for payment drawn under any Letter of
         Credit (whether drawn before or on its stated expiry date) issued by
         Lender; and (ii) interest on all amounts referred to in clause (i)
         above from the date of such draw until payment in full at a fluctuating
         rate per annum at all times equal to the Reference Rate PLUS 2.00% per
         annum.

                  (e) Borrower agrees to pay to Lender a commission (the "Letter
         of Credit Commission") of 1.5% per annum upon the undrawn face amount
         of each Letter of Credit issued by Lender outstanding from time to
         time. The Letter of Credit Commission for each Letter of Credit shall
         be payable in advance: (1) on the date of issuance of such Letter of
         Credit for the initial period from the date of issuance through, to and
         including the day preceding the immediately following Quarterly Payment
         Date; and (2) on each Quarterly Payment Date following such issuance
         date for the following quarter (or, any lesser period if the relevant
         Letter of Credit is scheduled to expire prior to the end of such
         quarter). Borrower further agrees to pay to Lender all reasonable and
         customary charges, fees and expenses which Lender may generally assess
         to its customers in connection with, and any and all expenses which
         Lender may pay or incur in connection with, the issuance, extension,
         amendment or payment of any Letter of Credit.

                  (f) The rights of Lender against Borrower hereunder shall be
         in addition to all rights under (and shall control over any conflict
         under) any Letter of Credit Application.

         5. INTEREST. Borrower agrees to pay interest on the outstanding
principal amount of each Loan at the rates and at the times specified in the
Note evidencing such Loan. Each change in the interest rates due to a change in
the Reference Rate shall take effect simultaneously with the corresponding
change in the Reference Rate. Interest may be charged to Borrower's loan account
as an Advance at Lender's option, whether or not Borrower then has a right to
obtain an Advance pursuant to the terms of this Agreement.

         6. SET-OFF; ETC. Upon the occurrence of a Default or an Event of
Default, Lender is hereby authorized at any time and from time to time, without
notice to Borrower (any such notice being expressly waived by Borrower), to set
off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by Lender or any Participant to or for the credit or the account of Borrower,
any amounts held in any account maintained at Lender or any Participant, against
any and all amounts which may be owed to Lender or any Participant by Borrower
whether in connection with this Agreement or otherwise and irrespective of
whether Borrower shall have made any requests under this Agreement.


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         7. COLLECTION.

                  (a) At any time after the occurrence of an Event of Default,
         Lender may notify account debtors on the Receivables (the "Customers")
         at any time that Receivables have been assigned to Lender and collect
         them directly in Lender's own name but unless and until Lender does so
         or gives Borrower other instructions, Borrower shall make collection
         for Lender at Borrower's sole cost and expense. Following the
         occurrence of an Event of Default, Borrower shall deliver to Lender all
         full and partial payments arising from the sale or other disposition of
         Collateral received by Borrower their original form, except for
         endorsement where necessary. Until such payments are so delivered to
         Lender, such payments shall be held in trust by Borrower for and as
         Lender's property and shall not be commingled with any funds of
         Borrower. The net amount received by Lender as proceeds arising from
         the sale or other disposition of Collateral will be credited by Lender
         to Borrower's loan account (subject to final collection thereof) after
         allowing the number of days required by the applicable bank for
         collection of checks and other instruments.

         8. WARRANTY AS TO COLLATERAL. Borrower warrants that:

                  (a) All Receivables listed in Borrower's financial statements
         or schedules will, when Borrower delivers such financial statements or
         the schedules to Lender, be bona fide existing obligations created by
         the sale and actual delivery of goods or the rendition of services to
         Customers in the ordinary course of business, which Borrower then owns
         free of any Security Interest except for the Security Interest in favor
         of Lender created by this Agreement and which are then unconditionally
         owing to Borrower without defense, offset or counterclaim; and

                  (b) all Inventory and Equipment is and shall be owned by
         Borrower, free of any Security Interest except for the Security
         Interest of Lender created by this Agreement or Security Interests
         permitted by Paragraph 18(c).

Lender's rights to and security interest in the Collateral will not be impaired
by the ineligibility of any such Collateral for Advances and will continue to be
effective until all Obligations chargeable to Borrower's loan account have been
fully satisfied.

         9. POWER OF ATTORNEY. Borrower appoints Lender, or any other person
whom Lender may from time to time designate, as Borrower's attorney with power:
(a) to endorse Borrower's name on any checks, notes, acceptances, drafts or
other forms of payment or security that may come into Lender's possession; (b)
to sign Borrower's name on any invoice or bill of lading relating to any
Receivables, on drafts against Customers, on schedules and confirmatory
assignments of Receivables, on notices of assignment, financing statements and
amendments under the Commercial Code and other public records, on verifications
of accounts and on notices 


                                       51
<PAGE>


to Customers; (c) to notify the post office authorities to change the address
for delivery of Borrower's mail to an address designated by Lender; (d) to
receive, open and dispose of all mail addressed to Borrower; (e) to send
requests for verification of accounts to Customers; and (f) to do all things
necessary to carry out this Agreement; PROVIDED, HOWEVER, that the powers
specified in clauses (c) and (d) above may be exercised only after the
occurrence of an Event of Default. Borrower ratifies and approves all acts of
the attorney taken within the scope of this power of attorney. Neither Lender
nor the attorney will be liable for any acts of commission or omission nor for
any error in judgment or mistake of fact or law. This power, being coupled with
an interest, is irrevocable so long as any Receivable in which Lender has a
security interest or any Obligation remains unpaid. Borrower waives presentment
and protest of all instruments and notice thereof, notice of default and
dishonor and all other notices to which Borrower may otherwise be entitled.

         10. LOCATION OF COLLATERAL. Borrower warrants that its chief executive
office is at the address stated in the opening paragraph of this Agreement and
that its books and records concerning Receivables are located there. Borrower's
Inventory, Equipment and other goods are at the location or locations as
designated on SCHEDULE A annexed hereto. Borrower shall immediately notify
Lender if any additional locations for Collateral are subsequently established.
Borrower shall not change the location of its chief executive office, the place
where it keeps its books and records, or the location of any Collateral (except
for sales of Inventory or obsolete Equipment in the ordinary course of business)
until Borrower has obtained the written consent of Lender and all necessary
filings have been made and other actions taken to continue the perfection of
Lender's Security Interest in such new location. Lender's Security Interest
attaches to all the Collateral wherever located, and the failure of Borrower to
inform Lender of the location of any item or items of Collateral shall not
impair Lender's Security Interest therein.

         11. OWNERSHIP AND PROTECTION OF COLLATERAL. Borrower warrants,
represents and covenants to Lender that the Collateral is now and, so long as
Borrower is obligated to Lender, will be, owned by Borrower free and clear of
all Security Interests except for the Security Interest in favor of Lender
created by this Agreement and except the Security Interests, if any, permitted
by Paragraph 18(c). Borrower will not sell, lease or otherwise dispose of the
Collateral, or attempt so to do (except for sales in the ordinary course of
business of Inventory or obsolete Equipment) without the prior written consent
of Lender and unless the proceeds of any such sale (including, without
limitation, sales in the ordinary course of business of Inventory or obsolete
Equipment) are deposited in Borrower's "Main Operating Account" described in the
Cash Management Agreement. After the occurrence of a Default or an Event of
Default, Lender will at all times have the right to take physical possession of
any tangible Collateral and to maintain such possession on Borrower's premises
or to remove the same or any part thereof to such other places as Lender may
wish. If Lender exercises Lender's right to take possession of such Collateral,
Borrower shall on Lender's demand, assemble the same and make it available to
Lender at a place reasonably convenient to Lender. Borrower shall at all times
keep the Equipment constituting Collateral in good condition and repair. All
expenses of protecting,


                                       52
<PAGE>


storing, warehousing, insuring, handling and shipping of the Collateral, all
costs of keeping the Collateral free of any Security Interests prohibited by
this Agreement and of removing the same if they should arise, and any and all
excise, property, sales and use taxes imposed by any state, federal or local
authority on any of the Collateral or in respect of the sale thereof, shall be
borne and paid by Borrower and if Borrower fails to promptly pay any thereof
when due, Lender may, at its option, but shall not be required to, pay the same
and charge Borrower's loan account therefor. Borrower agrees to renew all
insurance required by this Paragraph 11 or Paragraph 13 at least 30 days prior
to its expiration.

         12. PERFECTION OF SECURITY INTEREST. Borrower agrees to execute such
financing statements together with any and all other instruments or documents
and take such other action, including delivery, as may be required to create,
evidence, perfect and maintain Lender's Security Interest in the Collateral and
Borrower shall not in any manner do any act or omit to do any act which would in
any manner impair or invalidate Lender's Security Interest in the Collateral or
the perfection thereof.

         13. INSURANCE. Borrower shall maintain insurance coverage on any
Collateral including Receivables and other rights to payment with such
companies, against such hazards, and in such amounts as may from time to time be
acceptable to Lender and shall deliver such policies or copies thereof to Lender
with satisfactory lender's loss payable endorsements naming Lender. Each policy
of insurance shall contain a clause requiring the insurer to give not less than
30 days prior written notice to Lender in the event of any anticipated
cancellation of the policy for any reason and a clause that the interest of
Lender shall not be impaired or invalidated by any act or neglect of Borrower
nor by the occupation of the premises wherein such Collateral is located for
purposes more hazardous than are permitted by said policy. Borrower will
maintain, with financially sound and reputable insurers, insurance with respect
to its properties and business against such casualties and contingencies of such
types (which may include, without limitation, public and product liability,
larceny, embezzlement, or other criminal misappropriation insurance) and in such
amounts as may from time to time be required by Lender.

         14. BORROWER'S LOAN ACCOUNT. Lender may charge to Borrower's loan
         account at any time the amounts of all Obligations (and interest, if
         any, thereon) owing by Borrower to Lender, including (without
         limitation) loans, Advances, the Term Loan, the Letters of Credit
         Obligations, debts, liabilities, obligations acquired by purchase,
         assignment or participation and all other obligations, whenever
         arising, whether absolute or contingent and whether due or to become
         due; also the amount of all costs and expenses and all attorneys' fees
         and legal expenses incurred in 


                                       53
<PAGE>


         connection with efforts made to enforce payment of such obligations, or
         to obtain payment of any Receivables, or the foreclosure of any
         Collateral or in the prosecution or defense of any actions or
         proceedings relating in any way to this Agreement whether or not suit
         is commenced, including reasonable attorneys' fees and legal expenses
         incurred in connection with any appeal of a lower court's order or
         judgment; and also the amounts of all unpaid taxes and the like, owing
         by Borrower to any governmental authority or required to be deposited
         by Borrower, which Lender pays or deposits for Borrower's account. All
         sums at any time standing to Borrower's credit on Lender's books and
         all of Borrower's property at any time in Lender's possession or upon
         or in which Lender has a Security Interest, may be held by Lender as
         security for all obligations which are chargeable to Borrower's loan
         account. Subject to the foregoing, Lender, at Borrower's request, will
         remit to Borrower any net balance standing to Borrower's credit on
         Lender's books. Lender will account to Borrower monthly and each
         monthly accounting will be fully binding on Borrower, unless, within
         sixty (60) days thereafter, Borrower gives Lender specific written
         notice of exceptions. All debit balances in Borrower's loan account
         will bear interest as provided in Paragraph 5 of this Agreement.

         15. PARTICIPATIONS. If any Person shall acquire a participation in any
Loan or the Letters of Credit Obligations made to Borrower hereunder, Borrower
hereby grants to any such Person holding a participation, and such Person shall
have and is hereby given a continuing Security Interest in any money, securities
and other property of Borrower in the custody or possession of such Participant,
including the right of set-off as fully as if such Participant had lent directly
to Borrower the amount of such participation.

         16. GENERAL REPRESENTATIONS AND WARRANTIES. To induce Lender to make
Advances and the Term Loan hereunder, Borrower makes the following
representations and warranties, all of which shall survive the initial Advance:
1. 

                  (a) Borrower is a corporation duly organized, existing, and in
         good standing under the laws of the State of Minnesota, has power to
         own its property and to carry on its business as now conducted, and is
         duly qualified to do business in all states in which the nature of its
         business requires such qualification.

                  (b) The execution and delivery of this Agreement and the other
         Loan Documents and the performance by Borrower of its obligations
         hereunder and thereunder do not and will not conflict with any
         provision of law, or of the charter or bylaws of Borrower, or of any
         agreement binding upon Borrower.

                  (c) The execution and delivery of this Agreement and the other
         Loan Documents have been duly authorized by all necessary official
         action by the Board of Directors and shareholders of Borrower; and this
         Agreement and the other Loan Documents have in fact been duly executed
         and delivered by Borrower and constitute its lawful and binding
         obligations, legally enforceable against it in accordance with their
         respective terms.



                                       54
<PAGE>




                  (d) There is no action, suit or proceeding at law or equity,
         or before or by any federal, state, local or other governmental
         department, commission, board, bureau, agency or instrumentality,
         domestic or foreign, pending or, to the knowledge of Borrower,
         threatened against Borrower or the property of Borrower which, if
         determined adversely, would be a Material Adverse Occurrence or would
         affect the ability of Borrower to perform its obligations under the
         Loan Documents; and the Borrower is not in default with respect to any
         final judgment, writ, injunction, decree, rule or regulation of any
         court or federal, state, local or other governmental department,
         commission, board, bureau, agency or instrumentality, domestic or
         foreign, where the effect of such default would be a Material Adverse
         Occurrence.

                  (e) The authorization, execution and delivery of this
         Agreement, and the payment of the Loans and interest thereon, is not,
         and will not be, subject to the jurisdiction, approval or consent of
         any federal, state or local regulatory body or administrative agency.

                  (f) Except as set forth on SCHEDULE B attached hereto, all of
         the assets of Borrower are free and clear of Security Interests.

                  (g) Borrower has filed all federal, state and local tax
         returns which, to the knowledge of Borrower, are required to be filed,
         and Borrower has paid all taxes shown on such returns and all
         assessments which are due. Borrower has made all required withholding
         deposits. Federal income tax returns of Borrower have been examined and
         approved or adjusted by the applicable taxing authorities or closed by
         applicable statutes for any fiscal years prior to and including the
         fiscal year ended on December 31, 1991 . Borrower does not have
         knowledge of any objections to or claims for additional taxes by
         federal, state or local taxing authorities for subsequent years which
         would be a Material Adverse Occurrence.

                  (h) Borrower has furnished to Lender the financial statements
         described on SCHEDULE C attached hereto. These statements were prepared
         in accordance with GAAP and present fairly the financial condition of
         Borrower and its consolidated Subsidiaries. There has been no material
         adverse change in the condition of Borrower, financial or otherwise,
         since the date of the most recent of such financial statements.

                  (i) The value of the assets and properties of Borrower at a
         fair valuation and at their then present fair salable value is and,
         after giving effect to any pending Advance and the application of the
         amount advanced, will be materially greater than its total liabilities,
         including Contingent Obligations, and Borrower has (and has no reason
         to believe that it will not have) capital sufficient to pay its
         liabilities, including Contingent Obligations, as they become due.


                                       55
<PAGE>




                  (j) Borrower is in compliance with all requirements of law
         relating to pollution control and environmental regulations in the
         respective jurisdictions where Borrower is presently doing business or
         conducting operations.

                  (k) All amounts obtained pursuant to Advances will be used for
         Borrower's working capital purposes and to finance capital expenditures
         permitted to made pursuant hereto. The Term Loan will be used to
         partially finance Borrower's acquisition of the Mortgaged Property. No
         part of any Loan shall be used at any time by Borrower to purchase or
         carry margin stock (within the meaning of Regulation U promulgated by
         the Board of Governors of the Federal Reserve System) or to extend
         credit to others for the purpose of purchasing or carrying any margin
         stock. Borrower is not engaged principally, or as one of its important
         activities, in the business of extending credit for the purposes of
         purchasing or carrying any such margin stock. No part of the proceeds
         of any Loan will be used by Borrower for any purpose which violates, or
         which is inconsistent with, any regulations promulgated by the Board of
         Governors of the Federal Reserve System.

                  (l) Except for the trademarks, patents, copyrights and
         franchise rights listed on SCHEDULE D attached hereto, Borrower is not
         the owner of any patent, trademark, copyright or franchise rights.
         Borrower is not an "investment company", or an "affiliated person" of,
         or a "promoter" or "principal underwriter" for, an "investment
         company", as such terms are defined in the Investment Company Act of
         1940, as amended. The making of the Loans, the application of the
         proceeds and repayment thereof by Borrower and the performance of the
         transactions contemplated by this Agreement will not violate any
         provision of said Act, or any rule, regulation or order issued by the
         Securities and Exchange Commission thereunder.

                  (m) (i) Each Plan is in compliance in all material respects
         with all applicable provisions of ERISA and the Code; (ii) the
         aggregate present value of all accrued vested benefits under all Plans
         (calculated on the basis of the actuarial assumptions specified in the
         most recent actuarial valuation for such Plans) did not exceed as of
         the date of the most recent actuarial valuation for such Plans the fair
         market value of the assets of such Plans allocable to such benefits;
         (iii) Borrower is not aware of any information since the date of such
         valuations which would materially affect the information contained
         therein; (iv) no Plan which is subject to Part 3 of Subtitle B of Title
         I of ERISA or Section 412 of the Code has incurred an accumulated
         funding deficiency, as that term is defined in Section 302 of ERISA or
         Section 412 of the Code (whether or not waived); (v) no liability to
         the PBGC (other than required premiums which have become due and
         payable, all of which have been paid) has been incurred with respect to
         any Plan, and there has not been any Reportable Event which presents a
         material risk of termination of any Plan by the PBGC; and (vi) Borrower
         has not engaged in a transaction which would subject it to tax, penalty
         or liability for prohibited transactions imposed by ERISA or the 


                                       56
<PAGE>



         Code. Borrower does not contribute to any Multiemployer Plan.

                  (n) The number of shares and classes of the capital stock of
         Borrower and the ownership thereof are accurately set forth on SCHEDULE
         E attached hereto. Borrower has not: (i) issued any unregistered
         securities in violation of the registration requirements of Section 5
         of the Securities Act of 1933, as amended, or any other law; or (ii)
         violated any rule, regulation or requirement under the Securities Act
         of 1933, as amended, or the Securities Exchange Act of 1934, as
         amended, in either case where the effect of such violation would be a
         Material Adverse Occurrence. No proceeds of the Advances will be used
         to acquire any security in any transaction which is subject to Section
         13(d) or 14(d) of the Securities Exchange Act of 1934, as amended.

                  (o) Except as set forth on SCHEDULE F attached hereto,
         Borrower does not have any Contingent Obligations.

                  (p) Borrower has conducted a comprehensive review and
         assessment of its computer applications and has made inquiry of
         Borrower's material suppliers, vendors and customers with respect to
         the Year 2000 Problem and, based upon such review, Borrower reasonably
         believes that the Year 2000 Problem will not result in a material
         adverse change in Borrower's business, condition (financial or
         otherwise), operations, properties or prospects, or ability to repay
         the Obligations. Year 2000 Problem means the risk that computer
         applications used by any Person may be unable to recognize the perform
         properly date-sensitive functions involving certain dates prior to and
         any date after December 31, 1999.

                  (q) All factual information heretofore or herewith furnished
         by or on behalf of Borrower to Lender for purposes of or in connection
         with this Agreement or any transaction contemplated hereby is, and all
         other such factual information hereafter furnished by or on behalf of
         Borrower to Lender will be, true and accurate in every material respect
         on the date as of which such information is dated or certified and no
         such information contains any material misstatement of fact or omits to
         state a material fact or any fact necessary to make the statements
         contained therein not misleading.

                  (r) Each representation and warranty shall be deemed to be
         restated and reaffirmed to Lender on and as of the date of the making
         of each Advance and the Term Loan and of the issuing of each Letter of
         Credit, as the case may be, under this Agreement except that any
         reference to the financial statements referred to in Paragraph 16(h)
         shall be deemed to refer to the financial statements then most recently
         delivered to Lender pursuant to Paragraphs 17(a)(i) and (ii).

         17. AFFIRMATIVE COVENANTS. Borrower agrees that it will do all of the
         following:


                                       57
<PAGE>



         (a) Furnish to Lender in form satisfactory to Lender:

                  (i) Within 90 days after the end of each fiscal year of
         Borrower, a complete audited financial report prepared and certified
         without qualification or explanatory language by Independent Public
         Accountants on a Consolidated and consolidating basis for Borrower and
         any Consolidated Subsidiaries of Borrower; together with a copy of the
         management letter or memorandum, if any, delivered by such Independent
         Public Accountants to Borrower and Borrower's response thereto. If
         Borrower shall fail to supply the report within such time limit, Lender
         shall have the right (but not the duty) to employ certified public
         accountants acceptable to Lender to prepare such report at Borrower's
         expense.

                  (ii) Within 45 days after the end of each fiscal quarter, a
         balance sheet and operating figures as to that quarter and year-to date
         prepared in accordance with GAAP on a Consolidated and consolidating
         basis for Borrower and any Consolidated Subsidiaries of Borrower and
         certified as correct by the chief financial officer or treasurer of
         Borrower but subject to adjustments as to inventories or other items to
         which an officer of Borrower directs attention in writing.

                  (iii) With the financial statements described in Paragraph
         17(a)(i) and (ii), a compliance certificate in the form attached as
         EXHIBIT C certified as true and accurate by the chief financial officer
         or treasurer of Borrower.

                  (iv) By no later than 45 days after the beginning of any of
         the Borrower's fiscal years, projections for Borrower's then current
         fiscal year consisting of projected month-end balance sheets and
         month-end and year-to-date statements of earnings and cash flows, all
         in a form acceptable to Lender and certified by Borrower's chief
         financial officer or treasurer as having been prepared in good faith
         and representing the most probable course of Borrower's business during
         such fiscal year.

                  (v) Immediately upon and in any event within five (5) days
         after any officer of Borrower becomes aware of any Default or Event of
         Default, a notice describing the nature thereof and what action
         Borrower proposes to take with respect thereto

                  (vi) As soon as available and in event within ten (10) days
         after the filing thereof, a copy of each report filed with the
         Securities and Exchange Commission.


                                       58
<PAGE>




                  (vii) Immediately upon becoming aware of the occurrence, with
         respect to any Plan, of any Reportable Event or any "prohibited
         transaction" (as defined in Section 4975 of the Code), a notice
         specifying the nature thereof and what action the Borrower proposes to
         take with respect thereto, and, when received, copies of and notice
         from PBGC of intention to terminate or have a trustee appointed for any
         Plan.

                  (viii) From time to time, at Lender's request, any and all
         other material, reports, information, or figures required by Lender.

                  (b) Permit Lender and its representatives access to, and the
         right to make copies of, the books, records, and properties of Borrower
         at all reasonable times; and permit Lender and its representatives to
         discuss Borrower's financial matters with officers of Borrower and with
         its independent certified public accountant (and, by this provision,
         Borrower authorizes its independent certified public accountant to
         participate in such discussions).

                  (c) Pay when due all taxes, assessments, and other liabilities
         against it or its properties except those which are being contested in
         good faith and for which an adequate reserve has been established;
         Borrower shall make all withholding payments when due.

                  (d) Promptly notify Lender in writing of any substantial
         change in present management of Borrower.

                  (e) Pay when due all amounts necessary to fund in accordance
         with its terms any Plan;

                  (f) Comply in all material respects with all laws, acts,
         rules, regulations and orders of any legislative, administrative or
         judicial body or official applicable to Borrower's business operation
         or Collateral or any part thereof; PROVIDED, HOWEVER, that Borrower may
         contest any such law, act, rule, regulation or order in good faith by
         appropriate proceedings so long as (i) Borrower first notifies Lender
         of such contest, and (ii) such contest does not, in Lender's sole
         discretion, adversely affect Lender's right or priority in the
         Collateral or impair Borrower's ability to pay the Obligations when
         due.

                  (g) Promptly notify Lender in writing of: (x) any litigation
         which: (i) involves an amount in dispute in excess of $50,000.00 which
         is not covered by insurance or, if covered by insurance, the insurer
         has failed to accept defense of the litigation or has done so under a
         reservation of rights; (ii) relates to the matters which are the
         subject of this Agreement; or (iii) if determined adversely to Borrower
         would be a Material Adverse Occurrence; and (y) any adverse development
         in any litigation described in clause (x) which could cause a Material
         Adverse Occurrence.



                                       59
<PAGE>



                  (h) Maintain all of Borrower's primary operating accounts at
         Lender.

                  (i) At all times, maintain the ratio of: (i) Borrower's
         Liabilities; to (ii) Tangible Net Worth at not greater than 1.15 to
         1.0.

                  (j) Maintain Borrower's Tangible Net Worth at not less than:
         (i) $5,000,000.00 at all times other than at its fiscal year-end; or
         (ii) $5,500,000.00 at each of its fiscal year-ends.

         18. NEGATIVE COVENANTS. Borrower agrees that it will not do any of the
following, without first obtaining Lender's prior written consent:

                  (a) Purchase or redeem any shares of Borrower's capital stock;
         or declare or pay any dividends (other than dividends payable in
         capital stock); or make any distribution to stockholders of any assets
         of Borrower except that so long as no Default or Event of Default has
         occurred and is continuing at the time of any of the following
         described payments or would result therefrom, Borrower may pay
         dividends payable from Borrower's net income.

                  (b) Incur or permit to exist any interest-bearing
         indebtedness, secured or unsecured, including without limitation,
         indebtedness for money borrowed or capitalized leases, except (i)
         borrowings under this Agreement; (ii) borrowings, if any, which are
         existing on the date of this Agreement and which are disclosed on
         SCHEDULE G attached hereto; (iii) borrowing from the Minnesota
         Horesman's Benevolent & Protective Association, Inc. so long as the
         aggregate outstanding principal amount of such borrowings does not
         exceed $750,000.00 at any time and such borrowings are unsecured and do
         not have any priority of payment over the Obligations upon the
         occurrence of any Default or Event of Default described in Paragraph
         20(d), (e), (f), (g) or (h); (iv) capital leases permitted by Paragraph
         18(l) and then only so long as the aggregate balance sheet amount, as
         determined in accordance with GAAP, does not exceed $250,000.00 at any
         time; or (v) purchase money indebtedness incurred in connection with
         capital expenditures permitted by Paragraph 18(l)(ii) so long as the
         aggregate outstanding principal balance thereof does not exceed
         $250,000.00 at any time.

                  (c) Create or permit to exist any Security Interest on any of
         Borrower's assets now owned or hereafter acquired except: (i) those
         created in Lender's favor and held by Lender; (ii) liens of current
         taxes not delinquent or taxes which are being contested in good faith
         for which an adequate reserve has been established; (iii) Security
         Interests disclosed on SCHEDULE B attached hereto and in the case of
         Security Interests disclosed in Part II of SCHEDULE B, securing only
         debt outstanding on the date of this Agreement and disclosed on
         SCHEDULE G; PROVIDED, HOWEVER, that Security Interests disclosed in
         Part I of 


                                       60
<PAGE>


         SCHEDULE B are permitted only so long as: (A) Borrower's title to its
         property is not materially adversely affected; (B) its use of such
         property in the ordinary course of its business is not materially
         interfered with; (C) adequate reserves with respect thereto have been
         set aside on the Borrower's books in accordance with GAAP; and (D) in
         all events, the Borrower shall pay or cause to be paid all such secured
         amounts forthwith upon the commencement of foreclosure of any such
         Security Interest; or (iv) security interests created in connection
         with purchase money indebtedness incurred in connection with the
         capital expenditures permitted by Paragraph 18(l)(ii), but only to the
         extent that: (A) such security interest attaches only to the equipment
         then being acquired by the Borrower, did not and does not attach to the
         Borrower's current assets and does not secure any other indebtedness;
         (B) no Default or Event of Default has occurred and is continuing at
         the time of the proposed creation of such security interest or would
         result therefrom; and/or (C) no portion of the purchase price of the
         relevant equipment has been funded by the trade-in or available
         proceeds arising from the sale or other disposition of any of the
         Borrower's then, or previously, owned equipment.

                  (d) Effect any recapitalization; or be a party to any merger
         or consolidation; or sell, transfer, convey or lease all, or any
         substantial part, of its property where "substantial" means property
         having an aggregate book value (as measured by Borrower's then most
         recent audited financial statements delivered to Lender) of at least
         $100,00.00 for any single transaction (or related series of
         transactions) or aggregate book value of at least $500,000.00 for all
         transactions in any fiscal year ; or sell or assign (except to Lender),
         with or without recourse, any Receivables or General Intangibles.

                  (e) Enter into a new business or purchase or otherwise acquire
         any business enterprise or any substantial assets of any person or
         entity; or make any loans to any person or entity except for loans and
         advances to officers for expenses to be incurred in the ordinary course
         of business so long as the aggregate outstanding principal amount
         thereof does not exceed $10,000.00 at any time; or purchase any shares
         of stock of, or similar investment in, any entity.

                  (f) Become a guarantor or surety or pledge its credit or its
         assets on any undertaking of another.

                  (g) Make any substantial change in present management or
         policy or in its present business or enter into a new business.

                  (h) Enter into any agreement providing for the leasing by
         Borrower of property which has been or is to be sold or transferred by
         Borrower to the lessor thereof, or which is substantially similar in
         purpose to the property so sold or transferred.

                  (i)      Change its fiscal year.



                                       61
<PAGE>



                  (j) (i) Permit or suffer any Plan maintained for employees of
         Borrower or any commonly controlled entity to engage in any transaction
         which results in a liability of Borrower under Section 409 or 502(i) of
         ERISA or Section 4975 of the Code; (ii) permit or suffer any such Plan
         to incur any "accumulated funding deficiency" (within the meaning of
         Section 302 of ERISA and Section 412 of the Code), whether or not
         waived; (iii) terminate, or suffer to be terminated, any Plan covered
         by Title IV of ERISA maintained by Borrower or any commonly controlled
         entity or permit or suffer to exist a condition under which PBGC may
         terminate any such Plan; or (iv) permit to exist the occurrence of any
         Reportable Event (as defined in Title IV of ERISA) which represents
         termination by the PBGC of any Plan.

                  (k) Enter into any agreement containing any provision which
         would be violated or breached by Borrower under any Loan Document or by
         the performance by Borrower of its obligations under any Loan Document.

                  (l) Make capital expenditures (including without limitation by
         way of capitalized leases) except for replacement and repair of
         Borrower's existing Equipment or for acquisition of new Equipment
         consistent with Borrower's present business practices and then, only so
         long as the aggregate amount of all such capital expenditures made
         during any of Borrower's fiscal years does not exceed the sum of: (i)
         the amount of capital leases permitted by Paragraph 18(b); PLUS (ii) an
         aggregate amount of $250,000.00 for other capital expenditures.

         19.      AVAILABILITY OF COLLATERAL.  Intentionally Deleted.

         20. DEFAULT AND REMEDIES. It shall be an Event of Default under this
Agreement if:

                  (a) Borrower fails to make any payment required under this
         Agreement or any present or future supplements hereto or under any
         other agreement between Borrower and Lender when due, or if payable
         upon demand, upon demand and such failure shall remain unremedied for
         five (5) days; or

                  (b) Borrower fails to perform or observe any covenant,
         condition or agreement contained in this Agreement or any Loan Document
         on its part to be performed (other than those failures covered by other
         subparagraphs of this Paragraph) and such default shall continue for a
         period of 30 days after written notice thereof from Lender to Borrower;
         or

                  (c) Any warranty, representation or statement made or
         furnished to Lender by or on behalf of Borrower proves to have been
         false in a material respect when made; or


                                       62
<PAGE>



                  (d) A proceeding seeking an order for relief under the
         Bankruptcy Code is commenced by or against Borrower and, if commenced
         against Borrower, remains undismissed for 60 days; or

                  (e) Borrower becomes insolvent or generally fails to pay, or
         admit in writing its or his inability to pay, its or his debts as they
         become due; or

                  (f) Borrower applies for, consents to, or acquiesces in, the
         appointment of a trustee, receiver or other custodian for it or him or
         for any of its or his property, or makes a general assignment for the
         benefit of creditors; or, in the absence of such application, consent
         or acquiescence, a trustee, receiver or other custodian is appointed
         for Borrower or for a substantial part of Borrower's property; or

                  (g) Any other reorganization, debt arrangement, or other case
         or proceeding under any bankruptcy or insolvency law, or any
         dissolution or liquidation proceeding is commenced in respect of
         Borrower; or

                  (h) Borrower takes any action to authorize, or in furtherance
         of, any of the events described in the foregoing clauses (d) through
         (g); or

                  (i) Any judgments, writs, warrants of attachment, executions
         or similar process (not covered by insurance) is issued or levied
         against Borrower or any of its assets in excess of an aggregate amount
         of $100,00.00 for any or all of such judgments, writs, warrants,
         executions or similar process and is not released, vacated or fully
         bonded prior to any sale and in any event within 90 days after its
         issue or levy; or

                  (j) Borrower shall fail to comply with Paragraph 13, any of
         Paragraphs 17 (a), (i) or (j) or any of Paragraphs 18(a) through (l)
         (both inclusive); or

                  (k) The maturity of any Indebtedness of the Borrower (other
         than Indebtedness under this Agreement or the other Loan Documents) in
         the aggregate amount of more than $500,000.00 for Borrower shall be
         accelerated, or Borrower shall fail to pay any such Indebtedness when
         due or, in the case of such Indebtedness payable on demand; or

                  (l)      Any Change of Control shall occur.

Upon the occurrence of any Event of Default described in Paragraphs 20(d), (e),
(f), (g) or (h), all Obligations shall be and become immediately due and payable
without any declaration, notice, presentment, protest, demand or dishonor of any
kind (all of which are hereby waived) and Borrower's ability to obtain any
additional Advance, the Term Loan or any additional Letter of Credit under this
Agreement shall be immediately and automatically terminated. Upon the 



                                       63
<PAGE>


occurrence of any other Event of Default, Lender, without notice to Borrower,
may terminate Borrower's ability to obtain any additional Advance, the Term Loan
or any additional Letter of Credit under this Agreement and may declare all or
any portion of the Obligations to be due and payable, without notice,
presentment, protest or demand or dishonor of any kind (all of which are hereby
waived), whereupon the full unpaid amount of the obligations which shall be so
declared due and payable shall be and become immediately due and payable. Upon
the occurrence of an Event of Default, Lender shall have all the rights and
remedies of a secured party under the Commercial Code and may require Borrower
to assemble the Collateral and make it available to Lender at a place designated
by Lender, and Lender shall have the right to take immediate possession of the
Collateral and may enter any of the premises of Borrower or wherever the
Collateral is located with or without process of law and to keep and store the
same on said premises until sold (and if said premises be the property of
Borrower, Borrower agrees not to charge Lender or a purchaser from Lender for
storage thereof for a period of at least 90 days). Upon the occurrence of an
Event of Default, Lender, without further demand, at any time or times, may sell
and deliver any or all of the Collateral at public or private sale, for cash,
upon credit or otherwise, at such prices and upon such terms as Lender deems
advisable, at its sole discretion. Any requirement under the Commercial Code or
other applicable law of reasonable notice will be met if such notice is mailed
to Borrower at its address set forth in the opening paragraph of this Agreement
at least ten (10) days before the date of sale. Lender may be the purchaser at
any such sale, if it is public. The proceeds of sale will be applied first to
all expenses of retaking, holding, preparing for sale, selling and the like,
including attorneys' fees and legal expenses (whether or not suit is commenced)
including, without limitation, reasonable attorneys' fees and legal expenses
incurred in connection with any appeal of a lower court's order or judgment and
second to the payment (in whatever order Lender elects) of all other obligations
chargeable to Borrower's loan account hereunder. Subject to the provisions of
the Commercial Code, Lender will return any excess to Borrower and Borrower
shall remain liable to Lender for any deficiency. Borrower agrees to give Lender
immediate notice of the existence of any Default or Event of Default.

         Borrower agrees that if the Obligations become immediately due and
payable in full at a time when one or more Letters of Credit are outstanding,
the Borrower shall thereupon automatically be obligated to pay to Lender, in
addition to all other amounts owing under this Agreement, the aggregate face
amount of all Letters of Credit then outstanding. The foregoing obligation to
pay in advance for amounts which Lender may later have to pay pursuant to the
Letters of Credit is and shall at all times constitute a part of the
"Obligations". Amounts paid by Borrower pursuant to this paragraph shall be made
directly to an interest-bearing collateral account maintained at Lender for
application to Borrower's reimbursement obligations under Paragraph 4C(d) as
payments are made on the Letters of Credit, with the balance, if any, to be
applied to the other Obligations



                                       64
<PAGE>




         21. CONDITIONS PRECEDENT TO INITIAL ADVANCE. The obligation of Lender
to make the initial Advance is subject to the condition precedent that Lender
shall have received on or before the date of the initial Advance copies of all
of the following, unless waived by Lender:

                  (a) A favorable opinion of counsel to Borrower in form and
         substance satisfactory to Lender;

                  (b) UCC-1 Financing Statements in a form acceptable to Lender
         appropriately completed and duly executed by Borrower;

                  (c) Recent UCC searches from the filing offices in all states
         required by Lender which reflect that no other Person holds a Security
         Interest in any Collateral of Borrower, except for Security Interests
         permitted by Paragraph 18(c);

                  (d) The Revolving Credit Note, in form and substance
         satisfactory to Lender, appropriately completed and duly executed by
         the Borrower;

                  (e) A certified copy of all documents evidencing any necessary
         consent or governmental approvals (if any) with respect to the Loan
         Documents or any other documents provided for in this Agreement;

                  (f) A certificate by the Secretary or any Assistant Secretary
         of Borrower certifying as to: (i) attached resolutions of Borrower's
         Board of Directors authorizing or ratifying the execution, delivery and
         performance of the Loan Documents to which Borrower is a party and any
         other documents provided for by this Agreement, (ii) the names of the
         officers of Borrower authorized to sign the Loan Documents together
         with a sample of the true signature of such officers, and (iii)
         attached bylaws of Borrower;

                  (g) A copy of Borrower's articles of incorporation certified
         by the Secretary of State;

                  (h) Certificates of Good Standing for Borrower issued by its
         state of incorporation and by those states requested by Lender;

                  (i) Evidence of insurance for all insurance required by the
         Loan Documents;

                  (j) An officer certificate, in form and substance satisfactory
         to Lender, executed by the President of Borrower; and

                  (k) Such other approvals, opinions or documents as Lender may
         require.



                                       65
<PAGE>



         22. CONDITIONS PRECEDENT TO TERM LOAN. The obligation of Lender to make
the Term Loan is subject to the condition precedent that Lender shall have
received on or before the date on which the Term Loan is to made copies of all
of the following, unless waived by Lender:

                  (a) A favorable opinion of counsel to Borrower in form and
         substance satisfactory to Lender;

                  (b) The Term Note, in form and substance satisfactory to
         Lender, appropriately completed and duly executed by Borrower;

                  (c) The Mortgage, the Assignment of Rents and the Indemnity,
         in each case appropriately completed and duly executed by Borrower;

                  (d) UCC-1 Financing Statements in a form acceptable to Lender
         appropriately completed and duly executed by Borrower;

                  (c) Recent UCC searches from the filing offices in all states
         required by Lender which reflect that no other Person holds a Security
         Interest in any Collateral of Borrower, except for Security Interests
         permitted by Paragraph 18(c);

                  (d) A certified copy of all documents evidencing any necessary
         consent or governmental approvals (if any) with respect to the Loan
         Documents or any other documents provided for in this Agreement;

                  (e) A certificate by the Secretary or any Assistant Secretary
         of Borrower certifying as to: (i) attached resolutions of Borrower's
         Board of Directors authorizing or ratifying the execution, delivery and
         performance of the Loan Documents to which Borrower is a party and any
         other documents provided for by this Agreement, (ii) the names of the
         officers of Borrower authorized to sign the Loan Documents together
         with a sample of the true signature of such officers, and (iii)
         attached bylaws of Borrower;

                  (f) A copy of Borrower's articles of incorporation certified
         by the Secretary of State;

                  (g) Certificates of Good Standing for Borrower issued by its
         state of incorporation and by those states requested by Lender;

                  (h) Evidence of insurance for all insurance required by the
         Loan Documents;

                  (i) An officer certificate, in form and substance satisfactory
         to Lender, executed by the President of Borrower;



                                       66
<PAGE>



                  (j) The documents described on EXHIBIT D attached hereto by no
         later than ten (10) days prior to the closing date for the Term Loan;
         and

                  (k) Such other approvals, opinions or documents as Lender may
         require.

         23. CONDITIONS PRECEDENT TO ALL ADVANCES; ETC. The obligation of Lender
to make any Advance (including the initial Advance), the Term Loan or to issue
any Letters of Credit (including the initial Letter of Credit) shall be subject
to the satisfaction of each of the following conditions, unless waived in
writing by Lender:

                  (a) the representations and warranties of Borrower set forth
         in this Agreement are true and correct on the date of such credit
         extension (and after giving effect to these then being made);

                  (b) No Default, no Event of Default and no Material Adverse
         Occurrence shall then have occurred and be continuing on the date of
         such credit extension or result therefrom;

         24. TERMINATION. Subject to automatic termination of Borrower's ability
to obtain additional Advances, the Term Loan or any Letters of Credit under this
Agreement upon the occurrence of any Event of Default specified in Paragraphs
20(d), (e), (f), (g) or (h) and to Lender's right to terminate Borrower's
ability to obtain additional Advances, the Term Loan or any Letters of Credit
under this Agreement upon the occurrence of any other Event of Default, this
Agreement shall have a term ending on March 31, 1999, with respect to the
Revolving Credit Commitment and/or the day prior to the fifth annual anniversary
date of the closing of the Term Loan with respect to the Term Loan. Lender's
rights with respect to outstanding Obligations owing on or prior to the
Termination Date will not be affected by termination and all of said rights
including (without limitation) Lender's Security Interest in the Collateral
existing on such Termination Date or acquired by Borrower thereafter.

         25. GRANT OF LICENSE TO USE PATENTS AND TRADEMARKS COLLATERAL. For the
purpose of enabling Lender to exercise rights and remedies under this Agreement,
Borrower hereby grants to Lender and irrevocable, non-exclusive license
(exercisable without payment of royalty or other compensation to Borrower) to
use, license or sublicense any patent or trademark now owned or hereafter
acquired by Borrower and wherever the same may be located, and including in such
license reasonable access to all media in which any of the licensed items may be
recorded or stored and to all computer and automatic machinery software and
programs used for the compilation or printout thereof.

         26.      MISCELLANEOUS.

                  (a) The performance or observance of any affirmative or
         negative covenant or


                                       67
<PAGE>


         other provision of this Agreement and any supplement hereto may be 
         waived by Lender in a writing signed by Lender but not otherwise. No
         delay on the part of Lender in the exercise of any remedy, power or 
         right shall operate as a waiver thereof, nor shall any single or 
         partial exercise of any remedy, power or right preclude other or 
         further exercise thereof or the exercise of any other remedy, power or
         right. Each of the rights and remedies of Lender under this Agreement
         will be cumulative and not exclusive of any other right or remedy 
         which Lender may have hereunder or as allowed by law.

                  (b) Any notice, demand or consent authorized by this Agreement
         to be given to Borrower shall be deemed to be given when transmitted by
         telex or telecopier or personally delivered, or three days after being
         deposited in the U.S. mail, postage prepaid, or one day after delivery
         to Federal Express or other overnight courier service, in each case
         addressed to Borrower at its address shown in the opening paragraph of
         this Agreement, or at such other address as Borrower may, by written
         notice received by Lender, designate as Borrower's address for purposes
         of notice hereunder. Any notice or request authorized by this Agreement
         to be given to Lender shall be deemed to be given when transmitted by
         telex or telecopier or personally delivered, or three days after being
         deposited in the U.S. mail, postage prepaid, or one day after delivery
         to Federal Express or other overnight courier, in each case addressed
         to Lender at its address shown in the opening paragraph of this
         Agreement, or at such other address as Lender may, by written notice
         received by Borrower, designate as Lender's address for purposes of
         notice hereunder; PROVIDED, HOWEVER, that any notice to Lender given
         pursuant to Paragraph 4A(b); 4B(b) or 4C(b) shall not be deemed given
         until received.

                  (c) This Agreement, including exhibits and schedules and other
         agreements referred to herein, is the entire agreement between the
         parties supersedes and rescinds all prior agreements relating to the
         subject matter herein, cannot be changed, terminated or amended orally,
         and shall be deemed effective as of the date it is accepted by Lender.

                  (d) Borrower agrees to pay and will reimburse Lender on demand
         for all out-of-pocket expenses incurred by Lender arising out of this
         transaction including without limitation filing and recording fees and
         attorneys' fees and legal expenses (whether or not suit is commenced)
         incurred in the protection and perfection of Lender's security interest
         in the Collateral, in the enforcement of any of the provisions of this
         Agreement or of Lender's rights and remedies hereunder and against the
         Collateral, in the defense of any claim or claims made or threatened
         against Lender arising out of this transaction or otherwise, including,
         without limitation, in each instance, all reasonable attorneys' fees
         and legal expenses incurred in connection with any appeal of a lower
         court's order or judgment; PROVIDED, HOWEVER, that Lender agrees that
         Borrower's obligations to reimburse Lender for its attorneys' fees and
         legal expenses incurred in connection with the preparation of this
         Agreement and the other Loan Documents shall be limited to the sum of
         $2,000.00 plus its out-of-pocket expenses.



                                       68
<PAGE>



                  (e) Borrower hereby agrees to indemnify, exonerate and hold
         Lender and its officers, directors, employees and agents (the
         "Indemnified Parties") free and harmless from and against any and all
         actions, causes of action, suits, losses, liabilities and damages, and
         expenses in connection therewith including, without limitation,
         reasonable attorneys' fees and disbursements (the 'Indemnified
         Liabilities"), incurred by the Indemnified Parties or any of them as a
         result of, or arising out of, or relating to:

                           (1)      any transaction financed or to be financed
                                    in whole or in part directly or indirectly
                                    with proceeds of any Credit extension
                                    hereunder, or

                           (2)      the execution, delivery, performance or
                                    enforcement of this Agreement or any
                                    document executed pursuant hereto by any of
                                    the Indemnified Parties

         except for any such Indemnified Liabilities arising on account of any
         Indemnified Party's gross negligence or willful misconduct.

         If and to the extent that the foregoing undertaking may be
         unenforceable for any reason, Borrower hereby agrees to make the
         maximum contribution to the payment and satisfaction of each of the
         Indemnified Liabilities which is permissible under applicable law. The
         provisions of this Paragraph shall survive termination of this
         Agreement.

                  (f) This Agreement is made under and shall be governed by and
         interpreted in accordance with the internal laws of the State of
         Minnesota, except to the extent that the perfection of the Security
         Interest hereunder, or the enforcement of any remedies hereunder with
         respect to any particular Collateral, shall be governed by the laws of
         a jurisdiction other than the State of Minnesota. Captions herein are
         for convenience only and shall not be deemed part of this Agreement.

                  (g) This Agreement shall be binding upon Borrower and Lender
         and their respective successors, assigns, heirs, and personal
         representatives and shall inure to the benefit of Borrower, Lender and
         the successors and assigns of Lender, except that Borrower may not
         assign or transfer its rights hereunder without the prior written
         consent of Lender, and any assignment or transfer in violation of this
         provision shall be null and void. In connection with the actual or
         prospective sale by Lender of any interest or participation in the
         obligations, Borrower authorizes Lender to furnish any information in
         its possession, however acquired, concerning Borrower or any of its
         Affiliates to any person or entity.

                  (h) Borrower hereby irrevocably submits to the jurisdiction of
         any Minnesota 


                                       69
<PAGE>


         state court or federal court sitting in Minneapolis or St. Paul,
         Minnesota, over any action or proceeding arising out of or relating to
         the Agreement, and Borrower hereby irrevocably agrees that all claims
         in respect of such action or proceeding may be heard and determined in
         such Minnesota State or Federal court. Borrower hereby irrevocably
         waives, to the fullest extent it may effectively do so, the defense of
         an inconvenient forum to the maintenance of such action or proceeding.
         Borrower irrevocably consents to the service of copies of the summons
         and complaint and any other process which may be served in any such
         action or proceeding by the mailing by United States certified mail,
         return receipt requested, of copies of such process to Borrower's
         address stated in the preamble hereto and addressed to Borrower's
         President by title. Borrower agrees that judgment final by appeal, or
         expiration of time to appeal without an appeal being taken, in any such
         action or proceeding shall be conclusive and may be enforced in any
         other jurisdictions by suit on the judgment or in any other manner
         provided by law. Nothing in this Paragraph shall affect the right of
         Lender to serve legal process in any other manner permitted by law or
         affect the right of Lender to bring any action or proceeding against
         Borrower or its property in the courts of any other jurisdiction.
         Borrower agrees that, if it brings any action or proceeding arising out
         of or relating to this Agreement, it shall bring such action or
         proceeding in Hennepin County or Ramsey County, Minnesota.

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

                                    LENDER:

                                    FIRST AMERICAN BANK, NATIONAL ASSOCIATION


                                    By:  /S/ ERNEST W. JENSEN
                                         --------------------
                                    Its: SENIOR VICE PRESIDENT
                                         ---------------------



                                    BORROWER:

                                    CANTERBURY PARK HOLDING CORPORATION

                                    By:  /S/ RANDALL D. SAMPSON
                                         ----------------------
                                    Its: PRESIDENT
                                         ---------



                                       70
<PAGE>



                              REVOLVING CREDIT NOTE

$2,250,000.00                                                  MINNEAPOLIS, 
MINNESOTA
                                                                   JUNE 3, 1998

         FOR VALUE RECEIVED, the undersigned, CANTERBURY PARK HOLDING
CORPORATION, a Minnesota corporation (the "Borrower"), promises to pay to the
order of FIRST AMERICAN BANK, NATIONAL ASSOCIATION, a national banking
association (the "Lender"), on the Revolving Credit Termination Date, the
principal sum of Two Million Two Hundred Fifty Thousand and No/100ths Dollars
($2,250,000.00) or, if less, the then aggregate unpaid principal amount of the
Advances as may be borrowed by the Borrower under the Credit Agreement and are
outstanding on the Revolving Credit Termination Date. All Advances and all
payments of principal shall be recorded by the Lender in its records which
records shall be conclusive evidence of the subject matter thereof, absent
manifest error.

         The Borrower further promises to pay to the order of the Lender
interest on each Advance from time to time outstanding from the date hereof
until paid in full at a fluctuating annual rate equal to the Reference Rate;
PROVIDED, HOWEVER, that, notwithstanding anything to the contrary contained
herein, upon the occurrence and during the continuance of any Event of Default,
the rate of interest hereunder shall be 2.0% per annum above the Reference Rate.
Interest shall be due and payable on the first day of each calendar month,
starting on April 1, 1998, and at maturity. Interest payable after maturity
shall be payable on demand. The term "Reference Rate" shall mean the publicly
announced base rate (or other publicly announced reference rate) charged by
Bremer Financial Corporation; Borrower acknowledges that the Reference Rate may
not be the lowest rate made available by Lender to its customers and that Lender
may lend to its customers at rates that are at, above or below the Reference
Rate. Each change in the fluctuating interest rate shall take effect
simultaneously with the corresponding change in the Reference Rate.

         All payments of principal and interest under this Note shall be made in
lawful money of the United States of America in immediately available funds to
the Lender at the Lender's office at 633 South Concord Street, South St, Paul,
MN 55075, or at such other place as may be designated by the Lender to the
Borrower in writing.

         This Note is the Revolving Credit Note referred to in, and evidences
indebtedness incurred under, a General Credit and Security Agreement dated as of
June 3, 1998 (herein, as it may be amended, modified or supplemented from time
to time, called the "Credit Agreement;" capitalized terms not otherwise defined
herein being used herein as therein defined) between the Borrower and the
Lender, to which Credit Agreement reference is made for a statement of the terms
and provisions thereof, including those under which the Borrower is permitted
and required to make prepayments and repayments of principal of such


                                       71
<PAGE>



indebtedness and under which such indebtedness may be declared to be immediately
due and payable.

         All parties hereto, whether as makers, endorsers or otherwise,
severally waive presentment, demand, protest and notice of dishonor in
connection with this Note.
         This Note is made under and governed by the internal laws of the State
of Minnesota.

                                            CANTERBURY PARK HOLDING CORPORATION


                                              By:  /S/ RANDALL D. SAMPSON
                                                   ----------------------
                                              Its: PRESIDENT
                                                   ---------


                                       72
<PAGE>




                                                LIST OF EXHIBITS


         Exhibit A                          Form of Revolving Credit Note

         Exhibit B                          Form of Term Note

         Exhibit C                          Form of Compliance Certificate

         Exhibit D                          Term Loan Documents




                                               LIST OF SCHEDULES


         Schedule A                         Locations

         Schedule B                         Existing Security Interests

         Schedule C                         Financial Statements

         Schedule D                         Intellectual Property

         Schedule E                         Shareholders

         Schedule F                         Contingent Obligations

         Schedule G                         Existing Indebtedness


                                       73
<PAGE>



EXHIBIT A

                              REVOLVING CREDIT NOTE

$2,250,000.00      MINNEAPOLIS, MINNESOTA
                                                                    JUNE 3, 1998

         FOR VALUE RECEIVED, the undersigned, CANTERBURY PARK HOLDING
CORPORATION, a Minnesota corporation (the "Borrower"), promises to pay to the
order of FIRST AMERICAN BANK, NATIONAL ASSOCIATION, a national banking
association (the "Lender"), on the Revolving Credit Termination Date, the
principal sum of Two Million Two Hundred Fifty Thousand and No/100ths Dollars
($2,250,000.00) or, if less, the then aggregate unpaid principal amount of the
Advances as may be borrowed by the Borrower under the Credit Agreement and are
outstanding on the Revolving Credit Termination Date. All Advances and all
payments of principal shall be recorded by the Lender in its records which
records shall be conclusive evidence of the subject matter thereof, absent
manifest error.

         The Borrower further promises to pay to the order of the Lender
interest on each Advance from time to time outstanding from the date hereof
until paid in full at a fluctuating annual rate equal to the Reference Rate;
PROVIDED, HOWEVER, that, notwithstanding anything to the contrary contained
herein, upon the occurrence and during the continuance of any Event of Default,
the rate of interest hereunder shall be 2.0% per annum above the Reference Rate.
Interest shall be due and payable on the first day of each calendar month,
starting on April 1, 1998, and at maturity. Interest payable after maturity
shall be payable on demand. The term "Reference Rate" shall mean the publicly
announced base rate (or other publicly announced reference rate) charged by
Bremer Financial Corporation; Borrower acknowledges that the Reference Rate may
not be the lowest rate made available by Lender to its customers and that Lender
may lend to its customers at rates that are at, above or below the Reference
Rate. Each change in the fluctuating interest rate shall take effect
simultaneously with the corresponding change in the Reference Rate.

         All payments of principal and interest under this Note shall be made in
lawful money of the United States of America in immediately available funds to
the Lender at the Lender's office at 633 South Concord Street, South St, Paul,
MN 55075, or at such other place as may be designated by the Lender to the
Borrower in writing.

         This Note is the Revolving Credit Note referred to in, and evidences
indebtedness incurred under, a General Credit and Security Agreement dated as of
June 3, 1998 (herein, as it may be amended, modified or supplemented from time
to time, called the "Credit Agreement;" capitalized terms not otherwise defined
herein being used herein as therein defined) between the Borrower and the
Lender, to which Credit Agreement reference is made for a statement of the 



                                       74
<PAGE>


terms and provisions thereof, including those under which the Borrower is
permitted and required to make prepayments and repayments of principal of such
indebtedness and under which such indebtedness may be declared to be immediately
due and payable.

         All parties hereto, whether as makers, endorsers or otherwise,
severally waive presentment, demand, protest and notice of dishonor in
connection with this Note.
         This Note is made under and governed by the internal laws of the State
of Minnesota.

                                             CANTERBURY PARK HOLDING CORPORATION


                                             By:________________________________
                                             Its:_______________________________




                                       75
<PAGE>




                                    EXHIBIT B

                                    TERM NOTE

$750,000.00               MINNEAPOLIS, MINNESOTA
                                                               ___________, 1998



         FOR VALUE RECEIVED, the undersigned, CANTERBURY PARK HOLDING
                                    CORPORATION, a Minnesota corporation (the
                                    "Borrower"), promises to pay to the order of
                                    FIRST AMERICAN BANK, NATIONAL ASSOCIATION, a
                                    national banking association (the "Lender"),
                                    the principal sum of Seven Hundred Fifth
                                    Thousand and No/100ths Dollars ($750,000.00)
                                    together with interest accruing on the
                                    unpaid principal balance hereof at a
                                    fluctuating annual rate equal to the
                                    Reference Rate in:

         (a)     59 consecutive monthly combined installments of principal and
                 interest in the initial amount of $ ______, commencing on 
                 _______________, 1998 and continuing through, to and including
                 _______________ , 2003; PROVIDED, HOWEVER, that, since the 
                 Term Loan accrues interest at a floating rate, the principal 
                 and interest payment will be adjusted on last day of 
                 ______________ of each year, commencing ______________, 199_ 
                 for the following twelve (12) installments and shall be equal 
                 to the amount necessary to fully amortize the Term Loan 
                 balance on such date accruing interest at the rate in effect 
                 on that date over the remaining portion of a hypothetical 180 
                 month amortization period, commencing on _______________, 199_;
                 and

         (b)     All remaining principal and accrued interest are due and
                 payable on _____________, 200_;

 .PROVIDED, HOWEVER, that, notwithstanding anything to the contrary contained
herein, upon the occurrence and during the continuance of any Event of Default.
Interest payable after maturity shall be payable on demand The term "Reference
Rate" shall mean the publicly announced base rate (or other publicly announced
reference rate) charged by Bremer Financial Corporation;


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<PAGE>


Borrower acknowledges that the Reference Rate may not be the lowest rate made
available by Lender to its customers and that Lender may lend to its customers
at rates that are at, above or below the Reference Rate.. Each change in the
fluctuating interest rate shall take effect simultaneously with the
corresponding change in the Reference Rate.

         All payments of principal and interest under this Note shall be made in
lawful money of the United States of America in immediately available funds at
the Lender's office at 633 South Concord Street, South St. Paul, MN 55075, or at
such other place as may be designated by the Lender to the Borrower in writing.
All payments shall be applied first to accrued interest and then to principal.

         This Note is the Term Note referred to in, and evidences indebtedness
incurred under, a General Credit and Security Agreement dated as of June 3, 1998
(herein, as it may be amended, modified or supplemented from time to time,
called the "Credit Agreement;" capitalized terms not otherwise defined herein
being used herein as therein defined) between the Borrower and the Lender, to
which Credit Agreement reference is made for a statement of the terms and
provisions thereof, including those under which the Borrower is permitted and
required to make prepayments and repayments of principal of such indebtedness
and under which such indebtedness may be declared to be immediately due and
payable.

         All parties hereto, whether as makers, endorsers or otherwise,
severally waive presentment, demand, protest and notice of dishonor in
connection with this Note.

         This Note is made under and governed by the internal laws of the State
of Minnesota.

                                             CANTERBURY PARK HOLDING CORPORATION


                                             By:________________________________
                                             Its:_______________________________




                                       77
<PAGE>

                                    EXHIBIT C

                             COMPLIANCE CERTIFICATE

         Pursuant to Section 17 (a)(iii) of the General Credit and Security
Agreement dated as of June 3, 1998 (the General Credit and Security Agreement as
it may be amended, modified, supplemented or restated from time to time being
the "Credit Agreement"; the terms defined therein being used herein as therein
defined) by and between the undersigned and FIRST AMERICAN BANK, NATIONAL
ASSOCIATION (the "Bank"), the undersigned certifies to the Lender as follows:

         1. The financial statements of the Borrower attached hereto for the
period ending ______________, 19__ (the "Financial Statements") have been
prepared in accordance with GAAP applied on a consistent basis subject only to
non-accrual of bonuses, other variations from GAAP which in the aggregate are
not material, year-end adjustments which in the aggregate are not expected to be
materially adverse and the omission of footnotes.

         2. The representations and warranties contained in Section 16 of the
Credit Agreement are true and correct as of the date hereof as though made on
that date except that the representations and warranties set forth in Section
16(h) to the financial statements of the Borrower shall be deemed a reference to
the audited and unaudited financial statements of the Borrower, as the case may
be, then most recently delivered to the Lenders pursuant to Section 17(a)(i) or
(ii), as the case may be.

         3. As of _________, 199_, (the "Measurement Date") no Default or Event
of Default has occurred and is continuing [except (DESCRIBE HERE ANY DEFAULT OR
EVENT OF DEFAULT AND THE ACTION WHICH THE UNDERSIGNED PROPOSES TO TAKE WITH
RESPECT THERETO.)].

         4. SECTION 17(i). The undersigned's minimum required ratio of
Liabilities to Tangible Net Worth was not less than 1.15 to 1.00 and the
undersigned's actual ratio at such Measurement Date was ________ to 1.00 and was
computed in accordance with the Credit Agreement.

         5. SECTION 17(j). The undersigned's minimum required Tangible Net Worth
was not less than $_________ and the undersigned's actual Tangible Net Worth at 
such Measurement Date was $________ and was computed in accordance with the 
Credit Agreement.


Dated ____________, 19__.            CANTERBURY PARK HOLDING CORPORATION



                                     BY  __________________________________
                                     Its __________________________________


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<PAGE>





                                    EXHIBIT D
                         ADDITIONAL TERM LOAN DOCUMENTS


1.       A title insurance commitment in accordance with EXHIBIT D-1 from a
         title insurance company acceptable to Lender ("Title Company").

2.       Three (3) copies of a current (within thirty (30) days prior to
         submission) certified ALTA/ACSM Mortgaged Property TITLE SURVEY of the
         Mortgaged Property which also meets the requirements set forth on
         EXHIBIT D-2.

3.       A written environmental review, audit, assessment or report
         ("Environmental Audit") addressed to Lender (or if to the Borrower,
         accompanies by a reliance letter addressed to the Lender), setting
         forth the results of an investigation of the Mortgaged Property,
         showing that no hazardous or toxic substance, waste, or material, or
         any other pollutant or contaminant (including but not limited to
         gasoline, asbestos, urea-formaldehyde and polychlorinated biphenyls),
         as those terms are defined or used in any applicable statute,
         ordinance, code or regulation ("Pollutant"), is present above, on, in
         or under the Mortgaged Property, including an historical investigation
         of the uses and ownership of the Mortgaged Property, contacts with
         appropriate governmental agencies, soil borings and tests, chemical
         tests, and such other tests and analyses (hereafter collectively
         referred to as "Tests") as may be requested by Lender, conducted by a
         competent environmental engineer or consultant that is acceptable to
         Lender and is licensed, bonded and insured in accordance with all
         applicable statutes, ordinances, codes and regulations, and all
         reports, data and other information produced in connection with the
         Tests. Lender shall be notified in advance of the date and time of
         conducting any Tests and Lender's representatives shall have the right
         to observe such Tests. The Environmental Audit shall also specify
         whether or not any environmental assessment, study or statement with
         respect to the Mortgaged Property is required by any applicable
         federal, state, statute, ordinance or governmental regulation. If such
         an assessment, study or statement is so required, Borrower shall
         provide a copy thereof to Lender, and, if none is so required, Borrower
         shall provide Lender with an appropriate declaration of environmental
         nonsignificance relating to the Mortgaged Property.

4.       A copy of Borrower's purchase agreement for the Mortgaged Property
         certified by Borrower's chief financial officer or treasurer to be a
         true, correct and complete copy thereof.

5.       A current appraisal of the Mortgaged Property, addressed to Lender,
         prepared in substantial conformance with (1) Title XI of the Financial
         Institution Reform, Recovery and Enforcement Act of 1989 (FIRREA); (2)
         the [OCC APPRAISAL STANDARDS OF 12 CFR, PART 34]; and (3) the Code of
         Professional Ethics and Standards of Professional Practice and the
         American Institute of Real Estate Appraisers and the 


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<PAGE>



         Guidelines for Real Estate Appraisal Policies and Review Procedures
         adopted by the Lender supervision offices of the Federal Deposit
         Insurance Corporation, the Board of Governors of the Federal Reserve
         System and the Office of the Comptroller of the Currency as of December
         9, 1987. The appraisal report must also contain a Statement of
         Assumptions and Limiting Conditions, as well as a dated and signed
         Certification in accordance with Standard Rule 2-3 of the Uniform
         Standards of Professional Appraisal Practices of the Appraisal
         Foundation, and Supplement Standards of Professional Practice of the
         American Institute of Real Estate Appraisers. The appraisal must be
         signed by an appraiser acceptable to Lender.

6.       Evidence that the Mortgaged Property does not lie in the 100-year flood
         plain zone.


                                   EXHIBIT D-1


               As a pre-closing requirement, Borrower must submit a title
insurance commitment or preliminary title report, issued by a reputable,
commercial title insurance company acceptable to Bank, agreeing to issue a 1970
ALTA form of loan policy of title insurance ("Policy"), in the amount of the
Term Loan, insuring to Lender and its assigns that:

               1.      The fee owner of the Mortgaged Property is the Borrower.

               2.      The Mortgage is a first lien upon the Mortgaged Property
                       and any improvements thereon or to be erected thereon.

               3.      The Mortgaged Property is free and clear of all other
                       liens, charges and encumbrances not approved by Lender.

               4.      All possible contractor and supplier mechanic's and
                       materialmen's lien claims, rights of parties in
                       possession and matters which could be shown by an
                       adequate survey are unconditionally insured against.

-              The commitment or report should be accompanied by complete copies
               of all recorded instruments referred to therein.

-              The commitment or report and Policy shall include these
               endorsements.

               1.       ALTA Form No. 100 (Comprehensive).

               2.       Zoning.

                        3.      Other endorsements required by Lender.



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<PAGE>



                                   EXHIBIT D-2

                               SURVEY REQUIREMENTS


A.       BOUNDARY SURVEY

     These items are to be included and shown on the Boundary Survey:

1. The complete and correct legal description of the Mortgaged Property as shown
on the title insurance commitment or preliminary title report. (Note: It must be
possible to trace the legal description of the Mortgaged Property on the survey
by following the bearings and dimensions around the boundaries of the Mortgaged
Property.)

2. The location of all recorded easements and of all unrecorded easements
ascertainable by an inspection of the Mortgaged Property, which benefit or
burden the Mortgaged Property. (Note: All recorded easements are to be
identified by a document recording number or other document reference.)

3. All areas affected by any recorded restrictions or access limitations. (Note:
All such areas are to be identified by a document recording number or other
document reference.)

4. The location of all adjoining streets, roads, highways and alleys, with
names, rights-of-way widths and distances from the Mortgaged Property noted. If
none adjoin the Mortgaged Property, then the location of the nearest public
street, road or highway and its distance from the Mortgaged Property.

5. The location of public access to the Mortgaged Property and of all entrance
drives and curb cuts.

6. A directional indicator showing North.

7. The street address of any existing improvements.

8. The dimensions of the Mortgaged Property and the locations of existing
improvements as measured in both directions from property lines.

9. The perimeter dimensions of existing improvements.

10. Interior lot lines, if any.

11. All applicable building setback lines.



                                       81
<PAGE>



12. The location of existing connections and on-site utility and service lines
for natural gas, electricity, water, and sanitary and storm sewers.

13. The area of the Mortgaged Property.

14. Any portion of the Mortgaged Property which is located in a flood plain or
in any other flood hazard or flood danger area as designated by any governmental
authority claiming jurisdiction over the Mortgaged Property.

The following certification of surveyor.

             "I hereby certify to First American Bank, National Association, 
             Canterbury Park Holding Corporation and ________________Title 
             Insurance Company and to their heirs, successors and assigns, 
             that I have surveyed, on the ground, the property legally 
             described hereon; that this plat of survey is a true, correct 
             and accurate drawing and representation of said property and of 
             the size, location, exterior dimensions and boundaries thereof; 
             that the street addresses, locations and dimensions of all 
             buildings, and the locations of all parking areas, of any 
             buildings or other improvements upon said property, of all 
             fences thereon, of all recorded and/or visible easements, of all 
             streets, roads, means of public access, utility lines (from each 
             building to their points of connection with the public systems) 
             and rights-of-way which affect, benefit or burden said property, 
             and of all building setback lines which affect said property are 
             correctly and accurately shown hereon; that there are no 
             discrepancies, conflicts, gaps, boundary disputes, shortages in 
             area, encroachments of improvements over boundary lines from or 
             onto said property or upon easements, overlapping of 
             improvements, visible easements, overlapping of easements, 
             roads, alleys, rights-of-way or building set back lines which 
             affect said property, except as shown hereon; that there are no 
             fences, light posts or other improvements appurtenant to said 
             property which are located within the boundary lines of 
             adjoining properties, except as shown hereon; that the legal 
             description of said property, as set out hereon, is correct, 
             complete and accurate; a guaranty that no portion of said 
             property is located in a flood plain or in any other flood 
             hazard or flood danger area, as designated by applicable 
             governmental authorities, except as shown and identified as such 
             hereon; and that this plat of survey and the survey on which it 
             is based were made in accordance with "Minimum Standard Detail 
             Requirements and Classification for ALTA/ACSM Mortgaged Property 
             Title Surveys," as jointly established and adopted by ALTA and 
             ASCM in 1992 and meets the requirements of an Urban Survey, as 
             defined therein."

     Dated this __ day of ____________________, 19__.

             ---------------------------------
             [LICENSED SURVEYOR'S SIGNATURE]
             [NAME OF SURVEYOR]
             Registration Number:



                                       82
<PAGE>




                                   SCHEDULE A
                                    LOCATIONS

                              1100 Canterbury Road
                               Shakopee, MN 55379

                                   SCHEDULE B
                           EXISTING SECURITY INTERESTS

Part I.  General Security Interests.

         The following Security Interests are permitted:

           (a) Deposits of pledges tosecure payment of workers'
               compensation, unemployment insurance, old age pensions or
               other social security obligations, in the ordinary course of
               business of the Borrower;
 
           (b) Security Interests for taxes, fees, asessments and
               governmental charges no delinquent or to the extent that
               payments therefor shall not at the time be required to be made
               in accordance with the provisions of Paragraph 17(C);

           (c) Security Interests of carriers, warehousemen, mechanics
               and materialmen, and other like Security Interests arising in
               the ordinary course of business, for sums not due or to the
               extent that the secured amounts are being contested in good
               faith by appropriate proceedings;

           (d) Deposits to secure the performance of bids, trade
               contracts, leases, statutory obligations and other obligations
               of a like nature incurred in the ordinary course of business;
               and

           (e) Zoning restrictions, easements, licenses, restrictions of
               the use of real property or irregularities in title thereto,
               which do not materially impari the use of such property in the
               operation of Borrower's business or the value of such property
               for the purpose of such business.

Part II:  Specific Security Interests.

                  See attached search by U.S. Corporate Services, Inc.


                                       83
<PAGE>




                                   SCHEDULE C

                              FINANCIAL STATEMENTS

           See attached Form 1-KSB for the fiscal year ended December
                                   31, 1997.

              See Attached Form 10-QSB for the quarter ended March
                                   31, 1998.

                                   SCHEDULE D

                              INTELLECTUAL PROPERTY

                                      None.

                                   SCHEDULE E

                                  SHAREHOLDERS

                    Refer to attached Canterbury Park Holding
                     Corporation Notice of Annual Meeting of
                     Shareholders and Proxy Statement dated
                                 April 29, 1998.

                                   SCHEDULE F

                             CONTINGENT OBLIGATIONS

          Refer to Financial Statement Footnote #8 in Form 10-KSB p. 29
           (atatched to schedule C) for discussion of the JRI Earn Out
                                Promissory Note.


                                       84
<PAGE>




                                   SCHEDULE G

                              EXISTING INDEBTEDNESS

                     As of Close of Business on June 4, 1998

<TABLE>
<CAPTION>

                                                                              ACCRUED             TOTAL
                                                            BALANCE           INTEREST        INDEBTEDNESS

<S>                                                       <C>                <C>             <C>
CURTIS A. SAMPSON
STATE BANK & TRUST COMPANY
NEW ULM MINNESOTA
LINE OF CREDIT 222541                                       $760,000.00      $16,308.19        $776,308.19

CURTIS A. SAMPSON
STATE BANK & TRUST COMPANY
NEW ULM MINNESOTA
COMMERCIAL LOAN 218695                                       134,083.86          794.20         134,878.06

HORSEMEN'S BENEVOLENT &
PROTECTIVE ASSOCIATION                                       499,269.23       32,146.35         531,415.58


TOTAL EXISTING INDEBTEDNESS                               $1,393,353.09      $49,248.74      $1,442,601.83
                                                          -------------      ----------      -------------
</TABLE>




                                       85