Document:

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                                  MASTER LEASE

         THIS LEASE (this "Lease") is made as of January 21, 2000 (the
"Effective Date"), by and between MINWOOD PARTNERS, INC., a Delaware corporation
("Lessor"), whose address is 7657 Anagram Drive, Eden Prairie, Minnesota 55344,
and FAMOUS DAVE'S OF AMERICA, INC., a Minnesota corporation ("Lessee"), whose
address is 7657 Anagram Drive, Eden Prairie, Minnesota 55344.

                                   WITNESSETH:

         THAT, in consideration of the mutual covenants and agreements herein
contained, Lessor and Lessee hereby covenant and agree as follows:

         1. CERTAIN DEFINED TERMS. The following terms shall have the following
meanings for all purposes of this Lease:

         "Action" has the meaning set forth in Section 24.A(iv).

         "ADA" has the meaning set forth in Section 16.C.

         "Additional Rental" has the meaning set forth in Section 5.B.

         "Affiliate" means any Person which directly or indirectly controls, is
under common control with or is controlled by any other Person. For purposes of
this definition, "controls", "under common control with", and "controlled by"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through the
ownership of voting securities or otherwise.

         "Applicable Regulations" has the meaning set forth in Section 16.A.

         "Base Annual Rental" means $456,180.60.

         "Base Monthly Rental" means an amount equal to 1/12 of the applicable
Base Annual Rental.

         "Business Day" means a day on which banks located in Phoenix, Arizona
are open for business other than Saturday, Sunday or a legal holiday, ending at
5:00 p.m. Phoenix, Arizona time.

         "Capital Lease" has the meaning set forth in Section 57.

         "Code" means the United States Bankruptcy Code, 11 U.S.C. Sec. 101 et
seq., as amended.

         "De Minimis Amounts" shall mean, with respect to any given level of
Hazardous Materials, that level or quantity of Hazardous Materials in any form
or combination of forms the

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use, storage or release of which does not constitute a violation of any
Environmental Laws and is customarily employed in the ordinary course of, or
associated with, similar businesses located in the state in which the Premises
is located.

         "Debt" has the meaning set forth in Section 57.

         "Default Rate" means 15% per annum or the highest rate permitted by
law, whichever is less.

         "Depreciation and Amortization" has the meaning set forth in
Section 57.

         "Environmental Insurer" means American International Specialty Lines
Insurance Company or such other environmental insurance company as Lender shall
select in its sole discretion.

         "Environmental Laws" means any present and future federal, state and
local laws, statutes, ordinances, rules, regulations and the like, as well as
common law, relating to Hazardous Materials and/or the protection of human
health or the environment, by reason of a Release or Threatened Release of
Hazardous Materials or relating to liability for or costs of Remediation or
prevention of Releases. "Environmental Laws" includes, but is not limited to,
the following statutes, as amended, any successor thereto, and any regulations
rulings, orders or decrees promulgated pursuant thereto, and any state or local
statutes, ordinances, rules, regulations and the like addressing similar issues:
the Comprehensive Environmental Response, Compensation and Liability Act; the
Emergency Planning and Community Right-to-Know Act; the Hazardous Materials
Transportation Act; the Resource Conservation and Recovery Act (including but
not limited to Subtitle I relating to underground storage tanks); the Solid
Waste Disposal Act; the Clean Water Act; the Clean Air Act; the Toxic Substances
Control Act; the Safe Drinking Water Act; the Occupational Safety and Health
Act; the Federal Water Pollution Control Act; the Federal Insecticide, Fungicide
and Rodenticide Act; the Endangered Species Act; the National Environmental
Policy Act; and the River and Harbors Appropriation Act. "Environmental Laws"
also includes, but is not limited to, any present and future federal, state and
local laws, statutes, ordinances, rules, regulations and the like, as well as
common law: conditioning transfer of property upon a negative declaration or
other approval of a Governmental Authority of the environmental condition of the
property; requiring notification or disclosure of Releases or other
environmental condition of the Premises to any Governmental Authority or other
person or entity, whether or not in connection with transfer of title to or
interest in property; imposing conditions or requirements relating to Hazardous
Materials in connection with permits or other authorization for lawful activity;
relating to nuisance, trespass or other causes of action related to Hazardous
Materials; relating to the handling and disposal of solid or hazardous waste;
and relating to wrongful death, personal injury, or property or other damage in
connection with the physical condition or use of the Premises by reason of the
presence of Hazardous Materials in, on, under or above the Premises.

         "Environmental Liens" has the meaning set forth in Section 16.E.

         "Equipment Payment Amount" has the meaning set forth in Section 57.

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         "Event of Default" has the meaning set forth in Section 24.

         "Fixed Charge Coverage Ratio" has the meaning set forth in Section 57.

         "Franchise Finance" means Franchise Finance Corporation of America, a
Delaware corporation, and its successors and assigns.

         "GAAP" means generally accepted accounting principles consistently
applied.

         "Governmental Authority" means any governmental authority, agency,
department, commission, bureau, board, instrumentality, court or
quasi-governmental authority of the United States, the State or any political
subdivision thereof.

         "Gross Sales" has the meaning set forth in Section 57.

         "Hazardous Materials" means (i) any toxic substance or hazardous waste,
substance, solid waste, or related material, or any pollutant or contaminant;
(ii) radon gas, asbestos in any form which is or could become friable, urea
formaldehyde foam insulation, transformers or other equipment which contains
dielectric fluid containing levels of polychlorinated biphenyls in excess of
federal, state or local safety guidelines, whichever are more stringent, or any
petroleum product; (iii) any substance, gas, material or chemical which is or
may be defined as or included in the definition of "hazardous substances,"
"toxic substances," "hazardous materials," "hazardous wastes," "regulated
substances" or words of similar import under any Environmental Laws; and (iv)
any other chemical, material, gas or substance the exposure to or release of
which is or may be prohibited, limited or regulated by any Governmental
Authority that asserts or may assert jurisdiction over the Premises or the
operations or activity at the Premises, or any chemical, material, gas or
substance that does or may pose a hazard to the health and/or safety of the
occupants of the Premises or the owners and/or occupants of property adjacent to
or surrounding the Premises.

         "Indemnified Parties" means Lessor, Environmental Insurer and Lender
and their directors, officers, shareholders, partners, members, employees,
agents, servants, representatives, contractors, subcontractors, affiliates,
subsidiaries, participants, successors and assigns, including, but not limited
to, any successors by merger, consolidation or acquisition of all or a
substantial portion of the assets and business of Lessor, Lender or
Environmental Insurer, as applicable.

         "Interest Expense" has the meaning set forth in Section 57.

         "Lease FCCR Payment" has the meaning set forth in Section 24.A(xii).

         "Lease Term" shall have the meaning described in Section 4.

         "Lender" means FFCA Acquisition Corporation, a Delaware corporation.

         "Loan Agreement" means the Loan Agreement dated as of the date of this
Lease in effect between Lessor and Lender, as such agreement may be amended from
time to time.

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         "Loan Documents" means, collectively, the Loan Agreement, the Notes,
the Mortgages, the UCC-1 Financing Statements and all other documents,
instruments and agreements executed in connection therewith or contemplated
thereby, all as amended and supplemented.

         "Loan FCCR Payment" has the meaning set forth in Section 24.A(xii).

         "Losses" means any and all claims, suits, liabilities (including,
without limitation, strict liabilities), actions, proceedings, obligations,
debts, damages, losses, costs, expenses, diminutions in value, fines, penalties,
charges, fees, expenses, judgments, awards, amounts paid in settlement and
damages of whatever kind or nature (including, without limitation, attorneys'
fees, court costs and other costs of defense).

         "Memorandum of Lease" means the Memorandum of Lease dated as of the
date of this Lease between Lessor and Lessee with respect to the Premises. A
duplicate original Memorandum of Lease will be executed and recorded in the
applicable real property records for each of the Premises.. The Memorandum of
Lease will contain the addresses and Lender Numbers for all of the Premises and
the legal description for the Premises.

         "Mortgages" means the mortgages or deeds of trust, assignments of rents
and leases, security agreements and fixture filings dated as of even date
herewith executed by Lessor for the benefit of Lender with respect to the
Premises, as such instrument may be amended, restated and/or supplemented from
time to time.

         "Net Amount" has the meaning set forth in Section 21.B.

         "Net Income" has the meaning set forth in Section 57.

         "Notes" means the promissory notes dated as of the date of this Lease
executed by Lessor and payable to Lender with respect to each Premises, as such
notes may be amended, restated and/or substituted from time to time.

         "Obligations" has the meaning set forth in Section 21.B.

         "Operating Lease Expense" has the meaning set forth in Section 57.

         "Partial Taking" has the meaning set forth in Section 21.D.

         "Permitted Concept" means a Famous Dave's restaurant or other
restaurant or retail concept approved in writing by Lender and Lessor in their
reasonable discretion.

         "Person" means any individual, corporation, partnership, limited
liability company, trust, unincorporated organization, Governmental Authority or
any other form of entity.

         "Personalty" has the meaning set forth in Section 31.

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         "Premises" means the parcel or parcels of real estate legally described
in Exhibit A attached hereto, all rights, privileges and appurtenances
associated therewith, and all buildings, fixtures and other improvements

         "Release" means any presence, release, deposit, discharge, emission,
leaking, spilling, seeping, migrating, injecting, pumping, pouring, emptying,
escaping, dumping, disposing or other movement of Hazardous Materials.

         "Remediation" means any response, remedial, removal, or corrective
action, any activity to cleanup, detoxify, decontaminate, contain or otherwise
remediate any Hazardous Material, any actions to prevent, cure or mitigate any
Release, any action to comply with any Environmental Laws or with any permits
issued pursuant thereto, any inspection, investigation, study, monitoring,
assessment, audit, sampling and testing, laboratory or other analysis, or any
evaluation relating to any Hazardous Materials.

         "Securitization" shall have the meaning set forth in the Loan
Agreement.

         "Securitized Loan Pool" means any pool or group of loans that are a
part of any Securitization.

         "State" means the state in which the Premises are located.

         "Substitute Premises" shall have the meaning set forth in the Loan
Agreement.

         "Successor Lessor" has the meaning set forth in Section 25.

         "Taking" has the meaning set forth in Section 21.A.

         "Temporary Taking" has the meaning set forth in Section 21.C.

         "Threatened Release" means a substantial likelihood of a Release which
requires action to prevent or mitigate damage to the soil, surface waters,
groundwaters, land, stream sediments, surface or subsurface strata, ambient air
or any other environmental medium comprising or surrounding the Premises which
may result from such Release.

         "Total Taking" has the meaning set forth in Section 21.B.

         "UCC-1 Financing Statements" means such UCC-1 Financing Statements
executed and delivered by Lessee for the benefit of Lessor with respect to the
Premises.

         2. DEMISE OF PREMISES. In consideration of the rentals and other sums
to be paid by Lessee and of the other terms, covenants and conditions on
Lessee's part to be kept and performed, Lessor hereby leases to Lessee, and
Lessee hereby takes and hires, the Premises.

         3. CHARACTERIZATION OF LEASE. A. Lessor and Lessee intend that:

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                  (i) this Lease constitutes a single master lease of all, but
         not less than all, of the Premises and that Lessor and Lessee have
         executed and delivered this Lease with the understanding that this
         Lease constitutes a unitary, unseverable instrument pertaining to all,
         but not less than all, of the Premises, and that neither this Lease nor
         the duties, obligations or rights of Lessee may be allocated or
         otherwise divided among the Premises by Lessee;

                  (ii) this Lease is a "true lease" and not a financing lease,
         capital lease, mortgage, equitable mortgage, deed of trust, trust
         agreement, security agreement or other financing or trust arrangement,
         and the economic realities of this Lease are those of a true lease, and
         the parties agree to execute such other documents to confirm this Lease
         is a true lease; and

                  (iii) the business relationship created by this Lease and any
         related documents is solely that of a long-term commercial lease
         between landlord and tenant and has been entered into by both parties
         in reliance upon the economic and legal bargains contained herein.

         B. Lessor and Lessee acknowledge and agree that the Lease Term,
including any term extensions provided for in this Lease, is less than the
remaining economic life of each of the Premises.

         C. Lessee waives any claim or defense based upon the characterization
of this Lease as anything other than a true lease, and Lessee stipulates and
agrees not to challenge the validity, enforceability or characterization of the
lease of the Premises as a true lease and further stipulates and agrees that
nothing contained in this Lease creates or is intended to create a joint
venture, partnership (either de jure or de facto), equitable mortgage, trust,
financing device or arrangement, security interest or the like. Lessee shall
support the intent of the parties that the lease of the Premises pursuant to
this Lease is a true lease and does not create a joint venture, partnership
(either de jure or de facto), equitable mortgage, trust, financing device or
arrangement, security interest or the like, if, and to the extent that, any
challenge occurs.

         D. Lessee waives any claim or defense based upon the characterization
of this Lease as anything other than a master lease of all of the Premises, and
Lessee stipulates and agrees not to challenge the validity, enforceability or
characterization of the lease of the Premises as a unitary, unseverable
instrument pertaining to the lease of all, but not less than all, of the
Premises. Lessee shall support the intent of the parties that this Lease is a
unitary, unseverable instrument pertaining to the lease of all, but not less
than all, of the Premises.

         E. The expressions of intent set forth in this Section are a material
inducement to Lessor entering into this Lease.

         4. LEASE TERM. The Lease Term shall commence as of the Effective Date
and shall expire on the date which is twenty years and six months after the last
day of the month in which the Effective Date occurs unless terminated sooner as
provided in this Lease. The time period during which this Lease shall actually
be in effect is referred to herein as the "Lease Term."

         5. RENTAL AND OTHER PAYMENTS. A. If the Effective Date is a date other
than the first day of the month, Lessee shall pay Lessor on the Effective Date
the Base Monthly Rental

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prorated on the basis of the ratio that the number of days from the Effective
Date through the last day in the month containing the Effective Date bears to
the number of days in such month. Thereafter, on or before the first day of each
succeeding calendar month, Lessee shall pay Lessor in advance the Base Monthly
Rental.

         B. All sums of money required to be paid by Lessee under this Lease
which are not specifically referred to as rent ("Additional Rental") shall be
considered rent although not specifically designated as such. Lessor shall have
the same remedies for nonpayment of Additional Rental as those provided herein
for the nonpayment of Base Annual Rental.

         6. REPRESENTATIONS AND WARRANTIES OF LESSOR. The representations and
warranties of Lessor contained in this Section are being made to induce Lessee
to enter into this Lease and Lessee has relied and will continue to rely upon
such representations and warranties. Lessor represents and warrants to Lessee as
follows:

                  A. Organization, Authority and Status of Lessor. (i) Lessor
         has been duly organized and is validly existing and in good standing
         under the laws of the State of Delaware and is qualified to do business
         in any jurisdiction where such qualification is required. All necessary
         action has been taken to authorize the execution, delivery and
         performance by Lessor of this Lease and the other documents,
         instruments and agreements provided for herein. Lessor is not a
         "foreign limited liability company", "foreign corporation", "foreign
         partnership", "foreign trust" or "foreign estate" as such terms are
         defined in the Internal Revenue Code and the regulations promulgated
         thereunder. Lessor's United States tax identification number is
         correctly set forth on the signature page of this Lease.

                  (ii) The person who has executed this Lease on behalf of
         Lessor is duly authorized so to do.

                  B. Enforceability. This Lease constitutes the legal, valid and
         binding obligation of Lessor, enforceable against Lessor in accordance
         with its terms.

                  C. Litigation. There are no suits, actions, proceedings or
         investigations pending, or to the best of its knowledge, threatened
         against or involving Lessor before any arbitrator, or Governmental
         Authority which might reasonably result in any material adverse change
         in the contemplated business, condition, worth or operations of Lessor.

                  D. Absence of Breaches or Defaults. Lessor is not in default,
         beyond the passage of any applicable notice and cure periods, under any
         document, instrument or agreement to which Lessor is a party or by
         which Lessor or any of Lessor's property is subject or bound. The
         authorization, execution, delivery and performance of this Lease and
         the documents, instruments and agreements provided for herein will not
         result in any breach of or default under any other document, instrument
         or agreement to which Lessor is a party or by which Lessor, the
         Premises or any of Lessor's property is subject or bound.

         7. REPRESENTATIONS AND WARRANTIES OF LESSEE. The representations and
warranties of Lessee contained in this Section are being made to induce Lessor
to enter into this Lease and

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Lessor has relied, and will continue to rely, upon such representations and
warranties. Lessee represents and warrants to Lessor as follows:

                  A. Organization, Authority and Status of Lessee. (i) Lessee
         has been duly organized or formed, is validly existing and in good
         standing under the laws of its state of formation and is qualified to
         do business in any jurisdiction where such qualification is required.
         All necessary action has been taken to authorize the execution,
         delivery and performance by Lessee of this Lease and of the other
         documents, instruments and agreements provided for herein. Lessee is
         not a "foreign limited liability company", "foreign corporation",
         "foreign partnership", "foreign trust" or "foreign estate", as those
         terms are defined in the Internal Revenue Code and the regulations
         promulgated thereunder. Lessee's United States tax identification
         number is correctly set forth on the signature page of this Lease.

                     (ii) The person who has executed this Lease on behalf of
         Lessee is duly authorized to do so.

                  B. Enforceability. This Lease constitutes the legal, valid and
         binding obligation of Lessee, enforceable against Lessee in strict
         accordance with all of its terms.

                  C. Litigation. There are no suits, actions, proceedings or
         investigations pending, or to the best of its knowledge, threatened
         against or involving Lessee or the Premises before any arbitrator or
         Governmental Authority which might reasonably result in any material
         adverse change in the contemplated business, condition, worth or
         operations of Lessee or the Premises.

                  D. Absence of Breaches or Defaults. Lessee is not in default
         under any other document, instrument or agreement to which Lessee is a
         party or by which Lessee, the Premises or any of Lessee's property is
         subject or bound. The authorization, execution, delivery and
         performance of this Lease and the documents, instruments and agreements
         provided for herein will not result in any breach of or default under
         any document, instrument or agreement to which Lessee is a party or by
         which Lessee, the Premises or any of Lessee's property is subject or
         bound.

                  E. Licenses and Permits. Lessee has obtained all required
         licenses and permits, both governmental and private, to use and operate
         the Premises as a Permitted Concept.

                  F. Financial Condition; Information Provided to Lessor. The
         financial statements, all financial data and all other documents and
         information heretofore delivered to Lessor or Lender by or with respect
         to Lessee and/or the Premises in connection with this Lease and/or
         relating to Lessee and/or the Premises are true, correct and complete
         in all material respects, and there have been no amendments to such
         financial statements, financial data and other documents and
         information since the date such financial statements, financial data,
         documents and other information were prepared or delivered to Lessor or
         Lender, and no material adverse change has occurred to any such
         financial statements, financial data, documents and other information
         not disclosed in writing to Lessor and Lender.

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                 G. True Lease. Lessee intends for this Lease to be a "true
         lease" and not a financing lease, capital lease, mortgage, equitable
         mortgage, deed of trust, trust agreement, security agreement or other
         financing or trust arrangement, and the economic realities of this
         Lease are those of a true lease. The option to purchase provided for in
         this Lease may be exercised only by Lessee paying the greater of the
         fair market value of the Premises and the Purchase Price, which payment
         amount will not be nominal. The term of this Lease is less than the
         remaining economic life of the Premises. Lessee waives any claim or
         defense based upon the characterization of this Lease as anything other
         than a true lease, and Lessee stipulates and agrees not to challenge
         the validity, enforceability or characterization of the lease of the
         Premises as a true lease and further stipulates and agrees that nothing
         contained in this Lease creates or is intended to create a joint
         venture, partnership, equitable mortgage, trust, financing device or
         arrangement, security interest or the like. Lessee shall support the
         intent of the parties that the lease of the Premises pursuant to this
         Lease is a true lease and does not create a joint venture, partnership,
         equitable mortgage, trust, financing device or arrangement, security
         interest or the like, if, and to the extent that, any challenge occurs.

                 H. Liabilities of Lessor. Lessee is not liable for any
         indebtedness for money borrowed by Lessor and has not guaranteed any of
         the debts or obligations of Lessor.

         8.      NONCONSOLIDATION COVENANTS. Lessee covenants to Lessor for so
long as this Lease is in effect that:

                  (i) The annual financial statements of Lessee, including
         consolidated financial statements, if any, shall contain notes stating
         that (a) all of Lessor's assets are owned by Lessor and (b) Lessor is a
         separate entity with its own separate creditors which will be entitled
         to be satisfied out of Lessor's assets.

                  (ii) Lessee will not assume liability for any indebtedness for
         money borrowed by Lessor and does not, and will not, guarantee any of
         the debts or obligations of Lessor. Lessee will not hold itself out as
         being liable for any obligations or indebtedness of Lessor.

                  (iii) Lessee shall not and shall use its best efforts to cause
         its affiliates not to hold Lessor out to the public or to any
         individual creditors as being a unified entity with assets and
         liabilities in common with Lessee except that Lessor may be included in
         Lessee's or its affiliates' reports under the Securities Exchange Act
         of 1934, as amended, and its and their consolidated financial
         statements, as appropriate, provided such statements adequately
         disclose the ownership by Lessor of the Premises and that the Premises
         are available first to satisfy any creditors of Lessor.

                  (iv) Lessee shall conduct its business so as not to mislead
         others as to the separate identity of Lessor, and particularly will
         avoid the appearance of conducting business on behalf of Lessor.
         Without limiting the generality of the foregoing, no oral and written
         communications of Lessee, including, without limitation, letters,
         invoices, purchase orders, contracts, statements and loan applications,
         will be made in the name of Lessor which to the extent that to do
         otherwise would materially bear upon the maintenance of Lessor's
         separate identity.

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                  (v) Lessee will not act in Lessor's name.

                  (vi) Where necessary and appropriate, Lessee shall disclose
         the independent business status of Lessor to creditors of Lessee, if
         any.

                  (vii) The resolutions, agreements and other instruments of
         Lessee, if any, underlying the transactions described in this Lease
         will be maintained by Lessee.

                  (viii) All transactions between Lessee and Lessor will be no
         less fair to each party than they could obtain on an arm's-length
         basis.

                  (ix) The books, records and accounts of Lessee shall at all
         times be maintained in a manner permitting the assets and liabilities
         of Lessor to be easily separated and readily ascertained from those of
         Lessee.

                  (x) Lessee will not direct, or otherwise control, the ongoing
         business decisions of Lessor.

                  (xi) Lessee will not file or cause to be filed a voluntary or
         involuntary petition in bankruptcy on behalf of or against Lessor, nor
         seek substantive consolidation of the assets and liabilities of Lessor
         and Lessee in any bankruptcy or insolvency proceeding during the Lease
         Term and for a period of 91 days after the Lease Term.

         9. RENTALS TO BE NET TO LESSOR. The Base Annual Rental payable
hereunder shall be net to Lessor, so that this Lease shall yield to Lessor the
rentals specified during the Lease Term, and that all costs, expenses and
obligations of every kind and nature whatsoever relating to the Premises shall
be performed and paid by Lessee.

         10. TAXES AND ASSESSMENTS. Lessee shall pay, prior to the earlier of
delinquency or the accrual of interest on the unpaid balance, all taxes and
assessments (or the applicable installments of such taxes and assessments) of
every type or nature assessed against or imposed upon the Premises or Lessee
during the Lease Term which affect in any manner the net return realized by
Lessor under this Lease, including without limitation, the following:

             A. All taxes and assessments upon the Premises or any part thereof
     and upon any Personalty and improvements located on the Premises, whether
     belonging to Lessor or Lessee, or any tax or charge levied in lieu of such
     taxes and assessments;

             B. All taxes, charges, license fees and or similar fees imposed by
     reason of the use of the Premises by Lessee; and

             C. All excise, transaction, privilege, license, sales, use and
     other taxes upon the rental or other payments hereunder, the leasehold
     estate of either party or the activities of either party pursuant to this
     Lease.

     All taxing authorities shall be instructed to send all tax and
assessment invoices to Lessor. After recording the information on such invoices,
Lessor shall forward such invoices to

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Lessee for payment. Within 30 days after each tax and assessment payment is
required by this Section to be paid, Lessee shall provide Lessor with evidence
satisfactory to Lessor that such payment was made in a timely fashion. Lessee
may, at its own expense, contest or cause to be contested (in the case of any
item involving more than $10,000.00, after prior written notice to Lessor), by
appropriate legal proceedings conducted in good faith and with due diligence,
the amount or validity or application, in whole or in part, of any item
specified in the foregoing subsection A or lien therefor, provided that (i) such
proceeding shall suspend the collection thereof from the Premises or any
interest therein, (ii) neither the Premises nor any interest therein would be in
any danger of being sold, forfeited or lost by reason of such proceedings, (iii)
no Event of Default is occurring, and (iv) Lessee shall have deposited with
Lessor adequate reserves for the payment of the taxes, together with all
interest and penalties thereon, unless paid in full under protest, or Lessee
shall have furnished the security as may be required in the proceeding or as may
be required by Lessor to insure payment of any contested taxes.

         11. UTILITIES. Lessee shall contract, in its own name, for and pay when
due all charges for the connection and use of water, gas, electricity,
telephone, garbage collection, sewer use and other utility services supplied to
the Premises during the Lease Term. Under no circumstances shall Lessor be
responsible for any interruption of any utility service.

         12. INSURANCE. Throughout the Lease Term Lessee shall maintain with
respect to the Premises, at its sole expense, the following types and amounts of
insurance (which may be included under a blanket insurance policy if all the
other terms hereof are satisfied), in addition to such other insurance as Lessor
may reasonably require from time to time:

             A. Insurance against loss, damage or destruction by fire and other
         casualty, including theft, vandalism and malicious mischief, flood (if
         the Premises is in a location designated by the Federal Emergency
         Management Administration as a Special Flood Hazard Area), earthquake
         (if the Premises is in an area subject to destructive earthquakes
         within recorded history), boiler explosion (if there is any boiler upon
         the Premises), plate glass breakage, sprinkler damage (if the Premises
         has a sprinkler system), all matters covered by a standard extended
         coverage endorsement, all matters covered by a special coverage
         endorsement commonly known as an "all-risk" endorsement and such other
         risks as Lessor may reasonably require, insuring the Premises for not
         less than 100% of their full insurable replacement cost.

             B. Comprehensive general liability and property damage insurance,
         including a products liability clause, covering Lessor and Lessee
         against bodily injury liability, property damage liability and
         automobile bodily injury and property damage liability, including
         without limitation any liability arising out of the ownership,
         maintenance, repair, condition or operation of the Premises or
         adjoining ways, streets or sidewalks and, if applicable, insurance
         covering Lessor and Lessee against liability arising from the sale of
         liquor, beer or wine on the Premises. Such insurance policy or policies
         shall contain a broad form contractual liability endorsement under
         which the insurer agrees to insure Lessee's obligations under Section
         18 hereof to the extent insurable, and a "severability of interest"
         clause or endorsement which precludes the insurer from denying the
         claim of Lessee or Lessor because of the negligence or other acts of
         the other, shall be in amounts of not less

                                       11
<PAGE>   12

         than $1,000,000.00 per injury and occurrence with respect to any
         insured liability, whether for personal injury or property damage, or
         such higher limits as Lessor may reasonably require from time to time,
         and shall be of form and substance satisfactory to Lessor.

             C. State Worker's Compensation insurance in the statutorily
         mandated limits, employer's liability insurance with limits not less
         than $500,000.00 or such greater amount as Lessor may from time to time
         require and such other insurance as may be necessary to comply with
         applicable laws.

             D. Business income insurance or rental interruption insurance, as
         requested by Lessor, equal to 100% of the Base Annual Rental for a
         period of not less than six months.

             All insurance policies shall:

             (i)   Provide for a waiver of subrogation by the insurer as to
         claims against Lessor, its employees and agents and provide that such
         insurance cannot be unreasonably cancelled, invalidated or suspended on
         account of the conduct of Lessee, its officers, directors, employees or
         agents;

             (ii)  Provide that any "no other insurance" clause in the
         insurance policy shall exclude any policies of insurance maintained by
         Lessor and that the insurance policy shall not be brought into
         contribution with insurance maintained by Lessor;

             (iii) Contain a standard without contribution mortgage clause
         endorsement in favor of Lender and any other lender designated by
         Lessor or Lender;

             (iv)  Provide that the policy of insurance shall not be
         terminated, cancelled or substantially modified without at least thirty
         (30) days' prior written notice to Lessor, Lender and to any lender
         covered by any standard mortgage clause endorsement;

             (v)   Provide that the insurer shall not have the option to
         restore the Premises if Lessor elects to terminate this Lease in
         accordance with the terms hereof;

             (vi)  Be issued by insurance companies licensed to do business in
         the State and which are rated A:VI or better by Best's Insurance Guide
         or are otherwise approved by Lessor; and

             (vii) Provide that the insurer shall not deny a claim because of
         the negligence of Lessee, anyone acting for Lessee or any subtenant or
         other occupant of the Premises.

         It is expressly understood and agreed that the foregoing minimum limits
of insurance coverage shall not limit the liability of Lessee for its acts or
omissions as provided in this Lease.

                                       12
<PAGE>   13

All insurance policies (with the exception of worker's compensation insurance to
the extent not available under statutory law) shall designate Lessor, Lender and
any other mortgagee of Lessor as additional insureds as their interests may
appear and shall be payable as set forth in Section 21 hereof. All such policies
shall be written as primary policies, with deductibles not to exceed 10% of the
amount of coverage. Any other policies, including any policy now or hereafter
carried by Lessor or Lender, shall serve as excess coverage. Lessee shall
procure policies for all insurance for periods of not less than one year and
shall provide to Lessor and any lender of Lessor certificates of insurance or,
upon Lessor's request, duplicate originals of insurance policies evidencing that
insurance satisfying the requirements of this Lease is in effect at all times.

         13. TAX AND INSURANCE IMPOUND. Upon the occurrence of an Event of
Default, Lessor may require Lessee to pay to Lessor sums which will provide an
impound account (which shall not be deemed a trust fund) for paying up to the
next one year of taxes, assessments and/or insurance premiums. Upon such
requirement, Lessor will estimate the amounts needed for such purposes and will
notify Lessee to pay the same to Lessor in equal monthly installments, as nearly
as practicable, in addition to all other sums due under this Lease. Should
additional funds be required at any time, Lessee shall pay the same to Lessor
within ten (10) days of demand. Lessee shall advise Lessor of all taxes and
insurance bills which are due and shall cooperate fully with Lessor in assuring
that the same are paid. Lessor may deposit all impounded funds in accounts
insured by any federal or state agency and may commingle such funds with other
funds and accounts of Lessor. Interest or other gains from such funds, if any,
shall be the sole property of Lessor. Upon the occurrence of an Event of Default
by Lessee, Lessor may apply all impounded funds against any sums due from Lessee
to Lessor. Lessor shall give to Lessee an annual accounting showing all credits
and debits to and from such impounded funds received from Lessee.

         14. PAYMENT OF RENTAL AND OTHER SUMS. All rental and other sums which
Lessee is required to pay hereunder shall be the unconditional obligation of
Lessee and shall be payable in full when due without any setoff, abatement,
deferment, deduction or counterclaim whatsoever. Upon execution of this Lease,
Lessee shall establish arrangements whereby payments of the Base Monthly Rental,
any Additional Rental and impound payments, if any, are transferred by wire or
other means directly from Lessee's bank account to such account as Lessor may
designate; provided, however, upon notice from Lender to Lessee and Lessor
delivered in the manner set forth in Section 29, Lessee shall deliver all
payments of Base Monthly Rental as specified in such notice from Lender and
Lessor hereby acknowledges that Lessee shall receive full credit hereunder for
any payments so made to Lender as if such payment had been made to Lessor. Any
delinquent payment (that is, any payment not made within five calendar days
after the date when due) shall, in addition to any other remedy of Lessor, incur
a late charge of 5% (which late charge is intended to compensate Lessor for the
cost of handling and processing such delinquent payment and should not be
considered interest) and bear interest at the Default Rate, such interest to be
computed from and including the date such payment was due through and including
the date of the payment; provided, however, in no event shall Lessee be
obligated to pay a sum of late charge and interest higher than the maximum legal
rate then in effect.

                                       13

<PAGE>   14

         15. USE. A. Lessee shall use the Premises solely for the operation of a
Permitted Concept and for no other purpose. Lessee shall occupy the Premises
promptly following the Effective Date and, except as set forth below and except
during periods when the Premises is untenantable by reason of fire or other
casualty or condemnation (provided, however, during all such periods while the
Premises is untenantable, Lessee shall strictly comply with the terms and
conditions of Section 21 of this Lease), Lessee shall at all times during the
Lease Term occupy the Premises and shall diligently operate its business on the
Premises. Lessee may cease diligent operation of business at the Premises for a
period not to exceed 90 days and may do so only once within any five-year period
during the Lease Term. If Lessee does discontinue operation as permitted by this
Section, Lessee shall (i) give written notice to Lessor within 10 days after
Lessee elects to cease operation, (ii) provide adequate protection and
maintenance of the Premises during any period of vacancy and (iii) pay all costs
necessary to restore the Premises to their condition on the day operation of the
business ceased at such time as the Premises is reopened for Lessee's business
operations or other substituted use approved by Lessor as contemplated below.
Notwithstanding anything herein to the contrary, Lessee shall pay the Base
Monthly Rental on the first day of each month during any period in which Lessee
discontinues operation.

         Lessee shall not, by itself or through any assignment, sublease or
other type of transfer, convert the Premises to an alternative use during the
Lease Term without Lessor's consent, which consent shall not be unreasonably
withheld. Lessor may consider any or all of the following in determining whether
to grant its consent, without being deemed to be unreasonable: (i) whether the
rental paid to Lessor would be equal to or greater than the anticipated rental
assuming continued existing use, (ii) whether the proposed rental to be paid to
Lessor is reasonable considering the converted use of the Premises and the
customary rental prevailing in the community for such use, (iii) whether the
converted use will be consistent with the highest and best use of the Premises,
and (iv) whether the converted use will increase Lessor's risks or decrease the
value of the Premises.

         B. Notwithstanding the provisions of the foregoing Section 15.A, Lessee
may cease continuous operation of its business on a Premises for up to 120 days
if Lessee, in the exercise of its reasonable business judgment, determines in
good faith that the business at such Premises cannot be operated economically as
evidenced by an affidavit so stating signed by an officer of Lessee ("Uneconomic
Operations"). If Lessee does not, in good faith, permanently reopen the Premises
for operation as a Permitted Concept within 120 days of cessation, then, Lessee
shall, on or prior to the last day of the 120-day period, substitute the
Premises in accordance with Section 58 of this Lease. If Lessee fails to
substitute the Premises as contemplated in this Section B in accordance with the
requirements of Section 13 of the Loan Agreement, such failure shall be an Event
of Default under this Lease and shall entitle Lessor to immediately exercise all
remedies available at law or in equity and as set forth in this Lease.

         16. COMPLIANCE WITH LAWS, RESTRICTIONS, COVENANTS AND ENCUMBRANCES.

         A. Lessee's use and occupation of the Premises, and the condition
thereof, shall, at Lessee's sole cost and expense, comply fully with (i) all
applicable statutes, regulations, rules, ordinances, codes, licenses, permits,
orders and approvals of each Governmental Authority, including, without
limitation, all health, building, fire, safety and other codes, ordinances and
requirements

                                       14

<PAGE>   15

and all applicable standards of the National Board of Fire Underwriters, and all
policies or rules of common law, in each case, as amended, and any judicial or
administrative interpretation thereof, including any judicial order, consent,
decree or judgment applicable to Lessee (collectively, "Applicable
Regulations"), and (ii) all restrictions, covenants and encumbrances of record
with respect to the Premises.

         B. Lessee will not permit any act or condition to exist on or about the
Premises which will increase any insurance rate thereon, except when such acts
are required in the normal course of its business and Lessee shall pay for such
increase.

         C. Without limiting the generality of the other provisions of this
Section, Lessee agrees that it shall be responsible for complying in all
respects with the Americans with Disabilities Act of 1990, as such act may be
amended from time to time, and all regulations promulgated thereunder
(collectively, the "ADA"), as it affects the Premises, including, but not
limited to, making required "readily achievable" changes to remove any
architectural or communications barriers, and providing auxiliary aids and
services within the Premises. Lessee further agrees that any and all alterations
made to the Premises during the Lease Term will comply with the requirements of
the ADA. All plans for alterations which must be submitted to Lessor under the
provisions of Section 18 must include a statement from a licensed Architect or
Engineer certifying that they have reviewed the plans, and that the plans comply
with all applicable provisions of the ADA. Any subsequent approval or consent to
the plans by the Lessor shall not be deemed to be a representation of Lessor's
part that the plans comply with the ADA, which obligation shall remain with
Lessee. Lessee agrees that it will defend, indemnify and hold harmless the
Indemnified Parties from and against any and all Losses caused by, incurred or
resulting from Lessee's failure to comply with its obligations under this
Section.

         D. Lessee represents and warrants to Lessor and Environmental Insurer
as follows:

                 (i)   The Premises and Lessee are not in violation of, or
         subject to, any existing, pending or to the best of Lessee's knowledge
         threatened investigation or inquiry by any Governmental Authority or to
         any remedial obligations under any Environmental Laws, and this
         representation and warranty would continue to be true and correct
         following disclosure to each Governmental Authority of all relevant
         facts, conditions and circumstances, if any, pertaining to the
         Premises. If any such investigation or inquiry is subsequently
         initiated, Lessee will promptly notify Lessor.

                 (ii)  Lessee has not obtained and is not required to obtain any
         permits, licenses or similar authorizations to construct, occupy,
         operate or use any buildings, improvements, fixtures and equipment
         forming a part of the Premises by reason of any Environmental Laws.

                 (iii) No Hazardous Materials have been used, handled,
         manufactured, generated, produced, stored, treated, processed,
         transferred, disposed of or otherwise Released by Lessee, and to the
         best of Lessee's knowledge, by any third party in, on, under, from or
         about the Premises, except in De Minimis Amounts.

                                       15
<PAGE>   16

                  (iv) The Premises do not contain Hazardous Materials other
         than in De Minimis Amounts in full compliance with all Environmental
         laws.

                  (v) To the best of Lessee's knowledge, there is no threat of
         any Release migrating to the Premises.

                  (vi) There is no present, or to the best of Lessee's
         knowledge, past non-compliance with Environmental Laws, or with permits
         issued pursuant thereto, in connection with the Premises.

                  (vii) Lessee has not received any written or oral notice or
         other communication from any person or entity (including but not
         limited to a Governmental Authority) relating to Hazardous Materials or
         Remediation thereof, of possible liability of any person or entity
         pursuant to any Environmental Law, other environmental conditions in
         connection with the Premises, or any actual or potential administrative
         or judicial proceedings in connection with any of the foregoing.

                  (viii) Lessee has truthfully and fully provided to Lessor, in
         writing, any and all information relating to environmental conditions
         in, on, under or from the Premises that is known to Lessee and that is
         contained in Lessee's files and records, including but not limited to
         any reports relating to Hazardous Materials in, on, under or from the
         Premises.

         E.       Lessee covenants to Lessor and Environmental Insurer during
the Lease Term that: (i) all uses and operations on or of the Premises, whether
by Lessee or any other person or entity, shall be in compliance with all
Environmental Laws and permits issued pursuant thereto; (ii) there shall be no
Releases in, on, under or from the Premises, except in De Minimis Amounts; (iii)
there shall be no Hazardous Materials or Regulated Substances in, on, or under
the Premises, except in De Minimis Amounts; (iv) Lessee shall keep the Premises
free and clear of all liens and other encumbrances imposed pursuant to any
Environmental Law, whether due to any act or omission of Lessee or any other
person or entity (the "Environmental Liens"); (v) Lessee shall, at its sole cost
and expense, fully and expeditiously cooperate in all activities pursuant to
subsection (1) below, including but not limited to providing all relevant
information and making knowledgeable persons available for interviews; (vi)
Lessee shall, at its sole cost and expense, perform any environmental site
assessment or other investigation of environmental conditions in connection with
the Premises as may be reasonably requested by Lessor (including but not limited
to sampling, testing and analysis of soil, water, air, building materials and
other materials and substances whether solid, liquid or gas), and share with
Lessor and Environmental Insurer the reports and other results thereof, and
Lessor, Environmental Insurer and the other Indemnified Parties shall be
entitled to rely on such reports and other results thereof; (vii) Lessee shall,
at its sole cost and expense, comply with all reasonable written requests of
Lessor to (1) reasonably effectuate Remediation of any condition (including but
not limited to a Release) in, on, under or from the Premises; (2) comply with
any Environmental Law; (3) comply with any directive from any Governmental
Authority; and (4) take any other reasonable action necessary or appropriate for
protection of human health or the environment; (viii) Lessee shall not do or
allow any tenant or other user of the Premises to do any act that materially
increases the dangers to human health or the environment, poses an unreasonable
risk of harm to any person or entity (whether on or off the Premises), impairs
or may impair the

                                       16

<PAGE>   17

value of the Premises, is contrary to any requirement of any insurer,
constitutes a public or private nuisance, constitutes waste, or violates any
covenant, condition, agreement or easement applicable to the Premises; and (ix)
Lessee shall immediately notify Lessor in writing of (A) any presence of
Releases or Threatened Releases in, on, under, from or migrating towards the
Premises; (B) any non-compliance with any Environmental Laws related in any way
to the Premises; (C) any actual or potential Environmental Lien; (D) any
required or proposed Remediation of environmental conditions relating to the
Premises; and (E) any written or oral notice or other communication which Lessee
becomes aware from any source whatsoever (including but not limited to a
Governmental Authority) relating in any way to Hazardous Materials or
Remediation thereof, possible liability of any person or entity pursuant to any
Environmental Law, other environmental conditions in connection with the
Premises, or any actual or potential administrative or judicial proceedings in
connection with anything referred to in this Section.

         F. Lessee shall, at its sole cost and expense, protect, defend,
indemnify, release and hold harmless the Indemnified Parties from and against
any and all Losses (excluding Losses arising out of any of the Indemnified
Parties' gross negligence or willful misconduct) and costs of Remediation
(whether or not performed voluntarily), engineers' fees, environmental
consultants' fees, and costs of investigation (including but not limited to
sampling, testing, and analysis of soil, water, air, building materials and
other materials and substances whether solid, liquid or gas) imposed upon or
incurred by or asserted against any Indemnified Parties, and directly or
indirectly arising out of or in any way relating to any one or more of the
following: (i) any presence of any Hazardous Materials in, on, above, or under
the Premises; (ii) any past or present Release or Threatened Release in, on,
above, under or from the Premises; (iii) any activity by Lessee, any person or
entity affiliated with Lessee or any other tenant or other user of the Premises
in connection with any actual, proposed or threatened use, treatment, storage,
holding, existence, disposition or other Release, generation, production,
manufacturing, processing, refining, control, management, abatement, removal,
handling, transfer or transportation to or from the Premises of any Hazardous
Materials at any time located in, under, on or above the Premises; (iv) any
activity by Lessee, any person or entity affiliated with Lessee or any other
tenant or other user of the Premises in connection with any actual or proposed
Remediation of any Hazardous Materials at any time located in, under, on or
above the Premises, whether or not such Remediation is voluntary or pursuant to
court or administrative order, including but not limited to any removal,
remedial or corrective action; (v) any past, present or threatened
non-compliance or violations of any Environmental Laws (or permits issued
pursuant to any Environmental Law) in connection with the Premises or operations
thereon, including but not limited to any failure by Lessee, any person or
entity affiliated with Lessee or any other tenant or other user of the Premises
to comply with any order of any Governmental Authority in connection with any
Environmental Laws; (vi) the imposition, recording or filing or the threatened
imposition, recording or filing of any Environmental Lien encumbering the
Premises; (vii) any administrative processes or proceedings or judicial
proceedings in any way connected with any matter addressed in this Section;
(viii) any past, present or threatened injury to, destruction of or loss of
natural resources in any way connected with the Premises, including but not
limited to costs to investigate and assess such injury, destruction or loss;
(ix) any acts of Lessee, any person or entity affiliated with Lessee or any
other tenant or user of the Premises in arranging for disposal or treatment, or
arranging with a transporter for transport for disposal or treatment, of
Hazardous Materials owned or possessed by Lessee, any person or entity
affiliated with Lessee or any other tenant or other user of the Premises, at any
facility or incineration

                                       17
<PAGE>   18

vessel owned or operated by another person or entity and containing such or
similar Hazardous Materials; (x) any acts of Lessee, any person or entity
affiliated with Lessee or any other tenant or other user of the Premises, in
accepting any Hazardous Materials for transport to disposal or treatment
facilities, incineration vessels or sites selected by Lessee, any person or
entity affiliated with Lessee or any other tenant or other user of the Premises,
from which there is a Release, or a Threatened Release of any Hazardous Material
which causes the incurrence of costs for Remediation; (xi) any personal injury,
wrongful death, or property damage arising under any statutory or common law or
tort law theory, including but not limited to damages assessed for the
maintenance of a private or public nuisance or for the conducting of an
abnormally dangerous activity on or near the Premises; and (xii) any
misrepresentation or inaccuracy in any representation or warranty or material
breach or failure to perform any covenants or other obligations pursuant to this
Section.

        G.  Upon reasonable prior notice, Lessor, Lender, any other lender to
Lessor, Environmental Insurer and any other person or entity designated by
Lessor, including but not limited to any receiver, any representative of a
Governmental Authority, and any environmental consultant, shall have the right,
but not the obligation, to enter upon the Premises at all reasonable times
(including, without limitation, in connection with a proposed sale or conveyance
of the Premises or a proposed financing or refinancing secured by the Premises
or in connection with the exercise of any remedies set forth in this Lease, the
Mortgages or the other Loan Documents or for any other commercially reasonable
purpose) to assess any and all aspects of the environmental condition of the
Premises and its use, including but not limited to conducting any environmental
assessment or audit (the scope of which shall be determined in Lessor's sole and
absolute discretion) and taking samples of soil, groundwater or other water,
air, or building materials, and conducting other invasive testing. Lessee shall
cooperate with and provide access to Lessor, Lender, Environmental Insurer and
any such person or entity designated by Lessor. Any such assessment or
investigation shall be at Lessee's sole cost and expense. Notwithstanding the
foregoing, any such assessment or investigation ordered for the purpose of
Lender's assignment of the Loan (as defined in the Loan Agreement) shall be at
Lender's cost and expense.

        H.  The obligations of Lessee and the rights and remedies of Lessor
under the foregoing subsections D through G shall survive the termination,
expiration and/or release of this Lease.

        I.  In addition to the other requirements of this Section, Lessee shall,
at all times throughout the Lease Term, comply with all Applicable Regulations.

        17. CONDITION OF PREMISES; MAINTENANCE. Lessee has inspected, or had
the opportunity to inspect, the Premises and hereby accepts the Premises "AS IS"
and "WHERE IS" with no representation or warranty of Lessor as to the condition
thereof. The Premises shall be kept in good, clean, sanitary and working
condition; and Lessee shall at all times at its own expense maintain, repair and
replace, as necessary, the Premises, including all portions of the Premises,
whether or not the Premises were in such condition on the Effective Date.

                                       18

<PAGE>   19

         18. WASTE; ALTERATIONS AND IMPROVEMENTS. Lessee shall not commit actual
or constructive waste upon the Premises. During the Lease Term, Lessee shall not
alter the exterior, structural, plumbing or electrical elements of the Premises
in any manner without the consent of Lessor, which consent shall not be
unreasonably withheld or conditioned; provided, however, Lessee may undertake
nonstructural alterations to the Premises costing less than $50,000.00 without
Lessor's consent. If Lessor's consent is required hereunder and Lessor consents
to the making of any such alterations, the same shall be made by Lessee at
Lessee's sole expense by a licensed contractor and according to plans and
specifications approved by Lessor and subject to such other conditions as Lessor
shall require. Any work at any time commenced by Lessee on the Premises shall be
prosecuted diligently to completion, shall be of good workmanship and materials
and shall comply fully with all the terms of this Lease. Upon completion of any
alterations, Lessee shall promptly provide Lessor with (i) evidence of full
payment to all laborers and materialmen contributing to the alterations, (ii) an
architect's certificate certifying the alterations to have been completed in
conformity with the plans and specifications, (iii) a certificate of occupancy
(if the alterations are of such a nature as would require the issuance of a
certificate of occupancy), and (iv) any other documents or information
reasonably requested by Lessor. Lessee shall execute and file or record, as
appropriate, a "Notice of Non-Responsibility," or any equivalent notice
permitted under applicable law in the state where the Premises is located. Any
addition to or alteration of the Premises shall be deemed a part of the Premises
and belong to Lessor, and Lessee shall execute and deliver to Lessor such
instruments as Lessor may require to evidence the ownership by Lessor of such
addition or alteration.

         19. INDEMNIFICATION. Lessee shall indemnify, protect, defend and hold
harmless each of the Indemnified Parties from and against any and all Losses
(excluding Losses suffered by an Indemnified Party arising out of such
Indemnified Party's gross negligence or willful misconduct) caused by, incurred
or resulting from Lessee's operations of or relating in any manner to the
Premises, whether relating to their original design or construction, latent
defects, alteration, maintenance, use by Lessee or any person thereon,
supervision or otherwise, or from any breach of, upon an Event of Default under,
or failure to perform, any term or provision of this Lease by Lessee, its
officers, employees, agents or other persons. It is expressly understood and
agreed that Lessee's obligations under this Section shall survive the expiration
or earlier termination of this Lease for any reason.

         20. QUIET ENJOYMENT. So long as Lessee shall pay the rental and other
sums herein provided and shall keep and perform all of the terms, covenants and
conditions on its part herein contained, Lessee shall have, subject and
subordinate to Lessor's rights herein, the right to the peaceful and quiet
occupancy of the Premises.

         21. CONDEMNATION OR DESTRUCTION. A. In case of a taking of all or any
part of the Premises or the commencement of any proceedings or negotiations
which might result in a taking for any public or quasi-public purpose by any
lawful power or authority by exercise of the right of condemnation or eminent
domain or by agreement between Lessor, Lessee and those authorized to exercise
such right ("Taking"), Lessee will promptly give written notice thereof to
Lessor, generally describing the nature and extent of such Taking and including
copies of any documents or notices received in connection therewith.

                                       19
<PAGE>   20

         B. In case of a Taking of the whole of any of the Premises, other than
for temporary use ("Total Taking"), this Lease shall terminate with respect to
such Premises as of the date of the Total Taking, but this Lease shall otherwise
continue in full force and effect with respect to the remaining Premises. From
and after the date of a Total Taking, the Base Annual Rental shall be reduced by
an amount equal to the product of (i) the net award or payment resulting from
such Total Taking, after deducting all costs, fees and expenses incident to the
collection of such award of payment (the "Net Amount"), and (ii) 11%. If the
date of such Total Taking is other than the first day of a month, the Base
Annual Rental payable for the month in which such Total Taking occurs shall be
apportioned based on such Adjustment as of the date of the Total Taking.
Lessee's obligations to Lessor under Section 18 of this Lease with respect to
such Premises and Lessee's obligation to pay all other sums of money under this
Lease (whether payable to Lessor or to a third-party) which accrue prior to the
date of such Total Taking shall survive the termination of this Lease with
respect to such Premises. Total Taking shall include a taking of substantially
all the Premises if, in the sole determination of Lessor, the remainder of the
Premises is not useable and cannot be made useable for the purposes provided
herein. Lessor shall be entitled to receive the entire award or payment in
connection with any taking of the Premises without deduction for any estate
vested in Lessee by this Lease. Lessee hereby expressly assigns to Lessor all of
its right, title and interest in and to every such award or payment and agrees
that Lessee shall not be entitled to any award or payment for the value of
Lessee's leasehold interest in the Lease. Lessee shall be entitled to claim and
receive any award or payment from the condemning authority expressly granted for
the taking of Lessee's Personalty, the interruption of its business and moving
expenses, but only if such claim or award does not adversely affect or interfere
with the prosecution of Lessor's claim for the Taking. Lessee shall promptly
send Lessor copies of all correspondence and pleadings relating to any such
claim.

         C. In case of a temporary use of all or any part of the Premises by a
Taking ("Temporary Taking"), this Lease shall remain in full force and effect
without any reduction of Base Annual Rental, Additional Rental or any other sum
payable hereunder. Except as provided below, Lessee shall be entitled to the
entire award for a Temporary Taking, whether paid by damages, rent or otherwise,
unless the period of occupation and use by the condemning authorities shall
extend beyond the date of expiration of this Lease, in which case the award made
for such Taking shall be apportioned between Lessor and Lessee as of the date of
such expiration. At the termination of any such Temporary Taking, Lessee will,
at its own cost and expense and pursuant to the terms of Section 18 above,
promptly commence and complete the restoration of the Premises; provided,
however, Lessee shall not be required to restore the Premises if the Lease Term
shall expire prior to, or within one year after, the date of termination of the
Temporary Taking, and in such event Lessor shall be entitled to recover all
damages and awards arising out of the failure of the condemning authority to
repair and restore the Premises at the expiration of such Temporary Taking.

         D. In the event of a Taking of less than all of the Premises for other
than a temporary use ("Partial Taking") or of damage or destruction to all or
any part of the Premises, all awards, compensation or damages shall be paid to
Lessor, and Lessor shall have the option to (i) terminate this Lease, provided
that Lessor shall have obtained Lender's prior written consent, by notifying
Lessee within 60 days after Lessee gives Lessor notice of such damage or
destruction or that title has vested in the taking authority or (ii) continue
this Lease in effect,

                                       20
<PAGE>   21

which election may be evidenced by either a notice from Lessor to Lessee or
Lessor's failure to notify Lessee that Lessor has elected to terminate this
Lease within such 60-day period. Lessee shall have a period of 60 days after
Lessor's notice that it has elected to terminate this Lease during which to
elect to continue this Lease on the terms herein provided. If Lessee does not
elect to continue this Lease or shall fail during such 60-day period to notify
Lessor of Lessee's intent to continue this Lease, then this Lease shall
terminate as of the last day of the month during which such period expired.
Lessee shall then immediately vacate and surrender the Premises, all obligations
of either party hereunder shall cease as of the date of termination (provided,
however, Lessee's obligations to Lessor under Section 19 and Lessee's
obligations to pay Base Annual Rental, Additional Rental and all other sums
(whether payable to Lessor or a third-party) accruing under this Lease prior to
the date of termination shall survive such termination), the Base Annual Rental
shall be reduced by an amount equal to the product of (i) the Net Award
resulting from such Taking and (ii) 11%, and Lessor may retain all such awards,
compensation or damages. If Lessor elects not to terminate this Lease, or if
Lessor elects to terminate this Lease but Lessee elects to continue this Lease,
then this Lease shall continue in full force and effect on the following terms:
(i) all Base Annual Rental, Additional Rental and other sums and obligations due
under this Lease shall continue unabated, and (ii) Lessee shall promptly
commence and diligently prosecute restoration of the Premises to the same
condition, as nearly as practicable, as prior to such partial condemnation,
damage or destruction as approved by Lessor. Lessor shall promptly make
available in installments as restoration progresses an amount up to but not
exceeding the amount of any award, compensation or damages received by Lessor,
upon request of Lessee accompanied by evidence reasonably satisfactory to Lessor
that such amount has been paid or is due and payable and is properly a part of
such costs and that Lessee has complied with the terms of Section 18 above in
connection with the restoration. Lessor shall be entitled to keep any portion of
such award, compensation or damages which may be in excess of the cost of
restoration, and Lessee shall bear all additional costs, fees and expenses of
such restoration in excess of the amount of any such award, compensation or
damages.

         E. Notwithstanding the foregoing, if at the time of any Taking or any
damage or destruction to all or any part of the Premises or at any time
thereafter an Event of Default has occurred and such Event of Default shall be
continuing, Lessor is hereby authorized and empowered but shall not be
obligated, in the name and on behalf of Lessee and otherwise, to file and
prosecute Lessee's claim, if any, for an award on account of such Taking or for
insurance proceeds on account of such damage or destruction and to collect such
award or proceeds and apply the same, after deducting all costs, fees and
expenses incident to the collection thereof, to the curing of such Event of
Default and any other then existing Event of Default under this Lease and/or to
the payment of any amounts owed by Lessee to Lessor under this Lease, in such
order, priority and proportions as Lessor in its discretion shall deem proper.

         F. Notwithstanding the foregoing, nothing in this Section 21 shall be
construed as limiting or otherwise adversely affecting the representations,
warranties, covenants and characterizations in and of this Lease, including,
without limitation, those provisions set forth in Section 3 of this Lease.

                                       21
<PAGE>   22

         22. INSPECTION. Lessor and its authorized representatives shall have
the right, upon giving reasonable notice, to enter the Premises or any part
thereof and inspect the same and make photographic or other evidence concerning
Lessee's compliance with the terms of this Lease. Lessor and its authorized
representatives will use reasonable efforts to minimize any inconvenience or
interference with Lessee's business while conducting such entry and inspection.
Notwithstanding the foregoing, Lessee hereby waives any claim for damages for
any injury or inconvenience to or interference with Lessee's business, any loss
of occupancy or quiet enjoyment of the Premises and any other loss occasioned by
such entry, unless such entry is due to Lessor's or its authorized
representatives' gross negligence or willful misconduct. Lessee shall keep and
maintain at Lessee's chief executive office full, complete and appropriate books
of account and records of Lessee's business relating to the Premises in
accordance with GAAP. To the extent permitted by law, Lessee's books and records
shall at all times be open for inspection by Lessor or Lender, their respective
auditors or other authorized representatives and shall show such information as
is reasonably necessary to determine compliance with Lessor's obligations under
the Loan Documents.

         23. OPTION TO PURCHASE THE PROPERTIES. Lessee shall have the option
during the 90 days immediately preceding the tenth and twentieth anniversaries
of this Lease and during the 90-day period immediately preceding the end of the
first and second optional extension terms set forth in Section 28 of this Lease,
if applicable (as applicable, the "Window"), to elect to purchase the Premises
for the greater of (i) their fair market value (which fair market value shall be
determined in the manner set forth below) or (ii) the Purchase Price (provided
that the Purchase Price shall be adjusted for purposes of this Section 23 to
include only those Premises subject to the Lease at the time the option to
purchase is consummated). Lessee shall elect such option by giving written
notice (the "Option Notice") to Lessor of its intention to do so, and the
closing of such purchase must occur during the first 90 days (the "Purchase
Period") following the end of the applicable Window for which the Option Notice
was given. Within 90 days of Lessor's receipt of the Option Notice, Lessor
shall, at Lessee's sole expense, retain an independent MAI appraiser to prepare
an appraisal of the fair market value of the Premises, including any additions
or renovations thereto. In determining the fair market value of the Premises,
the appraiser shall utilize the cost, income and sales comparison approaches to
value. In utilizing the income approach, the appraiser shall determine the
"leased fee" value of the Premises, which shall be arrived at by considering (i)
the income that would be produced by this Lease through the end of the fully
extended Lease Term, and (ii) any other factors relating to such approach which
the appraiser shall deem relevant in his sole discretion. The highest amount
which results from the calculation of each of the cost approach, the income
approach, and the sales comparison approach, all as determined in accordance
with the provisions of this Section, shall constitute the fair market value of
the Premises for purposes of this Section. If within 20 days after being
notified of the result of such appraisal Lessee elects to reject that appraisal,
then the first appraisal shall become null and void and Lessor shall nominate to
Lessee a list of not less than three independent MAI appraisers who are
experienced with appraising property similar to the Premises, and Lessee shall
select one such appraiser. Within 60 days of such selection, Lessor shall retain
such appraiser to prepare an appraisal of the Premises in the same manner
described above. Within 20 days after the results of that appraisal have been
delivered to Lessee, Lessee shall notify Lessor of its election to exercise this
option to purchase the Premises for the price set forth in such appraisal. If
such notice of exercise is not received by Lessor within such

                                       22
<PAGE>   23

20-day period, the option for such time period shall lapse and this Lease shall
remain in full force and effect.

         Upon exercise of this option, Lessor and Lessee shall open an escrow
account with a recognized title insurance or trust company selected by Lessor.
Such escrow shall be subject to the standard escrow instructions of the escrow
agent, to the extent they are not inconsistent herewith. At or before the close
of escrow, Lessor shall deliver to the escrow agent its special warranty deed
conveying to Lessee all of Lessor's right, title and interest in the Premises
free and clear of all liens and encumbrances except liens for taxes and
assessments and easements, covenants and restrictions of record which were
attached to the Premises as of the date hereof, attached during the Lease Term
through Lessee's action or inaction, as the case may be, have been granted by
Lessor in lieu of a taking by the power of eminent domain or the like, have been
approved by Lessee, or which do not materially adversely affect the use and
quiet enjoyment (as enjoyed on the date of this Lease) of any of the Premises as
a Permitted Concept. In the event Lessor is unable to convey title as required,
Lessee shall have the right to accept such title as Lessor can convey or elect
not to consummate its exercise of the option, in which case the option for such
time period shall lapse and this Lease shall remain in full force and effect.
Both Lessor and Lessee agree to execute a purchase agreement, escrow
instructions and such other instruments as may be necessary or appropriate to
consummate the sale of the Premises in the manner herein provided. All cost of
exercise of the option, including, but not limited to, escrow fees, title
insurance fees, recording costs or fees, attorneys' fees (including those of
Lessor), appraisal fees, stamp taxes and transfer fees shall be borne by Lessee.
Lessee shall continue to pay and perform all of its obligations under this Lease
until the close of escrow which in no event shall occur after the date of the
expiration of the Lease Term or the expiration of any extension thereof. The
purchase price paid by Lessee in exercising this option shall be paid to Lessor
or to such person or entity as Lessor may direct at closing in immediately
available funds. Lessee shall not have the right to exercise this option or
consummate the exercise thereof if at the time of exercise or consummation there
shall be an Event of Default or if any condition shall exist which upon the
giving of notice or the passage of time, or both, would constitute an Event of
Default by Lessee under this Lease.

         The failure of Lessee to consummate the purchase of the Premises as
contemplated herein shall not release Lessee from its obligations under this
Lease and the Lease shall remain in full force and effect until the expiration
of the Lease Term or applicable extension period. The escrow shall close within
the Purchase Period, or Lessor, at its option, may terminate Lessee's option to
purchase the Premises during such time period. The closing date may be extended
for a reasonable period of time to permit Lessor to cure title defects or to
permit either party to cure any other defects or defaults provided each party is
diligently seeking to cure such defect or default and Lessee continues to
perform its obligation hereunder.

         Lessee may not sell, assign, transfer, hypothecate or otherwise dispose
of the option granted herein or any interest therein, except in conjunction with
a permitted assignment of Lessee's entire interest herein and then only to the
assignee thereof. Any attempted assignment of this option which is contrary to
the terms of this paragraph shall be deemed to be an Event of Default under this
Lease and the option granted herein shall be void.

                                       23
<PAGE>   24

         24. DEFAULT, CONDITIONAL LIMITATIONS, REMEDIES AND MEASURE OF DAMAGES.
A. Each of the following shall be an event of default under this Lease (each, an
"Event of Default"):

                  (i) If any representation or warranty of Lessee set forth in
         this Lease is false in any material respect, or if Lessee renders any
         false statement or account;

                  (ii) If any rent or other monetary sum due under this Lease is
         not paid within five days from the date when due; provided, however,
         notwithstanding the occurrence of such an Event of Default, Lessor
         shall not be entitled to exercise its remedies set forth below unless
         and until Lessor shall have given Lessee notice thereof and a period of
         five days from the delivery of such notice shall have elapsed without
         such Event of Default being cured;

                  (iii) If Lessee fails to pay, prior to delinquency, any taxes,
         assessments or other charges the failure of which to pay will result in
         the imposition of a lien against the Premises pursuant to Applicable
         Regulations;

                  (iv) If Lessee becomes insolvent within the meaning of the
         Code, files or notifies Lessor that it intends to file a petition under
         the Code, initiates a proceeding under any similar law or statute
         relating to bankruptcy, insolvency, reorganization, winding up or
         adjustment of debts (collectively, hereinafter, an "Action"), becomes
         the subject of either a petition under the Code or an Action, or is not
         generally paying its debts as the same become due;

                  (v)  If Lessee vacates or abandons the Premises  subject to
         the terms and conditions of Section 15 above;

                  (vi) If Lessee fails to observe or perform any of the other
         covenants, conditions or obligations of Lessee in this Lease; provided,
         however, if any such failure does not involve the payment of any
         monetary sum, is not willful or intentional, does not place any rights
         or property of Lessor in immediate jeopardy, and is within the
         reasonable power of Lessee to promptly cure after receipt of notice
         thereof, all as determined by Lessor in its reasonable discretion, then
         such failure shall not constitute an Event of Default hereunder, unless
         otherwise expressly provided herein, unless and until Lessor shall have
         given Lessee notice thereof and a period of 30 days shall have elapsed,
         during which period Lessee may correct or cure such failure, upon
         failure of which an Event of Default shall be deemed to have occurred
         hereunder without further notice or demand of any kind being required.
         If such failure cannot reasonably be cured within such 30 day period,
         as determined by Lessor in its reasonable discretion, and Lessee is
         diligently pursuing a cure of such failure, then Lessee shall have a
         reasonable period to cure such failure beyond such 30 day period, which
         shall in no event exceed 120 days after receiving notice of such
         failure from Lessor. If Lessee shall fail to correct or cure such
         failure within such 120-day period, an Event of Default shall be deemed
         to have occurred hereunder without further notice or demand of any kind
         being required;

                  (vii) If a final, nonappealable judgment is rendered by a
         court against Lessee which has a material adverse effect on the ability
         to conduct business at the Premises as a

                                       24

<PAGE>   25

         Permitted Concept, or which does not have a material adverse
         effect on the ability to conduct business at the Premises as a
         Permitted Concept but which is in the amount of $100,000.00 or more,
         and in either event is not discharged or provision made for such
         discharge within 60 days from the date of entry thereof;

            (viii) If with Lessee's reasonable consent, Lessor shall have
         elected to substitute a Substitute Premises for the Premises in
         accordance with the provisions of Section 13 of the Loan Agreement, the
         failure of Lessee, on or before the date of the closing of such
         substitution, to enter into a lease with Lessor for the Substitute
         Premises on the same terms, conditions and provisions of this Lease;

            (x)    If Lender shall have given Lessor notice of a breach of
         the Fixed Charge Coverage Ratio requirement under the Loan Agreement
         and Lessor shall have notified Lessee that the Fixed Charge Coverage
         Ratio requirement under this Lease has been breached and that Lessor
         has elected to substitute a Substitute Premises for the Premises in
         accordance with the provisions of Section 13 of the Loan Agreement, the
         failure of Lessee, on or before the date of the closing of such
         substitution, to enter into a lease with Lessor for the Substitute
         Premises on the same terms, conditions and provisions of this Lease;

            (xi)   If there is an Event of Default under the Loan Agreement
         which results from a breach or default by Lessor under Section 7.B of
         the Loan Agreement.

            (xii)  If Lender shall have given Lessor notice of a breach of the
         Fixed Charge Coverage Ratio requirement under the Loan Agreement
         and Lessor shall have notified Lessee that the Fixed Charge Coverage
         Ratio requirement under this Lease has been breached and that Lessor is
         making a payment with respect to the applicable Note in order to cure
         Lessor's breach of the Fixed Charge Coverage Ratio requirement under
         the Loan Agreement (the "Loan FCCR Payment"), the failure of Lessee to
         pay to Lessor an amount equal to the Loan FCCR Payment (the "Lease FCCR
         Payment") on or before the date that Lessor is required to pay the Loan
         FCCR Payment to Lender. Promptly after Lessee's payment of the Lease
         FCCR Payment, Lessor and Lessee agree to execute an amendment to this
         Lease in form and substance reasonably acceptable to Lessor and Lessee
         reducing the Base Annual Rental to an equitable amount to be agreed
         upon by Lessor and Lessee in good faith after taking into account the
         Lease FCCR Payment, but in no event shall the reduced Base Annual
         Rental be less than the aggregate debt service amount payable under the
         Notes over a one-year period (after taking into account any reduction
         in such debt service amount after payment of the Loan FCCR Payment).

            (xiii) If Lessee fails or refuses to sign an estoppel certificate
         as required under Section 26 of this Lease within ten (10) days
         following a request by Lessor.

         B. Upon the occurrence of an Event of Default, with or without notice
or demand, except the notice prior to default required under certain
circumstances by subsection A. above or such other notice as may be required by
statute and cannot be waived by Lessee (all other notices being hereby waived),
Lessor shall be entitled to exercise, at its option, concurrently,

                                       25
<PAGE>   26

successively, or in any combination, all remedies available at law or in equity,
including without limitation, any one or more of the following:

                  (i)   To terminate this Lease, whereupon Lessee's right to
         possession of the Premises shall cease and this Lease, except as to
         Lessee's liability, shall be terminated.

                  (ii)  To reenter and take possession of the Premises, any or
         all Personalty of Lessee and, to the extent permissible, all
         franchises, licenses, area development agreements, permits and other
         rights or privileges of Lessee pertaining to the use and operation of
         the Premises and to expel Lessee and those claiming under or through
         Lessee, without being deemed guilty in any manner of trespass or
         becoming liable for any loss or damage resulting therefrom, without
         resort to legal or judicial process, procedure or action. No notice
         from Lessor hereunder or under a forcible entry and detainer statute or
         similar law shall constitute an election by Lessor to terminate this
         Lease unless such notice specifically so states. If Lessee shall, after
         default, voluntarily give up possession of the Premises to Lessor,
         deliver to Lessor or its agents the keys to the Premises, or both, such
         actions shall be deemed to be in compliance with Lessor's rights and
         the acceptance thereof by Lessor or its agents shall not be deemed to
         constitute a termination of the Lease. Lessor reserves the right
         following any reentry and/or reletting to exercise its right to
         terminate this Lease by giving Lessee written notice thereof, in which
         event this Lease will terminate as specified in said notice.

                  (iii) To seize all Personalty which Lessee owns or in which it
         has an interest, in which Lessor shall have a landlord's lien and/or
         security interest, and to dispose thereof in accordance with the laws
         prevailing at the time and place of such seizure or to remove all or
         any portion of such property and cause the same to be stored in a
         public warehouse or elsewhere at Lessee's sole expense, without
         becoming liable for any loss or damage resulting therefrom and without
         resorting to legal or judicial process, procedure or action.

                  (iv)  To bring an action against Lessee for any damages
         sustained by Lessor or any equitable relief available to Lessor.

                  (v)   To relet the Premises or any part thereof for such term
         or terms (including a term which extends beyond the original Lease
         Term), at such rentals and upon such other terms as Lessor, in its sole
         discretion, may determine, with all proceeds received from such
         reletting being applied to the rental and other sums due from Lessee in
         such order as Lessor may, in it sole discretion, determine, which other
         sums include, without limitation, all repossession costs, brokerage
         commissions, attorneys' fees and expenses, employee expenses,
         alteration, remodeling and repair costs and expenses of preparing for
         such reletting. Except to the extent required by applicable law, Lessor
         shall have no obligation to relet the Premises or any part thereof and
         shall in no event be liable for refusal or failure to relet the
         Premises or any part thereof, or, in the event of any such reletting,
         for refusal or failure to collect any rent due upon such reletting, and
         no such refusal or failure shall operate to relieve Lessee of any
         liability under this Lease or otherwise to affect any such liability.
         Lessor reserves the right following any reentry and/or reletting to
         exercise its right to terminate this Lease by giving Lessee written
         notice thereof, in which event this Lease will terminate as specified
         in said notice.

                                       26

<PAGE>   27

                  (vi)   To accelerate and recover from Lessee all rent and
         other monetary sums due and owing and scheduled to become due and owing
         under this Lease both before and after the date of such breach for the
         entire original scheduled Lease Term.

                  (vii)  To recover from Lessee all costs and expenses,
         including attorneys' fees, court costs, expert witness fees, costs of
         tests and analyses, travel and accommodation expenses, deposition and
         trial transcripts, copies and other similar costs and fees, paid or
         incurred by Lessor as a result of such breach, regardless of whether or
         not legal proceedings are actually commenced.

                  (viii) To immediately or at any time thereafter, and with or
         without notice, at Lessor's sole option but without any obligation to
         do so, correct such breach or default and charge Lessee all costs and
         expenses incurred by Lessor therein. Any sum or sums so paid by Lessor,
         together with interest at the then existing maximum legal rate, but not
         higher than 15% per annum, shall be deemed to be additional rent
         hereunder and shall be immediately due from Lessee to Lessor. Any such
         acts by Lessor in correcting Lessee's breaches or defaults hereunder
         shall not be deemed to cure said breaches or defaults or constitute any
         waiver of Lessor's right to exercise any or all remedies set forth
         herein.

                  (ix)   To immediately or at any time thereafter, and with or
         without notice, except as required herein, set off any money of Lessee
         held by Lessor under this Lease against any sum owing by Lessee
         hereunder.

                  (x)    To seek any equitable relief available to Lessor,
         including, without limitation, the right of specific performance.

                  All powers and remedies given by this Section to Lessor,
         subject to applicable law, shall be cumulative and not exclusive of one
         another or of any other right or remedy or of any other powers and
         remedies available to Lessor under this Lease, by judicial proceedings
         or otherwise, to enforce the performance or observance of the covenants
         and agreements of Lessee contained in this Lease, and no delay or
         omission of Lessor to exercise any right or power accruing upon the
         occurrence of any Event of Default shall impair any other or subsequent
         Event of Default or impair any rights or remedies consequent thereto.
         Every power and remedy given by this Section or by law to Lessor may be
         exercised from time to time, and as often as may be deemed expedient,
         by Lessor, subject at all times to Lessor's right in its sole judgment
         to discontinue any work commenced by Lessor or change any course of
         action undertaken by Lessor.

         25.      Mortgages, Subordination and Attornment. Lessor's interest in
this Lease and/or the Premises shall not be subordinate to any liens or
encumbrances placed upon the Premises by or resulting from any act of Lessee,
and nothing herein contained shall be construed to require such subordination by
Lessor. Lessee shall keep the Premises free from any liens for work performed,
materials furnished or obligations incurred by Lessee. NOTICE IS HEREBY GIVEN
THAT LESSEE IS NOT AUTHORIZED TO PLACE OR ALLOW TO BE PLACED ANY LIEN, MORTGAGE,
DEED OF TRUST, SECURITY INTEREST OR ENCUMBRANCE OF ANY KIND UPON ALL OR ANY PART
OF THE PREMISES AND THE PERSONALTY

                                       27
<PAGE>   28

OR LESSEE'S LEASEHOLD INTEREST THEREIN, AND ANY SUCH PURPORTED TRANSACTION SHALL
BE VOID. FURTHERMORE, ANY SUCH PURPORTED TRANSACTION SHALL BE DEEMED A TORTIOUS
INTERFERENCE WITH LESSOR'S RELATIONSHIP WITH LESSEE AND LESSOR'S OWNERSHIP OF
THE PREMISES.

         This Lease at all times shall automatically be subordinate to the
Mortgages and to the lien of any and all ground leases, mortgages and trust
deeds now or hereafter placed upon the Premises by Lessor, and Lessee covenants
and agrees to execute and deliver, upon demand, such further instruments
subordinating this Lease to the lien of any or all such ground leases, mortgages
or trust deeds as shall be desired by Lessor, or any present or proposed
mortgagees or lenders under trust deeds, upon the condition that Lessee shall
have the right to remain in possession and to enjoy the Premises under the terms
of this Lease, notwithstanding any default in any or all such mortgages or trust
deeds, or after foreclosure thereof, so long as there is no Event of Default
under any of the covenants, conditions and agreements contained in this Lease.

         If any mortgagee, receiver, Lender or other secured party elects to
have this Lease and the interest of Lessee hereunder be superior to any such
ground lease, mortgage or trust deed and evidences such election by notice given
to Lessee, then this Lease and the interest of Lessee hereunder shall be deemed
superior to any such ground lease, mortgage or trust deed, whether this Lease
was executed before or after such ground lease, mortgage or trust deed and in
that event such mortgagee, receiver, Lender or other secured party shall have
the same rights with respect to this Lease as if it had been executed and
delivered prior to the execution and delivery of such ground lease, mortgage or
trust deed and had been assigned to such mortgagee, receiver, Lender or other
secured party.

         Although the foregoing provisions shall be self-operative and no future
instrument of subordination shall be required, upon request by Lessor, Lessee
shall execute and deliver whatever instruments may be required for such
purposes, and in the event Lessee fails so to do within 10 days after demand,
Lessee does hereby make, constitute and irrevocably appoint Lessor as its agent
and attorney-in-fact and in its name, place and stead so to do, which
appointment shall be deemed coupled with an interest.

         In the event any purchaser or assignee of Lender at a foreclosure sale
acquires title to the Premises, or in the event Lender or any assignee otherwise
succeeds to the rights of Lessor as landlord under this Lease, Lessee shall
attorn to Lender or such purchaser or assignee, as the case may be (a "Successor
Lessor"), and recognize the Successor Lessor as lessor under this Lease, and, if
the Successor Lessor in its sole discretion elects to recognize Lessee's tenancy
under this Lease, this Lease shall continue in full force and effect as a direct
lease between the Successor Lessor and Lessee, provided that the Successor
Lessor shall only be liable for any obligations of the lessor under this Lease
which accrue after the date that such Successor Lessor acquires title. The
foregoing provision shall be self operative and effective without the execution
of any further instruments.

         Lessee shall give written notice to any lender of Lessor having a
recorded lien upon the Premises or any part thereof of which Lessee has been
notified of any breach or default by Lessor of any of its obligations under this
Lease and give such lender at least 60 days beyond any

                                       28
<PAGE>   29

notice period to which Lessor might be entitled to cure such default before
Lessee may exercise any remedy with respect thereto. Upon request by Lessor,
Lessee shall also provide Lessee's most recent audited financial statements to
Lessor or any such lender and certify the continuing accuracy of such financial
statements in such manner as Lessor or such lender may request.

         26. ESTOPPEL CERTIFICATE. At any time, and from time to time, Lessee
shall, promptly and in no event later than 10 days after a request from Lessor,
Lender or any other mortgagee of the Premises, execute, acknowledge and deliver
to Lessor, Lender or any other present or proposed mortgagee or purchaser
designated by Lessor, Lender or any mortgagee of the Premises a certificate in
the form supplied by Lessor, certifying: (i) that Lessee has accepted the
Premises (or, if Lessee has not done so, that Lessee has not accepted the
Premises, and specifying the reasons therefor); (ii) that this Lease is in full
force and effect and has not been modified (or if modified, setting forth all
modifications), or, if this Lease is not in full force and effect, the
certificate shall so specify the reasons therefor; (iii) the commencement and
expiration dates of the Lease Term and the terms of any extension options of
Lessee; (iv) the date to which the rentals have been paid under this Lease and
the amount thereof then payable; (v) whether there are then any existing
defaults by Lessor in the performance of its obligations under this Lease, and,
if there are any such defaults, specifying the nature and extent thereof;
(vi) that no notice has been received by Lessee of any default under this Lease
which has not been cured, except as to defaults specified in the certificate;
(vii) the capacity of the person executing such certificate, and that such
person is duly authorized to execute the same on behalf of Lessee; (viii) that
neither Lessor nor Lender has actual involvement in the management or control of
decision making related to the operational aspects or the day-to-day operations
of the Premises; and (ix) any other information reasonably requested by Lessor,
Lender, or its present or proposed purchaser or mortgagee.

         27. ASSIGNMENT. If Lender shall succeed to the rights of Lessor as
landlord under this Lease, whether through foreclosure of the lien of the
applicable Mortgage, deed-in-lieu of foreclosure or otherwise, Lender, as
lessor, shall have the right to sell or convey the Premises or to assign its
right, title and interest as lessor under this Lease in whole or in part. In the
event of any such sale or assignment other than a security assignment, Lessee
shall attorn to such purchaser or assignee and Lessor shall be relieved, from
and after the date of such transfer or conveyance, of liability for the
performance of any obligation of Lessor contained herein, except for obligations
or liabilities accrued prior to such assignment or sale (provided, however,
nothing in this Section 26 shall impose liability on Lender or such purchaser or
assignee, as lessor, for the obligations of Lessor accruing under this Lease
prior to the time Lender or such purchaser or assignee, as the case may be,
succeeds to Lessor's rights as lessor under this Lease). Otherwise, and except
as permitted pursuant to the Loan Documents, Lessor shall not have the right to
sell or convey the Premises or to assign its right, title and interest as lessor
under this Lease in whole or in part.

         Lessee acknowledges that Lessor has relied both on the business
experience and creditworthiness of Lessee and upon the particular purposes for
which Lessee intends to use the Premises in entering into this Lease. Without
the prior written consent of Lessor (i) Lessee shall not assign, transfer,
convey, pledge or mortgage this Lease or any interest therein, whether by
operation of law or otherwise; (ii) no interest in Lessee shall be assigned,
transferred, conveyed, pledged or

                                       29
<PAGE>   30

mortgaged, whether by operation of law or otherwise, including, without
limitation, a dissolution of Lessee, provided, however, the foregoing shall not
apply to (A) any transfer of stock traded publicly during such period of time
that Lessee is a publicly traded company or (B) any other transfer of stock that
does not result in a change of voting control in Lessee; and (iii) Lessee shall
not sublet all or any part of the Premises. It is expressly agreed that Lessor
may withhold or condition such consent based upon such matters as Lessor may in
its reasonable discretion determine, including, without limitation, the
experience and creditworthiness of any assignee, the assumption by any assignee
of all of Lessee's obligations hereunder by undertakings enforceable by Lessor,
payment to Lessor of any rentals owing under a sublease which are in excess of
the rentals owing hereunder, the transfer to any assignee of all necessary
licenses and franchises to continue operating the Premises for the purposes
herein provided, receipt of such representations and warranties from any
assignee as Lessor may request, including such matters as its organization,
existence, good standing and finances and other matters, whether or not similar
in kind. At the time of any assignment of this Lease which is approved by
Lessor, the assignee shall assume all of the obligations of Lessee under this
Lease pursuant to Lessor's standard form of assumption agreement. No such
assignment nor any subletting of the Premises shall relieve Lessee of its
obligations respecting this Lease. Any assignment, transfer, conveyance, pledge
or mortgage in violation of this paragraph shall be voidable at the sole option
of Lessor.

         28. OPTION TO EXTEND. Lessee, provided there is no Event of Default
hereunder at the time of exercise or at the expiration of the Lease Term or, if
applicable, the first extension of the Lease Term, shall have the option to
continue this Lease in effect for up to two additional successive periods of
five years each in accordance with the terms and provisions of this Lease then
in effect, including, without limitation, adjustments in the Base Annual Rental
during such extension term in accordance with the provisions of Section 5 except
for the following:

                  A. In the event the annual fair market rental value of the
         Premises (to be determined as set forth below) is greater than the Base
         Annual Rental then the annual fair market rental value of the Premises
         shall be substituted for the Base Annual Rental and all other
         provisions shall remain the same; or

                  B. In the event the annual fair market rental value of the
         Premises is less than the Base Annual Rental the provisions of this
         Lease shall remain the same.

         Lessee shall exercise such extension option by giving notice to Lessor
of Lessee's intention to do so not more than 270 days or less than 210 days
prior to the expiration of the Lease Term or the first extension of the Lease
Term and upon receipt of such notice Lessor shall within 90 days, at Lessee's
expense, cause an appraisal of the fair market rental value of the Premises to
be made by an independent MAI appraiser. If within 20 days after being notified
of the result of such appraisal Lessee elects to reject that appraisal, then
Lessor shall nominate to Lessee a list of not less than three independent MAI
appraisers who are experienced with appraising property similar to the Premises,
and Lessee shall select one such appraiser. Within 60 days of such selection an
appraisal shall be made of the Premises by that appraiser and within 20 days
after the results of that appraisal shall have been delivered to Lessee, Lessee
shall notify Lessor of Lessee's election to exercise its option to extend this
Lease and shall pay the rental so established above which shall be absolutely
net to Lessor as provided in Section 9 hereof. If such notice of exercise is not
received by Lessor

                                       30
<PAGE>   31

within the 20-day period then this Lease shall terminate on the last day of the
Lease Term or, if applicable, the last day of the first extension of the Lease
Term.

         29. NOTICES. All notices, consents, approvals or other instruments
required or permitted to be given by either party pursuant to this Lease shall
be in writing and given by (i) hand delivery, (ii) facsimile (with a copy by
overnight delivery service), (iii) express overnight delivery service or
(iv) certified or registered mail, return receipt requested, and shall be deemed
to have been delivered upon (a) receipt, if hand delivered, (b) transmission, if
delivered by facsimile, (c) the next Business Day, if delivered by express
overnight delivery service, or (d) the third Business Day following the day of
deposit of such notice with the United States Postal Service, if sent by
certified or registered mail, return receipt requested. Notices shall be
provided to the parties and addresses (or facsimile numbers, as applicable)
specified below:

 If to Lessee:                  Famous Dave's of America, Inc.
                                7657 Anagram Drive
                                Eden Prairie, MN 55344
                                Attention:     John Doll
                                Telephone:     (612) 294-1305
                                Telecopy:      (612) 294-1323

 If to Lessor:                  MinWood Partners, Inc.
                                7657 Anagram Drive
                                Eden Prairie, MN 55344
                                Attention:     John Doll
                                Telephone:     (612) 294-1305
                                Telecopy:      (612) 294-1323

or to such other address or such other person as either party may from time to
time hereafter specify to the other party in a notice delivered in the manner
provided above. No such notices, consents, approvals or other communications
shall be valid unless Lender receives a duplicate original thereof at the
following address:

                                Dennis L. Ruben, Esq.
                                Executive Vice President and General Counsel
                                FFCA Acquisition Corporation
                                17207 North Perimeter Drive
                                Scottsdale, Arizona 85255
                                Telephone:     (480) 585-4500
                                Telecopy:      (480) 585-2226

or to such other address or such other person as Lender may from time to time
specify to Lessor and Lessee in a notice delivered in the manner provided above.

         30. HOLDING OVER. If Lessee remains in possession of the Premises after
the expiration of the term hereof, Lessee, at Lessor's option and within
Lessor's sole discretion, may

                                       31

<PAGE>   32

be deemed a tenant on a month-to-month basis and shall continue to pay rentals
and other sums in the amounts herein provided, except that the Base Monthly
Rental shall be 125% of the Base Monthly Rental in effect on the day immediately
preceding the expiration of the term hereof, and to comply with all the terms of
this Lease; provided that nothing herein nor the acceptance of rent by Lessor
shall be deemed a consent to such holding over. Lessee shall defend, indemnify,
protect and hold the Indemnified Parties harmless from and against any and all
Losses resulting from Lessee's failure to surrender possession upon the
expiration of the Lease Term, including, without limitation, any claims made by
any succeeding lessee.

         31. LANDLORD'S LIEN/SECURITY INTEREST. Lessee agrees that Lessor shall
have a landlord's lien, and additionally hereby separately grants to Lessor a
first and prior security interest, in, on and against Lessee's right, title and
interest in and to all trade fixtures, machinery, appliances, furniture,
equipment and other personal property from time to time situated on or used in
connection with the Premises (the "Personalty"), which lien and security
interest shall secure the payment of all rental and other charges payable by
Lessee to Lessor under the terms hereof and all other obligations of Lessee to
Lessor under this Lease. Lessee further agrees to execute and deliver to Lessor
from time to time such financing statements and other documents as Lessor may
then deem appropriate or necessary to perfect and maintain said lien and
security interest, and expressly acknowledges and agrees that, cumulative of all
other rights of Lessor hereunder, Lessor shall have all rights and remedies of
Lessor at law or in equity in the event of any Event of Default of Lessee
hereunder, including, to the extent applicable, the Uniform Commercial Code then
in effect in the State in which the Premises is located. If Lessee shall fail
for any reason to execute any such financing statement or document within
10 days after Lessor's request therefor, Lessor shall have the right to execute
the same as attorney-in-fact of Lessee, coupled with an interest, for, and on
behalf, and in the name of Lessee. Lessee covenants to promptly notify Lessor of
any changes in Lessee's name and/or organizational structure which may
necessitate the execution and filing of additional financing statements
(provided, however, the foregoing shall not be construed as Lessor's consent to
such changes). Lessor may exercise any or all of the remedies of a secured party
available to it under the UCC with respect to such Personalty, and it is
expressly agreed that if upon an Event of Default Lessor should proceed to
dispose of such property in accordance with the provisions of the UCC, 10 days'
notice by Lessor to Lessee shall be deemed to be reasonable notice under any
provision of the UCC requiring such notice.

         32. REMOVAL OF PERSONALTY. Lessee may move all movable fixtures located
at the Premises at its discretion during the Lease Term so long as there is no
Event of Default. At the expiration of the Lease Term, and if Lessee is not then
in breach hereof, Lessee may remove from the Premises all Personalty belonging
to Lessee. Lessee shall repair any damage caused by such removal and shall leave
the Premises broom clean and in good and working condition and repair inside and
out. Any property of Lessee left on the Premises on the tenth day following the
expiration of the Lease Term shall automatically and immediately become the
property of Lessor.

         33. FINANCIAL STATEMENTS. Within 45 days after the end of each fiscal
quarter and within 120 days after the end of each fiscal year of Lessee, Lessee
shall deliver to Lessor, Lender and any other mortgagee of Lessor pertaining to
the Premises (i) complete financial statements of

                                       32
<PAGE>   33

Lessee including a balance sheet, profit and loss statement, statement of cash
flows and all other related schedules for the fiscal period then ended; and
(ii) income statements for the business at the Premises. All such financial
statements shall be prepared in accordance with GAAP, consistently applied from
period to period, and shall be certified to be accurate and complete by Lessee
(or the Treasurer or other appropriate officer of Lessee). Lessee understands
that Lessor and Lender will rely upon such financial statements and Lessee
represents that such reliance is reasonable. In the event that Lessee's property
and business at the Premises is ordinarily consolidated with other business for
financial statement purposes, such financial statements shall be prepared on a
consolidated basis showing separately the sales, profits and losses, assets and
liabilities pertaining to the Premises with the basis for allocation of overhead
of other charges being clearly set forth. The financial statements delivered to
Lessor and Lender need not be audited, but Lessee shall deliver to Lessor and
Lender copies of any audited financial statements of Lessee which may be
prepared, as soon as they are available. Notwithstanding the foregoing and
provided Lessee is a publicly traded corporation, Lessor agrees that Lessee may
comply with the reporting requirements of item (i) above by providing Lessor
with copies of (x) reports on Forms 10-K, 10-Q and 8-K which Lessee shall have
filed with the Securities and Exchange Commission, which reports shall be
delivered to Lessor promptly after the filing of such reports, and (y) all
financial statements, reports and proxy statements mailed to the shareholders of
Lessee, which materials shall be delivered to Lessor promptly after the mailing
of such materials to such shareholders.

         34. FORCE MAJEURE. Any prevention, delay or stoppage due to strikes,
lockouts, acts of God, enemy or hostile governmental action, civil commotion,
fire or other casualty beyond the control of the party obligated to perform
shall excuse the performance by such party for a period equal to any such
prevention, delay or stoppage, except the obligations imposed with regard to
rental and other monies to be paid by Lessee pursuant to this Lease.

         35. DOCUMENT REVIEW. In the event Lessee makes any reasonable request
upon Lessor requiring Lessor or its attorneys to review and/or prepare (or cause
to be reviewed and/or prepared) any document or documents in connection with or
arising out of or as a result of this Lease, then, except as expressly stated
elsewhere herein, Lessee shall reimburse Lessor or its designee promptly upon
Lessor's demand therefor a reasonable processing and review fee in an amount not
less than $500.00 for each such request.

         36. TIME IS OF THE ESSENCE. Time is of the essence with respect to each
and every provision of this Lease in which time is a factor.

         37. LESSOR'S LIABILITY. Notwithstanding anything to the contrary
provided in this Lease, it is specifically understood and agreed, such agreement
being a primary consideration for the execution of this Lease by Lessor, that
(i) there shall be absolutely no personal liability on the part of Lessor, its
successors or assigns and its officers, directors, employees and agents to
Lessee with respect to any of the terms, covenants and conditions of this Lease,
(ii) Lessee waives all claims, demands and causes of action against Lessor's
officers, directors, employees and agents in the event of any breach by Lessor
of any of the terms, covenants and conditions of this Lease to be performed by
Lessor, and (iii) Lessee shall look solely to the Premises for the satisfaction
of each and every remedy of Lessee in the event of any breach by Lessor of any
of the terms, covenants and conditions of this Lease to be performed by Lessor,
or any other matter

                                       33
<PAGE>   34

in connection with this Lease or the Premises, such exculpation of liability to
be absolute and without any exception whatsoever.

         38. CONSENT OF LESSOR. Unless specified otherwise herein, Lessor's
consent to any request of Lessee may be conditioned or withheld in Lessor's sole
discretion. Lessor shall have no liability for damages resulting from Lessor's
failure to give any consent, approval or instruction reserved to Lessor,
Lessee's sole remedy in any such event being an action for injunctive relief.

         39. WAIVER AND AMENDMENT. No provision of this Lease shall be deemed
waived or amended except by a written instrument unambiguously setting forth the
matter waived or amended and signed by the party against which enforcement of
such waiver or amendment is sought. Waiver of any matter shall not be deemed a
waiver of the same or any other matter on any future occasion. No acceptance by
Lessor of an amount less than the monthly rent and other payments stipulated to
be due under this Lease shall be deemed to be other than a payment on account of
the earliest such rent or other payments then due or in arrears nor shall any
endorsement or statement on any check or letter accompanying any such payment be
deemed a waiver of Lessor's right to collect any unpaid amounts or an accord and
satisfaction.

         40. SUCCESSORS BOUND. Except as otherwise specifically provided herein,
the terms, covenants and conditions contained in this Lease shall bind and inure
to the benefit of the respective heirs, successors, executors, administrators
and assigns of each of the parties hereto.

         41. NO MERGER. The voluntary or other surrender of this Lease by
Lessee, or a mutual cancellation thereof, shall not result in a merger of
Lessor's and Lessee's estates, and shall, at the option of Lessor, either
terminate any or all existing subleases or subtenancies, or operate as an
assignment to Lessor of any or all of such subleases or subtenancies.

         42. CAPTIONS. Captions are used throughout this Lease for convenience
of reference only and shall not be considered in any manner in the construction
or interpretation hereof.

         43. SEVERABILITY. The provisions of this Lease shall be deemed
severable. If any part of this Lease shall be held unenforceable by any court of
competent jurisdiction, the remainder shall remain in full force and effect, and
such unenforceable provision shall be reformed by such court so as to give
maximum legal effect to the intention of the parties as expressed therein.

         44. CHARACTERIZATION. A. It is the intent of the parties hereto that
the business relationship created by this Lease and any related documents is
solely that of a long-term commercial lease between landlord and tenant and has
been entered into by both parties in reliance upon the economic and legal
bargains contained herein. None of the agreements contained herein is intended,
nor shall the same be deemed or construed, to create a partnership (either de
jure or de facto) between Lessor and Lessee, to make them joint venturers, to
make Lessee an agent, legal representative, partner, subsidiary or employee of
Lessor, nor to make Lessor in any way responsible for the debts, obligations or
losses of Lessee.

         B. Lessor and Lessee acknowledge and warrant to each other that each
has been represented by independent counsel and has executed this Lease after
being fully advised by said

                                       34
<PAGE>   35

counsel as to its effect and significance. This Lease shall be interpreted and
construed in a fair and impartial manner without regard to such factors as the
party which prepared the instrument, the relative bargaining powers of the
parties or the domicile of any party. Whenever in this Lease any words of
obligation or duty are used, such words or expressions shall have the same force
and effect as though made in the form of a covenant.

         45. EASEMENTS. During the Lease Term Lessor shall have the right to
grant utility easements on, over, under and above the Premises, provided that
Lessor obtains Lessee's prior consent (which consent shall not reasonably be
withheld) that such easements will not materially interfere with Lessee's
long-term use of the Premises.

         46. BANKRUPTCY. A. As a material inducement to Lessor executing this
Lease, Lessee acknowledges and agrees that Lessor is relying upon (i) the
financial condition and specific operating experience of Lessee and Lessee's
obligation to use the Premises specifically as a Permitted Concept,
(ii) Lessee's timely performance of all of its obligations under this Lease
notwithstanding the entry of an order for relief under the Code for Lessee,
(iii) the characterization of this Lease as set forth in Section 3, and (iv) all
Events of Default under this Lease as to the Premises being cured promptly and
this Lease being assumed within 60 days of any order for relief entered under
the Code for Lessee, or this Lease being rejected within such 60 day period and
the Premises surrendered to Lessor.

         Accordingly, in consideration of the mutual covenants contained in this
Lease and for other good and valuable consideration, Lessee hereby agrees that:

                  (i) All obligations that accrue under this Lease (including
         the obligation to pay rent), from and after the date that an Action is
         commenced shall be timely performed exactly as provided in this Lease
         and any failure to so perform shall be harmful and prejudicial to
         Lessor;

                  (ii) Any and all obligations under this Lease that become due
         from and after the date that an Action is commenced and that are not
         paid as required by this Lease shall, in the amount of such rents,
         constitute administrative expense claims allowable under the Code with
         priority of payment at least equal to that of any other actual and
         necessary expenses incurred after the commencement of the Action;

                  (iii) Any extension of the time period within which the Lessee
         may assume or reject this Lease without an obligation to cause all
         obligations coming due under this Lease from and after the date that an
         Action is commenced to be performed as and when required under this
         Lease shall be harmful and prejudicial to Lessor;

                  (iv) Any time period designated as the period within which the
         Lessee must cure all defaults and compensate Lessor for all pecuniary
         losses which extends beyond the date of assumption of this Lease shall
         be harmful and prejudicial to Lessor;

                  (v) Any assignment of this Lease must result in all terms and
         conditions of this Lease being assumed by the assignee without
         alteration or amendment, and any assignment

                                       35
<PAGE>   36

         which results in an amendment or alteration of the terms and
         conditions of this Lease without the express written consent of Lessor
         shall be harmful and prejudicial to Lessor;

                  (vi) Any proposed assignment of this Lease to an assignee: (a)
         that will not use the Premises specifically as a Permitted Concept or
         (b) that does not possess financial condition, operating performance
         and experience characteristics equal to or better than the financial
         condition, operating performance and experience of Lessee as of the
         Effective Date, shall be harmful and prejudicial to Lessor; and

                  (vii) The rejection (or deemed rejection) of this Lease for
         any reason whatsoever shall constitute cause for immediate relief from
         the automatic stay provisions of the Code, and Lessee stipulates that
         such automatic stay shall be lifted immediately and possession of the
         Premises will be delivered to Lessor immediately without the necessity
         of any further action by Lessor.

                  (viii) This Lease shall at all times be treated as consistent
         with the specific characterizations set forth in Section 3 of this
         Lease, and assumption or rejection of this Lease shall be (a) in its
         entirety, (b) for all of the Premises, and (c) in strict accordance
         with the specific terms and conditions of this Lease.

         B. No provision of this Lease shall be deemed a waiver of Lessor's
rights or remedies under the Code or applicable law to oppose any assumption
and/or assignment of this Lease, to require timely performance of Lessee's
obligations under this Lease, or to regain possession of the Premises as a
result of the failure of Lessee to comply with the terms and conditions of this
Lease or the Code.

         C. Notwithstanding anything in this Lease to the contrary, all amounts
payable by Lessee to or on behalf of Lessor under this Lease, whether or not
expressly denominated as such, shall constitute "rent" for the purposes of the
Code.

         D. For purposes of this Section addressing the rights and obligations
of Lessor and Lessee in the event that an Action is commenced, the term "Lessee"
shall include Lessee's successor in bankruptcy, whether a trustee, Lessee as
debtor in possession or other responsible person.

         47. NO OFFER. No contractual or other rights shall exist between Lessor
and Lessee with respect to the Premises until both have executed and delivered
this Lease, notwithstanding that deposits may have been received by Lessor and
notwithstanding that Lessor may have delivered to Lessee an unexecuted copy of
this Lease. The submission of this Lease to Lessee shall be for examination
purposes only, and does not and shall not constitute a reservation of or an
option for Lessee to lease or otherwise create any interest on the part of
Lessee in the Premises.

         48. OTHER DOCUMENTS. Each of the parties agrees to sign such other and
further documents as may be necessary or appropriate to carry out the intentions
expressed in this Lease.

                                       36
<PAGE>   37

         49. ATTORNEYS' FEES. In the event of any judicial or other adversarial
proceeding between the parties concerning this Lease, to the extent permitted by
law, the prevailing party shall be entitled to recover all of its reasonable
attorneys' fees and other costs in addition to any other relief to which it may
be entitled. In addition, Lessor shall, upon demand, be entitled to all
attorneys' fees and all other costs incurred in the preparation and service of
any notice or demand hereunder, whether or not a legal action is subsequently
commenced. References in this Lease to Lessor's attorneys' fees and/or costs
shall mean both the fees and costs of independent counsel retained by Lessor
with respect to the matter and the fees and costs of Lessor's in-house counsel
incurred in connection with the matter.

         50. ENTIRE AGREEMENT. This Lease and any other instruments or
agreements referred to herein, constitute the entire agreement between the
parties with respect to the subject matter hereof, and there are no other
representations, warranties or agreements except as herein provided. Without
limiting the foregoing, Lessee specifically acknowledges that neither Lessor nor
any agent, officer, employee or representative of Lessor has made any
representation or warranty regarding the projected level of Lessee's gross sales
or the projected profitability of the business to be conducted on the Premises.
Furthermore, Lessee acknowledges that Lessor did not prepare or assist in the
preparation of any of the projected figures used by Lessee in analyzing the
economic viability and feasibility of the business to be conducted by Lessee at
the Premises.

         51. FORUM SELECTION; JURISDICTION; VENUE; CHOICE OF LAW. Lessee
acknowledges that this Lease was substantially negotiated in the State of
Arizona, this Lease was delivered in the State of Arizona, and there are
substantial contacts between the parties and the transactions contemplated
herein and the State of Arizona. For purposes of any action or proceeding
arising out of this Lease, the parties hereto expressly submit to the
jurisdiction of all federal and state courts located in the State of Arizona.
Lessee and Lessor consent that they may be served with any process or paper by
registered mail or by personal service within or without the State of Arizona in
accordance with applicable law. Furthermore, Lessee and Lessor waive and agree
not to assert in any such action, suit or proceeding that they are not
personally subject to the jurisdiction of such courts, that the action, suit or
proceeding is brought in an inconvenient forum or that venue of the action, suit
or proceeding is improper. The creation of this Lease and the rights and
remedies of Lessor with respect to the Premises, as provided herein and by the
laws of the State, shall be governed by and construed in accordance with the
internal laws of the State, without regard to principles of conflicts of law.
With respect to other provisions of this Lease, this Lease shall be governed by
the internal laws of the State of Arizona, without regard to its principles of
conflicts of law. Nothing contained in this Section shall limit or restrict the
right of Lessor or Lessee to commence any proceeding in the federal or state
courts located in the state in which the Premises is located to the extent
Lessor or Lessee deems such proceeding necessary or advisable to exercise
remedies available under this Lease.

         52. COUNTERPARTS. This Lease may be executed in one or more
counterparts, each of which shall be deemed an original.

         53. MEMORANDUM OF LEASE. Concurrently with the execution of this Lease,
Lessor and Lessee are executing a Memorandum of Lease to be recorded in the
applicable real property

                                       37

<PAGE>   38

records with respect to each of the Premises. Further, upon Lessor's request,
Lessee agrees to execute and acknowledge a termination of lease and/or quit
claim deed in recordable form with respect to each of the Premises to be held by
Lessor until the expiration or sooner termination of the Lease Term.

         54. NO BROKERAGE. Lessor and Lessee represent and warrant to each other
that they have had no conversation or negotiations with any broker concerning
the leasing of the Premises. Each of Lessor and Lessee agrees to protect,
indemnify, save and keep harmless the other, against and from all liabilities,
claims, losses, costs, damages and expenses, including attorneys' fees, arising
out of, resulting from or in connection with their breach of the foregoing
warranty and representation.

         55. WAIVER OF JURY TRIAL AND PUNITIVE, CONSEQUENTIAL, SPECIAL AND
INDIRECT DAMAGES. LESSOR AND LESSEE HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO
ANY AND ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM
BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER OR ITS SUCCESSORS WITH
RESPECT TO ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS LEASE, THE
RELATIONSHIP OF LESSOR AND LESSEE, LESSEE'S USE OR OCCUPANCY OF THE PREMISES,
AND/OR ANY CLAIM FOR INJURY OR DAMAGE, OR ANY EMERGENCY OR STATUTORY REMEDY.
THIS WAIVER BY THE PARTIES HERETO OF ANY RIGHT EITHER MAY HAVE TO A TRIAL BY
JURY HAS BEEN NEGOTIATED AND IS AN ESSENTIAL ASPECT OF THEIR BARGAIN.
FURTHERMORE, LESSEE HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE
RIGHT IT MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECT DAMAGES
FROM LESSOR AND ANY OF LESSOR'S AFFILIATES, OFFICERS, DIRECTORS OR EMPLOYEES OR
ANY OF THEIR SUCCESSORS WITH RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY
ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY LESSEE AGAINST LESSOR OR
ANY OF LESSOR'S AFFILIATES, OFFICERS, DIRECTORS OR EMPLOYEES OR ANY OF THEIR
SUCCESSORS WITH RESPECT TO ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS
LEASE OR ANY DOCUMENT CONTEMPLATED HEREIN OR RELATED HERETO. THE WAIVER BY
LESSEE OF ANY RIGHT IT MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL AND
INDIRECT DAMAGES HAS BEEN NEGOTIATED BY THE PARTIES HERETO AND IS AN ESSENTIAL
ASPECT OF THEIR BARGAIN.

         56. RELIANCE BY ENVIRONMENTAL INSURER. Lessee acknowledges and agrees
that Environmental Insurer may rely on the representations, warranties and
covenants set forth in Section 16 of this Lease, that Environmental Insurer is
an intended third-party beneficiary of such representations, warranties and
covenants and that Environmental Insurer shall have all rights and remedies
available at law or in equity as a result of a breach of such representations,
warranties and covenants, including to the extent applicable, the right of
subrogation.

         57. FIXED CHARGE COVERAGE RATIO. Lessee covenants to Lessor that an
aggregate Fixed Charge Coverage Ratio of at least 1.50:1 shall be maintained
with respect to the Premises, as

                                       38
<PAGE>   39

determined on the last day of each fiscal year of Lessee. For purposes of this
Section, the term "Fixed Charge Coverage Ratio" shall mean with respect to the
twelve month period of time immediately preceding the date of determination, the
ratio calculated for such period of time, each as determined in accordance with
GAAP, of (a) the sum of Net Income (including proceeds from business
interruption insurance payments, if any), Depreciation and Amortization,
Interest Expense and Operating Lease Expense, less a corporate overhead
allocation (which shall equal the sum of 5% of Gross Sales ) to (b) the sum of
the Operating Lease Expense (including, without limitation, any Operating Lease
Expense relating to this Lease and the Equipment Payment Amount.

         For purposes of this Section, the following terms shall be defined as
set forth below:

                           "Capital Lease" shall mean any lease of any
                  property (whether real, personal or mixed) by Lessee with
                  respect to one or more of the Premises, which lease would, in
                  conformity with GAAP, be required to be accounted for as a
                  capital lease on the balance sheet of Lessee. The term
                  "Capital Lease" shall not include any operating lease.

                           "Debt" shall mean as directly related to all of the
                  Premises and the period of determination (i) indebtedness for
                  borrowed money, (ii) obligations evidenced by bonds,
                  indentures, notes or similar instruments, (iii) obligations to
                  pay the deferred purchase price of property or services,
                  (iv) obligations under leases which should be, in accordance
                  with GAAP, recorded as Capital Leases, and (v) obligations
                  under direct or indirect guarantees in respect of, and
                  obligations (contingent or otherwise) to purchase or otherwise
                  acquire, or otherwise to assure a creditor against loss in
                  respect of, indebtedness or obligations of others of the kinds
                  referred to in clauses (i) through (iv) above.

                           "Depreciation and Amortization" shall mean with
                  respect to all of the Premises the depreciation and
                  amortization accruing during any period of determination with
                  respect to Lessor as determined in accordance with GAAP.

                           "Equipment Payment Amount" shall mean for any period
                  of determination the sum of all amounts payable during such
                  period of determination under all (i) leases for equipment
                  located at one or more of the Premises other than this Lease
                  and (ii) all loans secured by equipment located at one or more
                  of the Premises.

                           "Gross Sales" shall mean the sales or other income
                  arising from all business conducted at all of the Premises by
                  Lessee during the period of determination, less sales tax,
                  credit card commission and complimentary sales, as presented
                  in Lessee's publicly disclosed financial statements, and any
                  amounts received from not-for-profit sales of all non-food
                  items approved for use in connection with promotional
                  campaigns, if any, for all of the Premises.

                           "Interest Expense" shall mean for any period of
                  determination, the sum of all interest accrued or which should
                  be accrued in respect of all Debt of Lessee

                                       39
<PAGE>   40

                  allocable to one or more of the Premises and all
                  business operations thereon during such period (including
                  interest attributable to Capital Leases), as determined in
                  accordance with GAAP.

                           "Net Income" shall mean with respect to the period of
                  determination, the net income or net loss of Lessee allocable
                  to all of the Premises. In determining the amount of Net
                  Income, (i) adjustments shall be made for nonrecurring gains
                  and losses allocable to the period of determination,
                  (ii) deductions shall be made for, among other things,
                  Depreciation and Amortization, Interest Expense and Operating
                  Lease Expense allocable to the period of determination, and
                  (iii) no deductions shall be made for (x) income taxes or
                  charges equivalent to income taxes allocable to the period of
                  determination, as determined in accordance with GAAP, or
                  (y) corporate overhead expense allocable to the period of
                  determination.

                           "Operating Lease Expense" shall mean the expenses
                  incurred by Lessee under any operating leases with respect to
                  one or more of the Premises and the business operations
                  thereon during the period of determination, as determined in
                  accordance with GAAP.

         58.      Substitution. A. In the event Lessee ceases operation of a
Permitted Concept as a result of Uneconomic Operations, Lessee shall have the
right to terminate this Lease by substituting a Substitute Premises and lease
for such individual Premises and this Lease, subject to fulfillment of the
following conditions:

                  (i) Lessee shall have given Lessor notice of Lessee's
         intention to substitute the Premises (the "Substitution Notice") and no
         more than 120 days shall have elapsed since Lessor's notice of Lessee's
         intention to cease operation as a result of Uneconomic Operations.

                  (ii) Lessee must provide for the substitution of a Substitute
         Premises, and the proposed Substitute Premises must:

                       (1) be a Permitted Concept, in good condition and repair,
               ordinary wear and tear excepted;

                       (2) have for the twelve-month period preceding the date
               of the closing of such substitution a Fixed Charge Coverage Ratio
               (as defined below) of at least 1.50:1;

                       (3) be owned by and vested in Lessee free and clear of
               all liens and encumbrances, except such matters as are acceptable
               to Lessor (the "Substitute Premises Permitted Exceptions"); and

                       (4) have for the twelve-month period preceding the date
               of the closing of such substitution gross sales that are greater
               than the Lessee's gross sales for the same period at the
               Premises.

                                       40
<PAGE>   41

                         (5) have a fair market value equal to or greater than
               the fair market value of the Premises. The fair market value of
               the Premises and the fair market value of the Substitute Premises
               shall be determined in the same manner as set forth in Section 23
               above.

               (iii)     Lessor shall have inspected and approved the Substitute
          Premises utilizing Lessor customary site inspection and underwriting
          approval criteria. Lessee shall have reimbursed Lessor for all of its
          costs and expenses incurred with respect to such proposed
          substitution, including, without limitation, Lessor's third-party
          and/or in-house site inspectors' costs and expenses with respect to
          the proposed Substitute Premises. Lessee shall be solely responsible
          for the payment of all costs and expenses resulting from such proposed
          substitution, including, without limitation, the cost of title
          insurance and endorsements, survey charges, stamp taxes, mortgage
          taxes, transfer fees, escrow and recording fees, the cost of
          environmental reports and the attorneys' fees and expenses of counsel
          to Lessee and Lessor.

                  (v)    Lessor shall have received a preliminary title report
         and irrevocable commitment to insure title by means of an owner's ALTA
         extended coverage policy of title insurance (or its equivalent, in the
         event such form is not issued in the jurisdiction where the proposed
         Substitute Premises is located) for such proposed Substitute Premises
         issued by Title Company (as defined in the Loan Documents) showing good
         and marketable title in Lessee and committing to insure Lessor's fee
         ownership of the proposed Substitute Premises, subject only to the
         Substitute Premises Permitted Exceptions and containing endorsements
         substantially comparable to those required by Lessor in connection with
         Lessor's initial acquisition of the Premises (the "Closing");

                  (vi)   Lessor shall have received a current ALTA survey of
         such proposed Substitute Premises, the form of which shall be
         comparable to those received by Lessor at the Closing and sufficient to
         cause the standard survey exceptions set forth in the title policy
         referred to in the preceding subsection to be deleted.

                  (vii)  Lessor shall have received a satisfactory environmental
         insurance policy or a Phase I environmental report with respect to such
         proposed Substitute Premises, the scope of which shall conform to the
         then customary standards for Lessor purchasing commercial real estate,
         which shall conclude that there is no Environmental Condition affecting
         the proposed Substitute Premises.

                  (viii) Lessee shall deliver, or cause to be delivered, with
         respect to Lessee and the Substitute Premises, opinions of Counsel in
         form and substance comparable to those received at the Closing (but
         also addressing such matters unique to the Substitute Premises as may
         be reasonably required by Lessor).

                  (ix)   no default, beyond any applicable notice and cure
         period, shall then exist with respect to any other lease, loan or other
         transaction between Lessor or its affiliates on the one hand and Lessee
         or its affiliates on the other hand.

                                       41
<PAGE>   42

                  (x) Lessee shall have executed such documents as are
         comparable to the security documents executed and delivered at Closing,
         as applicable (but with such revisions as may be reasonably required by
         Lessor to address matters unique to the Substitute Premises) or
         amendments to such documents, including, without limitation, a deed,
         lease, memorandum of lease and UCC-1 financing statements (the
         "Substitute Documents"), to provide Lessor with fee ownership of the
         proposed Substitute Premises, subject only to the Substitute Premises
         Permitted Exceptions, and all other rights, remedies and benefits with
         respect to the proposed Substitute Premises which Lessor holds in the
         Premises, all of which documents shall be in form and substance
         reasonably satisfactory to Lessor.

                  (xi) the representations and warranties set forth in the
         Substitute Documents and Section 7 of this Lease applicable to the
         proposed Substitute Premises shall be true and correct in all material
         respects as of the date of substitution, and Lessee shall have
         delivered to Lessor an officer's certificate certifying to that effect.

                  (xii) Lessee shall have delivered to Lessor certificates of
         insurance showing that insurance required by the Substitute Documents
         is in full force and effect.

         Upon satisfaction of the foregoing conditions with respect to the
substitution of the Premises and this Lease:

                  (a) the proposed Substitute Premises and lease shall be deemed
         substituted for the Premises and this Lease;

                  (b) the Purchase Price for the Substitute Premises shall be
         the same as the Purchase Price for the Premises;

                  (c) in connection with this Lease, Lessor and Lessee shall
         execute Lessor's standard form mutual release and termination of lease;

                  (d) the Substitute Documents shall be dated as of the date of
         the substitution; and

                  (e) Lessor will execute a limited warranty deed for the
         Premises in favor of Lessee; title to the Premises shall be conveyed
         subject to liens for taxes and assessments and easements, covenants and
         restrictions of record which were attached to the Premises as of the
         date hereof, attached during the Lease Term through Lessee's action or
         inaction, as the case may be, have been granted by Lessor in lieu of a
         taking by the power of eminent domain or the like, have been approved
         by Lessee, or which do not materially adversely affect the use of the
         Premises as a Permitted Concept.

         B.       For Purposes of this Section, the following terms shall be
defined as set forth below:

                  "Capital Lease"  shall mean any lease of any property
            (whether real, personal or mixed) by Lessee with respect to the
            Substitute Premises which lease would, in conformity with GAAP, be
            required to be accounted for as a capital

                                       42
<PAGE>   43

            lease on the balance sheet of Lessee. The term "Capital Lease" shall
            not include any operating lease.

                     "Debt" shall mean as directly related to the Substitute
            Premises and the period of determination (i) indebtedness for
            borrowed money, (ii) obligations evidenced by bonds, indentures,
            notes or similar instruments, (iii) obligations to pay the deferred
            purchase price of property or services, (iv) obligations under
            leases which should be, in accordance with GAAP, accounted for as
            Capital Leases, and (v) obligations under direct or indirect
            guarantees in respect of, and obligations (contingent or otherwise)
            to purchase or otherwise acquire, or otherwise to assure a creditor
            against loss in respect of, indebtedness or obligations of others of
            the kinds referred to in clauses (i) through (iv) above.

                     "Depreciation and Amortization" shall mean with respect to
            the Substitute Premises the depreciation and amortization accruing
            during any period of determination with respect to Debtor as
            determined in accordance with GAAP.

                     " Equipment Payment Amount" shall mean for any period of
            determination the sum of all amounts payable during such period of
            determination under all (i) leases for equipment located at the
            Substitute Premises and (ii) all loans secured by equipment located
            at the Substitute Premises.

                     "FFCA Payments" shall mean with respect to the period of
            determination, the sum of the Base Monthly Rental and any and all
            other rent due and payable under this Lease.

                     "Fixed Charge Coverage Ratio" shall mean with respect to
            the twelve month period of time immediately preceding the date of
            determination, the ratio calculated for such period of time, each as
            determined in accordance with GAAP, of (a) the sum of Net Income
            (including proceeds from business interruption insurance payments,
            if any), Depreciation and Amortization, Interest Expense and
            Operating Lease Expense, less a corporate overhead allocation in an
            amount equal to 5% of Gross Sales to (b) the sum of the FFCA
            Payments, Operating Lease Expense and the Equipment Payment Amount.

                     "Gross Sales" shall mean the sales or other income arising
            from all business conducted at the Substitute Premises by Lessee
            during the period of determination, less sales tax, credit card
            commission and complimentary sales, as presented in the Lessee's
            publicly disclosed financial statements, and any amounts received
            from not-for-profit sales of all non-food items approved for use in
            connection with promotional campaigns, if any.

                     "Interest Expense" shall mean for any period of
            determination, the sum of all interest accrued or which should be
            accrued in respect of all Debt of Lessee allocable to the Substitute
            Premises and all business operations thereon during

                                       43
<PAGE>   44

            such period (including interest attributable to Capital Leases), as
            determined in accordance with GAAP.

                     "Net Income" shall mean with respect to the period of
            determination, the aggregate net income or net loss of Lessee
            allocable to the Substitute Premises. In determining the amount of
            Net Income, (i) adjustments shall be made for nonrecurring gains and
            losses allocable to the period of determination, (ii) deductions
            shall be made for Depreciation and Amortization, Interest Expense
            and Operating Lease Expense allocable to the period of
            determination, and (iii) no deductions shall be made for (x) income
            taxes or charges equivalent to income taxes allocable to the period
            of determination, as determined in accordance with GAAP, or
            (y) corporate overhead expense allocable to the period of
            determination.

                     "Operating Lease Expense" shall mean the sum of all
            payments and expenses incurred by Lessee under any operating leases
            with respect to the Substitute Premises and the business operations
            thereon during the period of determination, as determined in
            accordance with GAAP.

         C. Lessee shall also have the right to substitute a Premises in
accordance with this Section in the event Lessor exercises its right to
substitution under the Loan Agreement.

         59. LEASEHOLD FINANCING. Lessee may obtain leasehold financing on the
Premises located at 14601 Highway 7, Minnetonka, Minnesota which such financing
shall be secured by this Lease, provided that (i) Lender and Lessor shall
receive all material reasonably necessary to review the terms and conditions of
the leasehold financing, (ii) Lender and Lessor approve in writing the terms and
conditions of the leasehold financing, and (iii) subsequent to the leasehold
financing, the Fixed Charge Coverage Ratio as determined in accordance with
Section 57 shall be maintained.

                                       44
<PAGE>   45

         IN WITNESS WHEREOF, Lessor and Lessee have entered into this Lease as
of the date first above written.

                                           LESSOR:

                                           MINWOOD PARTNERS, INC.,
                                           a Delaware corporation

                                           By: /s/ Martin J. O'Dowd
                                               ---------------------------------
                                           Printed Name: Martin J. O'Dowd
                                                         -----------------------
Lessor's Tax Identification Number:        Title:  Director
    51-0396229                                     -----------------------------
 ----------------------------------------

                                            LESSEE:

                                            FAMOUS DAVE'S OF AMERICA, INC.,
                                            a Minnesota corporation

                                            By: /s/ Martin J. O'Dowd
                                                --------------------------------
                                            Printed Name: Martin J. O'Dowd
                                                          ----------------------
Lessee's Tax Identification Number:         Title: President
    41-1782300                                     -----------------------------
-----------------------------------------

<PAGE>   46

STATE OF    Minnesota       )
         -------------------) SS.
COUNTY OF   Hennepin        )
         -------------------

       The foregoing instrument was acknowledged before me on January 17,
2000 by Martin J. O'Dowd, Director of MinWood Partners, Inc., a Delaware
corporation, on behalf of the corporation.

                                               /s/  Rita A. Witting
                                               ---------------------------------
                                                        Notary Public

My Commission Expires:

         1/31/05
------------------------------------------

STATE OF    Minnesota          )
         ----------------------)SS.
COUNTY OF   Hennepin           )
         ----------------------

         The foregoing instrument was acknowledged before me on January 17, 2000
by Martin J. O'Dowd, President of Famous Dave's of America, Inc., a Minnesota
corporation, on behalf of the corporation.

                                               /s/  Rita A. Witting
                                               ---------------------------------
                                                        Notary Public

My Commission Expires:

         1/31/05
--------------------------------------------

<PAGE>   47

                                    EXHIBIT A

                                    PREMISES

FFCA No.                          ADDRESS                       AMOUNT
--------                          -------                       ------

8001-0988                      14601 Highway 7               $2,000,000.00
                               Minnetonka, MN

8001-0990                      1940 Donegal Drive            $1,800,000.00
                               Woodbury, MN<PAGE>   1

                                                                     EXHIBIT 4.1

                                RIGHTS AGREEMENT

     RIGHTS AGREEMENT, dated as of May 12, 2000 (the "AGREEMENT"), between Lakes
Gaming, Inc., a Minnesota corporation (the "COMPANY"), and Norwest Bank
Minnesota, National Association (the "RIGHTS AGENT").

     WHEREAS, on May 5, 2000, the Board of Directors of the Company (the
"BOARD") authorized and declared a dividend distribution of one Right (as
hereinafter defined) for each outstanding share of common stock, par value $.01
per share, of the Company (the "COMMON STOCK") outstanding on May 15, 2000 (the
"RECORD DATE"), each Right initially representing the right to purchase one
share of Common Stock upon the terms and subject to the conditions hereinafter
set forth (the "RIGHTS");

     NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby amend and restate the Agreement and agree
as follows:

     SECTION 1.  CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:

             (a) "ACQUIRING PERSON" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates (as such term is
hereinafter defined) and Associates (as such term is hereinafter defined) of
such Person, without the prior approval of a majority of the Board of Directors
shall be the Beneficial Owner (as such term is hereinafter defined) of voting
securities having 15% or more of the then voting power of the Company or who was
such a Beneficial Owner at any time after the date hereof, whether or not such
person continues to be the Beneficial Owner of voting securities having 15% or
more of the then voting power of the Company. Notwithstanding the foregoing, (A)
the term Acquiring Person shall not include (i) the Company, any Subsidiary of
the Company, any employee benefit plan of the Company or of any Subsidiary of
the Company, or any entity organized, appointed or established by the Company
for or pursuant to the terms of any such plan or (ii) any Person, who or which
together with all Affiliates of such Person becomes the Beneficial Owner of 15%
or more of the then outstanding shares of Common Stock as a result of the
acquisition of Common Stock directly from the Company (provided, however, that
if, after such acquisition, such Person or any Affiliate of such Person becomes
the Beneficial Owner of any additional shares of Common Stock in an acquisition
not made directly from the Company, then such Person shall be deemed an
Acquiring Person), and (B) no Person shall be deemed to be an Acquiring Person
either (X) as a result of the acquisition of Common Stock by the Company which,
by reducing the number of shares of Common Stock outstanding, increases the
proportionate number of shares Beneficially Owned by such Person together with
all Affiliates of such Person; except that if (i) such Person would become an
Acquiring Person (but for the operation of this subclause (X)) as a result of
the acquisition of Common Stock by the Company, and (ii) after

                                       7

<PAGE>   2

such share acquisition by the Company, such Person or any Affiliate of such
Person becomes the Beneficial Owner of any additional shares of Common Stock,
then such Person shall be deemed an Acquiring Person or (Y) if (i) such Person
or any Affiliate of such Person inadvertently becomes the Beneficial Owner of
15% or more of the outstanding shares of Common Stock, and (ii) within eight (8)
calendar days thereafter such Person notifies the Board of Directors that such
Person did so inadvertently and (iii) within two (2) days after such
notification, such Person is the Beneficial Owner of less than 15% of the
outstanding shares of Common Stock. For purposes of this Agreement, any
calculation of the number of shares of Common Stock outstanding at any
particular time, including for purposes of determining the particular percentage
of such outstanding shares of Common Stock of which any Person is the Beneficial
Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i)
of the General Rules and Regulations under the Securities Exchange Act of 1934,
as amended, as in effect on the date of this Agreement (the "EXCHANGE ACT").

            (b)     "ACQUISITION EVENT" shall mean either the event described in
Section 11(a)(ii) or Section 13(a) hereof.

            (c)     "AFFILIATE" and "ASSOCIATE" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act.

            (d)     A Person shall be deemed the "BENEFICIAL OWNER" of, and
shall be deemed to "BENEFICIALLY OWN", any securities:

                    (i)  which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly;

                    (ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right or obligation to acquire (whether such right or
obligation is exercisable or effective immediately or only after the passage of
time) pursuant to any agreement, arrangement or understanding (whether or not in
writing) or upon the exercise of conversion rights, exchange rights, rights
(other than the Rights at any time prior to the occurrence of an Acquisition
Event, but thereafter including the Rights acquired from and after the
Distribution Date (as defined in Section 3(a) below) other than pursuant to
Section 3(a) below), warrants or options, or otherwise; provided, however, that
a Person shall not be deemed the "Beneficial Owner" of, or to "beneficially
own," securities tendered pursuant to a tender or exchange offer made by such
Person or any of such Person's Affiliates or Associates until such tendered
securities are accepted for purchase or exchange; or (B) the right to vote
pursuant to any agreement, arrangement or understanding (whether or not in
writing); provided, however, that a Person shall not be deemed the "Beneficial
Owner" of, or to "beneficially own," any security under this clause (B) if the
agreement, arrangement or understanding to vote such security: (1) arises solely
from a revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable rules and
regulations of the Exchange Act, and (2) is not also then reportable by such
Person on Schedule 13D under the Exchange Act (or any comparable or successor
report); or

                                       8

<PAGE>   3

                    (iii) which are beneficially owned, directly or indirectly,
Person or any of such Person's Affiliates or Associates has any agreement,
arrangement or understanding (whether or not in writing), for the purpose of
acquiring, holding, voting (except pursuant to a revocable proxy as described in
clause (B) of subparagraph (ii) of this paragraph (d)) or disposing of any
voting securities of the Company.

            (e)     "BUSINESS DAY" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in the State of Minnesota are
authorized or obligated by law or executive order to close.

            (f)     "CLOSE OF BUSINESS" on any given date shall mean 5:00 P.M.,
Minneapolis, Minnesota time, on such date; provided, however, that if such date
is not a Business Day it shall mean 5:00 P.M., Minneapolis, Minnesota time, on
the next succeeding Business Day.

            (g)     "COMMON STOCK" shall mean the common stock, par value $.01
per share, of the Company, except that "Common Stock" when used with reference
to any Person other than the Company shall mean the capital stock of such Person
with the greatest voting power, or the equity securities or other equity
interest having power to control or direct the management, of such Person or, if
such Person is a subsidiary of another Person, the Person which ultimately
controls such first-mentioned Person and which has issued and outstanding
capital stock, equity securities or equity interests.

             (h)    "PERSON" shall mean any individual, firm, corporation,
partnership or other entity.

             (i)    "STOCK ACQUISITION DATE" shall mean the first date of public
announcement by the Company or an Acquiring Person that an Acquiring Person has
become such.

             (j)    "SUBSIDIARY" shall mean, with reference to any other Person,
any corporation of which a majority of any class of equity security is
beneficially owned, directly or indirectly, by such other Person.

             Any determination required by the definitions contained in this
Section 1 shall be made by the Board in their good faith judgment, which
determination shall be final and binding on the Rights Agent.

     SECTION 2.     APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall prior to the Distribution Date also
be the holders of the Common Stock) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such "Co-Rights Agents" as it may deem necessary or
desirable. In the event the Company appoints one or more Co-Rights Agents, the

                                       9

<PAGE>   4

respective duties of the Rights Agent and any Co-Rights Agent shall be as the
Company shall determine.

     SECTION 3.     ISSUE OF RIGHTS CERTIFICATES.

             (a)    Until the earlier of (i) the close of business on the tenth
Business Day after the Stock Acquisition Date, or (ii) the close of business on
the tenth Business Day after the date of the commencement of, or first public
announcement of the intent of any Person (other than the Company, any Subsidiary
of the Company or any employee benefit plan of the Company or of any Subsidiary
of the Company or any entity organized, appointed or established by the Company
for or pursuant to the terms of any such plan), to commence (which intention to
commence remains in effect for five Business Days after such announcement), a
tender or exchange offer which would result in such person becoming the
Beneficial Owner of 15% or more of the then outstanding shares of Common Stock
(including any such date which is after the date of this Agreement and prior to
the issuance of the Rights), (the earlier of such dates being herein referred to
as the "DISTRIBUTION DATE"), (x) the Rights will be evidenced (subject to the
provisions of paragraph (b) of this Section 3) by the certificates for Common
Stock registered in the names of the holders of the Common Stock (which
certificates for Common Stock shall be deemed also to be certificates for
Rights) and not by separate certificates, and (y) the Rights (and the right to
receive certificates therefor) will be transferable only in connection with the
transfer of the underlying shares of Common Stock (including a transfer to the
Company). As soon as practicable after the Distribution Date, the Rights Agent
will send by first-class, postage prepaid mail, to each record holder of the
Common Stock as of the close of business on the Distribution Date, at the
address of such holder shown on the records of the Company, one or more rights
certificates, in substantially the form of Exhibit A hereto (the "RIGHTS
CERTIFICATES"), evidencing one Right for each share of Common Stock so held. As
of and after the Distribution Date, the Rights will be evidenced solely by such
Rights Certificates.

             (b)    The Company sent a copy of a Summary of Rights, in
substantially the form of Exhibit B attached hereto, to each record holder of
the Common Stock as of the Record Date. With respect to certificates for the
Common Stock outstanding as of the Record Date, until the Distribution Date, the
Rights will be evidenced by such certificates for the Common Stock and the
registered holders of the Common Stock shall also be the registered holders of
the associated Rights. Until the earlier of the Distribution Date or the
Expiration Date (as such term is defined in Section 7 hereof), the surrender for
transfer of any of the certificates for the Common Stock outstanding on the
Record Date shall also constitute the transfer of the Rights associated with the
Common Stock represented by such certificate.

             (c)    Certificates for the Common Stock issued after the Record
Date, but prior to the earlier of the Distribution Date or the Expiration Date,
shall be deemed also to be certificates for Rights, and shall bear the following
legend:

                    This certificate also evidences and entitles the holder
                    hereof to certain Rights as set forth in the Rights
                    Agreement between Lakes Gaming,

                                       10

<PAGE>   5

                    Inc. and Norwest Bank Minnesota, National Association dated
                    as of May 12, 2000 (the "RIGHTS AGREEMENT"), the terms of
                    which are hereby incorporated herein by reference and a copy
                    of which is on file at the principal offices of Lakes
                    Gaming, Inc. Under certain circumstances, as set forth in
                    the Rights Agreement, such Rights will be evidenced by
                    separate certificates and will no longer be evidenced by
                    this certificate. Lakes Gaming, Inc. will mail to the holder
                    of this certificate a copy of the Rights Agreement without
                    charge promptly after receipt of a written request therefor.
                    Under certain circumstances, Rights issued to, or held by,
                    Acquiring, Persons or Affiliates or Associates thereof (as
                    such terms are defined in the Rights Agreement) and any
                    subsequent holder of such Rights may become null and void.

             With respect to such certificates containing the foregoing legend,
until the earlier of (i) the Distribution Date or (ii) the Expiration Date, the
Rights associated with the Common Stock represented by such certificates shall
be evidenced by such certificates alone and the registered holders of Common
Stock shall also be the registered holders of the associated Rights, and the
surrender for transfer of any of such certificates shall also constitute the
transfer of the Rights associated with the Common Stock represented by such
certificates.

     SECTION 4.     FORM OF RIGHTS CERTIFICATES.

             (a)    The Rights Certificates (and the forms of election to
exercise and of assignment to be printed on the reverse thereof) shall each be
substantially in the form attached hereto as Exhibit A and may have such marks
of identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which the Rights may from time to
time be listed, or to conform to usage. Subject to the provisions of Section 11
and Section 22 hereof, the Rights Certificates, whenever distributed, shall be
dated as of the Record Date and on their face shall entitle the holders thereof
to purchase such number of shares of Common Stock as shall be set forth therein
at the price per share set forth therein (the "PURCHASE PRICE"), but the number
of such shares and the Purchase Price shall be subject to adjustment as provided
herein.

             (b)    Any Rights Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights beneficially owned by: (i) an Acquiring
Person or any Associate or Affiliate of an Acquiring Person, (ii) a transferee
of an Acquiring Person (or such Associate or Affiliate) who becomes a transferee
after the Acquiring Person becomes such, or (iii) a transferee of an Acquiring
Person (or such Associate or Affiliate) who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person to or on behalf of holders of equity interests in

                                       11

<PAGE>   6

such Acquiring Person or to any Person with whom the Acquiring Person has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board of Directors otherwise concludes in
good faith (as determined in its discretion by the vote of a majority of the
Directors then in office) is part of a plan, arrangement or understanding which
has as a primary purpose or effect avoidance of Section 7(e) hereof, and any
Rights Certificate issued pursuant to Section 6 or Section 11 hereof upon
transfer, exchange, replacement or adjustment of any other Rights Certificate
referred to in this sentence, shall contain (to the extent feasible and
reasonably identifiable as such) the following legend:

                    The Rights represented by this Rights Certificate are or
                    were beneficially owned by a Person who was or became an
                    Acquiring Person or an Affiliate or Associate of an
                    Acquiring Person (as such terms are defined in that certain
                    Rights Agreement between Lakes Gaming, Inc. and Norwest Bank
                    Minnesota, National Association dated as of May12, 2000 (the
                    "RIGHTS AGREEMENT"). Accordingly, this Rights Certificate
                    and the Rights represented hereby may become void in the
                    circumstances specified in Section 7(e) of the Rights
                    Agreement.

     The provisions of Section 7(e) of the Rights Agreement shall be operative
whether or not the foregoing legend is contained on any such Rights Certificate.

     SECTION 5.     COUNTERSIGNATURE AND REGISTRATION.

             (a)    The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its Chief Executive Officer, or its
President, either manually or by facsimile signature, which shall be attested by
the Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. The Rights Certificates shall be manually countersigned by
the Rights Agent and shall not be valid for any purpose unless so countersigned.
In case any officer of the Company who shall have signed any of the Rights
Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Rights Certificates, nevertheless, may be countersigned by the Rights
Agent, and issued and delivered by the Company with the same force and effect as
though the person who signed such Rights Certificates had not ceased to be such
officer of the Company; and any Rights Certificates may be signed on behalf of
the Company by any person who, at the actual date of the execution of such
Rights Certificate, shall be a proper officer of the Company to sign such Rights
Certificate, although at the date of the execution of this Rights Agreement any
such person was not such an officer.

             (b)    Following the Distribution Date, the Rights Agent will keep
or cause to be kept, at its offices in St. Paul, Minnesota, books for
registration and transfer of the Rights Certificates issued hereunder. Such
books shall show the names and addresses of the respective

                                       12

<PAGE>   7

holders of the Rights Certificates, the number of Rights evidenced on its face
by each of the Rights Certificates and the date of each of the Rights
Certificates.

     SECTION 6.     TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES.

             (a)    Subject to the provisions of Section 14 hereof, at any time
after the close of business on the Distribution Date, and at or prior to the
close of business on the Expiration Date, any Rights Certificate or Certificates
may be transferred, split up, combined or exchanged for another Rights
Certificate or Certificates, entitling the registered holder to purchase a like
number of shares of Common Stock as the Rights Certificate or Certificates
surrendered then entitled such holder to purchase. Any registered holder
desiring to transfer, split up, combine or exchange any Rights Certificate shall
make such request in writing delivered to the Rights Agent, and shall surrender
the Rights Certificate or Rights Certificates to be transferred, split up,
combined or exchanged at the office or offices of the Rights Agent designated
for such purpose. Thereupon the Rights Agent shall countersign and deliver to
the Person entitled thereto a Rights Certificate or Rights Certificates, as the
case may be, as so requested. The Company may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer, split up, combination or exchange of Rights
Certificates.

             (b)    Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and reimbursement to the Company
and the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificate if
mutilated, the Company will execute and deliver a new Rights Certificate of like
tenor to the Rights Agent for countersignature and delivery to the registered
owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.

     SECTION 7.     EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF
RIGHTS.

             (a)    Subject to Section 7(e), the registered holder of any Rights
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein including without limitation, the restrictions on exercisability
set forth in Section 9(c), Section 11(a)(iii) and Section 23(a) hereof) in whole
or in part at any time after the Distribution Date upon surrender of the Rights
Certificate, with the form of election to exercise on the reverse side thereof
duly executed, to the Rights Agent at the office or offices of the Rights Agent
designated for such purpose, together with payment of the Purchase Price for
each share of Common Stock (or, if applicable, such other number of shares or
other securities) as to which the Rights are exercised, at or prior to the
earlier of (i) the close of business on May 12, 2010 (the "FINAL EXPIRATION
DATE"), or (ii) the time at which the Rights are redeemed as provided in Section
23 hereof (such earlier time being herein referred to as the "EXPIRATION DATE").
Any Person who prior to the Distribution Date becomes a record holder of shares
of Common Stock may exercise all of the rights of a registered holder of a
Rights

                                       13

<PAGE>   8

Certificate with respect to the Rights associated with such shares of Common
Stock in accordance with and subject to the provisions of this Agreement,
including the provisions of Section 7(e) hereof, as of the date such Person
becomes a record holder of shares of Common Stock.

             (b)    The Purchase Price for each share of Common Stock pursuant
to the exercise of a Right shall initially be Forty Dollars ($40.00), and shall
be subject to adjustment from time to time as provided in Section 11 hereof and
shall be payable in lawful money of the United States of America in accordance
with paragraph (c) below.

             (c)    Upon receipt of a Rights Certificate representing
exercisable Rights, with the form of election to exercise duly executed,
accompanied by payment (in cash, or by certified check or bank draft payable to
the order of the Company) of the Purchase Price for the shares to be purchased
and an amount equal to any applicable transfer tax, the Rights Agent shall
thereupon promptly (i) (A) requisition from any transfer agent of the shares of
Common Stock (or make available, if the Rights Agent is the transfer agent for
such shares) certificates for the number of shares of Common Stock to be
purchased and the Company hereby irrevocably authorizes its transfer agent to
comply with all such requests, or (B) if the Company, in its sole discretion,
shall have elected to deposit the shares of Common Stock issuable upon exercise
of the Rights hereunder into a depositary, requisition from the depositary agent
depositary receipts representing such number of shares of Common Stock as are to
be purchased (in which case certificates for the shares of Common Stock
represented by such receipts shall be deposited by the transfer agent with the
depositary agent) and the Company will direct the depositary agent to comply
with such request, (ii) when appropriate, requisition from the Company the
amount of cash, if any, to be paid in lieu of fractional shares in accordance
with Section 14 hereof, (iii) after receipt of such certificates or depositary
receipts, cause the same to be delivered to or upon the order of the registered
holder of such Rights Certificate, registered in such name or names as may be
designated by such holder, and (iv) when appropriate, after receipt thereof,
deliver such cash, if any, to or upon the order of the registered holder of such
Rights Certificate. In the event that the Company is obligated to issue other
securities of the Company, pay cash and/or distribute other property pursuant to
Section 11(a)(iii) hereof, the Company will make all arrangements necessary so
that such other securities, cash, and/or property are available for distribution
by the Rights Agent, if and when appropriate. In addition, in the case of an
exercise of the Rights by a holder pursuant to Section 11(a)(ii), the Rights
Agent shall return such Rights Certificate to the registered holder thereof
after imprinting, stamping or otherwise indicating thereon that the Rights
represented by such Rights Certificate no longer include the Rights provided by
Section 11(a)(ii) of the Rights Agreement and if less than all the Rights
represented by such Rights Certificate were so exercised, the Rights Agent shall
indicate on the Rights Certificate the number of Rights represented thereby
which continue to include the Rights provided by Section 11(a)(ii).

             (d)    In case the registered holder of any Rights Certificate
shall exercise (except pursuant to Section 11(a)(ii)) less than all the Rights
evidenced thereby, a new Rights Certificate evidencing Rights equivalent to the
Rights remaining unexercised shall be issued by the Rights

                                       14

<PAGE>   9

Agent and delivered to the registered holder of such Rights Certificate or to
such holder's duly authorized assigns, subject to the provisions of Section 14
hereof.

             (e)    Notwithstanding anything in this Agreement to the contrary,
from and after the occurrence of the event described in Section 11(a)(ii), any
Rights beneficially owned by (a) an Acquiring Person or an Associate or
Affiliate of an Acquiring Person, (b) except as provided below, a transferee of
an Acquiring Person (or such Associate or Affiliate) who becomes a transferee
after the Acquiring Person becomes such, and (c) except as provided below, a
transferee of an Acquiring Person (or such Associate or Affiliate) who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (i) a transfer (whether or not for
consideration) from the Acquiring Person to or on behalf of holders of equity
interests in such Acquiring Person or to any Person with whom the Acquiring
Person has any continuing agreement, arrangement or understanding regarding the
transferred Rights or (ii) a transfer which the Board of Directors otherwise
concludes in good faith (as determined in its discretion by the vote of a
majority of the Directors then in office) is part of a plan, arrangement or
understanding which has as a primary purpose or effect of avoidance of this
Section 7(e), shall become null and void without any further action, and any
holder of such Rights shall thereupon have no right to exercise such Rights. The
Board of Directors (as determined in its discretion by the vote of a majority of
the Directors then in office) may in appropriate circumstances waive application
of this Section 7(e) and the requirements of Section 4(b) to any transfer by an
Acquiring Person in connection with a transfer or series of transfers which
cause an Acquiring Person to become the Beneficial Owner of voting securities
having 5% or less of the voting power of the Company. The Company shall use all
reasonable efforts to insure that the provisions of this Section 7(e) hereof are
complied with, but shall have no liability to any holder of Rights for the
inability to make any determinations with respect to an Acquiring Person or its
Affiliates, Associates or transferees hereunder.

             (f)    Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder of any Rights Certificate upon the
occurrence of any purported exercise as set forth in this Section 7 unless the
certificate contained in the appropriate form of election to purchase set forth
on the reverse side of the Rights Certificate surrendered for such exercise
shall have been completed and signed by the registered holder thereof and the
Company shall have been provided with such additional evidence of the identity
of the Beneficial Owner (or former Beneficial Owner) of such Rights Certificate
or Affiliates or Associates thereof as the Company shall reasonably request.

     SECTION 8.     CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES. All
Rights Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificate purchased or acquired by

                                       15

<PAGE>   10

the Company otherwise than upon the exercise thereof. The Rights Agent shall
deliver all canceled Rights Certificates to the Company.

     SECTION 9.     RESERVATION AND AVAILABILITY OF COMMON STOCK.

             (a)    The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued shares of Common
Stock, the number of shares of Common Stock that, except as provided in Section
11(a)(iii) and subject to Section 7(e) hereof, will be sufficient to permit the
exercise in full of all outstanding Rights. In the event that there shall not be
sufficient authorized but unissued shares of Common Stock to permit such
exercise, the Company shall use its best efforts to have the stockholders of the
Company take such action as may be necessary to authorize additional shares of
Common Stock for issuance upon exercise of Rights.

             (b)    If the Company's Common Stock is listed on any national
securities exchange, the Company shall use its best efforts to cause, from and
after such time as the Rights become exercisable, all shares reserved for
issuance upon the exercise of the Rights to be listed on such exchange upon
official notice of issuance upon such exercise.

             (c)    The Company shall use its best efforts to (i) file, as soon
as practicable following the Distribution Date, a registration statement under
the Securities Act of 1933 (the "ACT"), with respect to the Rights and the
securities purchasable upon exercise of the Rights on an appropriate form, (ii)
cause such registration statement to become effective as soon as practicable
after such filing, and (iii) cause such registration statement to remain
effective (with a prospectus at all times meeting the requirements of the Act)
until the date of the expiration of the Rights. The Company will also take such
action as may be appropriate under the blue sky laws of the various states. The
Company may temporarily suspend, for a period of time not to exceed ninety (90)
days, the exercisability of the Rights in order to prepare and file any required
registration statement. Upon any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect.

             (d)    The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all shares of Common Stock delivered
upon exercise of Rights shall, at the time of delivery of the certificates for
such shares (subject to payment of the Purchase Price), be duly and validly
authorized and issued and fully paid and nonassessable shares.

             (e)    The Company further covenants and agrees that it will pay
when due and payable any and all federal and state transfer taxes and charges
which may be payable in respect of the issuance or delivery of the Rights
Certificates and of any certificates for shares of Common Stock upon the
exercise of Rights. The Company shall not, however, be required to pay any
transfer tax which may be payable in respect of any transfer or delivery of
Rights Certificates to a Person other than, or the issuance or delivery of the
shares of Common Stock in respect of a name other than that of, the registered
holder of the Rights Certificates evidencing Rights surrendered for exercise

                                       16

<PAGE>   11

or to issue or deliver any certificates for shares of Common Stock in a name
other than that of the registered holder upon the exercise of any Rights until
such tax shall have been paid (any such tax being payable by the holder of such
Rights Certificate at the time of surrender) or until it has been established to
the Company's satisfaction that no such tax is due.

     SECTION 10.    COMMON STOCK RECORD DATE. Each Person in whose name any
certificate for shares of Common Stock (or other securities, as the case may be)
is issued upon the exercise of Rights shall for all purposes be deemed to have
become the holder of record of the shares of Common Stock (or other securities,
as the case may be) represented thereby on, and such certificate shall be dated,
the date upon which the Rights Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and all applicable transfer
taxes) was made; provided, however, that if the date of such surrender and
payment is a date upon which the Common Stock (or other securities, as the case
may be) transfer books of the Company are closed, such person shall be deemed to
have become the record holder of such shares on, and such certificate shall be
dated, the next succeeding Business Day on which the Common Stock transfer books
of the Company are open. Prior to the exercise of the Rights evidenced thereby,
the holder of a Rights Certificate shall not be entitled to any rights of a
stockholder of the Company with respect to shares for which the Rights shall be
exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and shall
not be entitled to receive any notice of any proceedings of the Company, except
as provided herein.

     SECTION 11.    ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SHARES OR
NUMBER OF RIGHTS. The Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.

             (a)    (i)  In the event the Company shall at any time after the
date of this Agreement (A) declare a dividend on the Common Stock payable in
shares of Common Stock, (B) subdivide the outstanding Common Stock, (C) combine
the outstanding Common Stock into a smaller number of shares, or (D) issue any
shares of its capital stock in a reclassification of the Common Stock (including
any such reclassification in connection with a consolidation or merger in which
the Company is the continuing or surviving corporation), except as otherwise
provided in this Section 11(a) and in Section 7(e) hereof, the Purchase Price in
effect at the time of the record date for such dividend or of the effective date
of such subdivision, combination or reclassification, and the number and kind of
shares of Common Stock or capital stock, as the case may be, issuable on such
date, shall be proportionately adjusted so that the holder of any Right
exercised after such time shall be entitled to receive the aggregate number and
kind of shares of Common Stock or capital stock, as the case may be, which, if
such Right had been exercised immediately prior to such date and at a time when
the Common Stock transfer books of the Company were open, such holder would have
owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification. If an event occurs which
would require an adjustment under both Section 11(a)(i) and Section 11(a)(ii),
the adjustment provided for in this Section 11(a)(i) shall be in addition to,
and shall be made prior to any adjustment required pursuant to Section
11(a)(ii).

                                       17

<PAGE>   12

             (ii)   In the event any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company, or any entity organized, appointed or established by
the Company for or pursuant to the terms of any such plan), alone or together
with its Affiliates and Associates, shall become an Acquiring Person, then,
except as provided below and in Section 7(e) hereof, the holder of any Right
which has not theretofore been exercised shall thereafter be entitled to
receive, upon exercise of such Right at the then current Purchase Price in
accordance with the terms of this Agreement, such number of shares of Common
Stock of the Company equal to the result obtained by (1) multiplying the then
current Purchase Price by the then number of shares of Common Stock for which a
Right is then exercisable and (2) dividing that product by 50% of the current
market price (determined pursuant to Section 11(d) hereof) per share of Common
Stock as of the Stock Acquisition Date in question; provided, however, that if
the transaction that would otherwise give rise to the foregoing adjustment also
constitutes an event described in Section 13(a), then only the provisions of
Section 13 shall apply and no adjustment shall be made pursuant to this Section
11(a)(ii).

             (iii)  In lieu of issuing shares of Common Stock in accordance with
Section 11(a)(ii) hereof, the Company's Board of Directors may, if the Board of
Directors determines in its discretion (as evidenced by the vote of a majority
of the Directors then in office) that such action is necessary or appropriate
and not contrary to the interests of holders of Rights, elect to issue or pay,
upon the exercise of the Rights, cash (including an offset against the Purchase
Price), property, shares of Common Stock, other securities or any combination
thereof having an aggregate value equal to the value of the shares of Common
Stock which otherwise would have been issuable pursuant to Section 11(a)(ii),
which value shall be determined by a nationally recognized investment banking
firm selected by the Company's Board of Directors (as determined by the Board in
its discretion by the vote of a majority of the Directors then in office). For
purposes of the preceding sentence, the value of any preferred stock which the
Board of Directors determines to be a "COMMON STOCK EQUIVALENT" shall be deemed
to have the same value as the Common Stock. Any such election by the Board of
Directors must be made and publicly announced within 90 days of the relevant
Stock Acquisition Date. Following the occurrence of an event described in
Section 11(a)(ii), the Board of Directors may (as determined in its discretion
by the vote of a majority of the Directors then in office) suspend the
exercisability of the Rights for a period of up to 90 days following the
occurrence of such event to the extent that the Board of Directors has not
determined whether to exercise its rights of election under this paragraph
(a)(iii). In the event of any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the suspension is no
longer in effect.

             (b)    In case the Company shall fix a record date for the issuance
of rights, options or warrants to all holders of Common Stock entitling them to
subscribe for or purchase (for a period expiring within forty-five (45) calendar
days after such record date) Common Stock (or securities convertible into Common
Stock) at a price per share of Common Stock (or having a conversion price per
share of Common Stock, if a security convertible into Common Stock) less than
the current market price (as determined pursuant to Section 11(d) hereof) per
share of Common Stock on such record date, the Purchase Price to be in effect
after such record date shall be determined by

                                       18

<PAGE>   13

multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the number of shares of Common
Stock outstanding on such record date, plus the number of shares of Common Stock
which the aggregate offering price of the total number of shares of Common Stock
so offered for subscription or purchase (and/or the aggregate initial conversion
price of the convertible securities so to be offered) would purchase at such
current market price and the denominator of which shall be the number of shares
of Common Stock outstanding on such record date, plus the number of additional
shares of Common Stock to be offered for subscription or purchase (or into which
the convertible securities so to be offered are initially convertible). In case
such subscription price may be paid in a consideration part or all of which
shall be in a form other than cash, the value of such consideration shall be as
determined in good faith by the Board of Directors (as evidenced by the vote of
a majority of the Directors then in office) whose determination shall be
described in a statement filed with the Rights Agent and shall be binding on the
Rights Agent. Shares of Common Stock owned by or held for the account of the
Company shall not be deemed outstanding for the purpose of any such computation.
Such adjustment shall be made successively whenever such a record date is fixed;
and in the event that such rights or warrants are not so issued, the Purchase
Price shall be adjusted to be the Purchase Price which would then be in effect
if such record date had not been fixed.

             (c)    In case the Company shall fix a record date for a
distribution to all holders of Common Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness, cash (other than a regular
quarterly cash dividend out of the earnings or retained earnings of the
Company), assets (other than a dividend payable in Common Stock, but including
any dividend payable in stock other than Common Stock) or subscription rights or
warrants (excluding those referred to in Section 11(b)), the Purchase Price to
be in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the current market price (as determined pursuant
to Section 11(d) hereof) per share of Common Stock on such record date, less the
fair market value, as determined in good faith by the Board of Directors (as
evidenced by the vote of a majority of the Directors then in office) whose
determination shall be described in a statement filed with the Rights Agent, of
the portion of the cash, assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to a share of
Common Stock and the denominator of which shall be such current market price (as
determined pursuant to Section 11(d) hereof) per share of Common Stock. Such
adjustments shall be made successively whenever such a record date is fixed; and
in the event that such distribution is not so made, the Purchase Price shall be
adjusted to be the Purchase Price which would have been in effect if such record
date had not been fixed.

             (d)    For the purpose of any computation hereunder, the "CURRENT
MARKET PRICE" per share of Common Stock on any date shall be deemed to be the
average of the daily closing prices per share of such Common Stock for the
thirty (30) consecutive Trading Days (as such term is hereinafter defined)
immediately prior to such date; provided, however, that in the event that the
current market price per share of the Common Stock is determined during a period
following the announcement by the issuer of such Common Stock of (A) a dividend
or distribution on such

                                       19

<PAGE>   14

Common Stock payable in shares of such Common Stock or securities convertible
into shares of such Common Stock (other than the Rights), or (B) any
subdivision, combination or reclassification of such Common Stock, and prior to
the expiration of the thirty (30) Trading Day period after the ex- dividend date
for such dividend or distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case, the "current
market price" shall be properly adjusted to take into account ex-dividend
trading. The closing price for each day shall be the last sale price, regular
way, or, in case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if the shares
of Common Stock are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the shares of Common Stock are listed or admitted to trading or, if the
shares of Common Stock are not listed or admitted to trading on any national
securities exchange, the last quoted sale price or, if not so quoted, the
average of the high bid and low asked prices in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ") National Market or such other system then in use,
or, if on any such date the shares of Common Stock are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Common Stock selected by the
Board. If on any such date no market maker is making a market in the Common
Stock, the fair value of such shares on such date, as determined in good faith
by the Board of Directors (as evidenced by the vote of a majority of the
Directors then in office), shall be used. The term "TRADING DAY" shall mean a
day on which the principal national securities exchange on which the shares of
Common Stock are listed or admitted to trading is open for the transaction of
business or, if the shares of Common Stock are not listed or admitted to trading
on any national securities exchange, a Business Day. If the Common Stock is not
publicly held or not so listed or traded, "current market price" per share shall
mean the fair value per share as determined in good faith by the Board of
Directors (as evidenced by the vote of a majority of the Directors then in
office) whose determination shall be described in a statement filed with the
Rights Agent and shall be conclusive for all purposes.

             (e)    Anything herein to the contrary notwithstanding, no
adjustment in the Purchase Price shall be required unless such adjustment would
require an increase or decrease of at least one percent (1%) in the Purchase
Price; provided, however, that any adjustments which by reason of this Section
11(e) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 11
shall be made to the nearest cent or to the nearest ten-thousandth of a share of
Common Stock, as the case may be. Notwithstanding the first sentence of this
Section 11(e), any adjustment required by this Section 11 shall be made no later
than the earlier of (i) three (3) years from the date of the transaction which
mandates such adjustment, or (ii) the Expiration Date.

             (f)    If as a result of an adjustment made pursuant to Section
11(a) or Section 13, the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock other than Common Stock,
thereafter the number of such other shares so receivable upon

                                       20

<PAGE>   15

exercise of any Right shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions
contained in Sections 11(a), (b), (c), (e), (g), (h), (i), (j), (k) and (m), and
the provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the Common
Stock shall apply on like terms to any such other shares.

             (g)    All Rights originally issued by the Company subsequent to
any adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of shares of Common Stock
purchasable from time to time hereunder upon exercise of the Rights, all subject
to further adjustment as provided herein.

             (h)    Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
shares (calculated to the nearest ten-thousandth) of Common Stock obtained by
(i) multiplying (x) the number of shares covered by the Right immediately prior
to this adjustment, by (y) the Purchase Price in effect immediately prior to
such adjustment of the Purchase Price, and (ii) dividing the product so obtained
by the Purchase Price in effect immediately after such adjustment of the
Purchase Price.

             (i)    The Company may elect on or after the date of any adjustment
of the Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of shares of Common Stock purchasable upon the exercise
of a Right. Each of the Rights outstanding after the adjustment in the number of
Rights shall be exercisable for the number of shares of Common Stock for which a
Right was exercisable immediately prior to such adjustment. Each Right held of
record prior to such adjustment of the number of Rights shall become that number
of Rights (calculated to the nearest ten-thousandth) obtained by dividing the
Purchase Price in effect immediately prior to the adjustment of the Purchase
Price by the Purchase Price in effect immediately after adjustment of the
Purchase Price. The Company shall make a public announcement of its election to
adjust the number of Rights, indicating the record date for the adjustment, and,
if known at the time, the amount of the adjustment to be made. This record date
may be the date on which the Purchase Price is adjusted or any day thereafter,
but, if the Rights Certificates have been issued, shall be at least ten (10)
days later than the date of the public announcement. If Rights Certificates have
been issued, upon each adjustment of the number of Rights pursuant to this
Section 11(i), the Company shall, as promptly as practicable, cause to be
distributed to holders of record of Rights Certificates on such record date
Rights Certificates evidencing, subject to Section 14 hereof, the additional
Rights to which such holders shall be entitled as a result of such adjustment,
or, at the option of the Company, shall cause to be distributed to such holders
of record in substitution and replacement for the Rights Certificates held by
such holders prior to the date of adjustment, and upon surrender thereof, if
required by the Company, new Rights Certificates evidencing all the Rights to
which such holders shall be entitled after such adjustment. Rights Certificates
so to be distributed shall be issued, executed and countersigned in the manner
provided for herein (and may bear, at the option of the

                                       21

<PAGE>   16

Company, the adjusted Purchase Price) and shall be registered in the names of
the holders of record of Rights Certificates on the record date specified in the
public announcement.

             (j)    Irrespective of any adjustment or change in the Purchase
Price or the number of shares of Common Stock issuable upon the exercise of the
Rights, the Rights Certificates theretofore and thereafter issued may continue
to express the Purchase Price per share and the number of shares which were
expressed in the initial Rights Certificates issued hereunder.

             (k)    Before taking any action that would cause an adjustment
reducing the Purchase Price below the then par value, if any, of the shares of
Common Stock issuable upon exercise of the Rights, the Company shall take any
corporate action which may, in the opinion of its counsel, be necessary in order
that the Company may validly and legally issue fully paid and nonassessable
shares of Common Stock at such adjusted Purchase Price.

             (l)    In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the shares of Common Stock and other capital stock or securities of the Company,
if any, issuable upon such exercise over and above the shares of Common Stock
and other capital stock or securities of the Company, if any, issuable upon such
exercise on the basis of the Purchase Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to such holder a due bill or
other appropriate instrument evidencing such holder's right to receive such
additional shares upon the occurrence of the event requiring such adjustment.

             (m)    Anything in this Section 11 to the contrary notwithstanding,
the Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that the Board of Directors shall determine in its discretion (as
evidenced by the vote of a majority of the Directors then in office) to be
advisable in order that any (i) consolidation or subdivision of the Common
Stock, (ii) issuance wholly for cash of any shares of Common Stock at less than
the current market price, (iii) issuance wholly for cash of shares of Common
Stock or securities which by their terms are convertible into or exchangeable
for shares of Common Stock, (iv) stock dividends or (v) issuance of rights,
options or warrants referred to in this Section 11, hereafter made by the
Company to holders of its Common Stock shall not be taxable to such
stockholders.

             (n)    The Company covenants and agrees that it shall not, at any
time after the Distribution Date, (i) consolidate with, (ii) merge with or into,
or (iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one
or more transactions, assets or earning power aggregating more than 50% of the
assets or earning power of the Company and its Subsidiaries (taken as a whole)
to, any other Person if at the time of or immediately after such consolidation,
merger or sale (x) there are any rights, warrants or other instruments or
securities outstanding or agreements in effect which would substantially
diminish or otherwise eliminate the benefits intended to be afforded by the
Rights or (y) there are not sufficient unissued, unreserved shares of Common
Stock of the Company

                                       22

<PAGE>   17

to permit the exercise in full of the Rights (except to the extent cash,
property, or other securities have been substituted pursuant to Section
11(a)(iii)).

             (o)    The Company covenants and agrees that, after the Stock
Acquisition Date, it will not, except as permitted by Section 23, 24 or 27
hereof, take (or permit any Subsidiary to take) any action the purpose or effect
of which is to diminish substantially or otherwise eliminate the benefits
intended to be afforded by the Rights.

             (p)    The exercise of Rights under Section 11(a) (ii) shall only
result in the loss of rights under Section 11(a) (ii) with respect to Rights so
exercised and shall not otherwise affect the rights represented by unexercised
Rights under this Rights Agreement, including the rights represented by Section
13.

     SECTION 12.    CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.
Whenever an adjustment is made as provided in Sections 11 and 13 hereof, the
Company shall (a) promptly prepare a certificate setting forth such adjustment
and a brief statement of the facts accounting for such adjustment, (b) promptly
file with the Rights Agent and with each transfer agent for the Common Stock a
copy of such certificate, and (c) mail a brief summary thereof to each holder of
a Rights Certificate in accordance with Section 26 hereof. The Rights Agent
shall be fully protected in relying on any such certificate and on any
adjustment therein contained.

     SECTION 13.    CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR
EARNING POWER.

             (a)    In the event that, following the Stock Acquisition Date,
directly or indirectly, (x) the Company shall consolidate with, or merge with
and into, any other Person, and the Company shall not be the continuing or
surviving corporation of such consolidation or merger, (y) any Person shall
consolidate with, or merge with or into, the Company, and the Company shall be
the continuing or surviving corporation of such consolidation or merger and, in
connection with such consolidation or merger, all or part of the outstanding
shares of Common Stock shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other property, or (z) the Company
shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell
or otherwise transfer), in one or more transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any Person or Persons (other than the Company
or any Subsidiary of the Company), then, and in each such case, proper provision
shall be made so that: (i) following the Distribution Date, each holder of a
Right, shall thereafter have the right to receive, upon the exercise thereof at
the then current Purchase Price in accordance with the terms of this Agreement,
such number of validly authorized and issued, fully paid, non-assessable and
freely tradeable shares of Common Stock of the Principal Party (as hereinafter
defined), free and clear of liens, rights of call or first refusal, encumbrances
or other adverse claims, as shall be equal to the result obtained by (1)
multiplying the then current Purchase Price by the then number of shares of
Common Stock for which a Right is then exercisable (without giving effect to the
occurrence, if any, of any transaction described in Section 11(a)(ii) hereof)
and (2) dividing that product by 50% of the current market price (determined
pursuant to Section 11(d)

                                       23

<PAGE>   18

hereof) per share of the Common Stock of such Principal Party on the date of
consummation of such consolidation, merger, sale or transfer; (ii) such
Principal Party shall thereafter be liable for, and shall assume, by virtue of
such consolidation, merger, sale or transfer, all the obligations and duties of
the Company pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 hereof shall apply to such Principal
Party; and (iv) such Principal Party shall take such steps (including, but not
limited to, the reservation of a sufficient number of shares of its Common
Stock) in connection with the consummation of any such transaction as may be
necessary to assure that the provisions hereof shall thereafter be applicable,
as nearly as reasonably may be possible, in relation to its shares of Common
Stock thereafter deliverable upon the exercise of the Rights.

             (b) "PRINCIPAL PARTY" shall mean:

                 (i)     in the case of any transaction described in (x) or (y)
of the first sentence of Section 13(a), the Person that is the issuer of any
securities into which shares of Common Stock of the Company are converted in
such merger or consolidation, and if no securities are so issued, the Person
that is the other party to such merger or consolidation; and

                 (ii)    in the case of any transaction described in (z) of the
first sentence in Section 13(a), the Person that is the party receiving the
greatest portion of the assets or earning power transferred pursuant to such
transaction or transactions;

provided, however, that in any such case, (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person, the Common Stock of which is
and has been so registered, "Principal Party" shall refer to such other Person;
(2) in case such Person is a Subsidiary, directly or indirectly, of more than
one Person, the Common Stocks of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value; and (3)
in case such Person is owned, directly or indirectly, by a joint venture formed
by two or more Persons that are not owned, directly or indirectly, by the same
Person, the rules set forth in (1) and (2) above shall apply to each of the
chains of ownership having an interest in such joint venture as if such party
were a "Subsidiary" of both or all of such joint venturers and the Principal
Parties in each such chain shall bear the obligations set forth in this Section
13 in the same ratio as their direct or indirect interests in such Person bear
to the total of such interests.

             (c)    The Company shall not consummate any such consolidation,
merger, sale or transfer unless the Principal Party shall have a sufficient
number of authorized shares of its Common Stock which have not been issued or
reserved for issuance to permit the exercise in full of the Rights in accordance
with this Section 13 and unless prior thereto the Company and such Principal
Party shall have executed and delivered to the Rights Agent a supplemental
agreement providing for the terms set forth in paragraphs (a) and (b) of this
Section 13 and further providing that, as soon as

                                       24

<PAGE>   19

practicable after the date of any consolidation, merger or sale of assets
mentioned in paragraph (a) of this Section 13, the Principal Party will:

                 (i)     prepare and file a registration statement under the
Act, with respect to the Rights and the securities purchasable upon exercise of
the Rights on an appropriate form, and will use its best efforts to cause such
registration statement to (A) become effective as soon as practicable after such
filing and (B) remain effective (with a prospectus at all times meeting the
requirements of the Act) until the Expiration Date;

                 (ii)    use its best efforts to qualify or register the Rights
and the securities purchasable upon exercise of the Rights under the blue sky
laws of such jurisdictions as may be necessary or appropriate; and

                 (iii)   will deliver to holders of the Rights historical
financial statements for the Principal Party and each of its Affiliates which
comply in all material respects with the requirements for registration on Form
10 under the Exchange Act.

          The provisions of this Section 13 shall similarly apply to successive
mergers, consolidations, and sales or other transfers. If an adjustment under
Section 13(a) occurs at any time after an adjustment under Section 11(a)(ii),
the Rights that have not theretofore been exercised will thereafter become
exercisable in the manner described in Section 13(a).

     SECTION 14.    FRACTIONAL RIGHTS AND FRACTIONAL SHARES.

          (a)       The Company shall not be required to issue fractions of
Rights or to distribute Rights Certificates which evidence fractional Rights. In
lieu of such fractional Rights, there shall be paid to the registered holders of
the Rights Certificates with regard to which such fractional Rights would
otherwise be issuable, an amount in cash equal to the same fraction of the
current market value of a whole Right. For purposes of this Section 14(a), the
current market value of a whole Right shall be the closing price of the Rights
for the Trading Day immediately prior to the date on which such fractional
Rights would have been otherwise issuable The closing price of the Rights for
any day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Rights are not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Rights are listed or
admitted to trading, or if the Rights are not listed or admitted to trading on
any national securities exchange, the last quoted sale price or, if not so
quoted, the average of the high bid and low asked prices in the over-the-counter
market, as reported by NASDAQ or such other system then in use or, if on any
such date the Rights are not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in the Rights selected by the Board of Directors (as evidenced by the
vote of a majority of the Directors

                                       25

<PAGE>   20

then in office). If on any such date no such market maker is making a market in
the Rights, the fair value of the Rights on such date as determined in good
faith by the Board of Directors (as evidenced by the vote of a majority of the
Directors then in office) shall be used.

             (b)    The Company shall not be required to issue fractions of
shares of Common Stock upon exercise of the Rights or to distribute certificates
which evidence fractional shares of Common Stock. In lieu of fractional shares
of Common Stock, the Company may pay to the registered holders of Rights
Certificates at the time such Rights are exercised as herein provided an amount
in cash equal to the same fraction of the current market value of a share of
Common Stock. For purposes of this Section 14(b), the current market value of a
share of Common Stock shall be the closing sale price of a share of Common Stock
(as determined pursuant to Section 11(d) hereof) for the Trading Day immediately
prior to the date of such exercise.

             (c)    Following the occurrence of an Acquisition Event, the
Company shall not be required to issue fractions of shares of Common Stock upon
exercise of the Rights or to distribute certificates which evidence fractional
shares of Common Stock. In lieu of fractional shares of Common Stock, the
Company may pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one (1) share of Common Stock. For
purposes of this Section 14(c), the current market value of one (1) share of
Common Stock shall be the closing sale price of a share of Common Stock (as
determined pursuant to Section 11(d) hereof) for the Trading Day immediately
prior to the date of such exercise.

             (d)    The holder of a Right by the acceptance of the Rights
expressly waives such holder's right to receive any fractional Rights or any
fractional shares upon exercise of a Right, except as permitted by this Section
14.

     SECTION 15.    RIGHTS OF ACTION. All rights of action in respect of this
Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), may in such holder's own behalf and for
such holder's own benefit, enforce, and may institute and maintain any suit,
action or proceeding against the Company to enforce, or otherwise act in respect
of, such holder's right to exercise the Rights evidenced by such Rights
Certificate in the manner provided in such Rights Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
shall be entitled to specific performance of the obligations hereunder and
injunctive relief against actual or threatened violations of the obligations
hereunder of any Person subject to this Agreement. Holders of Rights shall be
entitled to recover the reasonable costs and expenses, including attorneys'
fees, incurred by them in any action to enforce the provisions of this
Agreement.

                                       26

<PAGE>   21

     SECTION 16.    AGREEMENT OF RIGHTS HOLDERS. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:

             (a)    prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of Common Stock;

             (b)    after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the office or offices of the Rights Agent designated for such purposes, duly
endorsed or accompanied by a proper instrument of transfer; and

             (c)    the Company and the Rights Agent may deem and treat the
person in whose name a Rights Certificate (or, prior to the Distribution Date,
the associated Common Stock certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby (notwith standing any notations of
ownership or writing on the Rights Certificates or the associated Common Stock
certificate made by anyone other than the Company or the Rights Agent) for all
purposes whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary.

     SECTION 17.    RIGHTS CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the shares of Common Stock
or any other securities of the Company which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Rights Certificate be construed to confer upon the holder of any
Rights Certificate, as such, any of the rights of a stockholder of the Company
or any right to vote for the election of directors or upon any matter submitted
to stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Rights Certificate shall have been exercised in accordance with the
provisions hereof.

     SECTION 18.    CONCERNING THE RIGHTS AGENT.

             (a)    The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability arising therefrom, directly or
indirectly.

                                       27

<PAGE>   22

             (b)    The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon any Rights
Certificate or certificate for Common Stock or for other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement, or other
paper or document believed by it to be genuine and to be signed, executed and,
where necessary, verified or acknowledged, by the proper Person or Persons.

     SECTION 19.    MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.

             (a)    Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any corporation succeeding to
the corporate trust business of the Rights Agent or any successor Rights Agent,
shall be the successor to the Rights Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto; provided, however, that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement, any of the Rights Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of a predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.

             (b)    In case at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates so countersigned; and in
case at that time any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.

     SECTION 20.    DUTIES OF RIGHTS AGENT The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:

             (a)    The Rights Agent may consult with legal counsel selected by
it (who may be legal counsel for the Company), and the opinion of such counsel
shall be full and complete authorization and protection to the Rights Agent as
to any action taken or omitted by it in good faith and in accordance with such
opinion.

                                       28

<PAGE>   23

             (b)    Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter (including, without limitation, the identity of any Acquiring Person and
the determination of "CURRENT MARKET PRICE") be proved or established by the
Company prior to taking or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein specifically prescribed) may
be deemed to be conclusively proved and established by a certificate signed by
the Chairman of the Board, the Vice Chairman of the Board, the President, any
Vice President, the Treasurer, any Assistant Treasurer, the Secretary or any
Assistant Secretary of the Company and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for any action taken
or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.

             (c)    The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.

             (d)    The Rights Agent shall not be liable for or by reason of any
f the statements of fact or recitals contained in this Agreement or in the
Rights Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.

             (e)    The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Rights Certificate;
nor shall it be responsible for any adjustment required under the provisions of
Sections 11 or 13 hereof or responsible for the manner, method or amount of any
such adjustment or the ascertaining of the existence of facts that would require
any such adjustment (except with respect to the exercise of Rights evidenced by
Right Certificates after actual notice of any such adjustment); nor shall it by
any act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Common Stock to be issued pursuant
to this Agreement or any Rights Certificate or as to whether any shares of
Common Stock will, when so issued, be validly authorized and issued, fully paid
and nonassessable.

             (f)    The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing by
the Rights Agent of the provisions of this Agreement.

             (g)    The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, any Vice Chairman of the Board, the Chief Executive
Officer, the President, any Vice President, the Secretary, any Assistant
Secretary, the Treasurer or any Assistant Treasurer of the Company, and to apply
to such officers for advice or instructions in connection with its duties, and
it shall not be liable for any

                                       29

<PAGE>   24

action taken or suffered to be taken by it in good faith in accordance with
instructions of any such officer.

             (h)    The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.

             (i)    The Rights Agent may execute and exercise any of the rights
or powers hereby vested in it or perform any duty hereunder either itself or by
or through its attorneys or agents, and the Rights Agent shall not be answerable
or accountable for any act, or omission, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Company resulting from any such
act, or omission, default, neglect or misconduct; provided, however, reasonable
care was exercised in the selection and continued employment thereof.

             (j)    No provision of this Agreement shall require the Rights
Agent to expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder or in the exercise of its
rights if there shall be reasonable grounds for believing that repayment of such
funds or adequate indemnification against such risk or liability is not
reasonably assured to it.

     SECTION 21.    CHANGE OF RIGHTS AGENT. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Company, and to each
transfer agent of the Common Stock, by registered or certified mail, and to the
holders of the Rights Certificates by first-class mail. The Company may remove
the Rights Agent or any successor Rights Agent upon thirty (30) days' notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent of the Common Stock, by registered or certified
mail, and to the holders of the Rights Certificates by first-class mail. If the
Rights Agent shall resign or be removed or shall otherwise become incapable of
acting, the Company shall appoint a successor to the Rights Agent. If the
Company shall fail to make such appointment within a period of thirty (30) days
after giving notice of such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated Rights Agent or
by the holder of a Rights Certificate (who shall, with such notice, submit his
Rights Certificate for inspection by the Company), then the registered holder of
any Rights Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be a corporation organized and doing
business under the laws of the United States or of the State of Minnesota (or of
any other state of the United States so long as such corporation is authorized
to do business as a banking institution in the State of Minnesota), in good
standing, having a principal office in the State of Minnesota, which is
authorized under such laws to exercise corporate trust powers and is subject to
supervision or examination by federal or state authority and

                                       30

<PAGE>   25

which has at the time of its appointment as Rights Agent a combined capital and
surplus of at least $250,000,000. After appointment, the successor Rights Agent
shall be vested with the same powers, rights, duties and responsibilities as if
it had been originally named as Rights Agent without further act or deed; but
the predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Stock, and mail a notice thereof in writing to the registered holders
of the Rights Certificates. Failure to give any notice provided for in this
Section 21, however, or any defect therein, shall not affect the legality or
validity of the resignation or removal of the Rights Agent or the appointment of
the successor Rights Agent, as the case may be.

     SECTION 22.    ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such form
as may be approved by the Board to reflect any adjustment or change in the
Purchase Price per share and the number or kind or class of shares or other
securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of shares of Common Stock following the Distribution
Date and prior to the Final Expiration Date, the Company (a) will, with respect
to shares of Common Stock so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement, granted or awarded as of the
Distribution Date, or upon the exercise, conversion, or exchange of securities
issued by the Company, and (b) may, in any other case, if deemed necessary or
appropriate by the Board of Directors of the Company, issue Rights Certificates
representing the appropriate number of Rights in connection with such issuance
or sale; provided, however, that (y) no such Rights Certificate will be issued
if, and to the extent that, the Company is advised by counsel that such issuance
would create a significant risk of material adverse tax consequences to the
Company or the Person to whom such Rights Certificate would be issued, and (z)
no such Rights Certificate will be issued if, and to the extent that,
appropriate adjustment has otherwise been made in lieu of the issuance of such
Rights Certificate.

     SECTION 23.    REDEMPTION AND TERMINATION.

             (a)    (i)  Subject to the provisions of Section 24 and 27, the
Board of Directors may, at its option, at any time prior to 5:00 P.M.,
Minneapolis, Minnesota time, on the earlier of (i) the tenth Business Day
following the related Stock Acquisition Date, or (ii) the Final Expiration Date,
redeem all but not less than all the then outstanding Rights at a redemption
price of $.01 per Right, appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date hereof (such
redemption price being hereinafter referred to as the "REDEMPTION PRICE").

                    (ii) In addition, the Board of Directors may redeem all,
but not less than all, of the then outstanding Rights at the Redemption Price
following the occurrence of a Stock Acquisition Date but prior to any event
described in Section 13(a) either (x) if each of the following

                                       31

<PAGE>   26

shall have occurred and remain in effect: (1) a Person who is an Acquiring
Person shall have transferred or otherwise disposed of a number of shares of
Common Stock in a transaction, or series of transactions, such that such Person
is thereafter a Beneficial Owner of voting securities have 5% or less of the
voting power of the Company and (2) there are no other Persons, immediately
following the occurrence of the event described in clause (1), who are Acquiring
Persons or (y) in connection with any event specified in Section 13(a), not
involving an Acquiring Person or an Affiliate or Associate of an Acquiring
Person.

             (b)    In the case of a redemption permitted under Section 23(a),
immediately upon the action of the Board of Directors of the Company ordering
the redemption of the Rights, evidence of which shall have been filed with the
Rights Agent and without any further action and without any notice, the right to
exercise the Rights will terminate and the only right thereafter of the holders
of Rights shall be to receive the Redemption Price. Within ten Business Days
after the action of the Board of Directors ordering any redemption of the
Rights, the Company shall give notice of such redemption to the Rights Agent and
the holders of the then outstanding Rights by mailing such notice to the Rights
Agent and to all such holders at their last addresses as they appear upon the
registry books of the Rights Agent or, prior to the Distribution Date, on the
registry books of the Transfer Agent for the Common Stock. Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice. Each such notice of redemption will state the method
by which the payment of the Redemption Price will be made.

     SECTION 24.    EXCHANGE.

             (a)    The Board of Directors of the Company may, at its option, at
any time after any Person becomes an Acquiring Person, exchange all or part of
the then outstanding and exercisable Rights (which shall not include Rights that
have become void pursuant to the provisions of Section 7(e) hereof) for shares
of Common Stock at an exchange ratio of one share of Common Stock per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing,
the Board of Directors shall not be empowered to effect such exchange at any
time after any Person (other than the Company, any Subsidiary of the Company,
any employee benefit plan of the Company or any such Subsidiary, or any entity
holding Common Stock for or pursuant to the terms of any such plan or any trust
agreement entered into by the Company to secure benefits payable under any
employee benefit plan of the Company or any Subsidiary of the Company), together
with all Affiliates and Associates of such Person, becomes the Beneficial Owner
of shares of Common Stock representing 50% or more of the Common Stock then
outstanding.

             (b)    Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to subsection (a) of this
Section 24 and without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right thereafter of a holder
of such Rights shall be to receive that number of shares of Common Stock equal
to the number of such Rights held by such holder multiplied by the Exchange
Ratio. The

                                       32

<PAGE>   27

Company shall promptly give public notice of any such exchange; provided,
however, that the failure to give, or any defect in, such notice shall not
affect the validity of such exchange. The Company shall promptly mail a notice
of any such exchange to all of the holders of the then outstanding Rights at
their last address as they appear upon the registry books of the Rights Agent.
Any notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of exchange will
state the method by which the exchange of the shares of Common Stock for Rights
will be effected and, in the event of any partial exchange, the number and kind
of Rights which will be exchanged. Any partial exchange shall be effected pro
rata based on the number of Rights being exchanged (other than Rights which have
become void pursuant to the provisions of Section 7(e) hereof) and the number of
Rights held by each holder.

             (c)    In the event that there shall not be sufficient Common
Shares issued but not outstanding, or authorized but unissued, to permit any
exchange of Rights as contemplated in accordance with this Section 24, the
Company shall take all such action as may be necessary to authorize additional
Common Shares for issuance upon exchange of the Rights.

     SECTION 25.    NOTICE OF CERTAIN EVENTS. In case the Company shall propose,
at any time after the Distribution Date, (a) to pay any dividend payable in
stock of any class to the holders of Common Stock or to make any other
distribution to the holders of Common Stock (other than a regular quarterly cash
dividend out of earnings or retained earnings of the Company), or (b) to offer
to the holders of Common Stock rights or warrants to subscribe for or to
purchase any additional shares of Common Stock or shares of stock of any class
or any other securities, rights or options, or (c) to effect any
reclassification of its Common Stock (other than a reclassification involving
only the subdivision of outstanding shares of Common Stock), or (d) to effect
any consolidation or merger into or with, or to effect any sale or other
transfer (or to permit one or more of its Subsidiaries to effect any sale or
other transfer), in one or more transactions, of more than 50% of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to, any
other Person, or (e) to effect the liquidation, dissolution or winding up of the
Company, then, in each such case, the Company shall give to each holder of a
Rights Certificate, to the extent feasible and in accordance with Section 26
hereof, a notice of such proposed action, which shall specify the record date
for the purposes of such stock dividend, distribution of rights or warrants, or
the date on which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the date of
participation therein by the holders of the shares of Common Stock, if any such
date is to be fixed, and such notice shall be so given in the case of any action
covered by clause (a) or (b) above at least twenty (20) days prior to the record
date for determining holders of the shares of Common Stock for purposes of such
action, and in the case of any such other action, at least twenty (20) days
prior to the date of the taking of such proposed action or the date of
participation therein by the holders of the shares of Common Stock whichever
shall be the earlier.

     In case of the occurrence of the event set forth in Section 11(a)(ii) of
this Agreement, (i) the Company shall as soon as practicable thereafter give to
each holder of a Rights Certificate, to the extent feasible and in accordance
with Section 26 hereof, a notice of the occurrence of such event,

                                       33

<PAGE>   28

which shall specify the event and the consequences of the event to holders of
Rights under Section 11(a)(ii) hereof, and (ii) all references in the preceding
paragraph to Common Stock shall be deemed thereafter to refer to Common Stock
and/or, if appropriate, other securities.

     SECTION 26.    NOTICES. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Rights Certificate
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:

                    Lakes Gaming, Inc.
                    130 Cheshire Lane
                    Minnetonka, Minnesota 55305
                    Attention:       Chief Executive Officer

     Subject to the provisions of Section 21, any notice or demand authorized by
this Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:

                    Norwest Bank Minnesota, National Association
                    161 North Concord Exchange
                    South St. Paul, MN  55075-0538
                    Attention: Nancy Rosengren

     Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.

     SECTION 27.    SUPPLEMENTS AND AMENDMENTS. The Company and the Rights Agent
shall from time to time, if the Company so directs, supplement or amend this
Agreement without the approval of any holders of Rights Certificates (or, prior
to the Distribution Date, the associated Common Stock certificates) in order (i)
to cure any ambiguity, (ii) to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
(iii) to extend the period for redemption provided in Section 23 or the Final
Expiration Date, notwithstanding anything to the contrary provided in clause (v)
hereof, (iv) prior to the Distribution Date, to change or supplement any of the
provisions hereunder which the Company may deem necessary or desirable to
effectuate the purposes of this Agreement or (v) following the Distribution
Date, to change or supplement any of the provisions hereunder in any manner
which the Company may deem necessary or desirable and which shall not adversely
affect the interests of the holders of Rights Certificates (other than an
Acquiring Person or an Affiliate or Associate of an Acquiring Person); provided,
however, that this Agreement shall not be supplemented or amended in any way
following the Distribution Date unless such amendment is approved by a majority
of the Board of

                                       34

<PAGE>   29

Directors (as determined in its discretion by the vote of a majority of the
Directors then in office) whose determination shall be final. Upon the delivery
of a certificate from an appropriate officer of the Company which states that
the proposed supplement or amendment is in compliance with the terms of this
Section 27, the Rights Agent shall execute such supplement or amendment unless
the Rights Agent shall have determined in good faith that such supplement or
amendment would adversely affect its interests under this Agreement. Prior to
the Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Stock.

     SECTION 28.    SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.

     SECTION 29.    BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall
be construed to give to any Person other than the Company, the Rights Agent and
the registered holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of the Common Stock) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock).

     SECTION 30.    ADMINISTRATION OF AGREEMENT. The Board shall have the
exclusive power and authority to administer this Agreement and to exercise all
rights and powers specifically granted to the Board or the Company or as may be
necessary or advisable in the administration of this Agreement, including
without limitation the right and power to interpret the Agreement and to make
all determinations deemed necessary or advisable for the administration of this
Agreement. All such acts, interpretations and determinations done or made by the
Board in good faith shall be final, conclusive and binding on the Company, the
Rights Agent and the holders of the Rights. Accordingly, the Board shall not be
liable to the holders of Rights Certificates or any other party for any
determination made, action taken, or action omitted to be taken pursuant to the
terms of this Agreement, if such determination, action or omitted action was
made or taken in good faith.

     SECTION 31.    SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated,
provided, however, that notwithstanding anything in this Agreement or the Rights
to the contrary, if any such term, provision, covenant, or restriction is held
by such court or authority to be invalid, void, or unenforceable and the Board
of Directors determines in its good faith judgment that severing the invalid
language from this Agreement would adversely affect the purpose or effect of
this Agreement, the right of redemption set forth in Section 23 shall be
reinstated and shall not expire until the close of business on the 15th calendar
day following the date of such determination.

     SECTION 32.    GOVERNING LAW. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Minnesota and

                                       35

<PAGE>   30

for all purposes shall be governed by and construed in accordance with the laws
of such State applicable to contracts made and to be performed entirely within
such State.

     SECTION 33.    COUNTERPARTS. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.

     SECTION 34.    DESCRIPTIVE HEADINGS. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.

            [The remainder of this page is intentionally left blank.]

                                       36

<PAGE>   31

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.

                          LAKES GAMING, INC.

                          By  /s/  Timothy J. Cope
                            ----------------------------------------------------
                          Its Executive Vice President & Chief Financial Officer
                          ------------------------------------------------------

                          NORWEST BANK MINNESOTA,
                               NATIONAL ASSOCIATION

                          By  /s/ Karri L. VanSell
                            ----------------------------------------------------
                          Its Assistant Vice President
                              --------------------------------------------------

                                       37

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