Document:

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                                                                    EXHIBIT 10.6

                                                                  EXECUTION COPY

          PLEDGE AND SECURITY AGREEMENT, dated as of February 15, 2006 (as the
same may be amended, supplemented or otherwise modified from time to time, this
"Agreement"), made by each of the Pledgors referred to below, in favor of PLKS
Funding, LLC, a Delaware limited liability company, in its capacity as the Agent
for the Lenders (as such terms are defined below) party to the Financing
Agreement referred to below (in such capacity, together with its successors and
permitted assigns, the "Agent").

                                   WITNESSETH:

          WHEREAS, Lakes Entertainment, Inc., a Minnesota corporation (the
"Parent"), the subsidiaries of the Parent listed as a "Borrower" on the
signature pages thereto (together with the Parent, each a "Borrower" and
collectively, the "Borrowers"), each other subsidiary of the Parent that becomes
a "Guarantor" in accordance with the terms thereof (collectively, the
"Guarantors" and, together with the Borrowers, each a "Pledgor" and collectively
the "Pledgors"), the lenders from time to time party thereto (each a "Lender"
and collectively, the "Lenders"), and the Agent are parties to a Financing
Agreement, dated as of February 15, 2006 (such agreement, as amended, restated,
supplemented or otherwise modified from time to time, including any replacement
agreement therefor, being hereinafter referred to as the "Financing Agreement");

          WHEREAS, pursuant to the Financing Agreement, the Lenders have agreed
to make a certain Loans (each, a "Loan" and collectively, the "Loans") to the
Borrowers in an aggregate principal amount at any one time outstanding not to
exceed the Total Commitment (as defined in the Financing Agreement);

          WHEREAS, it is a condition precedent to the Lenders making any Loan to
the Borrowers pursuant to the Financing Agreement that each Pledgor shall have
executed and delivered to the Agent a pledge and security agreement providing
for the pledge to the Agent, for the benefit of the Agent and the Lenders, and
the grant to the Agent, for the benefit of the Agent and the Lenders, of a
security interest in and Lien on the outstanding shares of Capital Stock (as
defined in the Financing Agreement) and indebtedness from time to time owned by
such Pledgor of each Person now or hereafter existing and in which such Pledgor
has any interest at any time;

          WHEREAS, the Pledgors are mutually dependent on each other in the
conduct of their respective businesses as an integrated operation, with the
credit needed from time to time by each Pledgor often being provided through
financing obtained by the other Pledgors and the ability to obtain such
financing being dependent on the successful operations of all of the Pledgors as
a whole; and

          WHEREAS, each Pledgor has determined that the execution, delivery and
performance of this Agreement directly benefit, and are in the best interest of,
such Pledgor;

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          NOW, THEREFORE, in consideration of the premises and the agreements
herein and in order to induce the Lenders to make and maintain the Loans to the
Borrowers pursuant to the Financing Agreement, the Pledgors hereby jointly and
severally agree with the Agent, for the benefit of the Agent and the Lenders, as
follows:

          SECTION 1. Definitions.

               (a) Reference is hereby made to the Financing Agreement for a
statement of the terms thereof. All terms used in this Agreement which are
defined in the Financing Agreement or in Article 8 or Article 9 of the Uniform
Commercial Code (the "Code") as in effect from time to time in the State of New
York and which are not otherwise defined herein shall have the same meanings
herein as set forth therein; provided, that terms used herein which are defined
in the Code as in effect in the State of New York on the date hereof shall
continue to have the same meaning notwithstanding any replacement or amendment
of such statute except as the Agent may otherwise determine.

               (b) As used in this Agreement, the following term shall have the
meaning indicated below:

               "Excluded Debt" means, subject to the last sentence of Section 4,
(i) any indebtedness in respect of Shingle Springs, Jamul, Iowa or Pawnee (but
not including indebtedness in respect of Pokagon), and (ii) any other
indebtedness of an Indian Tribe payable to a Loan Party, however evidenced,
identified by the Parent as such upon the written good faith representation of
the Parent to the Agent (upon Parent's consultation with a reputable law firm
with expertise in gaming matters) that the grant of security interest therein
would reasonably be expected to subject a secured party to review by or approval
of an Indian Gaming Authority.

               "Indian Gaming Authority" means the National Indian Gaming
Commission and such state and tribal gaming authorities as authorized by the
applicable tribal-state gaming compact.

          SECTION 2. Pledge and Grant of Security Interest. As collateral
security for all of the Obligations (as defined in Section 3 hereof), each
Pledgor hereby pledges and assigns to the Agent, and grants to the Agent, for
the benefit of the Agent and the Lenders, a continuing security interest in, and
Lien on such Pledgor's right, title and interest in and to the following
(collectively, the "Pledged Collateral"):

               (a) the indebtedness described in Schedule I hereto and all
indebtedness from time to time required to be pledged to the Agent pursuant to
the terms of the Financing Agreement, in any event to exclude the Excluded Debt
(the "Pledged Debt"), the promissory notes and other instruments evidencing the
Pledged Debt, and all interest, cash, instruments, investment property and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the Pledged Debt;

               (b) the shares of Capital Stock described in Schedule II hereto
(the "Pledged Shares"), whether or not evidenced or represented by any stock
certificate, certificated security or other instrument, issued by the Persons
described in such Schedule II (the "Existing Issuers"), the certificates
representing the Pledged Shares, all options and other rights,

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contractual or otherwise, in respect thereof and all dividends, distributions,
cash, instruments, investment property and other property (including, but not
limited to, any stock dividend and any distribution in connection with a stock
split) from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the Pledged Shares; but such Pledged
Shares in any event to exclude the shares of any Excluded Subsidiaries.

               (c) the shares of Capital Stock at any time and from time to time
acquired by such Pledgor of any and all Persons now or hereafter existing (such
Persons, together with the Existing Issuers, being hereinafter referred to
collectively as the "Pledged Issuers" and individually as a "Pledged Issuer")
other than the shares of Capital Stock of any Excluded Subsidiary which shall
not be subject to any security interest under this Agreement or any other Loan
Document, the certificates representing such Capital Stock, all options and
other rights, contractual or otherwise, in respect thereof and all dividends,
distributions, cash, instruments, investment property and other property
(including, but not limited to, any stock dividend and any distribution in
connection with a stock split) from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of the
foregoing;

               (d) except for Excluded Debt and Capital Stock of the Excluded
Subsidiaries all investment property, financial assets, securities, Capital
Stock, other equity interests, stock options and commodity contracts of such
Pledgor, all notes, debentures, bonds, promissory notes or other evidences of
indebtedness of such Pledgor, and all other assets now or hereafter received or
receivable with respect to the foregoing;

               (e) except for Excluded Debt and Capital Stock of the Excluded
Subsidiaries all security entitlements of such Pledgor in any and all of the
foregoing; and

               (f) all proceeds (including proceeds of proceeds) of any and all
of the foregoing;

in each case, whether now owned or hereafter acquired by such Pledgor and
howsoever its interest therein may arise or appear (whether by ownership,
security interest, Lien, claim or otherwise).

Notwithstanding the foregoing, if any Pledged Issuer, is organized or formed
under the laws of a jurisdiction other than the District of Columbia or any
State or territory of the United States of America, such Pledgor shall pledge
not more than 65% of the Capital Stock of such Pledged Issuer.

          SECTION 3. Security for Obligations. The security interest created
hereby in the Pledged Collateral constitutes continuing collateral security for
all of the following obligations, whether now existing or hereafter incurred
(the "Obligations"):

               (a) the prompt payment by each Pledgor, as and when due and
payable (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise), of all amounts from time to time owing by it in respect of
the Financing Agreement and the other Loan Documents, including, without
limitation, (i) all Obligations (as defined in the Financing Agreement)
(including, without limitation, all interest, fees and expenses that accrue
after the commencement of any Insolvency Proceeding of any Loan Party whether or
not the payment of

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such interest, fees or expenses are unenforceable or are not allowable, in whole
or in part, due to the existence of such Insolvency Proceeding), (ii) in the
case of a Guarantor, all amounts from time to time owing by such Pledgor in
respect of its guaranty made pursuant to a Guaranty to which it is a party,
including all obligations guaranteed by such Pledgor and (iii) all commissions,
charges, indemnifications and all other amounts due or to become due under any
Loan Document; and

               (b) the due performance and observance by each Pledgor of all of
its other obligations from time to time existing in respect of the Loan
Documents.

          SECTION 4. Delivery of the Pledged Collateral.

               (a) (i) All promissory notes currently evidencing the Pledged
Debt and all certificates currently representing the Pledged Shares shall be
delivered to the Agent on or prior to the execution and delivery of this
Agreement. All other promissory notes, certificates and instruments constituting
Pledged Collateral from time to time required to be pledged to the Agent
pursuant to the terms of this Agreement or the Financing Agreement (the
"Additional Collateral") shall be delivered to the Agent promptly upon, but in
any event within five (5) days of, receipt thereof by or on behalf of any of the
Pledgors. All such promissory notes, certificates and instruments shall be held
by or on behalf of the Agent pursuant hereto and shall be delivered in suitable
form for transfer by delivery or shall be accompanied by duly executed
instruments of transfer or assignment or undated stock powers executed in blank,
all in form and substance reasonably satisfactory to the Agent. If any Pledged
Collateral consists of uncertificated securities, unless the immediately
following sentence is applicable thereto, such Pledgor shall cause the Agent (or
its designated custodian or nominee) to become the registered holder thereof, or
cause each issuer of such securities to agree that it will comply with
instructions originated by the Agent with respect to such securities without
further consent by such Pledgor. If any Pledged Collateral consists of security
entitlements, such Pledgor shall transfer such security entitlements to the
Agent (or its custodian, nominee or other designee), or cause the applicable
securities intermediary to agree that it will comply with entitlement orders by
the Agent without further consent by such Pledgor. If no Event of Default has
occurred and is continuing, any Pledged Debt held by the Agent in respect of a
Project or new project developed in accordance with the Terms of the Loan
Documents shall be returned to the applicable Loan Party within two (2) Business
Days from the date such Loan Party notifies the Agent that an amendment to such
Pledge Debt is to be made it being understood that such Loan Party shall,
promptly, but in any event, within two (2) Business Days of receipt thereof,
provide the amended Pledged Debt to the Agent. It is understood that if any
Excluded Debt shall no longer be properly classified as Excluded Debt (because
the grant of a security interest therein would no longer subject a secured party
to licensing requirements or other review, approval of consent requirements
under tribal compacts or by any other Indian gaming authority) than such
Excluded Debt shall be automatically reclassified as Pledged Debt and delivered
in accordance with the terms hereof.

                    (ii) Within five (5) days of the receipt by a Pledgor of any
Additional Collateral, a Pledge Amendment, duly executed by such Pledgor, in
substantially the form of Annex I hereto (a "Pledge Amendment"), shall be
delivered to the Agent, in respect of the Additional Collateral which must be
pledged pursuant to this Agreement and the Financing

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Agreement. The Pledge Amendment shall from and after delivery thereof constitute
part of Schedules I and II hereto. Each Pledgor hereby authorizes the Agent to
attach each Pledge Amendment to this Agreement and agrees that all promissory
notes, certificates or instruments listed on any Pledge Amendment delivered to
the Agent shall for all purposes hereunder constitute Pledged Collateral and
such Pledgor shall be deemed upon delivery thereof to have made the
representations and warranties set forth in Section 5 hereof with respect to
such Additional Collateral.

               (b) If any Pledgor shall receive, by virtue of such Pledgor's
being or having been an owner of any Pledged Collateral, any (i) stock
certificate (including, without limitation, any certificate representing a stock
dividend or distribution in connection with any increase or reduction of
capital, reclassification, merger, consolidation, sale of assets, combination of
shares, stock split, spin-off or split-off), promissory note or other
instrument, (ii) option or right, whether as an addition to, substitution for,
or in exchange for, any Pledged Collateral, or otherwise, (iii) dividends
payable in cash (except such dividends permitted to be retained by any such
Pledgor pursuant to Section 7 hereof) or in securities or other property or (iv)
dividends, distributions, cash, instruments, investment property and other
property in connection with a partial or total liquidation or dissolution or in
connection with a reduction of capital, capital surplus or paid-in surplus, such
Pledgor shall receive such stock certificate, promissory note, instrument,
option, right, payment or distribution in trust for the benefit of the Agent,
shall segregate it from such Pledgor's other property and shall deliver it
forthwith to the Agent, in the exact form received, with any necessary
indorsement and/or appropriate stock powers duly executed in blank, to be held
by the Agent as Pledged Collateral and as further collateral security for the
Obligations.

          SECTION 5. Representations and Warranties. Each Pledgor jointly and
severally represents and warrants (but to the extent any representation or
warranty in this Section 5 is substantively the same as a representation or
warranty contained in Article V of the Financing Agreement and such
representation or warranty is qualified by a materiality or other qualifier in
the Financing Agreement, such representation or warranty herein shall be subject
to the same materiality or other qualifier as in Article V of the Financing
Agreement) as follows:

               (a) Each Pledgor (i) is a corporation, limited liability company
or limited partnership duly organized, validly existing and in good standing
under the laws of the state, province or other applicable jurisdiction of its
organization, (ii) has all requisite power and authority to conduct its business
as now conducted and as presently contemplated and to execute, deliver and
perform this Agreement and each other Loan Document to be executed and delivered
by it pursuant hereto and to consummate the transactions contemplated hereby and
thereby, and (iii) is duly qualified to do business and is in good standing
(except in the case of Louisiana where a dispute regarding taxes is currently
ongoing and as to which the aggregate tax liability shall not exceed an amount
indicated in Section 5.01(k) of the Financing Agreement) in each jurisdiction in
which the character of the properties owned or leased by it or in which the
transaction of its business makes such qualification necessary.

               (b) The execution, delivery and performance by each Pledgor of
this Agreement and each other Loan Document to which such Pledgor is or will be
party (i) have been duly authorized by all necessary corporate, limited
liability company or limited partnership,

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as the case may be, action, (ii) do not and will not contravene its charter or
by-laws, its limited liability company or operating agreement or its certificate
of partnership or partnership agreement, as applicable, or any applicable law or
any Material Contract, (iii) do not and will not result in or require the
creation of any Lien (other than pursuant to any Loan Document) upon or with
respect to any of its properties other than pursuant to this Agreement and (iv)
do not and will not result in any default, noncompliance, suspension,
revocation, impairment, forfeiture or nonrenewal of any permit, license,
authorization or approval applicable to its operations or any of its properties.

               (c) The Existing Issuers set forth in Schedule II hereto are the
Pledgors' only Subsidiaries existing on the date hereof. The Pledged Shares have
been duly authorized and validly issued and are fully paid and nonassessable and
the holders thereof are not entitled to any preemptive, first refusal or other
similar rights. Except as noted in Schedule II hereto and the last sentence of
Section 2, the Pledged Shares constitute 100% of the issued shares of Capital
Stock of the Pledged Issuers as of the date hereof. All other shares of stock
constituting Pledged Collateral will be duly authorized and validly issued,
fully paid and nonassessable.

               (d) The promissory notes currently evidencing the Pledged Debt
have been, and all other promissory notes from time to time evidencing Pledged
Debt, when executed and delivered, will have been, duly authorized, executed and
delivered by the respective makers thereof, and all such promissory notes are or
will be, as the case may be, legal, valid and binding obligations of such
makers, enforceable against such makers in accordance with their respective
terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws.

               (e) Each Pledgor is and will be at all times the legal and
beneficial owner of its Pledged Collateral free and clear of all Liens, except
for the Lien created by this Agreement.

               (f) The exercise by the Agent of any of its rights and remedies
hereunder will not contravene any law or any Material Contract and will not
result in or require the creation of any Lien upon or with respect to any of the
properties of such Pledgor other than pursuant to this Agreement or the other
Loan Documents.

               (g) No authorization or approval or other action by, and no
notice to or filing with, any Governmental Authority is required to be obtained
or made by any Pledgor for (i) the due execution, delivery and performance by
any Pledgor of this Agreement, (ii) the grant by any Pledgor, or the perfection,
of the Lien created hereby in the Pledged Collateral or (iii) the exercise by
the Agent of any of its rights and remedies hereunder, except as may be required
in connection with any sale of any Pledged Collateral by laws affecting the
offering and sale of securities generally.

               (h) This Agreement creates a valid Lien in favor of the Agent,
for the benefit of the Agent and the Lenders, in the Pledged Collateral as
security for the Obligations. The Agent's having possession of the promissory
notes evidencing the Pledged Debt, the certificates representing the Pledged
Shares and all other certificates, instruments and cash

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constituting Pledged Collateral from time to time results in the perfection of
such Lien. Such Lien is, or in the case of Pledged Collateral in which any of
the Pledgors obtains rights after the date hereof, will be, a perfected, first
priority Lien. All action necessary or desirable to perfect and protect such
Lien has been duly taken, except for the Agent's having possession of
certificates, instruments and cash constituting Pledged Collateral after the
date hereof.

               (i) This Agreement is, and each other Loan Document to which any
Pledgor is or will be a party, when executed and delivered, will be, a legal
valid and binding obligation of such Pledgor, enforceable against such Pledgor
in accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws.

          SECTION 6. Covenants as to the Pledged Collateral. So long as any of
the Obligations shall remain outstanding or prior to the termination of the
Total Commitment, each Pledgor will, unless the Agent shall otherwise consent in
writing:

               (a) keep adequate records concerning the Pledged Collateral and
permit the Agent or any agents, designees or representatives thereof at any time
or from time to time to examine and make copies of and abstracts from such
records;

               (b) at the Pledgors' joint and several expense, promptly deliver
to the Agent a copy of each notice or other communication received by it in
respect of the Pledged Collateral;

               (c) at the Pledgors' joint and several expense, defend the
Agent's right, title and security interest in and to the Pledged Collateral
against the claims of any Person;

               (d) at the Pledgors' joint and several expense, at any time and
from time to time, promptly execute and deliver all further instruments and
documents and take all further action that may be necessary or desirable or that
the Agent may reasonably request in order to (i) perfect and protect, or
maintain the perfection of, the security interest and Lien created hereby, (ii)
enable the Agent to exercise and enforce its rights and remedies hereunder in
respect of the Pledged Collateral or (iii) otherwise effect the purposes of this
Agreement, including, without limitation, delivering to the Agent irrevocable
proxies in respect of the Pledged Collateral;

               (e) not sell, assign (by operation of law or otherwise), exchange
or otherwise dispose of any Pledged Collateral or any interest therein except as
expressly permitted by Section 6.02 of the Financing Agreement whereupon Agent
will release its security interest under the terms of the Financing Agreement;

               (f) not create or suffer to exist any Lien upon or with respect
to any Pledged Collateral, except for the Lien created hereby or any Permitted
Lien.

               (g) not make or consent to any amendment or other modification or
waiver with respect to any Pledged Collateral or enter into any agreement or
permit to exist any restriction with respect to any Pledged Collateral other
than pursuant to or as permitted by the Loan Documents.

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               (h) not permit the issuance of (i) any additional shares of any
class of Capital Stock of any Pledged Issuer, (ii) any securities convertible
voluntarily by the holder thereof or automatically upon the occurrence or
non-occurrence of any event or condition into, or exchangeable for, any such
shares of Capital Stock or (iii) any warrants, options, contracts or other
commitments entitling any Person to purchase or otherwise acquire any such
shares of Capital Stock; and

               (i) not take or fail to take any action which would in any manner
impair the validity or enforceability of the Agent's security interest in and
Lien on any Pledged Collateral.

          SECTION 7. Voting Rights, Dividends, Etc. in Respect of the Pledged
Collateral.

               (a) So long as no Event of Default shall have occurred and be
continuing:

                    (i) each Pledgor may exercise any and all voting and other
consensual rights pertaining to any Pledged Shares for any purpose not
inconsistent with the terms of this Agreement, the Financing Agreement or the
other Loan Documents; provided, however, that (A) none of the Pledgors will
exercise or refrain from exercising any such right, as the case may be, if the
Agent gives a Pledgor notice that, in the Agent's judgment, such action (or
inaction) is reasonably likely to have a Material Adverse Effect and (B) each
Pledgor will give the Agent at least five (5) Business Days' notice of the
manner in which it intends to exercise, or the reasons for refraining from
exercising, any such right which is reasonably likely to have a Material Adverse
Effect;

                    (ii) each of the Pledgors may receive and retain any and all
dividends, interest or other distributions paid in respect of the Pledged
Collateral to the extent permitted by the Financing Agreement; provided,
however, that any and all (A) dividends and interest paid or payable other than
in cash in respect of, and instruments and other property received, receivable
or otherwise distributed in respect of or in exchange for, any Pledged
Collateral, (B) dividends and other distributions paid or payable in cash in
respect of any Pledged Collateral in connection with a partial or total
liquidation or dissolution or in connection with a reduction of capital, capital
surplus or paid-in surplus, and (C) cash paid, payable or otherwise distributed
in redemption of, or in exchange for, any Pledged Collateral, together with any
dividend, interest or other distribution or payment which at the time of such
payment was not permitted by the Financing Agreement, shall be, and shall
forthwith be delivered to the Agent, to hold as, Pledged Collateral and shall,
if received by any of the Pledgors, be received in trust for the benefit of the
Agent, shall be segregated from the other property or funds of the Pledgors, and
shall be forthwith delivered to the Agent in the exact form received with any
necessary indorsement and/or appropriate stock powers duly executed in blank, to
be held by the Agent as Pledged Collateral and as further collateral security
for the Obligations under the terms of the Loan Documents; and

                    (iii) the Agent will execute and deliver (or cause to be
executed and delivered) to a Pledgor all such proxies and other instruments as
such Pledgor may

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reasonably request for the purpose of enabling such Pledgor to exercise the
voting and other rights which it is entitled to exercise pursuant to Section
7(a)(i) hereof and to receive the dividends, interest and/or other distributions
which it is authorized to receive and retain pursuant to Section 7(a)(ii)
hereof.

               (b) Upon the occurrence and during the continuance of an Event of
Default:

                    (i) all rights of each Pledgor to exercise the voting and
other consensual rights which it would otherwise be entitled to exercise
pursuant to Section 7(a)(i) hereof, and to receive the dividends, distributions,
interest and other payments that it would otherwise be authorized to receive and
retain pursuant to Section 7(a)(ii) hereof, shall cease, and all such rights
shall thereupon become vested in the Agent, which shall thereupon have the sole
right to exercise such voting and other consensual rights and to receive and
hold as Pledged Collateral such dividends and interest payments;

                    (ii) the Agent is authorized to notify each debtor with
respect to the Pledged Debt to make payment directly to the Agent (or its
designee) and may collect any and all moneys due or to become due to any Pledgor
in respect of the Pledged Debt, and each of the Pledgors hereby authorizes each
such debtor to make such payment directly to the Agent (or its designee) without
any duty of inquiry;

                    (iii) without limiting the generality of the foregoing, the
Agent may at its option exercise any and all rights of conversion, exchange,
subscription or any other rights, privileges or options pertaining to any of the
Pledged Collateral as if it were the absolute owner thereof, including, without
limitation, the right to exchange, in its discretion, any and all of the Pledged
Collateral upon the merger, consolidation, reorganization, recapitalization or
other adjustment of any Pledged Issuer, or upon the exercise by any Pledged
Issuer of any right, privilege or option pertaining to any Pledged Collateral,
and, in connection therewith, to deposit and deliver any and all of the Pledged
Collateral with any committee, depository, transfer agent, registrar or other
designated agent upon such terms and conditions as it may determine; and

                    (iv) all dividends, distributions, interest and other
payments that are received by any of the Pledgors contrary to the provisions of
Section 7(b)(i) hereof shall be received in trust for the benefit of the Agent,
shall be segregated from other funds of the Pledgors, and shall be forthwith
paid over to the Agent as Pledged Collateral in the exact form received with any
necessary indorsement and/or appropriate stock powers duly executed in blank, to
be held by the Agent as Pledged Collateral and as further collateral security
for the Obligations.

          SECTION 8. Additional Provisions Concerning the Pledged Collateral.

               (a) To the maximum extent permitted by applicable law, and for
the purpose of taking any action that the Agent may deem necessary or advisable
to accomplish the purposes of this Agreement, each Pledgor (i) authorizes the
Agent to execute any such agreements, instruments or other documents in such
Pledgor's name and to file such agreements, instruments or other documents in
such Pledgor's name and to file such agreements, instruments,

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or other documents in any appropriate filing office, (ii) authorizes the Agent
to file any financing statements required hereunder or under any other Loan
Document, and any continuation statements or amendment with respect thereto, in
any appropriate filing office without the signature of such Pledgor and (iii)
ratifies the filing of any financing statement, and any continuation statement
or amendment with respect thereto, filed without the signature of such Pledgor
prior to the date hereof. A photocopy or other reproduction of this Agreement or
any financing statement covering the Pledged Collateral or any part thereof
shall be sufficient as a financing statement where permitted by law.

               (b) Each Pledgor hereby irrevocably appoints the Agent as such
Pledgor's attorney-in-fact and proxy (exercisable only during the continuance of
an Event of Default), with full authority in the place and stead of such Pledgor
and in the name of such Pledgor or otherwise, from time to time in the Agent's
discretion, to take any action and to execute any instrument that the Agent may
deem necessary or advisable to accomplish the purposes of this Agreement
(subject to the rights of such Pledgor under Section 7(a) hereof), including,
without limitation, to receive, indorse and collect all instruments made payable
to such Pledgor representing any dividend, interest payment or other
distribution in respect of any Pledged Collateral and to give full discharge for
the same. This power is coupled with an interest and is irrevocable until the
date on which all of the Obligations have been indefeasibly paid in full in cash
after the termination of the Loan Documents.

               (c) If any Pledgor fails to perform any agreement or obligation
contained herein, the Agent itself may perform, or cause performance of, such
agreement or obligation, and the expenses of the Agent incurred in connection
therewith shall be jointly and severally payable by the Pledgors pursuant to
Section 10 hereof and shall be secured by the Pledged Collateral.

               (d) Other than the exercise of reasonable care to assure the safe
custody of the Pledged Collateral while held hereunder, the Agent shall have no
duty or liability to preserve rights pertaining thereto and shall be relieved of
all responsibility for the Pledged Collateral upon surrendering it or tendering
surrender of it to any of the Pledgors. The Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if the Pledged Collateral is accorded treatment
substantially equal to that which the Agent accords its own property, it being
understood that the Agent shall not have responsibility for (i) ascertaining or
taking action with respect to calls, conversions, exchanges, maturities, tenders
or other matters relating to any Pledged Collateral, whether or not the Agent
has or is deemed to have knowledge of such matters, or (ii) taking any necessary
steps to preserve rights against any parties with respect to any Pledged
Collateral.

               (e) The powers conferred on the Agent hereunder are solely to
protect its interest in the Pledged Collateral and shall not impose any duty
upon the Agent to exercise any such powers. Except for the safe custody of any
Pledged Collateral in its possession and the accounting for monies actually
received by it hereunder, the Agent shall have no duty as to any Pledged
Collateral or as to the taking of any necessary steps to preserve rights against
prior parties or any other rights pertaining to any Pledged Collateral.

                                      -10-

<PAGE>

               (f) The Agent may at any time in its discretion (i) without
notice to any Pledgor, transfer or register in the name of the Agent or any of
its nominees any or all of the Pledged Collateral, subject only to the revocable
rights of such Pledgor under Section 7(a) hereof, and (ii) exchange certificates
or instruments constituting Pledged Collateral for certificates or instruments
of smaller or larger denominations.

          SECTION 9. Remedies Upon Default. If any Event of Default shall have
occurred and be continuing:

               (a) The Agent may exercise in respect of the Pledged Collateral,
in addition to any other rights and remedies provided for herein or otherwise
available to it, all of the rights and remedies of a secured party upon default
under the Code then in effect in the State of New York; and without limiting the
generality of the foregoing and without notice except as specified below, sell
the Pledged Collateral or any part thereof in one or more parcels at public or
private sale, at any exchange or broker's board or elsewhere, at such price or
prices and on such other terms as the Agent may deem commercially reasonable.
Each Pledgor agrees that, to the extent notice of sale shall be required by law,
at least five (5) days' notice to such Pledgor of the time and place of any
public sale of Pledged Collateral owned by such Pledgor or the time after which
any private sale is to be made shall constitute reasonable notification. The
Agent shall not be obligated to make any sale of Pledged Collateral regardless
of whether or not notice of sale has been given. The Agent may adjourn any
public or private sale from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned.

               (b) [Intentionally omitted]

               (c) Each Pledgor recognizes that the Agent may deem it
impracticable to effect a public sale of all or any part of the Pledged Shares
or any other securities constituting Pledged Collateral and that the Agent may,
therefore, determine to make one or more private sales of any such securities to
a restricted group of purchasers who will be obligated to agree, among other
things, to acquire such securities for their own account, for investment and not
with a view to the distribution or resale thereof. Each Pledgor acknowledges
that any such private sale may be at prices and on terms less favorable to the
seller than the prices and other terms which might have been obtained at a
public sale and, notwithstanding the foregoing, agrees that such private sales
shall be deemed to have been made in a commercially reasonable manner and that
the Agent shall have no obligation to delay the sale of any such securities for
the period of time necessary to permit the issuer of such securities to register
such securities for public sale under the Securities Act. Each Pledgor further
acknowledges and agrees that any offer to sell such securities which has been
(i) publicly advertised on a bona fide basis in a newspaper or other publication
of general circulation in the financial community of New York, New York (to the
extent that such an offer may be so advertised without prior registration under
the Securities Act) or (ii) made privately in the manner described above to not
less than fifteen bona fide offerees shall be deemed to involve a "public
disposition" for the purposes of Section 9-610(c) of the Code (or any successor
or similar, applicable statutory provision) as then in effect in the State of
New York, notwithstanding that such sale may not constitute a "public offering"
under the Securities Act, and that the Agent may, in such event, bid for the
purchase of such securities.

                                      -11-

<PAGE>

               (d) Any cash held by the Agent as Pledged Collateral and all cash
proceeds received by the Agent in respect of any sale of, collection from,
disposition or other realization upon, all or any part of the Pledged Collateral
may, in the discretion of the Agent, be held by the Agent as collateral for,
and/or then or at any time thereafter applied (after payment of any amounts
payable to the Agent pursuant to Section 10 hereof) in whole or in part by the
Agent against, all or any part of the Obligations in such order as the Agent
shall elect consistent with the provisions of the Financing Agreement. Any
surplus of such cash or cash proceeds held by the Agent and remaining after the
date on which all of the Obligations have been indefeasibly paid in full in cash
after the termination of the Loan Documents shall be paid over to the Pledgors
or to such Person as may be lawfully entitled to receive such surplus.

               (e) In the event that the proceeds of any such sale, collection,
disposition or realization are insufficient to pay all amounts to which the
Agent and the Lenders are legally entitled, the Pledgors shall be jointly and
severally liable for the deficiency, together with interest thereon at the
highest rate specified in any applicable Loan Document for interest on overdue
principal thereof or such other rate as shall be fixed by applicable law,
together with the costs of collection and the reasonable fees, costs and
expenses and other client charges of any attorneys employed by the Agent to
collect such deficiency.

          SECTION 10. Indemnity and Expenses.

               (a) Each Pledgor jointly and severally agrees to defend, protect,
indemnify and hold harmless each Indemnitee from and against any and all claims,
damages, losses, liabilities, obligations, penalties, fees, reasonable costs and
expenses (including, without limitation, reasonable legal fees, costs, expenses
and disbursements) incurred by such Indemnitee to the extent that they arise out
of or otherwise result from this Agreement (including, without limitation,
enforcement of this Agreement), except, claims, losses or liabilities resulting
solely and directly from such Indemnitee's gross negligence or willful
misconduct as determined by a final judgment of a court of competent
jurisdiction.

               (b) Each Pledgor jointly and severally agrees to pay to the Agent
upon demand the amount of any and all costs and expenses, including the
reasonable fees, costs, expenses and disbursements of the Agent's counsel and of
any experts and agents (including, without limitation, any collateral trustee
which may act as agent of the Agent) which the Agent may incur in connection
with (i) the preparation, negotiation, execution, delivery, recordation,
administration, amendment, waiver or other modification or termination of this
Agreement, (ii) the custody, preservation, use or operation of, or the sale of,
collection from, or other realization upon, any Pledged Collateral, (iii) the
exercise or enforcement of any of the rights of the Agent hereunder, or (iv) the
failure by any Pledgor to perform or observe any of the provisions hereof.

          SECTION 11. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing and shall be mailed, telecopied or
delivered, if to any Pledgor, to it in care of the Parent at its address
specified in the Financing Agreement; if to the Agent, to it at its address
specified in the Financing Agreement; or as to any such Person, at such other
address as shall be designated by such Person in a written notice to such other
Person complying as to delivery with the terms of this Section 11. All such
notices and other communications shall be

                                      -12-

<PAGE>

effective (a) if mailed (by certified mail, postage prepaid and return receipt
requested), when received or three (3) Business Days after deposited in the
mails, whichever occurs first, (b) if telecopied, when transmitted and
confirmation received, provided same is on a Business Day and, if not, on the
next Business Day or (c) if delivered, upon delivery, provided same is on a
Business Day and, if not, on the next Business Day.

          SECTION 12. Security Interest Absolute. All rights of the Agent and
the Lenders, all Liens and all obligations of each of the Pledgors hereunder
shall be absolute and unconditional irrespective of: (a) any lack of validity or
enforceability of the Financing Agreement or any other Loan Document, (b) any
change in the time, manner or place of payment of, or in any other term in
respect of, all or any of the Obligations, or any other amendment or waiver of
or consent to any departure from the Financing Agreement or any other Loan
Document, (c) any exchange or release of, or non-perfection of any Lien on any
Collateral, or any release or amendment or waiver of, or consent to or departure
from any guaranty, for all or any of the Obligations, or (d) any other
circumstance that might otherwise constitute a defense available to, or a
discharge of, any of the Pledgors in respect of the Obligations. All
authorizations and agencies contained herein with respect to any of the Pledged
Collateral are irrevocable and powers coupled with an interest.

          SECTION 13. Miscellaneous.

               (a) No amendment of any provision of this Agreement (including
any Schedule attached hereto) shall be effective unless it is in writing and
signed by each Pledgor and the Agent, and no waiver of any provision of this
Agreement, and no consent to any departure by any of the Pledgors therefrom,
shall be effective unless it is in writing and signed by the Agent, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.

               (b) No failure on the part of the Agent or the Lenders to
exercise, and no delay in exercising, any right hereunder or under any other
Loan Document shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right preclude any other or further exercise thereof or the
exercise of any other right. The rights and remedies of the Agent and the
Lenders provided herein and in the other Loan Documents are cumulative and are
in addition to, and not exclusive of, any rights or remedies provided by law.
The rights of the Agent and the Lenders under any Loan Document against any
party thereto are not conditional or contingent on any attempt by the Agent or
the Lenders to exercise any of their rights under any other document against
such party or against any other Person.

               (c) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining portions hereof or thereof or affecting the validity or enforceability
of such provision in any other jurisdiction.

               (d) This Agreement shall create a continuing security interest in
and Lien on the Pledged Collateral and shall (i) remain in full force and effect
until the date on which all of the Obligations have been indefeasibly paid in
full in cash after the termination of the Loan Documents and (ii) be binding on
each Pledgor and its respective successors and assigns, and

                                      -13-

<PAGE>

shall inure, together with all rights and remedies of the Agent and the Lenders
hereunder, to the benefit of the Agent and the Lenders and their respective
successors, transferees and assigns. Without limiting the generality of clause
(ii) of the immediately preceding sentence, the Agent and the Lenders may assign
or otherwise transfer their respective rights and obligations under this
Agreement and any other Loan Document to any other Person pursuant to the terms
of the Financing Agreement, and such other Person shall thereupon become vested
with all of the benefits in respect thereof granted to the Agent and the Lenders
herein or otherwise. Upon any such assignment or transfer, all references in
this Agreement to any Agent or any Lender shall mean the assignee of the Agent
or such Lender. None of the rights or obligations of any of the Pledgors
hereunder may be assigned or otherwise transferred without the prior written
consent of the Agent, and any such assignment or transfer shall be null and
void.

               (e) Upon the date on which all of the Obligations have been
indefeasibly paid in full in cash after the termination of the Loan Documents,
(i) this Agreement and the security interest and Lien created hereby shall
terminate and all rights to the Pledged Collateral shall revert to the Pledgors,
and (ii) the Agent will, upon the Pledgors' request and at the Pledgors'
expense, without any representation, warranty or recourse whatsoever, (A) return
to the Pledgors such of the Pledged Collateral as shall not have been sold or
otherwise disposed of or applied pursuant to the terms hereof and (B) execute
and deliver to the Pledgors such documents as the Pledgors shall reasonably
request to evidence such termination.

               (f) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT AS REQUIRED BY
MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE EXTENT THAT THE VALIDITY AND
PERFECTION OR THE PERFECTION AND THE EFFECT OF PERFECTION OR NON-PERFECTION OF
THE SECURITY INTEREST AND LIEN CREATED HEREBY, OR REMEDIES HEREUNDER, IN RESPECT
OF ANY PARTICULAR PLEDGED COLLATERAL ARE GOVERNED BY THE LAW OF A JURISDICTION
OTHER THAN THE STATE OF NEW YORK.

               (g) Section headings herein are included for convenience of
reference only and shall not constitute a part of this Agreement for any other
purpose.

               (h) This Agreement may be executed in any number of counterparts
and by the different parties hereto on separate counterparts, each of which
shall be deemed an original, but all such counterparts shall constitute one and
the same agreement. Delivery of an executed counterpart of this Agreement by
facsimile or electronic mail shall be equally effective as delivery of an
original executed counterpart.

               (i) All of the obligations of the Pledgors hereunder are joint
and several. The Agent may, in its sole and absolute discretion, enforce the
provisions hereof against any of the Pledgors and shall not be required to
proceed against all Pledgors jointly or seek payment from the Pledgors ratably.
In addition, the Agent may, in its sole and absolute discretion, select the
Pledged Collateral of any one or more of the Pledgors for sale or application to
the Obligations, without regard to the ownership of such Pledged Collateral, and
shall not be required to make such selection ratably from the Pledged Collateral
owned by all of the Pledgors. The

                                      -14-

<PAGE>

release or discharge of any Pledgor by the Agent shall not release or discharge
any other Pledgor from the obligations of such Person hereunder.

                                      -15-

<PAGE>

          IN WITNESS WHEREOF, each Pledgor has caused this Agreement to be
executed and delivered by its officer thereunto duly authorized, as of the date
first above written.

                                 PLEDGORS:

                                 LAKES ENTERTAINMENT, INC.

                                 By: /s/ Timothy J. Cope
                                     -------------------------------------------
                                 Name: Timothy J. Cope
                                 Title: President and Chief Financial Officer

                                 BORDERS LAND COMPANY, LLC
                                 GREAT LAKES GAMING OF MICHIGAN, LLC
                                 LAKES CLOVERDALE, LLC
                                 LAKES GAMING AND RESORTS, LLC
                                 LAKES GAME DEVELOPMENT, LLC
                                 LAKES GAMING-MISSISSIPPI, LLC
                                 LAKES IOWA CONSULTING, LLC
                                 LAKES IOWA MANAGEMENT, LLC
                                 LAKES JAMUL, INC.
                                 LAKES JAMUL DEVELOPMENT, LLC
                                 LAKES KAR SHINGLE SPRINGS, L.L.C.
                                 LAKES KEAN ARGOVITZ RESORTS-CALIFORNIA, L.L.C.
                                 LAKES KICKAPOO CONSULTING, LLC
                                 LAKES KICKAPOO MANAGEMENT, LLC
                                 LAKES NIPMUC, LLC
                                 LAKES PAWNEE CONSULTING, LLC
                                 LAKES PAWNEE MANAGEMENT, LLC
                                 LAKES POKER TOUR, LLC
                                 LAKES SHINGLE SPRINGS, INC.

                                 By: /s/ Timothy J. Cope
                                     -------------------------------------------
                                 Name: Timothy J. Cope
                                 Title: Chief Financial Officer of each of the
                                        above listed entitie<PAGE>
                                                                    Exhibit 10.7

          MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT
                               AND FIXTURE FILING

                                     made by
                            LAKES ENTERTAINMENT, INC.
                                  (MORTGAGOR)

                                   IN FAVOR OF
                     PLKS FUNDING, LLC, AS COLLATERAL AGENT
                                  (MORTGAGEE)

                               PROPERTY LOCATION:
                          130 CHESHIRE LANE, MINNETONKA
                           HENNEPIN COUNTY, MINNESOTA

                          DATED AS OF FEBRUARY 15, 2006

           THIS MORTGAGE WAS PREPARED BY AND WHEN RECORDED, RETURN TO:
                                        Schulte Roth & Zabel LLP
                                        19 Third Avenue
                                        New York, New York 10022
                                        Attention: Caryn J. Ettinger, Esq.
                                        Ref. No.: 089253.0012

Notwithstanding anything to the contrary herein, enforcement of this mortgage is
limited to a debt amount of $8,000,000.00 under chapter 287 of Minnesota
Statutes.

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
ARTICLE I. DEFINITIONS...................................................     2
   Section 1.01 Terms Defined Above......................................     2
   Section 1.02 Definitions..............................................     2
   Section 1.03 Terminology; Other Defined Terms.........................     5

ARTICLE II. GRANT OF LIEN AND SECURITY INTEREST..........................     5
   Section 2.01 Grant of Lien............................................     5
   Section 2.02 Grant of Security Interest...............................     6
   Section 2.03 No Obligation of Mortgagee...............................     6
   Section 2.04 Fixture Filing...........................................     6
   Section 2.05 Future Advances..........................................     7

ARTICLE III. ASSIGNMENT OF LEASES AND RENTS..............................     7
   Section 3.01 Assignment...............................................     7
   Section 3.02 Revocable License........................................     7
   Section 3.03 Enforcement of Leases....................................     8
   Section 3.04 Direction to Tenants.....................................     8
   Section 3.05 Appointment of Attorney-in-Fact..........................     9
   Section 3.06 No Liability of Mortgagee................................     9
   Section 3.07 Mortgagor's Indemnities..................................    10
   Section 3.08 No Modification of Mortgagor's Obligations...............    10

ARTICLE IV. REPRESENTATIONS AND WARRANTIES...............................    10
   Section 4.01 Title to Mortgaged Property and Lien of this Mortgage....    11
   Section 4.02 Taxes and Other Payments.................................    11
   Section 4.03 Power to Create Lien and Security........................    11
   Section 4.04 Loan and Loan Documents..................................    11
   Section 4.05 Compliance with Laws.....................................    11
   Section 4.06 No Condemnation..........................................    12
   Section 4.07 Flood Zone...............................................    12

ARTICLE V. AFFIRMATIVE COVENANTS.........................................    12
   Section 5.01 Lien Status..............................................    12
   Section 5.02 Payment of Impositions...................................    12
   Section 5.03 Repair...................................................    13
   Section 5.04 Insurance and Application of Insurance Proceeds..........    13
   Section 5.05 Condemnation and Application of Condemnation Proceeds....    16
   Section 5.06 Maintenance of Rights-of-Way, Easements, Licenses and
                Other Rights.............................................    17
   Section 5.07 Payment and Performance of Obligations...................    18
   Section 5.08 Compliance with Permitted Liens and Other Obligations....    18
   Section 5.09 Additional Affirmative Covenants.........................    18

ARTICLE VI. NEGATIVE COVENANTS...........................................    18
   Section 6.01 Use Violations...........................................    18
   Section 6.02 Waste....................................................    18
   Section 6.03 Alterations..............................................    19
   Section 6.04 No Further Encumbrances..................................    19
</TABLE>

                                       -i-

<PAGE>

<TABLE>
<S>                                                                         <C>
   Section 6.05 Transfer Restrictions....................................    19
   Section 6.06 Additional Negative Covenants............................    19

ARTICLE VII. EVENTS OF DEFAULT AND REMEDIES..............................    19
   Section 7.01 Event of Default.........................................    19
   Section 7.02 Foreclosure and Sale.....................................    20
   Section 7.03 Mortgagee's Agents.......................................    21
   Section 7.04 Judicial Foreclosure.....................................    21
   Section 7.05 Receiver.................................................    21
   Section 7.06 Foreclosure for Installments.............................    21
   Section 7.07 Separate Sales...........................................    22
   Section 7.08 Possession of Mortgaged Property.........................    22
   Section 7.09 Occupancy After Acceleration.............................    22
   Section 7.10 Remedies Cumulative, Concurrent and Nonexclusive.........    23
   Section 7.11 No Release of Obligations................................    23
   Section 7.12 Release of and Resort to Collateral......................    23
   Section 7.13 Waiver of Redemption, Notice and Marshalling of Assets...    23
   Section 7.14 Discontinuance of Proceedings............................    24
   Section 7.15 Application of Proceeds..................................    24
   Section 7.16 Uniform Commercial Code Remedies.........................    25
   Section 7.17 Indemnity................................................    25

ARTICLE VIII. MISCELLANEOUS..............................................    25
   Section 8.01 Instrument Construed as Mortgage, Etc....................    25
   Section 8.02 Performance at Mortgagor's Expense.......................    26
   Section 8.03 Survival of Obligations..................................    26
   Section 8.04 Further Assurances.......................................    26
   Section 8.05 Notices..................................................    26
   Section 8.06 No Waiver................................................    26
   Section 8.07 Mortgagee's Right to Perform; Mortgagee's Expenditures...    26
   Section 8.08 Successors and Assigns...................................    27
   Section 8.09 Severability.............................................    27
   Section 8.10 Entire Agreement and Modification........................    27
   Section 8.11 Applicable Law...........................................    28
   Section 8.12 Satisfaction of Prior Encumbrance........................    28
   Section 8.13 No Partnership...........................................    28
   Section 8.14 Headings.................................................    28
   Section 8.15 Release of Mortgage......................................    28
   Section 8.16 Limitation of Obligations with Respect to Mortgaged
                Property.................................................    29
   Section 8.17 Inconsistency with Financing Agreement...................    29
   Section 8.18 Limitation on Interest Payable...........................    29
   Section 8.19 Covenants To Run With the Land...........................    30
   Section 8.20 Last Dollar..............................................    30
   Section 8.21 Defense of Claims........................................    30
   Section 8.22 Exculpation Provisions...................................    30
   Section 8.23 No Merger of Estates.....................................    31
   Section 8.24 Counterparts.............................................    31
   Section 8.25 Maturity Date............................................    31
</TABLE>

                                      -ii-

<PAGE>

<TABLE>
<S>                                                                         <C>
ARTICLE IX. STATE SPECIFIC PROVISIONS....................................    31
   Section 9.01 Application of Rents and Proceeds........................    31
   Section 9.02 WAIVER OF CONSTITUTIONAL RIGHTS..........................    32
   Section 9.03 Wells and Sewer Systems..................................    33
   Section 9.04 Future Advances..........................................    33
</TABLE>

                                     -iii-

<PAGE>

MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING

          THIS MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND
FIXTURE FILING (hereinafter, together with any and all amendments, supplements,
modifications or restatements of any kind, referred to as this "Mortgage"), is
made as of FEBRUARY 15, 2006, by LAKES ENTERTAINMENT, INC., a Minnesota
corporation, having its principal place of business at 130 Cheshire Lane, Suite
101, Minnetonka, Minnesota 55305, Attention: Damon E. Schramm, Esq.
("Mortgagor"), in favor of PLKS FUNDING, LLC, a Delaware limited liability
company, having its principal place of business at c/o Prentice Capital
Management, LP, 623 Fifth Avenue, 32nd Floor, New York, New York 10022,
Attention: Michael Weiss, as Collateral Agent (in such capacity, together with
its successors and assigns, "Mortgagee"), for itself and for each of the
financial institutions and their respective successors and assigns which from
time to time shall be a "Lender" under the Financing Agreement (as hereinafter
defined).

                                    RECITALS:

          WHEREAS, Mortgagor is the owner and holder of fee simple title in and
to the Land (as hereinafter defined) described on Exhibit A attached hereto and
made a part hereof;

          WHEREAS, on the date hereof, Mortgagor and the subsidiaries of
Mortgagor listed as a "Borrower" on the signature pages to the Financing
Agreement (defined below) (collectively, "Subsidiaries" and Mortgagor and
Subsidiaries being hereinafter each referred to as a "Borrower" and collectively
as the "Borrowers"), and the Guarantors (as defined in the Financing Agreement),
entered into that certain financing agreement, dated of even date herewith (as
the same may be amended, modified or otherwise supplemented and in effect from
time to time, the "Financing Agreement"), with the Lenders and Mortgagee,
pursuant to which the Lenders agree to extend to the Borrowers certain term loan
facilities in the aggregate original principal amount of up to Fifty Million and
00/100 Dollars ($50,000,000.00) (collectively, the "Loan"):

          WHEREAS, Mortgagor will derive direct economic benefit from the Loan;

          WHEREAS, as a condition to Mortgagee executing the Financing
Agreement, Mortgagee is requiring that Mortgagor grant to Mortgagee a security
interest in and a first mortgage lien upon the Mortgaged Property (as
hereinafter defined), to secure (a) the payment of all of the Obligations (as
defined in the Financing Agreement), and (b) the performance of all terms ,
covenants, conditions, provisions, agreements and liabilities contained in this
Mortgage, the Financing Agreement, the Guaranty, and the other Loan Documents
(as defined in the Financing Agreement).

          NOW, THEREFORE, in order consideration for the Loan and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Mortgagor hereby covenants and agrees as follows:

                                       1

<PAGE>

                                    ARTICLE I

                                  DEFINITIONS

          SECTION 1.01 Terms Defined Above. As used in this Mortgage, the terms
defined in the introductory paragraph to this Mortgage and in the Recitals set
forth above shall have the meanings respectively assigned to such terms in such
paragraph and Recitals.

          SECTION 1.02 Definitions. As used herein, the following terms shall
have the following meanings:

          "Applicable UCC" means the Uniform Commercial Code as presently in
effect in the State or Commonwealth where the Mortgaged Property is located.

          "Buildings" means any and all buildings, structures, garages, utility
sheds, workrooms, air conditioning towers, open parking areas and other
improvements, and any and all additions, alterations, betterments or
appurtenances thereto, now or at any time hereafter situated, placed or
constructed upon the Land or any part thereof.

          "Default" has the meaning assigned to such term in the Financing
Agreement.

          "Event of Default" has the meaning assigned to such term in Section
7.01 hereof.

          "Fixtures" means all materials, supplies, equipment, apparatus and
other items of Personalty now or hereafter acquired by Mortgagor and
incorporated into the Mortgaged Property so as to constitute fixtures under the
Applicable UCC or otherwise under the laws of the state or commonwealth in which
such items are located.

          "Governmental Authority" has the meaning assigned to such term in the
Financing Agreement.

          "Governmental Requirements" means any and all present and future
judicial decisions, statutes, rulings, rules, regulations, permits, certificates
or ordinances of any Governmental Authority in any way applicable to Mortgagor
or the Mortgaged Property, including the ownership, use, occupancy, possession,
operation, maintenance, alteration, repair or reconstruction thereof.

          "Guarantors" has the meaning assigned to such term in the Financing
Agreement. "Guarantor" means any of the Guarantors.

          "Impositions" means any and all real estate and personal property
taxes; water, gas, sewer, electricity and other utility rates and charges;
charges for any easement, license or agreement maintained for the benefit of the
Mortgaged Property; and any and all other taxes, charges and assessments,
whether general or special, ordinary or extraordinary, foreseen or unforeseen,
of any kind and nature whatsoever which at any time prior to or after the
execution hereof may be assessed, levied or imposed upon the Mortgaged Property
or the ownership, use, occupancy, benefit or enjoyment thereof, together with
any interest, costs or penalties that may become payable in connection
therewith.

                                       2

<PAGE>

          "Indemnified Parties" means, with respect to any Person entitled to
the benefit of an indemnity, such Person and its officers, directors,
shareholders, partners, members, managers, employees, agents, representatives,
attorneys, accountants and experts. The term "Indemnified Party" means any one
of such Persons.

          "Indemnitees" has the meaning assigned to such term in the Financing
Agreement.

          "Land" means the real property or interest therein described in
Exhibit A attached hereto, and all rights, titles and interests appurtenant
thereto.

          "Leases" means any and all leases, master leases, subleases, licenses,
concessions or other agreements (whether written or oral, and whether now or
hereafter in effect) which grant to third Persons a possessory interest in and
to, or the right to use, all or any part of the Mortgaged Property, together
with all security and other deposits made in connection therewith and any
guarantee of the obligations of the landlord or the tenant thereunder.

          "License" has the meaning assigned to such term in Section 3.02(a)
hereof.

          "Lien" has the meaning assigned to such term in the Financing
Agreement.

          "Loan Documents" has the meaning assigned to such term in the
Financing Agreement.

          "Losses" means all obligations, damages, claims, causes of action,
costs, fines, fees, charges, penalties, deficiencies, losses, diminutions in
value, expenses (including court costs, fees and expenses of attorneys,
accountants, consultants and other experts) and other liabilities, and, with
respect to any indemnity, includes all attorneys' fees and expenses in
connection with the enforcement and collection of such indemnity. The term
"Loss" means any such Losses.

          "Mortgaged Property" means all of Mortgagor's right, title, interest
and estate, whether now owned or hereafter acquired, in and to the Land, the
Buildings, the Fixtures and the Personalty, together with:

          (i)  all rights, privileges, tenements, hereditaments, rights-of-way,
               easements, air rights, development rights or credits, zoning
               rights, appendages and appurtenances in anywise appertaining
               thereto, and all right, title and interest of Mortgagor in and to
               any streets, ways, alleys, strips or gores of land adjoining the
               Land or any part thereof, and all right, title and interest of
               Mortgagor, if any, in and to all rights, royalties and profits
               with respect to all minerals, coal, oil, gas and other substances
               of any kind or character on or underlying the Land, together with
               all right, title and interest of Mortgagor in and to all water
               and water rights (whether riparian, appropriative or otherwise
               and whether or not appurtenant);

          (ii) all rights of Mortgagor (but not its obligations) under any
               contracts and agreements, including, without limitation,
               construction contracts and

                                       3

<PAGE>

               architectural agreements, relating to the Land, the Buildings,
               the Fixtures or the Personalty;

          (iii) all of Mortgagor's right, title and interest in and to all
               permits, licenses, franchises, certificates, authorizations,
               consents, approvals and other rights and privileges (each, a
               "Permit") obtained in connection with the Land, the Buildings,
               the Fixtures or the Personalty or the use or operation thereof;

          (iv) all of Mortgagor's right, title and interest in and to all plans
               and specifications, designs, schematics, drawings and other
               information, materials and matters heretofore or hereafter
               prepared relating to the Land, the Buildings, the Fixtures or the
               Personalty;

          (v)  all of Mortgagor's right, title and interest in and to all
               proceeds arising from or by virtue of the sale, lease or other
               disposition of the Land, the Buildings, the Fixtures or the
               Personalty or any part thereof or any interest therein or from
               the operation thereof;

          (vi) all of Mortgagor's right, title and interest in and to all Leases
               now or hereafter in effect and all Rents, royalties, bonuses,
               issues, profits, revenues or other benefits arising from or
               attributable to the Land, the Buildings, the Fixtures or the
               Personalty;

          (vii) all of Mortgagor's right, title and interest in and to all
               betterments, additions, alterations, appurtenances,
               substitutions, replacements and revisions to the Land, the
               Buildings, the Fixtures or the Personalty and all reversions and
               remainders relating thereto;

          (viii) all of Mortgagor's right, title and interest in and to any and
               all other security and collateral of any nature whatsoever,
               whether now or hereafter given, for the repayment, performance
               and discharge of the Obligations (as hereinafter defined);

          (ix) all of Mortgagor's right, title and interest in and to all
               claims, awards, payments, remuneration, settlements or
               compensation now or hereafter made by any Governmental Authority
               pertaining to, and all other proceeds of, any taking, conversion,
               or like act, whether voluntary or involuntary, of any of the
               Land, the Buildings, the Fixtures, the Personalty or any of the
               property and rights described in the foregoing clauses (i)
               through (viii), including those arising from or attributable to
               any vacation of, or change of grade in, any streets affecting the
               Land or the Buildings, and all insurance and tort claims, refunds
               of real estate taxes and assessments, rent claims and other
               obligations dischargeable in cash or cash equivalents; and

          (x)  all other property and rights of Mortgagor of every kind and
               character relating to and/or used or to be used in connection
               with the foregoing, and all proceeds and products of any of the
               foregoing.

                                       4

<PAGE>

As used in this Mortgage, the term "Mortgaged Property" shall be expressly
defined as meaning all or, where the context permits or requires, any portion of
the above, and all or, where the context permits or requires, any interest
therein.

          "Obligations" has the meaning assigned to such term in the Financing
Agreement.

          "Permitted Liens" has the meaning assigned to such term in the
Financing Agreement to the extent that such definition applies to the Mortgaged
Property.

          "Person" has the meaning assigned to such term in the Financing
Agreement.

          "Personalty" means all of Mortgagor's right, title and interest in and
to all furniture, furnishings, equipment, machinery, goods, general intangibles,
money, insurance proceeds, contract rights, option rights, inventory, together
with all refundable, returnable or reimbursable fees, deposits or other funds or
evidences of credit or indebtedness deposited by or on behalf of Mortgagor with
any Governmental Authority, boards, corporations, providers of utility services,
public or private including all refundable, returnable or reimbursable tap fees,
utility deposits, commitment fees and development costs, and all other personal
property (other than Fixtures) of any kind or character), and including all such
property that is now or hereafter located or to be located upon, within or about
the Land and the Buildings, or which are or may be used in or related to the
planning, development, financing or operation of the Mortgaged Property,
together with all accessories, replacements and substitutions thereto or
therefor and the proceeds thereof.

          "Post-Default Rate" has the meaning assigned to such term in the
Financing Agreement.

          "Principal Balance" has the meaning assigned to such term in Section
7.02 hereof.

          "Rents" means all of the rents, revenues, income, proceeds, issues,
profits, security and other types of deposits (after Mortgagor acquires title
thereto), and other benefits paid or payable by parties (other than Mortgagor)
for using, leasing, licensing, possessing, operating from, residing in,
benefiting from or otherwise enjoying all or any part of the Land, the
Buildings, the Fixtures and/or the Personalty.

          SECTION 1.03 Terminology; Other Defined Terms. Any capitalized term
used in this Mortgage and not otherwise defined herein shall have the meaning
assigned to such term in the Financing Agreement. The rules of construction set
forth in Section 1.02 of the Financing Agreement shall apply hereto as if
incorporated at length herein.

                                   ARTICLE II

                       GRANT OF LIEN AND SECURITY INTEREST

          SECTION 2.01 Grant of Lien. To secure the full and timely payment,
performance and discharge of all of the Obligations, Mortgagor hereby
irrevocably GRANTS, BARGAINS, SELLS, ASSIGNS, TRANSFERS, MORTGAGES, CONVEYS AND
CONFIRMS unto Mortgagee, WITH POWER OF SALE and right of entry and possession,
for the use and benefit

                                       5

<PAGE>

of Mortgagee, as collateral agent for the Lenders pursuant to the Financing
Agreement, all right, title, interest and estate in, to and under the Mortgaged
Property, subject, however, to the Permitted Liens; TO HAVE AND TO HOLD the
Mortgaged Property unto Mortgagee, subject to the terms and conditions of this
Mortgage, with POWER OF SALE, forever, and Mortgagor does hereby bind itself,
its successors and assigns to WARRANT AND FOREVER DEFEND the title to the
Mortgaged Property unto Mortgagee against every Person whomsoever lawfully
claiming or to claim the same or any part thereof; provided, however, that if
Mortgagor shall pay (or cause to be paid) and perform and discharge (or cause to
be performed and discharged) all of the Obligations on or before the date on
which the same are to be paid, performed and discharged, then the Liens, estates
and rights granted by this Mortgage shall cease and terminate.

          SECTION 2.02 Grant of Security Interest. This Mortgage shall be
construed as a mortgage on the Land and the Buildings and it shall also
constitute and serve as a "security agreement" within the meaning of, and shall
constitute a first and prior security interest under, the Applicable UCC with
respect to the Personalty and the Fixtures. To this end, Mortgagor by these
presents does GRANT, BARGAIN, CONVEY, ASSIGN, SELL, TRANSFER AND SET OVER unto
Mortgagee, as collateral agent for the Lenders pursuant to the Financing
Agreement, a security interest in all of Mortgagor's right, title and interest
in, to and under the Personalty and the Fixtures, to secure the full and timely
payment, performance and discharge of the Obligations. Mortgagor hereby consents
to Mortgagee filing and recording financing statements (and continuations
thereof) with the appropriate filing and recording offices in order to perfect
(and maintain the perfection of) the security interests granted herein.

          SECTION 2.03 No Obligation of Mortgagee. The assignment and security
interest herein granted to Mortgagee shall not be deemed or construed to
constitute Mortgagee as a mortgagee-in-possession of the Mortgaged Property,
obligate Mortgagee to lease the Mortgaged Property or attempt to do the same, or
to take any action, incur any expense or perform or discharge any obligation,
duty or liability whatsoever.

          SECTION 2.04 Fixture Filing. Without in any manner limiting the
generality of any of the other provisions of this Mortgage: (a) some portions of
the goods described or to which reference is made herein are or are to become
fixtures on the Land described or to which reference is made herein or on
Exhibit A attached to this Mortgage; (b) this Mortgage is to be filed of record
in the real estate records as a financing statement and shall constitute a
"fixture filing" for purposes of the Applicable UCC; and (c) Mortgagor is the
record owner of the real estate or interests in the real estate constituting the
Mortgaged Property hereunder. Information concerning the security interest
herein granted may be obtained at the addresses set forth on the first page
hereof. The addresses of the Secured Party (Mortgagee) and of the Debtor
(Mortgagor) are set forth on the first page hereof. In that regard, the
following information is provided:

Name of Debtor:           Lakes Entertainment, Inc.
Type of Organization:     Corporation
State:                    Minnesota

                                        6

<PAGE>

FEIN:                     41-1913991
Organizational ID Number: 10E-882
Name of Secured Party:    PLKS Funding, LLC
Address of Secured Party: c/o Prentice Capital Management, LP, 623 Fifth Avenue,
                          32nd Floor, New York, New York 10022,
                          Attention: Michael Weiss

          SECTION 2.05 Future Advances. It is the intention of Mortgagor and
Mortgagee that this Mortgage (as renewed and extended from time to time) shall
secure future advances and readavances, and the lien and security interest
created by this Mortgage shall attach upon execution and have priority from the
time of recording as to all advances, whether obligatory or discretionary, until
this Mortgage is released of record.

                                   ARTICLE III

                         ASSIGNMENT OF LEASES AND RENTS

          SECTION 3.01 Assignment. For Ten Dollars ($10.00) and other good and
valuable consideration, including the indebtedness evidenced by the Financing
Agreement, the receipt and sufficiency of which are hereby acknowledged and
confessed, Mortgagor has presently, absolutely and irrevocably GRANTED,
BARGAINED, SOLD, ASSIGNED, TRANSFERRED, CONVEYED and CONFIRMED, and by these
presents does presently, absolutely and irrevocably GRANT, BARGAIN, SELL,
ASSIGN, TRANSFER, CONVEY and CONFIRM, unto Mortgagee, as collateral agent for
the Lenders pursuant to the Financing Agreement, as security for the payment,
performance and discharge of the Obligations, all of the Leases and Rents (if
any), subject only to the Permitted Liens applicable thereto and the License (as
hereinafter defined); TO HAVE AND TO HOLD the Leases and the Rents unto
Mortgagee, forever, and Mortgagor does hereby bind itself, its successors and
assigns to warrant and forever defend the title to the Leases and the Rents unto
Mortgagee against every Person whomsoever lawfully claiming or to claim the same
or any part thereof; provided, however, that if Mortgagor shall pay (or cause to
be paid) and perform and discharge (or cause to be performed and discharged) all
of the Obligations on or before the date on which the same are to be paid,
performed and discharged, then this assignment shall terminate, and all rights,
titles and interests conveyed pursuant to this assignment shall become vested in
Mortgagor.

          SECTION 3.02 Revocable License.

          (A) Mortgagee hereby grants to Mortgagor a revocable license (the
"License"), nonexclusive with the rights of Mortgagee reserved in Sections
3.02(b), 3.04 and 3.05 hereof, to exercise and enjoy all incidences of the
status of a lessor under the Leases and the Rents, including, without
limitation, the right to collect, demand, sue for, attach, levy, recover and
receive the Rents and to give proper receipts, releases and acquittances
therefor. Mortgagor hereby agrees to receive all Rents and hold the same as a
trust fund to be applied, and to apply the Rents so collected, except to the
extent otherwise provided in the Financing Agreement, first to the payment,
performance and discharge of the Obligations and then to the payment of the

                                        7

<PAGE>

Impositions. Thereafter, Mortgagor may use the balance of the Rents collected in
any manner not inconsistent with the Loan Documents.

          (B) If an Event of Default shall occur and be continuing, the License
shall immediately and automatically terminate without the necessity of any
action by Mortgagee or any other Person, and Mortgagee shall have the right in
such event to exercise the rights and remedies provided under this Mortgage or
otherwise available to Mortgagee under applicable law. Upon demand by Mortgagee
at any time that an Event of Default shall have occurred, Mortgagor shall
promptly pay to Mortgagee all security deposits under the Leases and all Rents
allocable to any period commencing from and after the occurrence of such Event
of Default. Any Rents received hereunder by Mortgagee shall be applied and
disbursed to the payment, performance and discharge of the Obligations, subject
to the terms of the Financing Agreement; provided, however, that, subject to any
applicable requirement of law, any security deposits actually received by
Mortgagee shall be held, applied and disbursed as provided in the applicable
Leases.

          SECTION 3.03 Enforcement of Leases. Mortgagor shall (a) submit any and
all proposed Leases which individually grant the use of more than 3,000 square
feet (including any subleases which individually grant the use of more than
3,000 square feet) provided to Mortgagor for approval to Mortgagee for approval
prior to the execution thereof or consent thereto, as applicable; (b) duly and
punctually perform and comply with any and all representations, warranties,
covenants and agreements expressed as binding upon the lessor under any Lease;
(c) maintain each Lease in full force and effect during the term thereof; (d)
provide Mortgagee with prompt notice of each notice of default sent to a tenant
under a Lease, provide Mortgagee with prompt notice of each notice of default
received from (or relating to) a tenant under a Lease, and otherwise promptly
reasonably indicate that a material default or termination of a Lease may occur
(other than by reason of the expiration of the term of such Lease); (e) appear
in and defend any action or proceeding in any manner connected with any of the
Leases; (f) deliver to Mortgagee true and complete copies of all Leases; and (g)
deliver to Mortgagee all such further information, and execute and deliver to
Mortgagee such further assurances and assignments, with respect to the Leases as
Mortgagee may from time to time reasonably request. Without Mortgagee's prior
written consent, Mortgagor shall not (i) do or knowingly permit to be done
anything to materially impair the value of any of the Leases; (ii) except for
security or similar deposits, collect any of the Rent more than one (1) month in
advance of the time when the same becomes due under the terms of any Lease;
(iii) discount any future accruing Rents; (iv) amend or modify any of the Leases
so as to reduce the length of the Lease terms or the Rents due thereunder, or
accept the surrender of or terminate any of the Leases; or (v) assign or grant a
security interest in or to the License or any of the Leases or Rents.

          SECTION 3.04 Direction to Tenants. Upon and at any time following the
occurrence and during the continuance of an Event of Default, Mortgagor hereby
authorizes and directs, and shall, at the direction of Mortgagee, further
authorize and direct, in writing, the tenant under each Lease to pay directly
to, or as directed by, Mortgagee all Rents accruing or due under its Lease,
without proof to the tenant of the occurrence and continuance of such Event of
Default. Mortgagor hereby authorizes the tenant under each Lease to rely upon
and comply with any notice or demand from Mortgagee for payment of Rents to
Mortgagee, and Mortgagor shall

                                        8

<PAGE>

have no claim against any tenant for Rents paid by such tenant to Mortgagee
pursuant to such notice or demand. All Rents actually collected by Mortgagee
pursuant to this Section 3.04 shall be applied in accordance with the Financing
Agreement.

          SECTION 3.05 Appointment of Attorney-in-Fact.

          (A) Mortgagor hereby constitutes and appoints Mortgagee the true and
lawful attorney-in-fact, coupled with an interest, of Mortgagor and Mortgagor
hereby confers upon Mortgagee the right, in the name, place and stead of
Mortgagor, to, upon the occurrence and during the continuance of an Event of
Default, demand, sue for, attach, levy, recover and receive any of the Rents and
any premium or penalty payable upon the exercise by any third Person under any
Lease of a privilege of cancellation originally provided in such Lease and to
give proper receipts, releases and acquittances therefor and, after deducting
expenses of collection, to apply the net proceeds as provided in the Financing
Agreement. Mortgagor hereby authorizes and directs any such third Person to
deliver such payment to Mortgagee in accordance with this Article III, and
Mortgagor hereby ratifies and confirms all that its said attorney-in-fact, the
Mortgagee, shall do or cause to be done in accordance with this Mortgage and by
virtue of the powers granted hereby. The foregoing appointment is irrevocable
and continuing, and such rights, powers and privileges shall be exclusive in
Mortgagee, and its successors and assigns, so long as any part of the
Obligations remains unpaid or unperformed and undischarged;

          (B) Mortgagor hereby constitutes and appoints Mortgagee the true and
lawful attorney-in-fact, coupled with an interest, of Mortgagor and Mortgagor
hereby confers upon Mortgagee the right, in the name, place and stead of
Mortgagor, to subject and subordinate at any time and from time to time any
Lease or any part thereof to the lien, assignment and security interest of this
Mortgage and to the terms hereof, or to any other mortgage, deed of trust,
assignment or security agreement, or to any ground lease or surface lease, with
respect to all or a portion of the Mortgaged Property, or to request or require
such subordination, where such reservation, option or authority was reserved to
Mortgagor under any such Lease, or in any case where Mortgagor otherwise would
have the right, power or privilege so to do. The foregoing appointment is
irrevocable and continuing, and such rights, powers and privileges shall be
exclusive in Mortgagee, and its successors and assigns, so long as any part of
the Obligations remains unpaid or unperformed and undischarged. Mortgagor hereby
represents and warrants that it has not at any time prior to the date hereof
exercised (or appointed any Person as attorney-in-fact to exercise) any of the
rights described in this Section 3.05, and Mortgagor hereby covenants not to
exercise (or appoint any other Person as attorney-in-fact to exercise) any such
right, nor (except at Mortgagee's written request) to subordinate any such Lease
to the lien of this Mortgage or to any other mortgage, deed of trust, assignment
or security agreement or to any ground lease or surface lease.

          SECTION 3.06 No Liability of Mortgagee. Neither the acceptance hereof
nor the exercise of the rights and remedies hereunder nor any other action on
the part of Mortgagee or any Person exercising the rights of Mortgagee or any
Lender hereunder shall be construed to: (a) be an assumption by Mortgagee or any
such Person or to otherwise make Mortgagee or such Person liable or responsible
for the performance of any of the obligations of Mortgagor under or with respect
to the Leases or for any Rent, security deposit or other amount delivered to
Mortgagor, provided that Mortgagee or any such Person exercising the rights of
Mortgagee shall

                                       9

<PAGE>

be accountable for any Rents, security deposits or other amounts actually
received by Mortgagee or such Person, as the case may be; or (b) obligate
Mortgagee or any such Person to take any action under or with respect to the
Leases or with respect to the Mortgaged Property, to incur any expense or
perform or discharge any duty or obligation under or with respect to the Leases
or with respect to the Mortgaged Property, to appear in or defend any action or
proceeding relating to the Leases or the Mortgaged Property, to constitute
Mortgagee as a mortgagee-in-possession (unless Mortgagee actually enters and
takes possession of the Mortgaged Property), or to be liable in any way for any
injury or damage to Persons or property sustained by any Person in or about the
Mortgaged Property, other than to the extent caused by the gross negligence or
willful misconduct of Mortgagee or any Person exercising the rights of Mortgagee
hereunder.

          SECTION 3.07 Mortgagor's Indemnities. Mortgagor hereby agrees to
protect, indemnify and hold harmless Mortgagee and each of the other Indemnitees
and each Indemnified Party related to Mortgagee or such other Indemnitees from
and against any and all Losses which Mortgagee or any such other Indemnitees or
Indemnified Party may incur under or by reason of this Article III, or for any
action taken by Mortgagee or any such other Lender or Indemnified Party
hereunder, or by reason or in defense of any and all claims and demands
whatsoever which may be asserted against Mortgagee or any such other Indemnitees
or Indemnified Party arising out of the Leases, including, without limitation,
any claim by any third Person for credit on account of Rents paid to and
received by Mortgagor, but not delivered to Mortgagee or its agents,
representatives or employees, for any period under any Lease more than one (1)
month in advance of the due date thereof. The foregoing indemnity shall include,
in any case, such Loss as may result from the ordinary negligence of Mortgagee
or such other Indemnitees or Indemnified Party, but not any such Loss that is
caused by the gross negligence or willful misconduct of Mortgagee or any such
other Indemnitees or Indemnified Party. In the event that Mortgagee or any of
the other Lenders or any Indemnified Party incurs any Losses covered by the
indemnity set forth in this Section 3.07, the amount thereof, including
reasonable attorneys' fees, with interest thereon at the Post-Default Rate,
shall be payable by Mortgagor to Mortgagee within ten (10) days after demand
therefor, and shall be secured hereby and by all other security for the payment
and performance of the Obligations, including, without limitation, the lien and
security interest of this Mortgage. The liabilities of Mortgagor as set forth in
this Section 3.07 shall survive the termination of this Mortgage and the
repayment of the Obligations.

          SECTION 3.08 No Modification of Mortgagor's Obligations. Nothing
herein contained shall modify or otherwise alter the obligation of Mortgagor to
make prompt payment of all Obligations as and when the same become due,
regardless of whether the Rents described in this Article III are sufficient to
pay the Obligations, and the security provided to Mortgagee pursuant to this
Article III shall be cumulative of all other security of any and every character
now or hereafter existing to secure payment of the Obligations.

                                   ARTICLE IV

                         REPRESENTATIONS AND WARRANTIES

          Mortgagor hereby unconditionally represents and warrants to Mortgagee
(but to the extent any representation or warranty in this Section IV is
substantively the same as a representation or warranty contained in Article V of
the Financing Agreement and such

                                       10

<PAGE>

representation or warranty is qualified by a materiality or other qualifier in
the Financing Agreement, such representation or warranty herein shall be subject
to the same materiality or other qualifier as in Article V of the Financing
Agreement) as follows:

          SECTION 4.01 Title to Mortgaged Property and Lien of this Mortgage.
Mortgagor has good, marketable and indefeasible fee simple title to the Land and
the Buildings, and has good, marketable and indefeasible title to the Fixtures,
the Personalty and the other Mortgaged Property. The Mortgaged Property is free
and clear of any and all Liens, charges, encumbrances, security interests and
adverse claims whatsoever, except for all Liens, charges, encumbrances, security
interests and adverse claims specifically identified as exceptions in the policy
of title insurance accepted by Mortgagee in connection herewith or otherwise
permitted by the Financing Agreement.

          SECTION 4.02 Taxes and Other Payments. Mortgagor has filed all
federal, state, commonwealth, county, municipal and city income and other
material tax returns required to have been filed by it and has paid all taxes
and other Impositions which have become due pursuant to such returns or pursuant
to any assessments or charges received by it, and Mortgagor does not know of any
basis for any additional assessment or charge in respect of any such taxes or
other Impositions. Mortgagor has paid in full all sums owing or claimed for
labor, material, supplies, personal property (whether or not forming a Fixture
hereunder) and services of every kind and character used, furnished or installed
in or on the Mortgaged Property that are now due and owing and no claim for same
exists or will be permitted to be created, except such claims as may arise in
the ordinary course of business and that are not yet past due.

          SECTION 4.03 Power to Create Lien and Security. Mortgagor has full
power and lawful authority to grant, bargain, sell, assign, transfer, mortgage
and convey a Lien and security interest in all of the Mortgaged Property in the
manner and form herein provided and without obtaining the authorization,
approval, consent or waiver of any grantor, lessor, sublessor, Governmental
Authority or other Person whomsoever.

          SECTION 4.04 Loan and Loan Documents. Mortgagor has received a copy of
and is fully familiar with the terms and provisions of the Financing Agreement
and the other Loan Documents. All representations and warranties made by
Mortgagor in the Financing Agreement and the other Loan Documents are
incorporated herein by reference and are hereby made by Mortgagor as to itself
and the Mortgaged Property as though such representations and warranties were
set forth at length herein as the representations and warranties of Mortgagor.

          SECTION 4.05 Compliance with Laws. All of the improvements on the Land
(i) comply with all material requirements of all applicable laws and ordinances
with respect to zoning, subdivision, construction, building and land use,
including, without limitation, requirements with respect to parking, access and
certificates of occupancy (and similar certificates) and (ii) comply with, and
shall remain in compliance with, applicable health, fire and building codes. All
of the Buildings lie wholly within the boundaries and building restriction lines
of the Land. No improvements on adjoining properties encroach upon the Land, and
no easements or other encumbrances upon the Land encroach upon or under any of
the Buildings or any portion of the Mortgaged Property. All of the Buildings and
the use of the Mortgaged Property materially comply with, and shall remain in
material compliance with, all

                                       11

<PAGE>

applicable statutes, rules, regulations and private covenants now or hereafter
relating to the ownership, construction, use or operation of the Mortgaged
Property, including all applicable statutes, rules and regulations pertaining to
requirements for equal opportunity, anti-discrimination, fair housing,
environmental protection, zoning and land use. All certifications, permits,
licenses and approvals, including, without limitation, certificates of
completion and occupancy permits required for the legal use, occupancy and
operation of the Mortgaged Property have been obtained and are in full force and
effect. Mortgagor has not received any notice of, or other communication with
respect to, an alleged violation with respect to any of the foregoing.

          SECTION 4.06 No Condemnation. No part of any property subject to this
Mortgage has been taken in condemnation or other like proceeding nor is any
proceeding pending, threatened or known to be contemplated for the partial or
total condemnation or taking of the Mortgaged Property.

          SECTION 4.07 Flood Zone. The Mortgaged Property is not located in an
area identified by the Federal Emergency Management Agency ("FEMA") as having
special flood hazards or if the Land or any part thereof is identified by the
Federal Emergency Management Agency as an area having special flood hazards
(including, without limitation, those areas designated as Zone A or Zone V),
then Mortgagor has obtained the insurance required under Section 5.04(a)(v) of
this Mortgage.

                                    ARTICLE V

                              AFFIRMATIVE COVENANTS

          Mortgagor hereby unconditionally covenants and agrees with Mortgagee
as follows:

          SECTION 5.01 Lien Status. Except as otherwise expressly provided in
the Financing Agreement, Mortgagor shall not place, or permit to be placed, or
otherwise mortgage, hypothecate or encumber the Mortgaged Property, or any
portion thereof or interest therein, with any other Lien or security interest of
any nature whatsoever (statutory, constitutional or contractual), other than
Permitted Liens, regardless of whether such Lien or security interest is
inferior to the Lien and security interest created by this Mortgage, and, if any
such Lien or security interest is asserted against the Mortgaged Property,
Mortgagor shall promptly, at its own cost and expense, (a) pay the underlying
claim in full (except for so long as such claim is being contested by Mortgagor
in good faith and as and to the extent permitted in accordance with the terms of
the Financing Agreement) or take such other action as may be necessary to cause
the same to be released of record and otherwise, and (b) within ten (10) days
after the date on which Mortgagor receives notice of such Lien or security
interest, give Mortgagee notice of such Lien or security interest. Such notice
shall specify who is asserting such Lien or security interest and shall detail
the origin and nature of the underlying claim giving rise to such asserted Lien
or security interest.

          SECTION 5.02 Payment of Impositions. Mortgagor shall duly pay and
discharge, or cause to be paid and discharged, all Impositions not later than
the due date thereof, or the day

                                       12

<PAGE>

on which any fine, penalty, interest or cost may be added thereto or imposed, or
the day on which any Lien may be filed for the nonpayment thereof (if such day
is used to determine the due date of the respective item); provided, however,
that Mortgagor may, if permitted by applicable law and if such installment
payment would not create or permit the filing of a Lien against the Mortgaged
Property, pay the Impositions in installments. Notwithstanding the foregoing,
Mortgagor may in good faith, by appropriate proceedings and upon notice to
Mortgagee, contest the validity, applicability or amount of any asserted tax or
assessment, subject to any more restrictive provisions applicable to any such
contest contained in the Financing Agreement and (without limiting the
foregoing) so long as (a) such contest is diligently pursued, (b) Mortgagee
determines, in its opinion reasonably exercised, that such contest suspends the
obligation to pay the tax and that nonpayment of such tax or assessment will not
result in the sale, loss, forfeiture or diminution of the Mortgaged Property or
any part thereof or any interest of Mortgagee therein, and (c) unless expressly
provided to the contrary in the Financing Agreement, prior to the earlier of the
commencement of such contest or the delinquency date of the asserted tax or
assessment, Mortgagor deposits with Mortgagee an amount determined by Mortgagee
to be adequate to cover the payment of such tax or assessment and a reasonable
additional sum to cover possible interest, costs and penalties; provided,
however, that Mortgagor shall promptly cause to be paid any amount adjudged by a
court of competent jurisdiction to be due, with all interest, costs and
penalties thereon, promptly after such judgment becomes final (and, subject to
Mortgagee's rights and remedies during an Event of Default, Mortgagee shall make
any sum deposited pursuant to clause (c) above available for such payment); and
provided, further, that in any event each such contest shall be concluded, the
taxes, assessments, interest, costs and penalties shall be paid prior to the
date any writ or order is issued under which the Mortgaged Property may be sold,
lost or forfeited.

          SECTION 5.03 Repair. Mortgagor shall keep the Mortgaged Property in
good order and condition (reasonable wear and tear excepted) and shall make all
repairs, replacements and improvements thereof and thereto, interior and
exterior, structural and non-structural, ordinary and extraordinary, which are
necessary to keep the same in such order and condition. Mortgagor shall also use
reasonable efforts to prevent any act or occurrence which might impair the value
or usefulness of the Mortgaged Property for its intended usage.

          SECTION 5.04 Insurance and Application of Insurance Proceeds.

          (A) During the term of this Mortgage, Mortgagor, at its sole cost and
expense, shall maintain or cause to be maintained all insurance on the Mortgaged
Property that is required to be maintained under the Financing Agreement. In
addition, Mortgagor, at its sole cost and expense, shall maintain or cause to be
maintained such other insurance as may, from time to time, be required by
Mortgagee in order to protect its interests in the Mortgaged Property.

          (B) All such insurance policies with respect to the Mortgaged Property
shall contain a standard, non-contributory mortgagee clause naming Mortgagee,
and its successors and assigns, as an additional insured under all liability
insurance policies, as the first mortgagee and loss payee on all property
insurance policies, and as the sole loss payee on all rental loss or business
interruption insurance policies. Mortgagor shall not take out separate insurance
with respect to the Mortgaged Property concurrent in form or contributing in the
event of loss with that required to be maintained hereunder or under the
Financing Agreement unless Mortgagee is

                                       13

<PAGE>

named as an additional insured thereon under a standard mortgagee clause
acceptable to Mortgagee and each such policy is otherwise in form and substance
acceptable to Mortgagee.

          (C) In the event of the foreclosure of this Mortgage, or in the event
of any transfer of title to the Mortgaged Property, or any part thereof, by
foreclosure sale or by power of sale or deed in lieu of foreclosure, the
purchaser of the Mortgaged Property, or such part thereof, shall succeed to all
of Mortgagor's rights with respect to the Mortgaged Property, including any
rights to unexpired, unearned or returnable insurance premiums, subject to
limitations on the assignment of blanket policies, but limited to such rights as
relate to the Mortgaged Property or such part thereof. If Mortgagee acquires
title to the Mortgaged Property, or any part thereof, in any manner, Mortgagee
shall thereupon (as between Mortgagor and Mortgagee) become the sole and
absolute owner of the insurance policies with respect to the Mortgaged Property,
and all insurance proceeds payable thereunder with respect to the Mortgaged
Property, with the sole right to collect and retain all unearned or returnable
premiums thereon with respect to the Mortgaged Property, or such part thereof,
if any.

          (D) If any damage to, destruction or loss of or other casualty with
respect to any of the Mortgaged Property shall occur, Mortgagor shall file and
prosecute its claim or claims for any insurance proceeds in good faith and with
due diligence and cause the same to be collected and paid over to Mortgagee, and
Mortgagor hereby irrevocably authorizes and empowers Mortgagee, in the name of
Mortgagor or otherwise, to collect and receipt for any such insurance proceeds
and to adjust any insurance claims and to file and prosecute such claim or
claims, and although it is hereby expressly agreed that the same shall not be
necessary in any event, Mortgagor shall, upon demand of Mortgagee, make, execute
and deliver any and all assignments and other instruments sufficient for the
purpose of assigning any such insurance proceeds to Mortgagee, free and clear of
any Liens whatsoever. Mortgagor hereby irrevocably appoints Mortgagee as
Mortgagor's attorney-in-fact for each such purpose (which appointment is coupled
with an interest) and authorizes any Person to act upon the foregoing
appointment.

          (E) Following any damage to, destruction or loss of or other casualty
with respect to any of the Mortgaged Property, Mortgagee shall apply the entire
amount of any insurance proceeds in accordance with the provisions of the
Financing Agreement or, if there is no provision contained in the Financing
Agreement governing how the same are to be applied, then Mortgagee shall apply
the entire amount thereof to the payment of the Obligations, whether or not then
due and payable, in such manner and order as Mortgagee may elect. Unless
expressly provided to the contrary in the Financing Agreement, Mortgagor hereby
covenants and agrees to promptly commence and to diligently prosecute the
restoration of the Mortgaged Property upon the occurrence of any casualty loss
affecting the Mortgaged Property, without regard to the availability or adequacy
of insurance proceeds, but in all events in a manner approved by Mortgagee.
Notwithstanding any damage to, destruction or loss of or other casualty with
respect to any of the Mortgaged Property, Mortgagor shall continue to pay the
Obligations at the time and in the manner provided for in the Financing
Agreement and the other Loan Documents until the Obligations have been paid in
full. Notwithstanding anything to the contrary in this Section 5.04 but subject
to the final sentence of this Section 5.04(e), if any damage to, destruction or
loss of or other casualty with respect to the Mortgaged Property results in
damage or loss of $50,000.00 or less, provided that no Default exists under the
Loan Documents, Mortgagor shall be allowed to settle such claims with no
involvement by

                                       14

<PAGE>

Mortgagee, retain any proceeds, and apply them to restoration of the Mortgaged
Property. Furthermore, subject to the final sentence of this Section 5.04(e), in
the event of any damage to or destruction of the Mortgaged Property or any part
thereof to an extent that the cost of restoration is greater than $50,000 but
less than twenty-five percent (25%) of the fair market value of the Mortgaged
Property, Mortgagee shall make the net insurance proceeds payable by reason of
such damage or destruction available for restoration and repair of the Mortgaged
Property to its original condition ("restoration"), provided that the following
conditions are satisfied to the reasonable satisfaction of Mortgagee within one
hundred twenty (120) days after such damage or destruction:

               (i) Mortgagor shall submit to Mortgagee schematic plans and
     specifications for the restoration, which plans and specifications shall be
     consistent with the condition of the Mortgaged Property immediately prior
     to such damage or destruction, subject to modifications approved by
     Mortgagee;

               (ii) Mortgagor shall enter into a fixed or guaranteed maximum
     cost contract for the restoration with a contractor reasonably acceptable
     to Mortgagee;

               (iii) Mortgagor shall obtain all necessary governmental permits
     and approvals for the restoration;

               (iv) Mortgagor shall deposit with Mortgagee such sums of money as
     are necessary, when added to the net insurance proceeds and earnings
     thereon, to pay the full cost of the restoration;

               (v) The contract for performance of the restoration shall provide
     that the restoration shall be substantially complete within one (1) year
     after the date of the damage or destruction; and

               (vi) Mortgagor shall agree to comply with such additional
     construction disbursement conditions and procedures as are customary for
     such projects.

The net insurance proceeds and any sums deposited by Mortgagor pursuant to (iv)
above shall be held by Mortgagee in a separate interest-bearing account
established at Mortgagor's expense in the name of Mortgagee but for the benefit
of Mortgagor, and all earnings on such deposits shall be added to such account.
Mortgagor shall pay to Mortgagee a fee for Mortgagee's internal staff expense of
monitoring such disbursements equal to one percent (1%) of the amount deposited
in such account, and Mortgagor shall pay all out-of-pocket fees and expenses
paid by Mortgagee to title insurance companies and consulting engineers and
architects, for endorsements to title policies, review of plans, inspections and
disbursing services in connection with such application of net insurance
proceeds to the restoration. After completion of the restoration, any balance
remaining in such account up to the amount of any sums deposited by Mortgagor
pursuant to (iv) above plus $50,000 shall be paid to Mortgagor, and any balance
remaining in such account in excess of such amounts shall be paid to Mortgagee
for application to the Obligations in such order as Mortgagee shall determine.
If the Mortgaged Property is sold, through foreclosure or otherwise, prior to
the receipt by Mortgagee of such insurance proceeds, Mortgagee shall have the
right, whether or not a deficiency judgment on any Loan Document shall have been
sought,

                                       15

<PAGE>

recovered or denied, to receive such insurance proceeds, or a portion thereof
sufficient to pay the then unpaid Obligations, whichever is less.

          SECTION 5.05 Condemnation and Application of Condemnation Proceeds.

          (A) Promptly upon its obtaining knowledge of the institution or the
threatened institution of any proceeding for the condemnation or other taking of
the Mortgaged Property, or any portion thereof or interest therein, Mortgagor
shall notify Mortgagee of such proceeding. Mortgagor shall then, if requested by
Mortgagee, file or defend its claim thereunder and prosecute same with due
diligence to its final disposition and shall, subject to the terms of the
Financing Agreement, cause any awards or settlements to be paid over to
Mortgagee for disposition pursuant to the terms of this Mortgage. Mortgagee
shall be entitled to participate in any such proceeding, at Mortgagor's sole
cost and expense, and Mortgagor shall deliver or cause to be delivered to
Mortgagee such instruments as may be requested by Mortgagee from time to time to
permit such participation.

          (B) If the Mortgaged Property or any part thereof is taken or
diminished in value, or if a consent settlement is entered by or under threat of
such proceeding, the award or settlement payable to Mortgagor by virtue of its
interest in the Mortgaged Property shall be, and by these presents is, assigned,
transferred and set over unto Mortgagee to be held by Mortgagee, subject to the
Lien and security interest of this Mortgage, and disbursed in accordance with
the provisions of the Financing Agreement or, if there is no provision contained
in the Financing Agreement governing how the same is to be disbursed, then
Mortgagee shall apply the entire amount thereof to the payment of the
Obligations, whether or not then due and payable, in such manner and order as
Mortgagee may elect. In all events, unless otherwise expressly provided to the
contrary in the Financing Agreement, Mortgagor hereby covenants and agrees to
commence and diligently to prosecute the restoration of the Mortgaged Property
upon the occurrence of any condemnation or other taking affecting the Mortgaged
Property, without regard to the availability or adequacy of any award or
settlement. Notwithstanding any condemnation or other taking of any of the
Mortgaged Property, Mortgagor shall continue to pay the Obligations at the time
and in the manner provided for in the Financing Agreement and the other Loan
Documents until any condemnation award or settlement shall have been actually
received and applied by Mortgagee to the discharge of the Obligations.
Notwithstanding anything to the contrary in this Section 5.05 but subject to the
final sentence of this Section 5.05(b), if the Mortgaged Property or any part
thereof is taken or diminished in value, or if a consent settlement is entered
by or under threat of such proceeding, and the award or settlement payable to
Mortgagor by virtue of its interest in the Mortgaged Property is $50,000.00 or
less, provided that no Default exists under the Loan Documents, Mortgagor shall
be entitled to retain that part of any such award or settlement that is
designated for restoration of the Mortgaged Property and shall apply it
accordingly, and the balance shall be paid to Mortgagee for application to the
Obligations in such order as Mortgagee shall determine. Furthermore, subject to
the final sentence of this Section 5.05(b), in the event the Mortgaged Property
or any part thereof is taken or diminished in value, or if a consent settlement
is entered by or under threat of such proceeding, and the award or settlement
payable to Mortgagor by virtue of its interest in the Mortgaged Property is
greater than $50,000 but less than twenty-five percent (25%) of the fair market
value of the Mortgaged Property, Mortgagee shall make that portion of any such
award or settlement that is designated for restoration of the Mortgaged Property
available for restoration and repair of the Mortgaged

                                       16

<PAGE>

Property to a complete architectural unit ("restoration"), provided that the
following conditions are satisfied to the reasonable satisfaction of Mortgagee
within one hundred twenty (120) days after such taking:

               (i) Mortgagor shall submit to Mortgagee schematic plans and
     specifications for the restoration, which plans and specifications shall be
     consistent with the condition of the Mortgaged Property immediately prior
     to such taking, subject to modifications approved by Mortgagee;

               (ii) Mortgagor shall enter into a fixed or guaranteed maximum
     cost contract for the restoration with a contractor reasonably acceptable
     to Mortgagee;

               (iii) Mortgagor shall obtain all necessary governmental permits
     and approvals for the restoration;

               (iv) Mortgagor shall deposit with Mortgagee such sums of money as
     are necessary, when added to the award proceeds and earnings thereon, to
     pay the full, cost of the restoration;

               (v) The contract for performance of the restoration shall provide
     that the restoration shall be substantially complete within one (1) year
     after the date of the taking; and

               (vi) Mortgagor shall agree to comply with such additional
     construction disbursement conditions and procedures as are customary for
     such projects.

The award or settlement amount and any sums deposited by Mortgagor pursuant to
(iv) above shall be held by Mortgagee in a separate interest-bearing account
established at Mortgagor's expense in the name of Mortgagee but for the benefit
of Mortgagor, and all earnings on such deposits shall be added to such account.
Mortgagor shall pay to Mortgagee a fee for Mortgagee's internal staff expense of
monitoring such disbursements equal to one percent (1%) of the amount deposited
in such account, and Mortgagor shall pay all out-of-pocket fees and expenses
paid by Mortgagee to title insurance companies and consulting engineers and
architects, for endorsements to title policies, review of plans, inspections and
disbursing services in connection with such application of award proceeds to the
restoration. After completion of the restoration, any balance remaining in such
account up to the amount of any sums deposited by Mortgagor pursuant to (iv)
above plus $50,000 shall be paid to Mortgagor, and any balance remaining in such
account in excess of such amounts shall be paid to Mortgagee for application to
the Obligations in such order as Mortgagee shall determine. If the Mortgaged
Property is sold, through foreclosure or otherwise, prior to the receipt by
Mortgagee of such condemnation award or settlement, Mortgagee shall have the
right, whether or not a deficiency judgment on any Loan Document shall have been
sought, recovered or denied, to receive such condemnation award or settlement,
or a portion thereof sufficient to pay the Obligations, whichever is less.

          SECTION 5.06 Maintenance of Rights-of-Way, Easements, Licenses and
Other Rights. Mortgagor shall maintain, preserve and renew all rights-of-way,
easements, tenements, hereditaments, development rights and credits, zoning
rights, grants, privileges, appurtenances,

                                       17

<PAGE>

licenses, franchises and other rights reasonably necessary for the use or
operation of the Mortgaged Property from time to time, or otherwise relevant to
the value thereof, and Mortgagor shall not, without the prior written consent of
Mortgagee, initiate, join in or consent to any private restrictive covenant or
other public or private restriction as to the present or future use or operation
of the Mortgaged Property. Mortgagor shall, however, comply with all restrictive
covenants which may at any time affect the Mortgaged Property, all applicable
zoning ordinances and all other public or private restrictions relating to the
use of the Mortgaged Property.

          SECTION 5.07 Payment and Performance of Obligations. Mortgagor shall
duly and punctually pay and perform all of the Obligations.

          SECTION 5.08 Compliance with Permitted Liens and Other Obligations.
Mortgagor shall comply in all material respects with any and all obligations,
restrictions and requirements that may be set forth in each and every document
constituting a Permitted Lien. In addition, Mortgagor shall comply in all
material respects with each and every obligation legally imposed upon it and/or
relating to the Mortgaged Property pursuant to applicable law (including,
without limitation, all matters described in Section 4.05 hereof), contract or
other agreement. It is hereby acknowledged that Mortgagee's consent to a
Permitted Lien as of the date hereof shall in no way be deemed to constitute
approval of any future Lien which may be imposed upon any portion of the
Mortgaged Property, or any other enforcement action affecting Mortgagor or the
Mortgaged Property, as a result of Mortgagor's failure to perform or comply with
its obligations under any document constituting a Permitted Lien as of the date
hereof.

          SECTION 5.09 Additional Affirmative Covenants. All affirmative
covenants made by the Borrowers or Guarantors or any of them in the Financing
Agreement are incorporated herein by reference and are hereby also made by
Mortgagor as to itself and the Mortgaged Property as though such covenants were
set forth at length herein as the covenants of Mortgagor.

                                   ARTICLE VI

                               NEGATIVE COVENANTS

          Mortgagor hereby covenants and agrees with Mortgagee that, until all
of the Obligations shall have been paid or performed in full and discharged:

          SECTION 6.01 Use Violations. Mortgagor shall not use, maintain,
operate or occupy, or allow the use, maintenance, operation or occupancy of, the
Mortgaged Property in any manner which (a) violates in any material respect any
Governmental Requirement, (b) may be dangerous unless safeguarded as required by
applicable law, (c) constitutes a public or private nuisance, or (d) makes void,
voidable or cancelable, or increases, substantially in excess of commercially
reasonably rates, the premium of, any insurance then in force with respect
thereto.

          SECTION 6.02 Waste. Mortgagor shall not commit or permit any waste
with respect to the Mortgaged Property.

                                       18

<PAGE>

          SECTION 6.03 Alterations. Mortgagor shall notify Mortgagee, in writing
and in advance, with respect to all proposed alterations, improvements or
additions to the Mortgaged Property (collectively, "Alterations") which are of a
material nature, and, unless and to the extent otherwise expressly provided in
the Financing Agreement, Mortgagor shall not effect any material Alterations to
the Mortgaged Property without the prior written consent of Mortgagee.
Notwithstanding the foregoing, Mortgagor shall have the right to perform
Alterations to the Mortgaged Property without obtaining the prior written
consent of the Mortgagee pursuant to (i) its normal course of tenant improvement
activities pursuant to any Leases; and (ii) non-structural Alterations the costs
of which in the aggregate do not exceed $100,000.00 in any given year.

          SECTION 6.04 No Further Encumbrances. Mortgagor shall not, without the
prior written consent of Mortgagee, create, place or permit to be created or
placed, or through any act or failure to act, acquiesce in the placing of, or
allow to remain, any mortgage, pledge, Lien (statutory, constitutional or
contractual), security interest, encumbrance or charge on, or conditional sale
or other title retention agreement with respect to, the Mortgaged Property, or
any portion thereof or interest therein, other than the Permitted Liens,
regardless of whether the same are subordinate to the Lien(s) and security
interest(s) created by this Mortgage. Notwithstanding the foregoing, Mortgagor
shall be permitted to place or create purchase money liens on equipment acquired
or held by Mortgagor in the ordinary course of its business to secure the
purchase price of such equipment or indebtedness incurred solely for the purpose
of financing the acquisition of such equipment or liens existing on such
equipment at the time of its acquisition; provided that no such lien shall
extend to or cover any other Mortgaged Property, the principal amount of the
indebtedness secured by any such lien shall not exceed the lesser of 100% of the
fair market value or the cost of the property so held or acquired, and the
aggregate principal amount of indebtedness secured by any or all such liens
shall not exceed at any one time outstanding $160,000.00.

          SECTION 6.05 Transfer Restrictions. Mortgagor shall not sell, lease,
assign, transfer or otherwise dispose of or abandon all or any part of the
Mortgaged Property (or any interest therein), except as expressly permitted by,
and in accordance with the terms of, the Financing Agreement or as permitted
pursuant to Section 3.03 herein.

          SECTION 6.06 Additional Negative Covenants. All negative covenants
made by the Borrowers or Guarantors or any of them in the Financing Agreement
and the other Loan Documents are incorporated herein by reference and are hereby
also made by Mortgagor as to itself and the Mortgaged Property as though such
negative covenants were set forth at length herein as the negative covenants of
Mortgagor.

                                   ARTICLE VII

                         EVENTS OF DEFAULT AND REMEDIES

          SECTION 7.01 Event of Default. The "Events of Default" set forth in
Section 8.01 of the Financing Agreement are hereby incorporated herein as if
fully set forth herein, and, without limiting the generality of the foregoing,
the occurrence of an "Event of Default" under the Financing Agreement or any
other Loan Document shall constitute an "Event of Default" hereunder.

                                       19

<PAGE>

          SECTION 7.02 Acceleration. Upon the occurrence and during the
continuance of any Event of Default, in addition to any other rights, powers or
remedies conferred herein or by operation of law, Mortgagee, in its sole
judgment and discretion, may declare the then unpaid principal balance of the
Loan (the "Principal Balance"), the accrued interest thereon and any other
accrued but unpaid portion of the Obligations to be, and they shall thereupon
forthwith become, immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived by
Mortgagor.

          SECTION 7.03 Foreclosure and Sale. If an Event of Default shall occur
and be continuing, Mortgagee shall have the right and option to take possession
of the Mortgaged Property and/or proceed with foreclosure and to sell, to the
extent and in the manner permitted by applicable law, all or any portion of the
Mortgaged Property at one or more sales, as an entirety or in parcels, at such
place or places, in such manner and upon such notice as may be required by
applicable law, or, in the absence of any such requirement, as Mortgagee may
deem appropriate, and to make conveyance to the purchaser or purchasers. Where
the Mortgaged Property is situated in more than one county, notice as above
provided shall be posted and filed in all such counties (if such notices are
required by applicable law), and all such Mortgaged Property may be sold in any
such county and any such notice shall designate the county where such Mortgaged
Property is to be sold. Nothing contained in this Section 7.03 shall be
construed so as to limit in any way Mortgagee's rights to sell the Mortgaged
Property, or any portion thereof, by private sale if, and to the extent that,
such private sale is permitted under the laws of the applicable jurisdiction or
by public or private sale after entry of a judgment by any court of competent
jurisdiction so ordering. Mortgagor hereby irrevocably appoints Mortgagee to be
the attorney-in-fact of Mortgagor (coupled with an interest) and in the name and
on behalf of Mortgagor to execute and deliver any deeds, transfers, conveyances,
assignments, assurances and notices which Mortgagor ought to execute and
deliver, and to do and perform any other acts or things which Mortgagor ought to
do and perform under the covenants herein contained and, generally, to use the
name of Mortgagor in the exercise of any of the powers hereby conferred on
Mortgagee. At any such sale: (a) whether made under the power herein contained
or any other legal enactment, or by virtue of any judicial proceedings or any
other legal right, remedy or recourse, it shall not be necessary for Mortgagee
to have physically present, or to have constructive possession of, the Mortgaged
Property (Mortgagor hereby covenanting and agreeing to deliver to Mortgagee any
portion of the Mortgaged Property not actually or constructively possessed by
Mortgagee immediately upon demand by Mortgagee) and the title to and right of
possession of any such property shall pass to the purchaser thereof as
completely as if the same had been actually present and delivered to purchaser
at such sale; (b) each instrument of conveyance executed by Mortgagee shall
contain a general warranty of title, binding upon Mortgagor and its successors
and assigns; (c) each and every recital contained in any instrument of
conveyance made by Mortgagee shall conclusively establish the truth and accuracy
of the matters recited therein, including, without limitation, nonpayment and/or
nonperformance of the Obligations and advertisement and conduct of such sale in
the manner provided herein and otherwise required by applicable law; (d) any and
all prerequisites to the validity thereof shall be conclusively presumed to have
been performed; (e) the receipt of Mortgagee, or of such other Person or officer
making the sale, shall be a sufficient discharge to the purchaser for its
purchase money and neither such purchaser nor its assigns or personal
representatives shall thereafter be obligated to see to the application of such
purchase money, or be in any way answerable for any loss, misapplication or
non-application thereof; (f) to the fullest extent permitted by applicable

                                       20

<PAGE>

law, Mortgagor shall be completely and irrevocably divested of all of its right,
title, interest, estate, claim and demand whatsoever, either at law or in equity
(including any statutory or common law right of redemption, which is hereby
waived to the fullest extent permitted by applicable law), in and to the
property sold in any such event, and such sale shall be a perpetual bar, both at
law and in equity, against Mortgagor and any and all other Persons claiming by,
through or under Mortgagor; and (g) to the extent and under such circumstances
as are permitted by applicable law, Mortgagee may be a purchaser at any such
sale, and shall have the right, after paying or accounting for all costs of said
sale or sales, to credit the amount of the then unpaid Obligations to the amount
of its bid (in the order of priority set forth in Section 7.16 hereof) in lieu
of cash payment. Each remedy provided in this instrument is distinct from and
cumulative with all other rights and remedies provided hereunder or afforded by
applicable law or equity, and may be exercised concurrently, independently or
successively, in any order whatsoever.

          SECTION 7.04 Mortgagee's Agents. Mortgagee may appoint or delegate any
one or more Persons as agent to perform any act or acts necessary or incident to
any sale held by Mortgagee, including the posting of notices and the conduct of
sale, but in the name and on behalf of Mortgagee.

          SECTION 7.05 Judicial Foreclosure. If any Event of Default shall occur
and be continuing, Mortgagee shall have the right and power to proceed by a suit
or suits in equity or at law, whether for the specific performance of any
covenant or agreement herein contained or in aid of the execution of any power
herein granted, or for any foreclosure hereunder or for the sale of the
Mortgaged Property under the judgment or decree of any court or courts of
competent jurisdiction, or for the enforcement of any other appropriate legal or
equitable remedy.

          SECTION 7.06 Receiver. If any Event of Default shall occur and be
continuing, Mortgagee may apply for and obtain as a matter of right and without
notice to Mortgagor, which notice is hereby expressly waived by Mortgagor, the
appointment of a receiver to collect the Rents of the Mortgaged Property and to
preserve the security hereof, either before or after any foreclosure sale or the
sale of the Mortgaged Property under the order of a court or courts of competent
jurisdiction or under executory or other legal process, without regard to the
value of the Mortgaged Property as security for the amount then due to
Mortgagee, or the solvency of any entity or entities, person or persons
primarily or secondarily liable for the payment of such amounts; the Rents of
the Mortgaged Property, in any such event, having heretofore been assigned to
Mortgagee pursuant to Section 3.01 as additional security for the payment of the
Obligations secured hereby. Any money advanced by Mortgagee in connection with
any such receivership shall be a demand obligation (which obligation Mortgagor
hereby expressly promises to pay) owing by Mortgagor to Mortgagee and shall be
subject to the provisions of Section 8.07(1b) hereof.

          SECTION 7.07 Foreclosure for Installments. To the extent allowed by
applicable law, Mortgagee shall also have the option to proceed with foreclosure
in satisfaction of any installments of the Obligations which have not been paid
when due, either through the courts or otherwise, by non-judicial power of sale
in satisfaction of the matured but unpaid portion of the Obligations as if under
a full foreclosure, conducting the sale as herein provided and without declaring
the entire principal balance and accrued interest due. Such sale may be made
subject to the unmatured portion of the Obligations, and any such sale shall not
in any manner affect the

                                       21

<PAGE>

unmatured portion of the Obligations, but as to such unmatured portion of the
Obligations this Mortgage shall remain in full force and effect just as though
no sale had been made hereunder. It is further agreed that several sales may be
made hereunder without exhausting the right of sale for any unmatured part of
the Obligations, it being the intent and purpose hereof to provide for a
foreclosure and sale of the security for any matured portion of the Obligations
without exhausting the power to foreclose and sell the Mortgaged Property for
any subsequently maturing portion of the Obligations.

          SECTION 7.08 Separate Sales. To the extent allowed by applicable law,
the Mortgaged Property may be sold in one or more parcels and in such manner and
order as Mortgagee, in its sole discretion, may elect, it being expressly
understood and agreed that the right of sale arising out of any Event of Default
shall not be exhausted by any one or more sales.

          SECTION 7.09 Possession of Mortgaged Property. Mortgagor agrees to the
full extent that it lawfully may, that, in case one or more of the Events of
Default shall have occurred and be continuing, then, and in every such case,
Mortgagee shall have the right and power to enter into and upon and take
possession of all or any part of the Mortgaged Property in the possession of
Mortgagor, its successors or assigns, or its or their agents or servants, and
may exclude Mortgagor, its successors or assigns, and all Persons claiming by,
through or under Mortgagor, and its or their agents or servants wholly or partly
therefrom; and, holding the same, Mortgagee may use, administer, manage, operate
and control the Mortgaged Property and conduct the business thereof to the same
extent as Mortgagor, its successors or assigns, might at the time do and may
exercise all rights and powers of Mortgagor, in the name, place and stead of
Mortgagor, or otherwise as Mortgagee shall deem best. All costs, expenses and
liabilities of every character incurred by Mortgagee in administering, managing,
operating and controlling the Mortgaged Property shall constitute a demand
obligation (which obligation Mortgagor hereby expressly promises to pay) owing
by Mortgagor to Mortgagee and shall be subject to the provisions of Section
8.07(b) hereof. Mortgagor hereby irrevocably constitutes and appoints Mortgagee
as Mortgagor's attorney-in-fact (coupled with an interest) to perform such acts
and execute such documents as Mortgagee, in its sole discretion, shall deem
appropriate, including endorsement of Mortgagor's name on any instruments.
Regardless of any provision of this Mortgage, the Financing Agreement or any
other Loan Document, Mortgagee shall not be considered to have accepted any
property other than cash or immediately available funds in satisfaction of any
obligation of Mortgagor to Mortgagee, unless Mortgagee shall have given express
written notice of Mortgagee's election to the contrary.

          SECTION 7.10 Occupancy After Acceleration. In the event that there is
an acceleration of the Loan and Mortgagor or Mortgagor's representatives,
successors or assigns or any other Person claiming any interest in the Mortgaged
Property by, through or under Mortgagor, continues to occupy or use the
Mortgaged Property or any part thereof, each and all shall immediately become
the tenant of Mortgagee (or its successor, if applicable), which tenancy shall
be a tenancy from day-to-day, terminable at the will of either the landlord or
tenant, at a rent to be determined by Mortgagee (which may be in excess of fair
market value); provided, however, that until Mortgagee sets forth the amount of
such rent, such rent shall be a fair market rental per day based upon the value
of the Mortgaged Property as a whole; and such rental shall be due daily to the
Mortgagee (or its successor, if applicable). To the extent permitted by
applicable law, Mortgagee (or its successor, if applicable), notwithstanding any
language herein

                                       22

<PAGE>

to the contrary, shall have the sole option to demand immediate possession or to
permit the occupants to remain as tenants at will. In the event that the tenant
fails to surrender possession of said property upon demand, Mortgagee (and its
successor, if applicable) shall be entitled to institute and maintain a summary
action for possession of the Mortgaged Property (such as an action for forcible
entry and detainer) in any court having appropriate jurisdiction.

          SECTION 7.11 Remedies Cumulative, Concurrent and Nonexclusive. Every
right, power and remedy herein given to Mortgagee shall be cumulative and in
addition to every other right, power and remedy herein specifically given or now
or hereafter existing in equity, at law or by statute (including specifically
those granted by the Applicable UCC). Each such right, power and remedy, whether
specifically herein given or otherwise existing, may be exercised from time to
time and so often and in such order as may be deemed expedient by Mortgagee, and
the exercise, or the beginning of the exercise, of any such right, power or
remedy shall not be deemed a waiver of the right to exercise, at the same time
or thereafter, any other right, power or remedy. Mortgagee shall be entitled to
collect all costs and expenses incurred in pursuing such remedies. No delay or
omission by Mortgagee in the exercise of any such right, power or remedy shall
impair any such right, power or remedy or operate as a waiver thereof or of any
other right, power or remedy then or thereafter existing.

          SECTION 7.12 No Release of Obligations. Neither Mortgagor nor any
Borrower, Guarantor or other Person now or hereafter obligated for the payment
or performance of all or any part of the Obligations shall be relieved of any
such obligation by reason of (a) the failure of Mortgagee to comply with any
request of Mortgagor or any Borrower, Guarantor or other Person so obligated to
foreclose the Lien of this Mortgage or to enforce any provision hereunder or
under the Loan Agreement; (b) the release, regardless of consideration, of the
Mortgaged Property or any portion thereof or interest therein or the addition of
any other property to the Mortgaged Property; (c) any agreement or stipulation
between any subsequent owner of the Mortgaged Property and Mortgagee extending,
renewing, rearranging or in any other way modifying the terms of this Mortgage
without first having obtained the consent of, given notice to or paid any
consideration to Mortgagor or any Borrower, Guarantor or other Person, and in
any such event Mortgagor and all Borrowers, Guarantors and such other Persons
shall continue to be liable to make payment according to the terms of any such
extension or modification agreement unless expressly released and discharged in
writing by Mortgagee; or (d) any other act or occurrence save and except the
complete payment and performance of all of the Obligations.

          SECTION 7.13 Release of and Resort to Collateral. Mortgagee may
release, regardless of consideration, any part of the Mortgaged Property
without, as to the remainder, in any way impairing, affecting, subordinating or
releasing the Lien or security interest created in or evidenced by this Mortgage
or its stature as a first and prior Lien and security interest in and to the
Mortgaged Property, and without in any way releasing or diminishing the
liability of any Person liable for the payment or performance of the
Obligations. Mortgagee may resort to any other security for the Obligations held
by Mortgagee in such manner and order as Mortgagee may elect.

          SECTION 7.14 Waiver of Redemption, Notice and Marshalling of Assets.
To the fullest extent permitted by applicable law, Mortgagor hereby irrevocably
and unconditionally waives and releases (a) all benefits that might accrue to
Mortgagor by virtue of any present or

                                       23

<PAGE>

future moratorium law or other law exempting the Mortgaged Property from
attachment, levy or sale on execution or providing for any appraisement,
valuation, stay of execution, exemption from civil process, redemption or
extension of time for payment; (b) except for notices expressly provided for
herein or in the Financing Agreement, all notices of any Event of Default or of
Mortgagee's intention to accelerate maturity of the Obligations or of
Mortgagee's election to exercise or actual exercise of any right, remedy or
recourse provided for hereunder or under the Financing Agreement; and (c) any
right to a marshalling of assets or a sale in inverse order of alienation; and
(d) any and all conflicts with any provisions of any of the Loan Documents. If
any law referred to in this Mortgage and now in force, of which Mortgagor or its
successor or successors might take advantage despite the provisions hereof,
shall hereafter be repealed or cease to be in force, such law shall thereafter
be deemed not to constitute any part of the contract herein contained or to
preclude the operation or application of the provisions hereof.

          SECTION 7.15 Discontinuance of Proceedings. In case Mortgagee shall
have proceeded to invoke any right, remedy or recourse permitted hereunder or
under the Financing Agreement and shall thereafter elect to discontinue or
abandon same for any reason, Mortgagee shall have the unqualified right so to do
and, in such an event, Mortgagor and Mortgagee shall be restored to their former
positions with respect to the Obligations, this Mortgage, the Financing
Agreement, the Mortgaged Property and otherwise, and the rights, remedies,
recourses and powers of Mortgagee shall continue as if same had never been
invoked.

          SECTION 7.16 Application of Proceeds. After the occurrence and during
the continuance of an Event of Default, the proceeds of any sale of and any
other amounts generated by the holding, leasing, operating or other use of the
Mortgaged Property shall be applied by Mortgagee (or the receiver, if one is
appointed), to the extent that funds are so available therefrom, in accordance
with the provisions of the Financing Agreement or, if not so provided, then in
the following order of priority, except to the extent otherwise required by
applicable law:

          (A) first, to the payment of the reasonable and necessary costs and
expenses of taking possession of the Mortgaged Property and of holding, using,
leasing, repairing, improving the same, including reasonable (i) receivers'
fees, (ii) court costs, (iii) attorneys' and accountants' fees, (iv) costs of
advertisement and title search fees, and (v) the payment of any and all
Impositions, Liens, security interests or other rights, titles or interests
equal or superior to the Lien and security interest of this Mortgage (except
those to which the Mortgaged Property has been sold subject to and without in
any way implying Mortgagee's prior consent to the creation thereof);

          (B) second, to the payment of all amounts other than the Principal
Balance and accrued but unpaid interest which may be due to Mortgagee hereunder
or under the other Loan Documents, together with interest thereon as provided
herein;

          (C) third, to the payment of the Obligations in such order and manner
as Mortgagee determines in its sole discretion; and

          (D) fourth, to Mortgagor or as otherwise required by any Governmental
Requirement.

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<PAGE>

Mortgagor shall be liable for any deficiency remaining.

          SECTION 7.17 Uniform Commercial Code Remedies. Mortgagee shall have
all of the rights, remedies and recourses with respect to the Personalty and the
Fixtures afforded to it by the Applicable UCC, including, without limitation,
the right to take possession of the Personalty and the Fixtures or any part
thereof, and to take such other measures as Mortgagee may deem necessary for the
care, protection and preservation of the Personalty and the Fixtures, in
addition to, and not in limitation of, the other rights, remedies and recourses
afforded by this Mortgage and the other Loan Documents.

          SECTION 7.18 Indemnity. In connection with any action taken by
Mortgagee pursuant to this Mortgage, neither Mortgagee nor any Indemnified
Person shall be liable for any Loss sustained by Mortgagor, including those
resulting from (a) any assertion that Mortgagee or any Indemnified Person
received funds from the operations of the Mortgaged Property claimed by third
Persons, or (b) any act or omission of Mortgagee or such Indemnified Person in
administering, managing, operating or controlling the Mortgaged Property,
including in either case such Loss as may result from the ordinary negligence of
Mortgagee or such Indemnified Person or which may result from strict liability,
whether under applicable law or otherwise, unless such Loss is caused by the
gross negligence or willful misconduct of Mortgagee or such Indemnified Person,
nor shall Mortgagee or such Indemnified Person be obligated to perform or
discharge any obligation, duty or liability of Mortgagor. Mortgagor shall and
does hereby agree to indemnify Mortgagee and each Indemnified Person for, and to
hold Mortgagee and each such Indemnified Person harmless from, any and all
Losses which may or might be incurred by Mortgagee or any Indemnified Person by
reason of this Mortgage or the exercise of rights or remedies hereunder,
including such Losses as may result from the ordinary negligence of Mortgagee or
any Indemnified Person or which may result from strict liability, whether under
applicable law or otherwise, unless such Loss is caused by the gross negligence
or willful misconduct of Mortgagee or such Indemnified Person. WITHOUT
LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO MORTGAGEE AND EACH
INDEMNIFIED PERSON WITH RESPECT TO LOSSES WHICH IN WHOLE OR IN PART ARE CAUSED
BY OR ARISE OUT OF ANY NEGLIGENT ACT OR OMISSION OF MORTGAGEE, SUCH INDEMNIFIED
PERSON OR ANY OTHER PERSON. Should Mortgagee or any Indemnified Person make any
expenditure on account of any such Losses, the amount thereof, including costs,
expenses and reasonable attorneys' fees, shall be a demand obligation (which
obligation Mortgagor hereby expressly promises to pay) owing by Mortgagor to
Mortgagee and shall be subject to the provisions of Section 8.07fb) hereof.
Mortgagor hereby assents to, ratifies and confirms any and all actions of
Mortgagee with respect to the Mortgaged Property taken under this Mortgage. This
Section 7.18 shall survive the termination of this Mortgage and the payment and
performance of the Obligations.

                                  ARTICLE VIII

                                 MISCELLANEOUS

          SECTION 8.01 Instrument Construed as Mortgage, Etc. This Mortgage may
be construed as a mortgage, deed of trust, chattel mortgage, conveyance,
assignment, security agreement, pledge, financing statement, hypothecation or
contract, or any one or more of them,

                                       25

<PAGE>

in order to fully effectuate the liens and security interests created hereby and
the purposes and agreements set forth herein.

          SECTION 8.02 Performance at Mortgagor's Expense, The cost and expense
of performing or complying with any and all of the Obligations shall be borne
solely by Mortgagor, and no portion of such cost and expense shall be, in any
way or to any extent, credited against any installment on or portion of the
Obligations.

          SECTION 8.03 Survival of Obligations. Each and all of the Obligations
shall survive the execution and delivery of this Mortgage and shall continue in
full force and effect until all of the Obligations shall have been fully
satisfied.

          SECTION 8.04 Further Assurances. Mortgagor, upon the request of
Mortgagee, shall execute, acknowledge, deliver and record and/or file such
further instruments, including financing statements, and do such further acts as
may be reasonably necessary, desirable or proper to carry out more effectively
the purpose of this Mortgage and to subject to the Liens and security interests
hereof any property intended by the terms hereof to be covered hereby, including
any renewals, additions, substitutions, replacements, betterments or
appurtenances to the then Mortgaged Property.

          SECTION 8.05 Notices. All notices or other communications required or
permitted to be given pursuant to this Mortgage shall be in writing and shall be
considered properly given if given in the manner and to the addresses prescribed
by Section 11.01 of the Financing Agreement to the parties and at the addresses
set forth in the first paragraph of this Mortgage, and to each of the parties to
the Financing Agreement at the addresses set forth in Section 11.01 thereof. Any
party shall have the right to change its address for notice hereunder to any
other location within the continental United States by the giving often (10)
days' notice to the other party in the manner set forth above.

          SECTION 8.06 No Waiver. Any failure by Mortgagee to insist, or any
election by Mortgagee not to insist, upon strict performance by Mortgagor of any
of the terms, provisions or conditions of this Mortgage shall not be deemed to
be a waiver of the same or of any other terms, provision or condition hereof,
and Mortgagee shall have the right, at any time or times thereafter, to insist
upon strict performance by Mortgagor of any and all of such terms, provisions
and conditions. Mortgagee may, in Mortgagee's sole and absolute discretion, (i)
in the case of a Default, determine whether such Default has been cured, and
(ii) in the case of an Event of Default, accept or reject any proposed cure of
an Event of Default. In no event shall any provision of this Mortgage or any
other Loan Document which provides that Mortgagee shall have certain rights
and/or remedies only during the continuance of an Event of Default be construed
so as to require Mortgagee to accept a cure of any such Event of Default. Unless
and until Mortgagee accepts any proposed cure of an Event of Default, such Event
of Default shall be deemed to be continuing for purposes of this Mortgage and
the other Loan Documents.

          SECTION 8.07 Mortgagee's Right to Perform; Mortgagee's Expenditures.

          (a) Mortgagor agrees that if Mortgagor fails to perform any act or
take any action which Mortgagor is required to perform or take hereunder or
under the Financing

                                       26

<PAGE>

Agreement or to pay any money which Mortgagor is required to pay hereunder or
under the Financing Agreement, Mortgagee may, but shall not be obligated to,
perform or cause to be performed such act or take such action or pay such money
to the extent and only to the extent permitted under the Financing Agreement.

          (b) All costs and expenses incurred by Mortgagee (or any Indemnified
Party), including, without limitation, attorneys fees and expenses, all monies
paid by (or on behalf of) Mortgagee and the monetary value of all services
performed by (or on behalf of Mortgagee) in connection with a Default or Event
of Default hereunder or under any other Loan Document, including, without
limitation, the (i) the enforcement of any term or provision of this Mortgage or
any other Loan Document, (ii) the performance by Mortgagee of any obligation of
Mortgagor under this Mortgage or any other Loan Document if Mortgagee elects to
so perform, in its sole and absolute discretion, and (iii) any action Mortgagee
elects to take, in its sole and absolute discretion, to protect its interest in
or the value of the Mortgaged Property, shall be a demand obligation owing by
Mortgagor to Mortgagee, as the case may be, and to the extent any payment is
made to a third Person, Mortgagee, upon making such payment, shall be subrogated
to all of the rights of the Person receiving such payment. All such costs and
expenses, monies and the monetary value of such services performed shall (x)
bear interest at the Post-Default Rate from the date of such incurrence, payment
or performance, as applicable, until paid, and (y) (together with such interest)
constitute a portion of the Obligations and shall be secured by this Mortgage
and all of the other Loan Documents. If Mortgagee shall elect to pay any
Imposition or other sums due with reference to the Mortgaged Property, Mortgagee
may do so in reliance on any bill, statement or assessment procured from the
appropriate Governmental Authority or other issuer thereof.

          SECTION 8.08 Successors and Assigns. All of the terms hereof shall
apply to, be binding upon and inure to the benefit of the parties hereto, their
successors, assigns, heirs and legal representatives, and all other Persons
claiming by, through or under them; provided, however, that nothing herein shall
be deemed to imply any right on behalf of Mortgagor to assign its interest in
any of the Mortgaged Property except as may be expressly set forth in the
Financing Agreement.

          SECTION 8.09 Severabilitv. This Mortgage is intended to be performed
in accordance with, and only to the extent permitted by, all applicable laws and
regulations of applicable Governmental Authorities and the provisions hereof are
intended to be limited to the extent necessary that they will not render this
Mortgage invalid, unenforceable or not entitled to be recorded, registered or
filed under the provisions of any applicable law. If any provision hereof or the
application thereof to any Person or circumstance shall, for any reason and to
any extent, be invalid or unenforceable, neither the remainder of this Mortgage
nor the application of such provision to other Persons or circumstances shall be
affected thereby, but rather shall be enforced to the greatest extent permitted
by applicable law.

          SECTION 8.10 Entire Agreement and Modification. This Mortgage may not
be amended, revised, waived, discharged, released or terminated orally, but only
by a written instrument or instruments executed by the party against which
enforcement of the amendment, revision, waiver, discharge, release or
termination is asserted. Any alleged amendment, revision,

                                       27

<PAGE>

waiver, discharge, release or termination which is not so documented shall not
be effective as to any party.

          SECTION 8.11 Applicable Law. THIS MORTGAGE SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE IN WHICH THE
MORTGAGED PROPERTY IS LOCATED; PROVIDED, HOWEVER, THAT THE FINANCING AGREEMENT
IS AND EACH GUARANTY IS BY ITS TERMS, GOVERNED BY THE INTERNAL LAWS OF THE STATE
OF NEW YORK AS PROVIDED THEREIN, AND, IN THE EVENT THAT IT BECOMES NECESSARY, IN
CONNECTION WITH THE ENFORCEMENT OF THIS MORTGAGE OR OTHERWISE, TO CONSTRUE OR
ENFORCE THE OBLIGATIONS (WHICH OBLIGATIONS ARE SECURED BY THIS MORTGAGE), THE
FINANCING AGREEMENT AND EACH GUARANTY SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK

          SECTION 8.12 Satisfaction of Prior Encumbrance, To the extent that
proceeds advanced pursuant to the Financing Agreement are used to pay
indebtedness secured by any outstanding Lien, security interest, charge or prior
encumbrance against the Mortgaged Property, such proceeds shall be deemed to
have been advanced by Mortgagee at Mortgagor's request, and Mortgagee shall be
subrogated to any and all rights, security interests and Liens owned by any
owner or holder of such outstanding Liens, security interests, charges or
encumbrances, irrespective of whether said Liens, security interests, charges or
encumbrances are released, and it is expressly understood that, in consideration
of the payment of such other indebtedness by Mortgagee, Mortgagor hereby waives
and releases all demands and causes of action for offsets and payments to, upon
and in connection with the said indebtedness.

          SECTION 8.13 No Partnership. Nothing contained in this Mortgage is
intended to, or shall be construed to, create to any extent and in any manner
whatsoever any partnership, joint venture, or association between Mortgagor and
Mortgagee, or in any way make Mortgagee a co-principal with Mortgagor with
reference to the Mortgaged Property, and any inferences to the contrary are
hereby expressly negated.

          SECTION 8.14 Headings. The Article, Section and Subsection headings
hereof are inserted for convenience of reference only and shall in no way alter,
modify or define, or be used in construing, the text of such Articles, Sections
or Subsections.

          SECTION 8.15 Release of Mortgage. If all of the Obligations shall be
paid, performed and discharged and the Financing Agreement is and each Guaranty
is terminated, Mortgagee shall forthwith cause satisfaction and discharge of
this Mortgage to be entered upon the record, at the sole cost and expense of
Mortgagor, and shall execute and deliver (or cause to be executed and delivered)
such instruments of satisfaction and discharge as may be appropriate, such
instruments to be duly acknowledged and in form for recording, at the sole cost
and expense of Mortgagor.

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<PAGE>

          SECTION 8.16 Limitation of Obligations with Respect to Mortgaged
Property.

          (A) Neither Mortgagee nor any Lender shall have any duty to protect or
preserve, or any liability with respect to the protection or preservation of,
any Mortgaged Property or to preserve rights pertaining thereto other than the
duty to use reasonable care in the custody and preservation of any Mortgaged
Property in its actual possession. Mortgagee shall be deemed to have exercised
reasonable care in the custody and preservation of any Mortgaged Property in its
possession if such Mortgaged Property is accorded treatment substantially equal
to that which Mortgagee accords its own like property. Mortgagee shall be
relieved of all responsibility for any Mortgaged Property in its possession upon
surrendering it, or tendering surrender of it, to Mortgagor or to such other
Person entitled thereto by applicable law.

          (B) Nothing contained in this Mortgage shall be construed as requiring
or obligating Mortgagee or any Lender, and neither Mortgagee nor any Lender
shall be required or obligated, to (i) make any demand or inquiry as to the
nature or sufficiency of any payment received by it, or present or file any
claim or notice or take any action with respect to any Mortgaged Property or the
monies due or to become due in connection therewith, (ii) ascertain or take
action with respect to calls, conversions, exchanges, maturities, tenders,
offers or other matters relating to any Mortgaged Property, whether or not
Mortgagee or any of the other Lenders has or is deemed to have knowledge or
notice thereof, (iii) take any necessary steps to preserve rights against any
prior parties with respect to any Mortgaged Property, or (iv) notify Mortgagor
or any other Person of any decline in the value of any Mortgaged Property.

          SECTION 8.17 Inconsistency with Financing Agreement. To the fullest
extent possible, the terms and provisions of the Financing Agreement shall be
read together with the terms and provisions of this Mortgage such that the terms
and provisions of this Mortgage shall supplement, rather than conflict with, the
terms and provisions of the Financing Agreement; provided, however, that,
notwithstanding the foregoing, in the event any of the terms or provisions of
this Mortgage conflict with any of the terms or provisions of the Financing
Agreement, such that it is impractical for such terms or provisions to coexist,
the terms or provisions of the Financing Agreement shall govern and control for
all purposes; and, provided further, that the inclusion in this Mortgage of
terms and provisions, supplemental rights or remedies in favor of a secured
party but which are not addressed in the Financing Agreement shall not be deemed
to be a conflict with the Financing Agreement and all such additional terms,
provisions, supplemental rights or remedies contained herein shall be given full
force and effect.

          SECTION 8.18 Limitation on Interest Payable. It is the intention of
the parties to conform strictly to the usury laws, whether state or federal,
that are applicable to the transaction of which this Mortgage is a part. All
agreements between Mortgagor and Mortgagee, or any Lender, whether now existing
or hereafter arising and whether oral or written, are hereby expressly limited
so that in no contingency or event whatsoever shall the amount paid or agreed to
be paid by Mortgagor for the use, forbearance or detention of the money to be
loaned under the Financing Agreement or any other Loan Document, or for the
payment or performance of any covenant or obligation contained herein or in the
Financing Agreement or any other Loan Document, exceed the maximum amount
permissible under applicable federal or state usury laws. If, under any
circumstances, fulfillment of any such provision, at the time performance of
such provision shall be due, shall involve exceeding the limit of validity
prescribed by applicable

                                       29

<PAGE>

law, then the obligation to be fulfilled shall be reduced to the limit of such
validity. If, under any circumstances, Mortgagor shall have paid an amount of
money which is deemed to be interest and such interest would exceed the highest
lawful rate, such amount that would be excessive interest under applicable usury
laws shall be applied to the reduction of the principal amount owing in respect
of the Obligations and not to the payment of interest, or if such excessive
interest exceeds the unpaid balance of principal and any other amounts due
hereunder, the excess shall be refunded to Mortgagor. All sums paid or agreed to
be paid for the use, forbearance or detention of the principal under any
extension of credit by Mortgagee (or any Lender) shall, to the extent permitted
by applicable law, and to the extent necessary to preclude exceeding the limit
of validity prescribed by applicable law, be amortized, prorated, allocated and
spread from the date of this Mortgage until payment in full of the Obligations
so that the actual rate of interest on account of such principal amounts is
uniform throughout the term hereof.

          SECTION 8.19 Covenants To Run With the Land. All of the grants,
representations, warranties, undertakings, covenants, terms, provisions and
conditions in this Mortgage shall run with the Land and shall apply to and bind
the successors and assigns of Mortgagor. If there shall be more than one
mortgagor, the covenants, representations and warranties made herein shall be
deemed to be joint and several.

          SECTION 8.20 Last Dollar. So long as the balance of the Obligations
exceeds the portion of the Obligations secured by this Mortgage, no payment on
account of the Obligations shall be deemed to be applied against or to reduce
the portion of the Obligations secured by this Mortgage, but shall, instead, be
deemed to be applied against only such portions of the Obligations that are not
secured by this Mortgage.

          SECTION 8.21 Defense of Claims. Mortgagor shall promptly notify
Mortgagee in writing of the commencement of any legal proceedings affecting
Mortgagor's title to the Mortgaged Property or Mortgagee's Lien on or security
interest in the Mortgaged Property, or any part thereof, and shall take all such
action, employing attorneys agreeable to Mortgagee, as may be necessary to
preserve Mortgagor's and Mortgagee's rights affected thereby. If Mortgagor fails
or refuses to adequately or vigorously, in the sole judgment of Mortgagee,
defend Mortgagor's or Mortgagee's rights to the Mortgaged Property, Mortgagee
may take such action on behalf of and in the name of Mortgagor and at
Mortgagor's expense. Moreover, Mortgagee may take (or cause its agents to take)
such independent action in connection therewith as they may in their discretion
deem proper, including, without limitation, the right to employ independent
counsel and to intervene in any suit affecting the Mortgaged Property. All
costs, expenses and attorneys' fees incurred by Mortgagee (or its agents)
pursuant to this Section 8.21 or in connection with the defense by Mortgagee of
any claims, demands or litigation relating to Mortgagor, the Mortgaged Property
or the transactions contemplated in this Mortgage shall be paid by Mortgagor on
demand, plus interest thereon from the date of the advance by Mortgagee until
reimbursement of Mortgagee at the Post-Default Rate.

          SECTION 8.22 Exculpation Provisions. EACH OF THE PARTIES HERETO
SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS MORTGAGE; AND AGREES THAT IT
IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS OF THIS MORTGAGE; THAT IT HAS
IN FACT READ THIS MORTGAGE AND IS FULLY INFORMED AND HAS FULL NOTICE AND
KNOWLEDGE OF THE

                                       30

<PAGE>

TERMS, CONDITIONS AND EFFECTS OF THIS MORTGAGE; THAT IT HAS BEEN REPRESENTED BY
INDEPENDENT LEGAL COUNSEL OF ITS CHOICE THROUGHOUT THE NEGOTIATIONS PRECEDING
ITS EXECUTION OF THIS MORTGAGE AND HAS RECEIVED THE ADVICE OF ITS ATTORNEY IN
ENTERING INTO THIS MORTGAGE; AND THAT IT RECOGNIZES THAT CERTAIN OF THE TERMS OF
THIS MORTGAGE RESULT IN ONE PARTY ASSUMING THE LIABILITY INHERENT IN SOME
ASPECTS OF THE TRANSACTION AND RELIEVING THE OTHER PARTY OF ITS RESPONSIBILITY
FOR SUCH LIABILITY. EACH PARTY HERETO AGREES AND COVENANTS THAT IT WILL NOT
CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION OF THIS
MORTGAGE ON THE BASIS THAT THE PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH
PROVISION OR THAT THE PROVISION IS NOT "CONSPICUOUS."

          SECTION 8.23 No Merger of Estates. So long as any part of the
Obligations remain unpaid, unperformed or undischarged, the fee, easement and
leasehold estates to the Mortgaged Property shall not merge but rather shall
remain separate and distinct, notwithstanding the union of such estates either
in Mortgagor, Mortgagee, any lessee, any third-party purchaser or otherwise.

          SECTION 8.24 Counterparts. This Mortgage may be executed in any number
of counterparts, each of which shall be deemed to be an original, and all of
which, taken together, shall be deemed to constitute one single instrument,
except that, to facilitate recordation, portions of Exhibit A hereto which
describe properties situated in counties other than the county in which this
Mortgage is to be recorded may be omitted.

          SECTION 8.25 Maturity Date. The latest Obligation secured by this
Mortgage matures on February 15,2009.

                                   ARTICLE IX

                            STATE SPECIFIC PROVISIONS

          SECTION 9.01 Application of Rents and Proceeds. Notwithstanding any
provision of this Mortgage (including, without limitation, Section 3.02(b),
Section 3.04, Section 7.06 and Section 7.16 hereof) to the contrary, all Rents
received from the Mortgaged Property shall be applied as follows:

               (1) to payment of all reasonable fees of the receiver approved by
     the court;

               (2) to payment of all tenant security deposits then owing to
     tenants under any of the Leases pursuant to the provisions of Minn. Stat.
     504B.178, if applicable;

               (3) to payment of all prior or current real estate taxes and
     special assessments with respect to the Mortgaged Property, or the escrow
     payments then due;

               (4) to payment of all premiums then due for the insurance
     required by the provisions of this Mortgage, or to the escrow payments then
     due;

                                       31

<PAGE>

               (5) to payment of all expenses to perform the covenants of any
     lessor or licensee pursuant to Minn. Stat. 504B.161, subd. 1, if
     applicable;

               (6) to payment of expenses incurred for normal maintenance and
     operation of the Mortgaged Property;

               (7) prior to commencement of any foreclosure, to Mortgagee for
     payment of the indebtedness secured by this Mortgage in such order as
     Mortgagee may elect, but no such payment made after acceleration of the
     indebtedness shall affect such acceleration;

               (8) after commencement of any foreclosure, to Mortgagee for
     payment of the amount required to be paid to effect a reinstatement prior
     to the foreclosure sale, but no such payment made after acceleration of the
     indebtedness shall affect such acceleration; and

               (9) after a foreclosure sale, at the option of Mortgagee, in its
     sole discretion, to payment of any deficiency or to the amount required to
     be paid to effect a redemption, with any excess to be paid to Mortgagor;
     provided, however, that if this Mortgage is not reinstated nor the
     Mortgaged Property redeemed, the entire amount received pursuant hereto,
     after deducting the amounts, if any, applied by Mortgagee to any
     deficiency, shall be the property of the purchaser of the Mortgaged
     Property at the foreclosure sale.

The rights and powers of the Mortgagee under this Mortgage and the application
of Rents under this Section shall continue until expiration of the redemption
period from any foreclosure sale, whether or not any deficiency remains after a
foreclosure sale. A receiver appointed pursuant to this Mortgage shall apply all
Rents in accordance with this section from the date of appointment of such
receiver through the entire redemption period following the foreclosure sale.

          SECTION 9.02 WAIVER OF CONSTITUTIONAL RIGHTS. MORTGAGOR UNDERSTANDS
AND AGREES THAT IF AN "EVENT OF DEFAULT" (AS DEFINED IN THE FINANCING AGREEMENT)
SHALL OCCUR, MORTGAGEE HAS THE RIGHT, INTER ALIA, TO FORECLOSE THIS MORTGAGE BY
ADVERTISEMENT PURSUANT TO MINNESOTA STATUTES, CHAPTER 580, AS HEREAFTER AMENDED,
OR PURSUANT TO ANY SIMILAR OR REPLACEMENT STATUTE HEREAFTER ENACTED; THAT IF
MORTGAGEE ELECTS TO FORECLOSE BY ADVERTISEMENT, IT MAY CAUSE THE MORTGAGED
PROPERTY, OR ANY PART THEREOF, TO BE SOLD AT PUBLIC AUCTION; THAT NOTICE OF SUCH
SALE MUST BE PUBLISHED AND GIVEN PERSONALLY TO THE PERSONS IN POSSESSION OF THE
MORTGAGED PROPERTY AS PROVIDED BY STATUTE; THAT MORTGAGOR WILL HAVE SUCH PERIOD
AS IS PROVIDED BY MINNESOTA STATUTES, SECTIONS 580.23 OR 582.032, AS APPLICABLE,
OR ANY AMENDMENT THERETO, OR ANY SIMILAR OR REPLACEMENT STATUTE HEREAFTER
ENACTED, TO REDEEM THE MORTGAGED PROPERTY SO SOLD BY PAYING THE SALE PRICE, ANY
TAXES, ASSESSMENTS AND INSURANCE PREMIUMS PAID BY THE PURCHASER AT SUCH SALE,
AND OTHER SUMS PERMITTED BY LAW, TOGETHER WITH INTEREST THEREON FROM THE DATE OF
SALE OR PAYMENT AT THE HIGHEST RATE PERMITTED BY LAW.

MORTGAGOR FURTHER UNDERSTANDS THAT IN THE EVENT OF SUCH DEFAULT, MORTGAGEE MAY
TAKE POSSESSION OF THE MORTGAGED PROPERTY WHICH IS

                                       32

<PAGE>

SUBJECT TO THE SECURITY INTEREST HEREINBEFORE GRANTED AND DISPOSE OF THE SAME BY
SALE OR OTHERWISE IN ONE OR MORE PARCELS, PROVIDED THAT AT LEAST (10) DAYS'
PRIOR NOTICE OF SUCH DISPOSITION MUST BE GIVEN TO MORTGAGOR, ALL AS PROVIDED FOR
BY THE MINNESOTA UNIFORM COMMERCIAL CODE, AS HEREAFTER AMENDED, OR BY ANY
SIMILAR OR REPLACEMENT STATUTE HEREAFTER ENACTED.

MORTGAGOR FURTHER UNDERSTANDS THAT UNDER THE CONSTITUTION OF THE UNITED STATES
IT MAY HAVE THE RIGHT TO NOTICE AND HEARING BEFORE THE MORTGAGED PROPERTY MAY BE
SOLD AND THAT THE PROCEDURE FOR FORECLOSURE BY ADVERTISEMENT DESCRIBED ABOVE
DOES NOT INSURE THAT NOTICE WILL BE GIVEN TO MORTGAGOR, AND NEITHER SAID
PROCEDURE FOR FORECLOSURE BY ADVERTISEMENT NOR THE MINNESOTA UNIFORM COMMERCIAL
CODE REQUIRES ANY HEARING OR OTHER JUDICIAL PROCEEDING.

MORTGAGOR HEREBY RELINQUISHES, WAIVES AND GIVES UP ANY CONSTITUTIONAL RIGHTS TO
NOTICE AND HEARING BEFORE SALE OF THE MORTGAGED PROPERTY AND EXPRESSLY CONSENTS
AND AGREES THAT THE MORTGAGED PROPERTY MAY BE FORECLOSED BY ADVERTISEMENT AND
THAT THE PORTION THEREOF WHICH IS SUBJECT TO THE SECURITY INTEREST HEREINBEFORE
GRANTED MAY BE DISPOSED OF PURSUANT TO THE UNIFORM COMMERCIAL CODE, ALL AS
DESCRIBED ABOVE.

MORTGAGOR ACKNOWLEDGES THAT IT IS REPRESENTED BY LEGAL COUNSEL; THAT BEFORE
SIGNING THIS DOCUMENT THIS SECTION AND ITS CONSTITUTIONAL RIGHTS WERE FULLY
EXPLAINED BY SUCH COUNSEL AND THAT IT UNDERSTANDS THE NATURE AND EXTENT OF THE
RIGHTS WAIVED HEREBY AND THE EFFECT OF SUCH WAIVER.

          SECTION 9.03 Wells and Sewer Systems. Mortgagor does not know of any
wells (as defined by Minnesota Statutes Section 1031.005, Subd. 21, as amended)
on the Land, nor of any individual sewage systems (within the meaning of
Minnesota Statutes Section 115.55, Subd. l(g)) on or serving the Land.

          SECTION 9.04 Future Advances. The maximum principal amount of
indebtedness secured by this Mortgage at any one time, excluding advances made
by Mortgagee in protection of the Mortgaged Property or the lien of this
Mortgage, shall be $8,000,000.00. To the extent that this Mortgage secures
future advances, the amount of such advances is not currently known. The
acceptance of this Mortgage by Mortgagee, however, constitutes an acknowledgment
that Mortgagee is aware of the provisions of Minnesota Statutes Section 287.05,
Subd. 5, and intends to comply with the requirements contained therein. The
representations contained in this Section are made solely for the benefit of the
county recording authorities in determining the mortgage registry tax payable as
a prerequisite to the recording of this Mortgage. Mortgagor acknowledges that
such representations do not constitute or imply an agreement by Mortgagee to
make any future advances to Mortgagor.

                  [Remainder of Page Intentionally Left Blank.]

                                       33

<PAGE>

     IN WITNESS WHEREOF, Mortgagor has executed this Mortgage as of the date
first above written.

                                        MORTGAGOR:

                                        LAKES ENTERTAINMENT, INC.
                                        a Delaware limited liability company

                                        By: /s/ Timothy J. Cope
                                            ------------------------------------
                                        Name: Timothy J. Cope
                                        Title: Chief Financial Officer

<PAGE>

                                 ACKNOWLEDGEMENT

STATE OF NEW YORK    )
                     ) ss:
COUNTY OF NEW YORK   )

     The foregoing instrument was acknowledged before me this 15th day of
February, 2006, by Timothy J. Cope, as Chief Financial Officer of Lakes
Entertainment. Inc.. a Minnesota corporation, on behalf of the corporation.

                                        /s/ THOMAS W. CAPLIS
                                        ----------------------------------------
                                        Notary Public
                                        My Commission Expires: _________________

                                                         (SEAL)

<PAGE>

                                    EXHIBIT A

                                LEGAL DESCRIPTION

Lot 1, Block 1, Carlson Center East, Hennepin County, Minnesota.

Together with the benefits and easements created in Declaration of Easements and
Covenants dated December 18, 1996, filed December 20, 1996, as Document No.
2771390 and as amended by that certain First Amendment to the Declaration of
Easements and Covenants dated March 25, 1998, filed April 14, 1998 as Document
No. 3009312.

Together with the rights and easements created under the terms of that certain
Water Main Easement dated March 26, 1999, filed April 5, 1999, as Document No.
3141558.

Torrens Property
Certificate of Title No. 1077389

                                      A-1

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