Document:

<PAGE>

                                                                    Exhibit 10.3

                            REAFFIRMATION OF GUARANTY
                            -------------------------

                                  June 19, 2001

General Electric Capital Corporation, as Agent
10 South LaSalle Street
Suite 2800
Chicago, Illinois 60603

Attn:  Wilsons Leather Account Manager

     Please refer to (1) the Third Amended and Restated Credit Agreement dated
the date hereof (the "Credit Agreement"), amending and restating that certain
Second Amended and Restated Credit Agreement dated as of October 31, 2000,
amending and restating that certain Amended and Restated Credit Agreement dated
as of May 24, 1999, amending and restating that certain Credit Agreement dated
as of May 25, 1996 among Wilsons Leather Holdings Inc. ("Borrower"), and the
Loan Parties, General Electric Capital Corporation, individually and as agent
("Agent") and the other lenders signatory thereto ("Lenders"), (2) the Parent
Guaranty dated as of May 25, 1996 (as amended, the "Parent Guaranty") by certain
of the undersigned in favor of Agent on behalf of the Lenders under the Credit
Agreement, (3) the Store Guarantors' Guaranty (as amended, the "Store
Guarantors' Guaranty") dated as of May 25, 1996 by certain of the undersigned in
favor of Agent on behalf of the Lenders under the Credit Agreement, (4) the
Joinder Agreement dated July 31, 1997 between Wilsons International, Inc. and
Agent, (5) the Joinder Agreement dated May 24, 1999 between certain of the
undersigned and Agent, (6) the Joinder Agreement dated October 10, 2000 between
certain of the undersigned and Agent, (7) the Joinder Agreement dated October
31, 2000 between certain of the undersigned and Agent, and (8) the Joinder
Agreement dated April 13, 2001 between certain of the undersigned and Agent.

     Pursuant to the Credit Agreement, Lenders have agreed to (i) increase the
Revolving Loan Commitments to $190,000,000, (ii) provide a new term loan in the
principal amount equal to $25,000,000 to Borrower, and (iii) continue to make
Loans and to incur Letter of Credit Obligations and Eligible Trade L/C
Obligations on behalf of Borrower. All capitalized terms used but not otherwise
defined herein have the meaning given to them in the Credit Agreement or in
Schedule A thereto.
<PAGE>

     We hereby (i) acknowledge receipt of the Credit Agreement, (ii) acknowledge
and reaffirm all of our obligations and undertakings under the Parent Guaranty
and the Store Guarantors' Guaranty (as applicable) (collectively, the
"Guaranties"), and (iii) acknowledge and agree that subsequent to, and taking
into account such Credit Agreement, the Guaranties are and shall remain in full
force and effect in accordance with the terms thereof.

                                       Parents:

                                       Wilsons The Leather Experts Inc.
                                       Wilsons Center, Inc.
                                       Rosedale Wilsons, Inc.
                                       River Hills Wilsons, Inc.

                                       By: /s/ Peter G. Michielutti
                                           -------------------------------------
                                       Name: Peter G. Michielutti
                                             -----------------------------------
                                       Title: Senior Vice President and Chief
                                              ----------------------------------
                                              Financial Officer
                                              ----------------------------------
                                              The authorized officer of each of
                                              the foregoing corporations

                                       Store Guarantors:

                                       Bentley's Luggage Corp.
                                       Bermans The Leather Experts Inc.
                                       El Portal Group, Inc.
                                       Florida Luggage Corp.
                                       Travelsupplies.com LLC
                                       Wilsons Leather Direct Inc.
                                       Wilsons International Inc.
                                       Wilsons Leather of Airports Inc.
                                       Wilsons Leather of Alabama Inc.
                                       Wilsons Leather of Arkansas Inc.
                                       Wilsons Leather of Canada Ltd.
                                       Wilsons Leather of Connecticut Inc.
                                       Wilsons Leather of Delaware Inc.
                                       Wilsons Leather of Florida Inc.
                                       Wilsons Leather of Georgia Inc.
                                       Wilsons Leather of Indiana Inc.
                                       Wilsons Leather of Iowa Inc.
                                       Wilsons Leather of Louisiana Inc.
                                       Wilsons Leather of Maryland Inc.
                                       Wilsons Leather of Massachusetts Inc.
                                       Wilsons Leather of Michigan Inc.
                                       Wilsons Leather of Mississippi Inc.
                                       Wilsons Leather of Missouri Inc.

                                      S-1
<PAGE>

                                       Wilsons Leather of New Jersey Inc.
                                       Wilsons Leather of New York Inc.
                                       Wilsons Leather of North Carolina Inc.
                                       Wilsons Leather of Ohio Inc.
                                       Wilsons Leather of Pennsylvania Inc.
                                       Wilsons Leather of Rhode Island Inc.
                                       Wilsons Leather of South Carolina Inc.
                                       Wilsons Leather of Tennessee Inc.
                                       Wilsons Leather of Texas Inc.
                                       Wilsons Leather of Vermont Inc.
                                       Wilsons Leather of Virginia Inc.
                                       Wilsons Leather of West Virginia Inc.
                                       Wilsons Leather of Wisconsin Inc.
                                       WWT, Inc.

                                       By: /s/ Peter G. Michielutti
                                           -------------------------------------
                                       Name: Peter G. Michielutti
                                             -----------------------------------
                                       Title: Senior Vice President and Chief
                                              ----------------------------------
                                              Financial Officer
                                              ----------------------------------
                                              The authorized officer of each of
                                              the foregoing corporations

                                      S-2<PAGE>

                                                                    Exhibit 10.4

================================================================================
                                                      Hennepin County, Minnesota

                   MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF
                    LEASES AND RENTS AND FINANCING STATEMENT

                                       BY

                        BERMANS THE LEATHER EXPERTS INC.,
                             a Delaware corporation,

                                   Mortgagor,

                                       TO

                      GENERAL ELECTRIC CAPITAL CORPORATION,
         as Agent, on behalf of itself as a Lender and for the Lenders,
                                    Mortgagee

                            Relating to Premises in:

                           Hennepin County, Minnesota

                           DATED: As of June 19, 2001

================================================================================

                          This instrument was prepared
                    outside of the State of Minnesota by and
                     after recording should be returned to:

                               David G. Crumbaugh
                                Latham & Watkins
                                5800 Sears Tower
                             Chicago, Illinois 60606

       THIS MORTGAGE IS INTENDED ALSO TO BE A FIXTURE FILING, AND IS TO BE
          INDEXED NOT ONLY AS A MORTGAGE BUT ALSO AS A FIXTURE FILING.
<PAGE>

NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, ENFORCEMENT OF THIS MORTGAGE IS
LIMITED TO A DEBT AMOUNT OF $9,350,000 UNDER CHAPTER 287 OF MINNESOTA STATUTES.

                    MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT
                   OF LEASES AND RENTS AND FINANCING STATEMENT
                   -------------------------------------------

     THIS MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND RENTS, AND
FINANCING STATEMENT ("Mortgage") is made as of June 19, 2001, by BERMANS THE
LEATHER EXPERTS INC., a Delaware corporation whose address is 7401 Boone Avenue
North, Brooklyn Park, Minnesota 55428 ("Mortgagor") to GENERAL ELECTRIC CAPITAL
CORPORATION, a New York corporation with its address at 10 South LaSalle Street,
Suite 2800, Chicago, Illinois 60603 as mortgagee, assignee and secured party, in
its capacity as agent on behalf of itself as lender and for the Lenders as
hereinafter defined (together with any successors or assigns in such capacity,
the "Agent" or "Mortgagee").

                                    RECITALS

     WHEREAS, Mortgagor is the owner and holder of fee simple title in and to
all of the real estate located in the County of Hennepin and State of Minnesota
(the "State"), more fully described in Exhibit A attached hereto (the
"Premises") and the owner of the Personal Property (as hereinafter defined),
which Premises forms a portion of the Property described below;

     WHEREAS, on June 19, 2001 Wilsons Leather Holdings Inc., a Minnesota
corporation ("Borrower"), entered into that certain Third Amended and Restated
Credit Agreement by and among each of the financial institutions named therein
(the "Lenders"), the Agent, and certain of Borrower's corporate Affiliates (as
defined in the Credit Agreement) (as the same may be amended, modified or
otherwise supplemented and in effect from time to time, hereinafter the "Credit
Agreement"; capitalized terms used herein but not otherwise defined herein are
defined as used in the Credit Agreement);

     WHEREAS, Mortgagor is party to that certain Store Guarantors' Guaranty
dated as of May 25, 1996 (as amended , restated or otherwise modified from time
to time and reaffirmed by Mortgagor as of the date hereof, the "Guaranty")
whereby Mortgagor has guaranteed all of the Obligations of Borrower under the
Credit Agreement;

     WHEREAS, Mortgagor wishes to provide further assurance and security to the
Agent and the Lenders and as a condition to the Agent and the Lenders continuing
to make Loans and provide other financial accommodations to Borrower pursuant to
the Credit Agreement, the Agent and the Lenders are requiring that Mortgagor
grant to the Agent, on behalf of the Lenders, a security interest in and a first
mortgage lien upon the Property (as hereinafter defined) to secure all of
Mortgagor's obligations under the Guaranty; and

     WHEREAS, Mortgagor is an Affiliate of Borrower, and as such will derive
direct and indirect economic benefits from the loans and other financial
accommodations provided to Borrower by Agent and Lenders pursuant to the Credit
Agreement.
<PAGE>

                                       I.
                                   OBLIGATIONS

     1.1 Obligations. This Mortgage is being given by Mortgagor to secure the
following (the "Secured Indebtedness"):

          (a) any and all obligations of Mortgagor under the Guaranty;

          (b) any and all other charges and amounts payable under the Guaranty
     or this Mortgage, as are exempt from Minnesota mortgage registry tax (the
     "Registry Tax") under Minn. Stat. ss. 287.05, Subd. 4;

          (c) any and all charges, amounts and non-monetary obligations under
     the Guaranty or this Mortgage which are not otherwise subject to Registry
     Tax;

          (d) any and all charges and amounts payable under the Guaranty or this
     Mortgage not referred to in clauses (a), (b) or (c) on which the Registry
     Tax has been paid; and

          (e) interest from time to time payable on any or all of the foregoing.

All charges referred to in this Mortgage as Secured Indebtedness shall be
secured by this Mortgage only if and to the extent provided for in subparagraphs
(a) through (e) above.

     1.2 Future Advances:

          (a) Any future advances shall be considered obligatory advances and
     the same shall bear interest at the same rate as specified in the Credit
     Agreement, unless such interest rate shall be modified by subsequent
     agreement.

          (b) 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 Minn. Stat.ss. 287.05, Subd. 5, and
     intends to comply with the requirements contained therein.

          (c) The maximum principal amount of indebtedness secured by this
     Mortgage at any one time, excluding any amounts constituting an
     "indeterminate amount" under Minn. Stat.ss. 287.05, Subd. 5, and excluding
     advances made by the Mortgagee in protection of the Property or the lien of
     this Mortgage, shall be of NINE MILLION THREE HUNDRED FIFTY THOUSAND
     DOLLARS ($9,350,000.00).

          (d) The representations contained in subparagraphs (b) and (c) of this
     Section are made solely for the benefit of 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 the Mortgagee to
     make any future advances to Mortgagor.

          (e) Notwithstanding any other provision of this Mortgage to the
     contrary, any indebtedness as to which Registry Tax is payable shall not be
     secured by this Mortgage unless and until the tax is paid.

                                       2
<PAGE>

     1.3 Revolving Credit. The Revolving Loans made in accordance with the
Credit Agreement provide for payments, advances and readvances as may be made
from time to time. The maximum principal amount of the line of credit under the
Revolving Loans secured by this Mortgage is $190,000,000.00.

     1.4 Maturity. The scheduled maturity date of the last maturing of the
Obligations evidenced by the Revolving Notes, the Swing Line Note and the Term B
Note (collectively, the "Notes") is May 24, 2004.

                                      II.
                                   CONVEYANCE

     NOW, THEREFORE, in order to secure the payment of the Secured Indebtedness
that may now or hereafter become owing from Mortgagor to Mortgagee and the
Lenders, and in consideration of the Recitals above stated and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Mortgagor does hereby irrevocably GRANT, BARGAIN, SELL, CONVEY TO
MORTGAGEE, WITH POWER OF SALE and unto its successors and assigns forever all
and singular the Premises described on Exhibit A, and the fee simple estate,
right, claim and interest therein, together with all of its ownership interest
in the following described property, all of which other property is conveyed
primarily on a parity with the Premises and not secondarily (the Premises and
the following described rights, interests, claims and property collectively
referred to as the "Property"):

          (a) all buildings, structures and other improvements of every kind and
     description now or hereafter erected, situated, or placed upon the Premises
     (the "Improvements"), together with any and all Personal Property (as
     defined in subparagraph (i) below) and all attachments now or hereafter
     owned by Mortgagor and located in or on, forming part of, attached to, used
     or intended to be used in connection with, or incorporated in any such
     Improvements, including all extensions of, additions to, betterments,
     renewals of, substitutions for and replacements for any of the foregoing;

          (b) all claim, demand, right, title and interest of Mortgagor now
     owned or hereafter acquired, including without limitation, any
     after-acquired title, franchise, license, remainder or reversion, in and to
     any and all (i) land or vaults lying within the right-of-way of any street,
     avenue, way, passage, highway, or alley, open or proposed, vacated or
     otherwise, adjoining the Premises; (ii) alleys, sidewalks, streets,
     avenues, strips and gores of land belonging, adjacent or pertaining to the
     Premises or the Improvements; (iii) storm and sanitary sewer, water, gas,
     electric, railway and telephone services relating to the Premises and the
     Improvements; (iv) development rights, air rights, water, water rights,
     water stock, gas, oil, minerals, coal and other substances of any kind or
     character underlying or relating to the Premises or any part thereof; and
     (v) tenements, hereditaments, easements, appurtenances, other rights,
     liberties, reservations, allowances and privileges relating to the Premises
     or the Improvements or in any way now or hereafter appertaining thereto,
     including homestead and any other claims at law or in equity;

          (c) all leasehold estates and right, title and interest of Mortgagor
     in any and all leases, subleases, management agreements, arrangements,
     concessions or agreements, written or oral, relating to the use and
     occupancy of the Premises or the Improvements or any portion thereof, now
     or hereafter existing or entered into (collectively "Leases");

          (d) all rents, issues, profits, royalties, revenue, advantages,
     income, avails, claims against guarantors, all cash or security deposits,
     advance rentals, deposits or payments given and other benefits now or
     hereafter derived directly or indirectly from the Premises and Improvements
     under the

                                       3
<PAGE>

     Leases or otherwise (collectively "Rents"), subject to the right, power and
     authority in the Assignments (as hereinafter defined) to collect and apply
     the Rents;

          (e) all right, title and interest of Mortgagor in and to all options
     to purchase or lease the Premises or the Improvements or any portion
     thereof or interest therein, or any other rights, interests or greater
     estates in the rights and properties comprising the Property now owned or
     hereafter acquired by Mortgagor;

          (f) any interests, estates or other claims of every name, kind or
     nature, both in law and in equity, which Mortgagor now has or may acquire
     in the Premises and Improvements or other rights, interests or properties
     comprising the Property now owned or hereafter acquired;

          (g) all rights of Mortgagor to any and all plans and specifications,
     designs, drawings and other matters prepared for any construction on the
     Premises or regarding the Improvements;

          (h) all rights of Mortgagor under any contracts executed by Mortgagor
     with any provider of goods or services for or in connection with any
     construction undertaken on or services performed or to be performed in
     connection with the Premises or the Improvements;

          (i) all right, title and interest of Mortgagor in and to all the
     following tangible personal property ("Personal Property") owned by
     Mortgagor and now or at any time hereafter located in, on or at the
     Premises or the Improvements and used or useful in connection therewith:

               (i) all building materials and equipment located upon the
          Premises and intended for construction, reconstruction, alteration,
          repair or incorporation in or to the Improvements now or hereafter to
          be constructed thereon, whether or not yet incorporated in such
          Improvements (all of which shall be deemed to be included in the
          Property upon delivery thereto);

               (ii) all machines, machinery, fixtures, apparatus, equipment or
          articles used in supplying heating, gas, electricity,
          air-conditioning, water, light, power, plumbing, sprinkler, waste
          removal, refrigeration, ventilation, and all fire sprinklers, alarm
          systems, protection, electronic monitoring equipment and devices;

               (iii) all window, structural, maintenance and cleaning equipment
          and rigs; and

               (iv) all fixtures now or hereafter owned by Mortgagor and
          attached to or contained in and used or useful in connection with the
          Premises or the Improvements. All such property owned by Mortgagor and
          placed by it on the Premises or used in connection with its operation
          or maintenance shall, so far as permitted by law, be deemed for the
          purposes of this Mortgage to be part of the real estate constituting
          and located on the Premises and covered by this Mortgage. As to any of
          the property that is not part of such real estate or does not
          constitute a "fixture," as such term is defined in the Uniform
          Commercial Code of the State (the "Code"), this Mortgage shall be
          deemed to be a security agreement under the Uniform Commercial Code
          for the purpose of creating hereby a security interest in property,
          which Mortgagor hereby grants to the Mortgagee as "secured party" as
          defined in the Code. The enumeration of any specific items of Personal
          Property set forth herein shall in no way exclude or be held to
          exclude any items of property not specifically enumerated;

          (j) all the estate, interest, right, title or other claim or demand
     which the Mortgagor now has or may hereafter have or acquire with respect
     to (i) proceeds of insurance in effect with respect to the Property and
     (ii) any and all awards, claims for damages, judgments, settlements and
     other

                                       4
<PAGE>

     compensation made for or consequent upon the taking by condemnation,
     eminent domain or any like proceeding, or by any proceeding or purchase in
     lieu thereof, of the whole or any part of the Property, including, without
     limitation, any awards and compensation resulting from a change of grade of
     streets and awards and compensation for severance damages (collectively
     "Awards").

     TO HAVE AND TO HOLD the Property hereby mortgaged and conveyed or so
intended, together with its rents, issues and profits, unto the Mortgagee and
unto Mortgagee's successors and assigns, forever, for the uses and purposes
hereinafter set forth forever, and Mortgagor does hereby bind itself and its
successors and assigns to WARRANT AND FOREVER DEFEND the Property unto the
Mortgagee and unto its respective successors and assigns against any and every
person lawfully claiming or to claim the same or any part thereof by, through
and under Mortgagor, subject, however, to the Permitted Exceptions (hereinafter
defined).

     The Mortgagor hereby covenants with the Mortgagee and with the purchaser at
any foreclosure sale: that at the execution and delivery hereof, Mortgagor owns
the Property and has good, indefeasible estate therein, in fee simple; that the
Property is free from all encumbrances and exceptions to title (and any claim of
any other person) other than those encumbrances and exceptions which are
Permitted Encumbrances defined in the Credit Agreement ("Permitted Exceptions"),
Mortgagee hereby acknowledging that those exceptions to title shown on the title
insurance commitment delivered to Mortgagee and described on Exhibit B hereto
with respect to the Premises constitute Permitted Exceptions; that it has good
and lawful right to sell, mortgage and convey the Property; and that Mortgagor
and its successors and assigns shall forever warrant and defend the Property
against all claims and demands whatsoever by, through and under Mortgagor.

     If and when Mortgagor has paid all of the indebtedness evidenced by the
Term B Note, and has strictly performed and observed all of the agreements,
terms, conditions, provisions and warranties contained herein and there exist no
commitments of the Lenders under the Term B Note or in the Credit Agreement that
specifically relate to the Term B Note and the indebtedness evidenced thereby
which could give rise to Secured Indebtedness, then this Mortgage and the
estate, right and interest of Mortgagee in and to the Property shall cease and
shall be released at the cost of Mortgagor, but otherwise shall remain in full
force and effect.

                                      III.
                               GENERAL AGREEMENTS

     3.1 Payment of Indebtedness. Mortgagor shall pay promptly and when due all
amounts owing in respect of the Guaranty, and all other Secured Indebtedness at
the times and in the manner provided in the Credit Agreement, the Notes, this
Mortgage, or any of the other Loan Documents, without notice, counterclaim,
offset, deduction or defense except as provided in the Guaranty, the Notes or
the Credit Agreement. Each of the Notes bears interest as therein provided. The
Notes provide for a variable rate of interest.

     3.2 Impositions. Except as otherwise permitted under the Credit Agreement,
Mortgagor shall pay immediately, when first due and owing, all general taxes,
special taxes, special assessments, water charges, sewer charges, and any other
charges, fees, taxes, claims, levies, expenses, liens and assessments, ordinary
or extraordinary, governmental or nongovernmental, statutory or otherwise (all
of the foregoing being herein collectively referred to as "Impositions"), that
may be asserted against the Property or any part thereof or interest therein.

     Mortgagor may, in good faith and with reasonable diligence, contest the
validity or amount of any Impositions in accordance with Section 5.2(b) of the
Credit Agreement.

                                       5
<PAGE>

     3.3 Payment of Impositions by Mortgagee. If Mortgagor shall fail to pay any
Impositions when due and such failure to pay constitutes an Event of Default
under the Credit Agreement, Mortgagee is hereby authorized to make or advance,
in the place and stead of Mortgagor, any payment relating to such Imposition,
unless such Imposition is then being contested by Mortgagor pursuant to Section
5.2(b) of the Credit Agreement. Mortgagee may do so according to any bill,
statement, or estimate procured from the appropriate public office without
inquiry into the accuracy or the validity of any Impositions, lien, sale,
forfeiture, or related title or claim. Mortgagee is further authorized to make
or advance, in place of Mortgagor, unless such matter is being contested by
Mortgagor in accordance with Section 5.2(b) of the Credit Agreement, any payment
relating to any apparent or threatened adverse title, lien, statement of lien,
encumbrance, claim, charge, or payment otherwise relating to any other purpose
herein and hereby authorized, but not enumerated in this Section, whenever, in
Mortgagee's judgment and discretion, such advance seems necessary or desirable
to protect the full security intended to be created by this Mortgage, but only
if non-payment by Mortgagor constitutes an Event of Default under the Credit
Agreement. All such advances and indebtedness authorized by this Section shall
constitute Secured Indebtedness and shall be repayable by Mortgagor upon demand
with interest at the then current rate of interest applicable to Revolving
Credit Advances under the Credit Agreement (the "Default Rate").

     3.4 Insurance, Damage to or Destruction of Collateral.

          (a) Mortgagor shall, at its sole cost and expense, maintain the
     policies of insurance described on Disclosure Schedule 3.18 of the Credit
     Agreement relating to the Property or substantially equivalent coverage
     with reputable insurers. If Mortgagor at any time or times hereafter shall
     fail to obtain or maintain any of the policies of insurance required above
     or to pay all premiums relating thereto, Mortgagee may at any time or times
     thereafter obtain and maintain such policies of insurance and pay such
     premium and take any other action with respect thereto which Mortgagee
     deems reasonably advisable. Mortgagee shall have no obligation to obtain
     insurance for Mortgagor or pay any premiums therefor. By doing so,
     Mortgagee shall not be deemed to have waived any Event of Default arising
     from Mortgagor's failure to maintain such insurance or pay any premiums
     therefor. All sums so disbursed, including reasonable attorneys' fees,
     court costs and other charges related thereto, shall be payable on demand
     by Mortgagor to Mortgagee and shall be additional Secured Indebtedness.
     Mortgagor must provide Mortgagee fifteen (15) days prior written notice of
     any non-renewal, cancellation or amendment of the insurance policies
     required above.

          (b) Mortgagor irrevocably makes, constitutes and appoints Mortgagee
     (and all officers, employees or agents designated by Mortgagee) as its true
     and lawful agent and attorney-in-fact for the purpose of making, settling
     and adjusting claims under such policies of insurance requested above,
     endorsing the name of Mortgagor on any check or other item of payment for
     the proceeds of such policies of insurance and for making all
     determinations and decisions with respect to such policies of insurance;
     provided that so long as no Event of Default shall have occurred and be
     continuing, Mortgagor shall have the right to direct any such settlements
     and adjustments in its sole discretion. Mortgagor shall promptly notify
     Mortgagee of any loss, damage, or destruction to the Property in the amount
     of $1,000,000 or more, whether or not covered by insurance. If an Event of
     Default shall have occurred and be continuing, Mortgagee is hereby
     authorized to collect all insurance proceeds relating to the Property .
     After deducting from such proceeds the expenses, if any, incurred by
     Mortgagee or Mortgagor in the collection or handling thereof, Mortgagee
     may, at its option, apply all net proceeds to the Secured Indebtedness in
     accordance with the Credit Agreement, or permit or require Mortgagor to use
     such money, or any part thereof, to replace the Property in a diligent and
     expeditious manner. Notwithstanding the foregoing, if the casualty giving
     rise to such insurance proceeds would not

                                       6
<PAGE>

     reasonably be expected to have a Material Adverse Effect (as defined in the
     Credit Agreement) and such insurance proceeds do not exceed $5,000,000 in
     the aggregate, Mortgagee shall permit Mortgagor to replace the Property,
     and shall release such insurance proceeds therefor, so long as no Event of
     Default shall have occurred and be continuing at the time of any requested
     release of funds; provided that, if Mortgagor shall not have completed the
     replacement of the Property within 270 days of such casualty (excluding
     delays due to force majeure), Mortgagee may apply such insurance proceeds
     to the Secured Indebtedness in accordance with the Credit Agreement. Except
     as otherwise provided in this Section and in the Credit Agreement, all
     insurance proceeds which are to be made available to Mortgagor to replace
     the Property shall first be applied by Mortgagee in accordance with the
     Credit Agreement, and any excess shall be released to Mortgagor.

     3.5 Condemnation and Eminent Domain. Mortgagor shall give Mortgagee prompt
notice of all proceedings, instituted or threatened, seeking condemnation or a
taking by eminent domain or like process (herein collectively called "Taking"),
of all or any part of the Property or affecting any related easement or
appurtenance (including severance of, consequential damage to, or change in
grade of streets), and shall deliver to Mortgagee copies of any and all papers
served in connection with any such proceeding. Mortgagor hereby assigns,
transfers and sets over unto Mortgagee the entire proceeds of any and all Awards
resulting from any Taking. Mortgagee is hereby authorized to collect and receive
from the condemnation authorities all Awards and is further authorized to give
appropriate receipts and acquittances. The proceeds of any and all Awards
resulting from any Taking shall be applied as set forth in Section 1.3(d) of the
Credit Agreement

     3.6 Maintenance of Property. Mortgagor shall:

          (a) promptly repair, restore, replace or rebuild any material portion
     of the Property which may become damaged, destroyed, altered, removed,
     severed, or demolished, whether or not proceeds of insurance are available
     or sufficient for the purpose, with replacements at least equal in quality
     and condition as previously existed, free from any security interest in,
     encumbrances on or reservation of title thereto except the lien of this
     Mortgage and the Permitted Exceptions;

          (b) keep the Property in good condition and repair, normal wear and
     tear excepted, without waste, and free from mechanics', materialmen's or
     like liens or claims except for the Permitted Exceptions; and

          (c) not make any material alterations in the Property, except as
     required by law or municipal ordinance or in the ordinary course of
     business, without consent of Mortgagee, which consent shall not be
     unreasonably withheld.

     3.7 Prohibited Liens and Transfers.

          (a) Except as otherwise provided in Section 6.7 of the Credit
     Agreement and except for the Permitted Exceptions, Mortgagor shall not
     create, suffer, or permit to be created or filed against the Property any
     mortgage or mortgage lien or other lien superior or inferior to the lien
     created by this Mortgage. Mortgagor may contest any lien or claim arising
     from any work performed, material furnished, or obligation incurred by
     Mortgagor as provided in Section 5.2(b) of the Credit Agreement.

          (b) Except as otherwise provided in Section 6.8 of the Credit
     Agreement, Mortgagor may not sell, lease or convey all or any part of the
     Property or any interest therein.

                                       7
<PAGE>

     3.8 Stamp Taxes. If at any time the United States government, or any
federal, state, or municipal governmental subdivision, requires Internal Revenue
or other documentary stamps or levies any tax on this Mortgage or on any of the
Loan Documents, then Mortgagor shall pay such tax, including interest and
penalties, in the required manner.

     3.9 Change in Tax Laws. In the event of the enactment, after the date of
this Mortgage, of any law of the United States of America, or any state or
political subdivision thereof, (i) deducting from the value of the Premises, for
the purpose of taxation, the amount of any lien thereon; (ii) imposing upon
Mortgagee the payment of all or any part of the taxes, assessments, charges or
liens hereby required to be paid by Mortgagor, or (iii) changing in any way the
laws relating to the taxation of mortgages or debts secured by mortgages or
Mortgagor's interest in the Property, or the manner of collection of taxes, so
as to adversely affect this Mortgage or the Secured Indebtedness, then
Mortgagor, upon demand by Mortgagee, shall pay such taxes, assessments, charges,
or liens or reimburse Mortgagee therefor. If, in the reasonable opinion of
counsel for Mortgagee, it would be unlawful to require Mortgagor to make such
payment or the making of such payment might result in the imposition of interest
beyond the maximum amount permitted by law, then Mortgagee may elect, by notice
in writing given to Mortgagor, to declare all of the Secured Indebtedness to
become due and payable within one hundred eighty (180) days after the giving of
such notice. Nothing contained in this Section 3.9 shall be construed as
obligating Mortgagor to pay any portion of Mortgagee's federal or state income
or corporate franchise tax.

     3.10 Assignment of Leases and Rents. All right, title, and interest of
Mortgagor in and to all present Leases affecting the Property and including and
together with any and all future Leases, written or oral, upon all or any part
of the Property and together with all of the rents, income, receipts, revenues,
issues, avails and profits from or due or arising out of the Property are hereby
transferred and assigned simultaneously herewith to Mortgagee as further
security for the payment of the Secured Indebtedness. Each Lease shall be
subordinate to this Mortgage. Although it is the intention of the parties that
the assignment contained in this Section shall be a present assignment, it is
expressly understood and agreed, anything to the contrary notwithstanding, that
Mortgagee shall not exercise any of the rights or powers conferred upon it by
this Section until an Event of Default shall exist under this Mortgage. From
time to time, Mortgagor shall furnish Mortgagee with executed copies of each of
the Leases and with estoppel letters from each tenant under each of the Leases
(unless such estoppel is not required under any existing Leases), which estoppel
letters shall be in a form reasonably satisfactory to Mortgagee and shall be
delivered within thirty (30) days after Mortgagee's written demand.

     Following the occurrence and during the continuance of an Event of Default,
(a) Mortgagee shall have the rights and powers as are provided herein, (b) this
Mortgage shall constitute a direction to each lessee under the Leases and each
guarantor thereof to pay all Rents directly to Mortgagee without proof of the
Event of Default, and (c) Mortgagee shall have the authority, as Mortgagor's
attorney-in-fact (such authority being coupled with an interest and
irrevocable), to sign the name of Mortgagor and to bind Mortgagor on all papers
and documents relating to the operation, leasing and maintenance of the
Property.

     If, during the continuance of an Event of Default, Mortgagor, as lessor
under any Lease, shall neglect or refuse to perform, observe and keep all of the
covenants, provisions and agreements contained in such Lease, then Mortgagee may
perform and comply with any such Lease covenants, agreements and provisions. All
costs and expenses incurred by Mortgagee in complying with such covenants,
agreements, and provisions shall constitute Secured Indebtedness and shall be
payable upon demand with interest at the Default Rate.

     Mortgagee shall not be obligated to perform or discharge any obligation,
duty or liability under any Lease, and Mortgagor shall and does hereby agree,
except to the extent of Mortgagee's gross negligence or willful misconduct, to
indemnify and hold the Mortgagee harmless of and from any and all liability,
loss or

                                       8
<PAGE>

damage which it may or might incur under any Lease or under or by reason of
their assignments and of and from any and all claims and demands whatsoever
which may be asserted against it by reason of all alleged obligations or
undertakings on its part to perform or discharge any of the terms, covenants or
agreements contained in such Lease. Should Mortgagee incur any such liability,
loss or damage under any Lease or under or by reason of its assignment, or in
the defense of any claims or demands, the amount thereof, including costs,
expenses and reasonable attorneys' fees, shall be secured hereby, and Mortgagor
shall reimburse Mortgagee therefor immediately upon demand with interest payable
at the Default Rate.

     3.11 Uniform Commercial Code. This Mortgage constitutes a Security
Agreement as that term is used in the Code with respect to: (i) all sums at any
time on deposit for the benefit of Mortgagee pursuant to any of the provisions
of this Mortgage or any of the Loan Documents; and (ii) any part of the Property
which may or might now or hereafter be or be deemed to be personal property,
fixtures or property (including all replacements, additions and substitutions)
other than real estate (collectively "Collateral"). For this purpose, the
following information is included: (i) Mortgagor shall be deemed the "Debtor"
with the address set forth in the Recitals, (ii) Mortgagee shall be deemed the
"Secured Party" with the address set forth in the Recitals, (iii) this document
covers goods which are or are to become fixtures, (iv) the name of the record
owner of the Premises is the Debtor, and (v) the tax identification number of
the Debtor is 41-1580755. If notice to Mortgagor of intended disposition of such
property is required by law in a particular instance, such notice shall be
deemed commercially reasonable if given to Mortgagor at least thirty (30)
calendar days prior to the date of intended disposition. All of Mortgagor's
right, title and interest in the Collateral is hereby assigned to Mortgagee to
secure the payment of the Secured Indebtedness and the performance of all of
Mortgagor's obligations. All of the terms, provisions, conditions and agreements
contained in this Mortgage apply to the Collateral as fully and to the same
extent as to any other property comprising the Property.

     At any time after an Event of Default has occurred and is continuing,
Mortgagee shall have the remedies of a Secured Party under the Code, including
without limitation the right to take immediate and exclusive possession of the
Collateral or any part thereof to the fullest extent permitted by law.

     The remedies of Mortgagee hereunder are cumulative and the exercise of any
one or more of the remedies provided for herein or under the Code shall not be
construed as a waiver of any of the other remedies of the Mortgagee, including
having the Collateral deemed part of the realty upon any foreclosure so long as
any part of the Secured Indebtedness remains unsatisfied. To the extent
permitted by applicable law, the security interest created hereby is
specifically intended to cover and include all Leases between the Mortgagor, as
lessor, and various tenants, as lessee, including all extensions and renewals of
the Lease terms, as well as any amendments to or replacements of the Leases,
together with all of the right, title and interest of the Mortgagor as lessor,
including, without limiting the generality of the foregoing, the present and
continuing right to: (i) make claim for, collect, receive and receipt for any
and all of the Rents, and moneys payable as damages or in lieu of the Rents and
moneys payable as the purchase price of the Property or any part thereof or
claims for money and other sums of money payable or receivable thereunder
howsoever payable; and (ii) bring actions and proceedings thereunder or for the
enforcement thereof, and to do any and all things which Mortgagor or any lessor
is or may become entitled to do under the Leases.

     3.12 Releases. Without notice and without regard to the consideration
therefor, and to the existence at that time of any inferior liens, Mortgagee may
release from the lien created hereby all or any part of the Property, or release
from liability any person obligated to repay any Secured Indebtedness, without
affecting the liability of any party to any of the Guaranty, the Notes, this
Mortgage, or any of the other Loan Documents (including without limitation any
guaranty given as additional security) and without in any way affecting the
priority of the lien created hereby. Mortgagee may agree with any liable party
to extend the time for payment of any part or all of the Secured Indebtedness.
Such agreement shall not in any way release or impair the lien

                                       9
<PAGE>

created by this Mortgage or reduce or modify the liability of any person or
entity obligated personally to repay the Secured Indebtedness, but shall extend
the lien created by this Mortgage as against the title of all parties having any
interest, in the Property.

     3.13 Ownership of Property. Mortgagor represents and warrants to Mortgagee
that Mortgagor has good and marketable title to, or valid leasehold interests
in, all of the Property. Mortgagor has received all deeds, assignments, waivers,
consents, nondisturbance and attornment or similar agreements, bills of sale and
other documents, and has duly effected all recordings, filings and other actions
necessary to establish, protect and perfect Mortgagor's right, title and
interest in and to the Property. As of the date hereof, no portion of the
Premises has suffered any material damage by fire or other casualty loss that
has not heretofore been repaired and restored in all material respects to its
original condition or otherwise remedied. As of the date hereof, all material
permits required to have been issued or appropriate to enable the Premises to be
lawfully occupied and used for all of the purposes for which it is currently
occupied and used have been lawfully issued and are in full force and effect.

     3.14 Hazardous Materials. Mortgagor represents and warrants to Mortgagee
(i) that the Premises is free of contamination from any Hazardous Material (as
defined below) in such form and quantity so as to create any material unpaid
liability for Mortgagor; (ii) Mortgagor has not caused or suffered to occur any
Release (as defined below) with respect to any Hazardous Material at, under,
above or upon the Premises where such Release would violate in any material
respect, or form the basis for any material Environmental Liabilities (as
defined in the Credit Agreement) under any Environmental Laws (as defined in the
Credit Agreement) or Environmental Permits (as defined in the Credit Agreement)
or would otherwise materially and adversely impact the value or marketability of
the Premises; and (iii) Mortgagor is not involved in operations that are likely
to result in the imposition of any lien on its assets or any material liability
under any Environmental Law, and Mortgagor has not permitted any tenant or
occupant of the Premises to engage in any such operations. As used herein,
"Hazardous Material" shall mean any substance, material or waste, the
generation, handling, storage, treatment or disposal of which is regulated by or
forms the basis of liability now or hereafter under, any governmental authority
in any jurisdiction in which the Premises is located or Mortgagor has owned,
leased, or operated real property or disposed of hazardous materials, or by any
Federal government authority, including, without limitation, any material or
substance which is (a) defined as a "solid waste," "hazardous waste," "hazardous
material," "hazardous substance," "extremely hazardous waste" or "restricted
hazardous waste" or other similar term or phrase under any Environmental Laws,
(b) petroleum, or any fraction or by-product thereof, asbestos, polychlorinated
biphenyls (PCB's), any radioactive substance, methane, volatile hydrocarbons or
any industrial solvent, (c) designated as a "hazardous substance" pursuant to
Section 311 of the Clean Water Act, 33 U.S.C. ss.ss. 1251 et seq. (33 U.S.C. ss.
1321) or listed pursuant to Section 307 of the Clean Water Act (33 U.S.C.
ss.1317), (d) defined as a "hazardous waste" pursuant to Section 1004 of the
Resource Conservation and Recovery Act, 42 U.S.C. ss.ss. 6901, et seq. (42
U.S.C. ss. 6903), or (e) defined as a "hazardous substance" pursuant to Section
1012 of the Comprehensive Environmental Response, Compensation, and Liability
Act, 42 U.S.C. ss. 9601 et seq. (42 U.S.C. ss.ss. 9601). As used herein,
"Release" shall mean, as to Mortgagor, any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, dumping of,
leaching or migration of Hazardous Materials in the indoor or outdoor
environment by Mortgagor, including the movement of Hazardous Material through
or in the air, soil, surface water, ground water or property, which, in any
event, has resulted in the creation of any material unpaid liability for
Mortgagor.

     3.15 Environmental Matters. Mortgagor agrees to (i) notify Mortgagee
promptly after Mortgagor becomes aware of any Release upon the Premises which is
reasonably likely to result in Environmental Liabilities and costs in excess of
$200,000, and (ii) promptly forward to Mortgagee a copy of any order, notice,
permit, application or any communication or report received by Mortgagor in
connection with any such Release,

                                       10
<PAGE>

its compliance with Environmental Laws and Environmental Permits or any other
matter relating to the Environmental Laws that may affect the Premises or
Mortgagor , in each case whether or not the Environmental Protection Agency, any
other federal agency or any state, local or foreign environmental agency has
taken or threatened any action in connection with any such Release or other
matter. If, following the occurance and during the continuance of any Event of
Default, Mortgagor shall permit Mortgagee or its representatives to have access
to the Premises for the purpose of conducting such environmental audits and
testing as Mortgagee reasonably deems appropriate, including Phase II
environmental testing. Mortgagor shall reimburse Mortgagee for the reasonable
costs of such audits and tests and the same will constitute a part of the
Secured Indebtedness.

     3.16 Further Assurances. Mortgagor agrees that, upon request of Mortgagee
from time to time, it will, at Mortgagor's sole cost and expense, execute,
acknowledge and deliver all such additional instruments and further assurances
of title and will do or cause to be done all such further acts and things as may
reasonably be necessary to fully effectuate the intent of this Mortgage,
including without limitation, reimbursing Mortgagee for the costs of appraisals
of the Property, to the extent that Mortgagee reasonably determines that such
appraisals are required by any law or any governmental rule, regulation, policy,
guideline or directive (whether or not having the force of law), or any
interpretation thereof, including, without limitation, the provisions of Title
XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989,
and any rules promulgated to implement such provisions. In the event that
Mortgagor shall fail to do any of the foregoing, Mortgagee may, in its sole
discretion, do so in the name of Mortgagor, and Mortgagor hereby appoints
Mortgagee as its attorney-in-fact to do any of the foregoing.

                                      IV.
                          EVENT OF DEFAULT AND REMEDIES

     4.1 Event of Default. Each of the following shall constitute an event of
default ("Event of Default") under this Mortgage:

          (a) The occurrence of an "Event of Default", as such term is defined
     in the Credit Agreement; or

          (b) Failure of Mortgagor to perform or observe any other covenant,
     agreement, representation, warranty or other provision contained in this
     Mortgage within 30 days after written notice of such failure from Mortgagee
     to Mortgagor.

     4.2 Acceleration of Maturity. Following the occurrence of an Event of
Default, Mortgagee may, at its option, accelerate the Secured Indebtedness in
accordance with the terms of the Credit Agreement. Upon acceleration, Mortgagee
may immediately proceed to foreclose this Mortgage and/or exercise any right,
power or remedy provided by this Mortgage or any of the other Loan Documents or
by law or in equity conferred and pursue all remedies afforded to a mortgagee
under and pursuant to applicable law.

     4.3 Remedies Cumulative and Non-Waiver. No remedy or right of Mortgagee
hereunder or under the Guaranty, or any of the Loan Documents or otherwise, or
available under applicable law, shall be exclusive of any other right or remedy.
Each such remedy or right shall be in addition to every other remedy or right
now or hereafter existing under any such document or under applicable law. No
delay in the exercise of, or omission to exercise, any remedy or right accruing
on the occurrence of any Event of Default shall impair any such remedy or right
or be construed to be a waiver of any such Event of Default or an acquiescence
therein, nor shall it affect any subsequent Event of Default of the same or a
different nature, nor shall it extend or affect any grace period. Every remedy
or right may be exercised concurrently or independently, when and as often as
may be deemed expedient by the Mortgagee. All obligations of the Mortgagor, and
all rights, powers and remedies of

                                       11
<PAGE>

the Mortgagee shall be in addition to, and not in limitation of, those provided
by law or in the Guaranty or contained in any of the Loan Documents or any other
written agreement or instrument relating to any of the Secured Indebtedness or
any security therefor.

     4.4 Litigation Expenses. In any proceeding to foreclose the lien of this
Mortgage or enforce any other remedy of Mortgagee under the Credit Agreement,
the Guaranty, this Mortgage, or the other Loan Documents, or in any other
proceeding in connection with any of the Loan Documents or any of the Property
in which Mortgagee is named as a party, there shall be allowed and included, as
additional indebtedness in the judgment or decree resulting, all related
reasonable expenses paid or incurred by or on behalf of Mortgagee. Such expenses
shall include: attorneys' fees, appraiser's fees, outlays for documentary and
expert evidence, stenographer's charges, publication costs, survey costs, and
costs of procuring all abstracts of title, title searches and examinations,
title insurance policies, Torrens certificates, and any similar data and
assurances with respect to title to the Property as Mortgagee may deem
reasonably necessary either to prosecute or defend in such proceeding or to
evidence to bidders at any sale pursuant to such decree the true condition of
the title to or value of the Premises or the Property. All foregoing expenses,
and such expenses as may be incurred in the protection of any of the Property
and the maintenance of the lien of this Mortgage, including the fees of any
attorney employed by Mortgagee in any litigation affecting the Credit Agreement,
the Guaranty, this Mortgage, or the Property, or in preparation for the
commencement or defense of any proceeding or threatened suit or proceeding
(which may be estimated as to items to be expended after entry of such judgment
or decree), shall be due and payable by Mortgagor upon demand with interest
thereon at the Default Rate.

     4.5 Mortgagee's Performance of Mortgagor's Obligations. Following the
occurrence and during the continuance of an Event of Default, Mortgagee, either
before or after acceleration of the Secured Indebtedness or the foreclosure of
the lien hereof and during the period of redemption, if any, may, but shall not
be required to, make any payment or perform any act herein, in the Notes, any of
the Loan Documents or any document or instrument related thereto which is
required of Mortgagor (whether or not Mortgagor is personally liable therefor)
in any form and manner reasonably deemed expedient to Mortgagee; and Mortgagee
may, but shall not be required to, make full or partial payments of principal or
interest on any permitted prior mortgage or encumbrances and purchase,
discharge, compromise or settle any tax lien or other prior lien on title or
claim thereof, or redeem from any tax sale or forfeiture affecting the Premises,
or contest any Impositions and may, but shall not be required to, complete
construction, furnishing and equipping of the Improvements upon the Premises and
rent, operate and manage the Premises and such Improvements and pay operating
costs and expenses, including management fees, of every kind and nature in
connection therewith, so that the Premises and Improvements shall be operational
and usable for their intended purposes. All monies paid for any of the purposes
herein authorized, and all expenses paid or incurred in connection therewith,
including reasonable attorneys' fees and any other monies advanced by Mortgagee
to protect the Premises and the lien hereof, or to complete construction,
furnishing and equipping or to rent, operate and manage the Premises and such
Improvements or to pay any such operating costs and expenses thereof or to keep
the Premises and Improvements operational and usable for their intended
purposes, shall constitute Secured Indebtedness, whether or not they exceed the
amount of Mortgagor's obligations under the Guaranty and shall become due and
payable upon demand and with interest thereon at the Default Rate. Mortgagee, in
making any payment hereby authorized: (a) for the payment of Impositions, may do
so according to any bill, statement or estimate, without inquiry into the
validity of any tax, assessment, sale, forfeiture, tax lien or title or claim
thereof; (b) for the purchase, discharge, compromise or settlement of any other
prior lien, may do so without inquiry as to the validity or amount of any claim
or lien which may be asserted; or (c) for the completion of construction,
furnishing or equipping of the Improvements or the Premises or the rental,
operation or management of the Premises or the payment of operating costs and
expenses thereof, may do so in such amounts and to such

                                       12
<PAGE>

persons as Mortgagee may deem appropriate and may enter into such contracts
therefor as Mortgagee may deem appropriate or may perform the same itself.

     4.6 Right of Possession. In any case in which Mortgagee has a right to
institute foreclosure proceedings (whether or not the entire principal sum
secured hereby becomes immediately due and payable or whether before or after
the institution of foreclosure proceedings or whether before or after judgment
thereunder and at all times until the expiration of any redemption period for
the foreclosure of this Mortgage, if any), Mortgagor shall, immediately upon
Mortgagee's demand, surrender to Mortgagee, and Mortgagee shall be entitled to
take actual possession of the Property or any part thereof, personally or by its
agent or attorneys. Mortgagee may enter upon and take and maintain possession or
may apply to the court, and shall be entitled to receive, appointment of a
receiver of all or any part of the Property, together with all documents, books,
records, papers, and accounts of Mortgagor or the then owner of the Property
relating thereto, and Mortgagor hereby consents to such appointment. To the
extent permitted by law, Mortgagee may exclude Mortgagor, such owner, and any
agents and servants from the Property. As attorney-in-fact or agent of Mortgagor
or such owner, or in its own name, Mortgagee may hold, operate, manage, and
control all or any part of the Property and conduct the business thereof, either
personally or by its agents. Mortgagee shall have full power to use such
measures, legal or equitable, as it may deem proper or necessary to enforce the
payment or security of the rents, issues, deposits, profits, and avails of the
Property, including actions for recovery of rent, actions in forcible detainer,
and actions in distress for rent, all without notice to Mortgagor.

     4.7 Priority of Rent Payments. Any rents, issues, deposits, profits, and
avails of the Property received by Mortgagee or any receiver of the Property
after the occurrence of an Event of Default, or pursuant to any assignment to
Mortgagee under the provisions of this Mortgage or any of the other Loan
Documents, shall be applied as follows:

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

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

          (c) to payment of all prior or current real estate taxes and special
     assessments with respect to the Property, or if this Mortgage or any other
     instrument relating to the Secured Indebtedness requires periodic escrow
     payments for such taxes and assessments, to the escrow payments then due;

          (d) to payment of all premiums then due for the insurance required
     with respect to the Property, or if this Mortgage or any other instrument
     relating to the Secured Indebtedness requires periodic escrow payments for
     such premiums, to the escrow payments then due;

          (e) to payment of expenses incurred for normal maintenance of the
     Property;

          (f) if received prior to any foreclosure sale of the Property pursuant
     to this Mortgage, to the Mortgagee for payment of the indebtedness secured
     hereby, but no such payment made after acceleration of the indebtedness
     secured hereby shall affect such acceleration;

          (g) if received during or with respect to the period of redemption
     after a foreclosure sale of the Property pursuant to this Mortgage:

               (i) if the purchaser at the foreclosure sale is not the
          Mortgagee, first to the Mortgagee to the extent of any deficiency of
          the sale proceeds to repay the Secured Indebtedness, second

                                       13
<PAGE>

          to the purchaser as a credit to the redemption price, but if the
          Property is not redeemed, then to the purchaser of the Property;

               (ii) if the purchaser at the foreclosure sale is the Mortgagee,
          to the Mortgagee to the extent of any deficiency of the sale proceeds
          to repay the Secured Indebtedness and the balance to be retained by
          the Mortgagee as a credit to the redemption price, but if the Property
          is not redeemed, then to the Mortgagee, whether or not any such
          deficiency exists.

The rights and powers of the Mortgagee and receivers 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.

     4.8 Appointment of Receiver. Upon the occurrence of an Event of Default,
Mortgagee may apply to the court and shall be entitled to receive appointment of
a receiver of the Property without regard to waste, adequacy of the security or
solvency of the Mortgagor. Such receiver shall have all powers and duties
prescribed by applicable law, including the power to make leases to be binding
upon all parties, including the Mortgagor after redemption, the purchaser at a
sale pursuant to a judgment of foreclosure and any person acquiring an interest
in the Property after entry of a judgment of foreclosure. In addition, such
receiver shall also have the following powers: (a) to extend or modify any then
existing leases, which extensions and modifications may provide for terms to
expire, or for options to lessees to extend or renew terms to expire, beyond the
maturity date of the Secured Indebtedness and beyond the date of the issuance of
a deed or deeds to a purchaser or purchasers at a foreclosure sale, it being
understood and agreed that any such leases, and the options or other such
provisions to be contained therein, shall be binding upon Mortgagor and all
persons whose interests in the Property are subject to the lien hereof and upon
the purchaser or purchasers at any foreclosure sale, notwithstanding any
redemption, discharge of the indebtedness, satisfaction of any foreclosure
judgment, or issuance of any certificate of sale or deed to any purchaser; and
(b) all other powers which may be necessary or are usual in such cases for the
protection, possession, control, management and operation of the Property during
the whole of the period of receivership. The court from time to time, either
before or after entry of judgment of foreclosure, may authorize the receiver to
apply the net income in his hands in payment in whole or in part of: (a) the
Secured Indebtedness, or any amounts included in any judgment of foreclosure or
supplemental judgment or other item for which Mortgagee is authorized to make a
protective advance, and (b) the deficiency in case of a sale and deficiency.

     4.9 Foreclosure Sale; Power of Sale

          (a) Upon the occurrence and during the continuance of an Event of
     Default, and in every such case, the holder or holders of any Secured
     Indebtedness may at its or their election proceed by suit or suits at law
     or in equity to enforce the payment of such Secured Indebtedness in
     accordance with the terms thereof and hereof, including the right to have a
     receiver appointed by a court of competent jurisdiction as herein provided,
     and to foreclose the lien of this Mortgage as against all or any portion of
     the Property, and to have said property sold under the judgment or decree
     of a court of competent jurisdiction. In the event of any foreclosure sale,
     the Property may be sold in one or more parcels. Mortgagee may be the
     purchaser at any foreclosure sale.

          (b) Upon the occurrence and during the continuance of an Event of
     Default, Mortgagee may elect to cause the Property or any part thereof to
     be sold at public auction as required by law, the power of sale being
     hereby expressly conferred. In connection with any sales hereunder,
     Mortgagee may elect to treat any of the Property which consists of a right
     of action or which is property that can be severed from the Property or the
     Improvements without causing structural damage thereto as

                                       14
<PAGE>

     if the same were Personal Property, and dispose of the same in accordance
     with applicable law, separate and apart from the sale of real property. Any
     sale of any Personal Property hereunder shall be conducted in any manner
     permitted by the applicable Uniform Commercial Code.

          (c) Should Mortgagee elect to foreclose by exercise of the power of
     sale herein contained:

               (i) Mortgagee shall cause to be recorded and given such Notice of
          Default as then required by law. Mortgagee shall, without demand on
          Mortgagor, after lapse of such time as may then be required by law and
          after recordation of such Notice of Default and after Notice of Sale
          having been given as required by law, sell the Property at the time
          and place of sale fixed by it in said Notice of Sale, either as a
          whole, or in separate lots or parcels or items as Mortgagee shall deem
          expedient, and in such order as it may determine, at public auction to
          the highest bidder for cash in lawful money of the United States
          payable at the time of sale. Mortgagee shall deliver to such purchaser
          or purchasers thereof its good and sufficient deed or deeds conveying
          the Property so sold, but without any covenant or warranty, express or
          implied. The recitals in such deed of any matters or facts shall be
          conclusive proof of the truthfulness thereof. Any person, including,
          without limitation, Mortgagee, may purchase at such sale.

               (ii) After deducting all costs, fees and expenses of Mortgagee,
          including costs of evidence of title and reasonable counsel fees in
          connection with sale, Mortgagee shall apply the proceeds of sale to
          payment of all sums expended under the terms hereof, not then repaid,
          with accrued interest at the rate provided in the Notes; all other
          sums then secured hereby and the remainder, if any, to the persons or
          persons legally entitled thereto.

          (d) To the extent permitted by law, upon any sale, whether under any
     power of sale hereby given or by virtue of judicial proceedings, it shall
     not be necessary for the Mortgagee or any public officer acting under
     execution or order of court to have physically present or constructively in
     his possession any of the Property.

     4.10 Application of Proceeds. The proceeds of any foreclosure or other sale
of the Property shall be distributed and applied in accordance with Section
8.2(c) of the Credit Agreement, subject to applicable law.

     4.11 Insurance Upon Foreclosure. In case of an insured loss after
foreclosure proceedings have been instituted, the proceeds of any insurance
policy or policies, if not applied in repairing, restoring, replacing or
rebuilding any portion of the Property in accordance with the terms of the
Credit Agreement, shall be used to pay the amount due in accordance with any
decree of foreclosure that may be entered in any such proceedings, and the
balance, if any, shall be paid as the court may direct. In case of the
foreclosure of this Mortgage, the court in its judgment may provide that the
judgment creditor may cause a new or additional loss clause to be attached to
each of said policies making the loss thereunder payable to said judgment
creditor. In the event of foreclosure or other sale, Mortgagee is hereby
authorized, but not required, without the consent of Mortgagor, to assign or
cause a receiver to assign any and all insurance policies to the purchaser at
the sale, or to take such other action as Mortgagee may deem advisable, to cause
the interest of such purchaser to be protected by any of the said insurance
policies.

     4.12 Waiver of Statutory Rights. Mortgagor shall not apply for or avail
itself of any appraisement, valuation, redemption, stay, extension, or exemption
laws, or any so-called "moratorium laws," now existing or hereafter enacted, in
order to prevent or hinder the enforcement or foreclosure of this Mortgage, and
Mortgagor hereby waives the benefit of such laws. Mortgagor, for itself and all
who may claim through or under it, waives

                                       15
<PAGE>

any and all rights to have the Property and estates comprising the Property
marshaled upon any foreclosure of the lien of this Mortgage, and agrees that any
court having jurisdiction to foreclose such lien may order the Property sold in
its entirety. Mortgagor further waives any and all rights of redemption from
foreclosure and from sale under any order or decree of foreclosure of the lien
created by this Mortgage, for itself and on behalf of: (i) all beneficially
interested persons; (ii) each and every person acquiring any interest in the
Property or title to the Premises subsequent to the date of this Mortgage; and
(iii) all other persons to the extent permitted by the provisions of laws of the
State in which the Premises are located.

     4.13 Mortgagor - Tenant at Will After Sale. Mortgagor agrees that after any
sale hereunder, Mortgagor and/or all parties occupying the Property, or any part
thereof, shall, at the option of any purchaser at such sale, be mere tenants at
the will and sufferance of the purchaser at such sale, and that such purchaser
shall be entitled to immediate possession thereof, and that if Mortgagor or any
such tenants fail to vacate the Property, or any part thereof immediately at
such purchaser's request, such purchaser may, and shall have the right to, file
or institute an action in forcible entry and detainer or institute or maintain
any other action or suit or exercise any other rights or remedies given
landlords under any statute or law. Notwithstanding the above, however, at the
option of any purchaser at such sale, any tenant leases covering the Property or
any part thereof in effect at the time of such sale shall remain in full force
and effect and such purchaser shall automatically become the "landlord"
thereunder with all rights and obligations accruing to the landlord thereunder.

     4.14 Continued Existence of Indebtedness. Without limitation of any other
provision hereof, Mortgagor agrees that if this Mortgage is foreclosed and sale
is made of the Property (or such part thereof which remains subject to this
Mortgage) pursuant to foreclosure proceedings, and if the proceeds of such sale
(after application of such proceeds as provided herein and after deducting all
accrued and due and payable general and special taxes and assessments) are not
sufficient to pay the total sum of the entire principal amount of the Secured
Indebtedness and all accrued interest thereon and all other sums due or to
become due thereunder or under any other instruments evidencing or securing or
pledged to secure the Secured Indebtedness (hereinafter together called the
"Note Balance"), and any other amounts provided for in the decree or judgment of
foreclosure or provided for by applicable law, then the Secured Indebtedness
shall not be satisfied to the extent of the deficiency in such proceeds to pay
the Note Balance, but such indebtedness shall continue in existence and continue
to be evidenced by any of the Loan Documents and, together with any deficiency
as to any other amounts provided for in such judgment or decree or provided for
by applicable law, shall continue to be secured by all of the other documents
and all of the mortgages, trust deeds and other instruments securing or pledged
to secure the indebtedness evidenced by any of the Loan Documents immediately
prior to any such decree or judgment of foreclosure except this Mortgage. If
Mortgagee shall acquire the Property as a result of any such foreclosure sale
(whether by bidding all or any of the Secured Indebtedness or otherwise), the
proceeds of such sale shall not be deemed to include (and Mortgagor shall not be
entitled to any benefit or credit on account of) proceeds of any subsequent sale
of the Property by Mortgagee. Without limitation of any other provision hereof,
Mortgagor further agrees that if any mortgage or trust deed (other than this
Mortgage) which secures or is pledged to Mortgagee to secure the Secured
Indebtedness is foreclosed and sale is made of the property subject to such
mortgage or trust deed pursuant to foreclosure proceedings, and if the proceeds
of such sale (after application of such proceeds as provided in such mortgage or
trust deed and after deducting all accrued general and special taxes and
assessments) are not sufficient to pay the Note Balance and any other amounts
provided for in the decree or judgment of foreclosure or provided for by
applicable law, then the Secured Indebtedness shall not be satisfied to the
extent of the deficiency in such proceeds to pay the Note Balance, but such
Secured Indebtedness shall continue in existence and continue to be evidenced by
any of the Loan Documents and, together with any deficiency as to any other
amounts provided for in such judgment or decree or provided for by applicable
law, shall continue to be secured by this Mortgage and all of the other
documents and all of the mortgages, trust deeds and other instruments securing
or pledged to secure the Secured

                                       16
<PAGE>

Indebtedness immediately prior to any such decree or judgment of foreclosure,
except such mortgage or trust deed.

                                       V.
                                  MISCELLANEOUS

     5.1 Notices.

          (a) Any notice that Mortgagee or Mortgagor may desire or be required
     to give to the other shall be in writing and shall be deemed to have been
     validly served, given or delivered (a) upon the earlier of actual receipt
     and three (3) Business Days after deposit in the United States Mail,
     registered or certified mail, return receipt requested, with proper postage
     prepaid, (b) upon transmission, when sent by telecopy or other similar
     facsimile transmission (with such telecopy or facsimile promptly confirmed
     by delivery of a copy by personal delivery or United States Mail as
     otherwise provided in this Section 5.1), (c) one (1) Business Day after
     deposit with a reputable overnight courier with all charges prepaid or (d)
     when delivered, if hand-delivered by messenger, all of which shall be
     addressed to the party to be notified and sent to the address or facsimile
     number indicated in Section 5.1(b) below or to such other address (or
     facsimile number) as may be substituted by notice given as herein provided.
     The giving of any notice required hereunder may be waived in writing by the
     party entitled to receive such notice. Failure or delay in delivering
     copies of any notice, demand, request, consent, approval, declaration or
     other communication to any Person (other than Mortgagor or Mortgagee)
     designated below to receive copies shall in no way adversely affect the
     effectiveness of such notice, demand, request, consent, approval,
     declaration or other communication. Except as otherwise specifically
     required, notice of the exercise of any right or option granted to
     Mortgagee by this Mortgage is not required to be given.

          (b) If to Mortgagor:

                   Bermans The Leather Experts Inc.
                   7401 Boone Avenue North
                   Brooklyn Park, Minnesota 55428
                   Attention:  Chief Financial Officer
                   Telecopier No.: (612) 391-4906
                   Telephone No.: (612) 391-4000

                   with copies to:

                   Faegre & Benson LLP
                   2200 Wells Fargo Center
                   90 South Seventh Street Minneapolis, Minnesota 55402
                   Attention: Susan Jacobson
                   Telecopier No.: (612) 766-1600
                   Telephone No.: (612) 766-6808

          (ii) If to Mortgagee:

                   General Electric Capital Corporation
                   10 South LaSalle Street
                   Suite 2800

                                       17
<PAGE>

                   Chicago, Illinois 60603
                   Attention: Wilsons Leather Account Manager
                   Telecopier No.: (312) 419-5992
                   Telephone No.: (312) 419-5900

                   with copies to:

                   Latham & Watkins
                   233 South Wacker Drive
                   Suite 5800
                   Chicago, Illinois 60606
                   Attention: David G. Crumbaugh
                   Telecopier No.: (312) 993-9767
                   Telephone No.: (312) 876-7660

                   and

                   General Electric Capital Corporation
                   201 High Ridge Road
                   Stamford, Connecticut 06927-5100
                   Attention: Corporate Counsel
                   Telecopier No.: (203) 316-7889
                   Telephone No.: (203) 316-7552

     5.2 Time of Essence. Time is of the essence of this Mortgage.

     5.3 Covenants Run with Land. All of the covenants of this Mortgage shall
run with the land constituting the Premises.

     5.4 GOVERNING LAW. THIS MORTGAGE SHALL BE CONSTRUED AND ENFORCED ACCORDING
TO THE LAWS OF THE STATE OF MINNESOTA (WITHOUT REFERENCE TO CONFLICTS OF LAWS
PROVISIONS THEREOF). TO THE EXTENT THAT THIS MORTGAGE MAY OPERATE AS A SECURITY
AGREEMENT UNDER THE CODE, MORTGAGEE SHALL HAVE ALL RIGHTS AND REMEDIES CONFERRED
THEREIN FOR THE BENEFIT OF A SECURED PARTY AS SUCH TERM IS DEFINED IN THE CODE.

     5.5 Rights and Remedies Cumulative. All rights and remedies in this
Mortgage are cumulative. The holder of every obligation secured hereby may
recover judgment, issue execution therefor, and resort to every other right or
remedy available at law or in equity, without first exhausting and without
affecting or impairing the security of any right or remedy.

     5.6 Severability. If any provision of this Mortgage, or any paragraph,
sentence, clause, phrase, or word, or their application, in any circumstance, is
held invalid, the validity of the remainder of this Mortgage shall be construed
as if such invalid part were never included.

     5.7 Non-Waiver. Unless expressly provided in this Mortgage to the contrary,
no consent or waiver, express or implied, by any party, to or of any breach or
default by any other party shall be deemed a consent to

                                       18
<PAGE>

or waiver of the performance by such defaulting party of any other obligations
or the performance by any other party of the same, or of any other, obligations.

     5.8 Headings. The headings of sections and paragraphs in this Mortgage are
for convenience or reference only and shall not be construed in any way to limit
or define the content, scope, or intent of the provisions.

     5.9 Grammar. As used in this Mortgage, the singular shall include the
plural, and masculine, feminine, and neuter pronouns shall be fully
interchangeable, where the context so requires.

     5.10 Deed in Trust. If title to the Property or any part thereof is now or
hereafter becomes vested in a trustee, any prohibition or restriction against
the creation of any lien on the Property shall be construed as a similar
prohibition or restriction against the creation of any lien on or security
interest in the beneficial interest of such trust.

     5.11 Successors and Assigns. This Mortgage shall be binding upon Mortgagor,
its successors, assigns, legal representatives, and all other persons or
entities claiming under or through Mortgagor. "Mortgagor," when used herein,
shall include all such persons and entities and any others liable for the
payment of the Secured Indebtedness, or any part thereof, whether or not they
have executed the Guaranty or this Mortgage. The word "Mortgagee," when used
herein, shall include each of: (i) the Agent in its capacity as a Lender and as
Agent for the Lenders; and (ii) the Lenders, together with each of their
successors, assigns and legal representatives.

     5.12 Beneficiary or Mortgagee in Possession. Nothing contained in this
Mortgage shall be construed as constituting Mortgagee a beneficiary or mortgagee
in possession in the absence of the actual taking of possession of the Property.

     5.13 Compliance with Applicable Law. Anything elsewhere herein contained to
the contrary notwithstanding,

          (a) In the event that any provision in this Mortgage shall be
     inconsistent with any provision of applicable law, the provisions of
     applicable law shall take precedence over the provisions of this Mortgage,
     but shall not invalidate or render unenforceable any other provision of
     this Mortgage that can be construed in a manner consistent with applicable
     law; and

          (b) If any provision of this Mortgage shall grant to Mortgagee any
     rights or remedies upon default of the Mortgagor which are more limited
     than the rights that would otherwise be vested in Mortgagee under
     applicable law in the absence of said provision, Mortgagee shall be vested
     with the rights granted under applicable law to the full extent permitted
     by law.

          (c) It is the intention of the parties to conform strictly to the
     usury laws, whether state or federal, that are applicable to the respective
     Loan Documents. All agreements between Mortgagor and Mortgagee, 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 any of the Loan Documents, or for
     the payment or performance of any covenant or obligation contained herein
     or in the Loan Documents, exceed the maximum amount permissible under
     applicable federal or state usury laws. If under any circumstances
     whatsoever fulfillment of any provision hereof or of any Loan Document, at
     the time performance of such provision shall be due, shall involve
     exceeding the limit of validity

                                       19
<PAGE>

     prescribed by 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 deemed interest by applicable law, which 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 Loans 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 the Loans shall, to the extent permitted by applicable law,
     and to the extent necessary to preclude exceeding the limit of validity
     prescribed by law, be amortized, prorated, allocated and spread from the
     date of this Mortgage until payment in full of the Secured Indebtedness so
     that the actual rate of interest on account of such principal amounts is
     uniform throughout the term hereof. The terms and provisions of this
     subparagraph shall control and supersede every other provision of any Loan
     Document.

          5.14 Incorporation of Credit Agreement. The terms of the Credit
     Agreement are incorporated by reference herein as though set forth in full
     detail. In the event of any conflict between the terms and provisions of
     this Mortgage and the Credit Agreement, the terms and provisions of the
     Credit Agreement shall control.

                            [SIGNATURE PAGE FOLLOWS]

                                       20
<PAGE>

     IN WITNESS WHEREOF, Mortgagor has duly signed and delivered this Mortgage
as of the date first above written.

                                       BERMANS THE LEATHER EXPERTS INC.
                                       a Delaware corporation

                                       By: /s/ Peter G. Michielutti
                                           -------------------------------------
                                       Name: Peter G. Michielutti
                                             -----------------------------------
                                       Title: Senior Vice President and Chief
                                              ----------------------------------
                                              Financial Officer
                                              ----------------------------------

                               Signature Page To
                                    Mortgage
<PAGE>

STATE OF MINNESOTA         )
                           )       ss:
COUNTY OF HENNEPIN         )

     The foregoing instrument was acknowledged before me this 15th day of June ,
2001, by Peter G. Michielutti, who is Senior Vice President and CFO of Bermans
The Leather Experts Inc., a Delaware corporation, on behalf of the corporation.

     GIVEN under my hand and seal this 15th day of June, 2001.

                                                   /s/ Joanne S. Swandby
                                       -----------------------------------------
                                       Notary Public
[Seal]                                 Name: Joanne S. Swandby
                                             -----------------------------------

My Commission expires: 1/31/05
                       ----------
My County of residence: Wright
                        ---------
<PAGE>

                                    EXHIBIT A
                                    ---------

                                LEGAL DESCRIPTION
                                -----------------

The Premises referred to is situated in the State of Minnesota, County of
Hennepin, and is described as follows:

Parcel 1:

The East 1000 feet of the Southeast Quarter of the Northwest Quarter of Section
30, Township 119, Range 21, Hennepin County, Minnesota, except the South 560
feet thereof and except that part thereof lying North of a line drawn parallel
with and distant 1350.20 feet South of the North line of the Northwest Quarter
of said Section 30.

Parcel 2:

Non-exclusive easement for road purposes over the East 30 feet of the North 130
feet of the South 395 feet of the West 330 feet of Government Lot 2 of Section
30, Township 119, Range 21, as shown in deed Doc. No. 435117, Files of the
Registrar of Titles.

                                      A-1
<PAGE>

                                    EXHIBIT B
                                    ---------

                              PERMITTED EXCEPTIONS
                              --------------------

1.   Defects, liens, encumbrances, adverse claims or other matters, if any,
     created, first appearing in the public records, or attaching subsequent to
     the effective date hereof but prior to the date the proposed Insured
     acquires for value of record the estate or interest or mortgage thereon
     covered by this Commitment.

2.   Any discrepancies or conflicts in boundary lines, any shortages in area, or
     any encroachment or overlapping of improvements.

3.   Any facts, rights, interests or claims which are not shown by the public
     record but which could be ascertained by an accurate survey of the land or
     by making inquiry of persons in possession thereof.

4.   Easements, liens or encumbrances or claims thereof, which are not shown by
     the public record.

5.   Any lien or right to lien for services, labor or material imposed by law
     and not shown by the public record.

6.   Taxes or special assessments which are not shown as existing liens by the
     public records.

     ITEMS 1 THROUGH 6 SHALL ONLY BE PERMITTED EXCEPTIONS UNTIL BORROWER HAS
            PROVIDED AN ALTA SURVEY CERTIFIED TO THE TITLE INSURER AND THE
            LENDER.

     NOTE:  THE ABOVE ITEMS 1 THROUGH 6, INCLUSIVE, WILL BE DELETED FROM THE
            FINAL POLICY TO BE ISSUED PURSUANT TO THAT FIRST AMERICAN TITLE
            INSURANCE COMPANY COMMITMENT DATED JUNE 19, 2001, NO. FILE NO.
            59-8040C, UPON RECEIPT OF A SURVEY CERTIFIED TO THE TITLE
            INSURANCE COMPANY AND UPON RECEIPT OF THE AFFIDAVIT REFERENCED IN
            PARAGRAPH B.3. OF SCHEDULE B - SECTION 1 OF THE TITLE POLICY
            COMMITMENT.

7.   Real estate taxes payable in the year 2001 in the amount of $401,208.76 are
     half paid. Tax Parcel No. 30-119-21-24-0006.

     Note: second half taxes are due October 15.

     Note: The above exception will be amended to read as follows in the
           final policy to be issued pursuant to this commitment:

           The second installment of real estate taxes payable in the year
           2001, a lien due but not yet payable.
           Tax Parcel No. 30-119-21-24-0006.

8.   Levied and pending special assessments, if any. Note: a search has been
     ordered.

                                      B-1
<PAGE>

9.   Rights of tenants under unrecorded leases.

     ITEMS 9 SHALL ONLY BE A PERMITTED EXCEPTION UNTIL BORROWER HAS PROVIDED
     FIRST AMERICAN TITLE INSURANCE COMPANY, THE TITLE INSURER, WITH AN
     AFFIDAVIT FROM THE BORROWER REGARDING THE EXISTENCE OF TENANTS UNDER
     UNRECORDED LEASES.

     Note: The above exception will be deleted from the final policy to be
     issued pursuant to this commitment upon receipt of the affidavit referenced
     in paragraph b.3. of Schedule B - Section 1 of this commitment.

10.  Non-exclusive easement for roadway and utility purposes as shown in
     Warranty Deed dated August 20, 1981, filed August 31, 1981 as Document
     Number 1438209.

11.  Notice of Lis Pendens in the Matter of the Condemnation of Certain Lands
     for Highway Purposes, filed July 2, 1968 as Document Number 913298.

12.  Slope easement in favor of The Village of Brooklyn Park, a Minnesota
     municipal corporation, dated August 2, 1968, filed August 19, 1968 as
     Document Number 918103.

13.  Street and utility easement in favor of The Village of Brooklyn Park, a
     Minnesota municipal corporation, dated August 2, 1968, filed August 19,
     1968 as Document Number 918104.

14.  Street and utility easement in favor of The Village of Brooklyn Park, a
     Minnesota municipal corporation, dated June 25, 1968, filed September 4,
     1968 as Document Number 919723.

15.  Slope easement in favor of The Village of Brooklyn Park, a Minnesota
     municipal corporation, dated June 25, 1968, filed September 4, 1968 as
     Document Number 919724.

16.  Sanitary sewer easement in favor of The City of Brooklyn Park, a Minnesota
     municipal corporation, dated March 10, 1972, filed May 8, 1972 as Document
     Number 1030067.

17.  Sanitary sewer easement in favor of The City of Brooklyn Park, a Minnesota
     municipal corporation, dated March 1, 1972, filed May 8, 1972 as Document
     Number 1030069.

18.  Declaration of Protective Covenants for Northland Park II, dated September
     5, 1980, filed September 9, 1980 as Document Number 1394458, as amended by
     Amendment to Protective Covenants dated August 18, 1981, filed August 21,
     1981 as Document Number 1438207 and by Amendment to Protective Covenants
     dated August 14, 1985, filed August 23, 1985 as Document Number 1667180.

19.  Street and utility easement in favor of The City of Brooklyn Park, a
     Minnesota municipal corporation, dated September 5, 1980, filed September
     9, 1980 as Document Number 1394459.

                                      B-2
<PAGE>

20.  Street and utility easement in favor of The City of Brooklyn Park, a
     Minnesota municipal corporation, dated August 17, 1981, filed August 31,
     1981 as Document Number 1438206.

21.  Sidewalk and utility easement in favor of The City of Brooklyn Park, a
     Minnesota municipal corporation, dated August 3, 1994, filed October 10,
     1994 as Document Number 25573473.

                                      B-3

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