LAKES ENTERTAINMENT, INC.



                              1998 STOCK OPTION AND

                                COMPENSATION PLAN

                                  (as amended)



1.    Purpose. The purpose of this Lakes Entertainment, Inc. (the "Company")

1998 Stock Option and Compensation Plan (the "Plan") is to increase stockholder

value and to advance the interests of the Company by furnishing a variety of

economic incentives ("Incentives") designed to attract, retain and motivate

employees and certain key consultants. Incentive may consist of opportunities to

purchase or receive shares of Common Stock, $.01 par value, of the Company

("Common Stock"), monetary payments, or both, on terms determined under this

Plan.



2.    Administration. The Plan shall be administered by the stock option

committee (the"Committee") of the board of directors of the Company (the

"Board"). The Committee shall be composed solely of outside directors within the

meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended, The

Board may from time to time appoint members of the Committee in substitution

for, or in addition to, members previously appointed, and may fill vacancies,

however caused, in the Committee. If more than one person is on the Committee,

the following shall apply: (a) the Committee shall select one of its members as

its chairman and shall hold its meetings at such times and places as it shall

deem advisable; (b) a majority of the Committee's members shall constitute a

quorum; (c) all action of the Committee shall be taken by the majority of its

members; and (d) any action may be taken by a written instrument signed by

majority of the members and actions so taken shall be fully effective as if they

had been made by a majority vote at a meeting duly called and held. The

Committee may appoint a secretary, shall keep minutes of its meetings and shall

make such rules and regulations for the conduct of its business as it shall deem

advisable. The Committee shall have complete authority to award Incentives under

the Plan, to interpret the Plan, and to make any other determination which it

believes necessary and advisable for the proper administration of the Plan. The

Committee's decisions and matters relating to the Plan shall be final and

conclusive on the Company and its participants.



3.    Eligible Participants. Employees of or consultants to the Company or its

subsidiaries or affiliates (including officers and directors, but excluding

directors who are not also employees of or consultants to the Company or its

subsidiaries or affiliates), shall become eligible to receive Incentives under

the Plan when designated by the Committee. Participants may be designated

individually or by groups or categories (for example, by pay grade) as the

Committee deems appropriate. Participation by officers of the Company or its

subsidiaries or affiliates and any performance objectives relating to such

officers must be approved by the Committee. Participation by others and any

performance objectives relating to others may be approved by groups or

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