Exhibit 10.23

COMMERCIAL LEASE

This Commercial Lease is executed October 1, 2008 by and between ROSEVILLE
PROPERTIES MANAGEMENT COMPANY, a Minnesota corporation, as agent for
Commers-Klodt III, a Minnesota general partnership (“Landlord”), and
ENTEROMEDICS, INC., a Delaware corporation (“Tenant”).

DEFINITIONS:

“Building” — That certain office/warehouse building on real property located in
the City of Roseville, County of Ramsey, State of Minnesota, containing
approximately 55,950 square feet and commonly addressed as 2800-2860 Patton
Road, Roseville, Minnesota 55113 (See Exhibit A).

“Demised Premises”—That certain portion of the Building addressed 2800 Patton
Road, consisting of approximately 28,388 square feet, as measured from the
outside walls of the Demised Premises to the center of the partition wall (see
Exhibit B). The Demised Premises includes a non-exclusive easement for access to
Common Areas as defined below, and all licenses and easements appurtenant to the
Demised Premises.

“Common Areas” — The term “Common Area” refers to all areas used non-exclusively
by Tenant and other tenants in the Building, including, but not limited to,
corridors, lavatories, driveways, truck docks, parking lots and landscaped
areas. Common Areas are available to Tenant and its employees, agents,
customers, and invitees for reasonable use in common with other tenants, their
employees, agents, customers and invitees, subject to reasonable rules and
regulations set forth by Landlord.

In consideration for the Base Rent, Additional Rent and any additional
consideration outlined in this Lease, Landlord leases to Tenant the Demised
Premises under the following conditions:

1.0 TERM OF LEASE AND POSSESSION:

Landlord gives and Tenant takes possession of Demised Premises for the term (the
“Term”) of seven (7) years beginning October 1, 2008 (the “Commencement Date”),
and ending September 30, 2015 (the “Expiration Date”), unless terminated earlier
as herein provided.

Unless otherwise stated in this Lease, Landlord shall deliver possession of the
Demised Premises to Tenant in its “as-is” condition on or before the
Commencement Date, but delivery of possession prior to or later than such
Commencement Date shall not affect the expiration date of this Lease. Landlord
shall not be liable in any respect for any failure to deliver possession of the
Demised Premises on or before the Commencement Date. Tenant’s possession of the
Demised Premises shall be conclusive evidence that the Demised Premises are in
good and satisfactory condition, punch list items excepted. The rentals herein
reserved shall commence on the date when possession of the Demised Premises is
delivered by Landlord to Tenant. Any occupancy by Tenant prior to the
Commencement Date commences all mutual terms and obligations of this Lease,
except Tenant’s payment of Base Rent and Additional Rent. Landlord shall have no
responsibility or liability for loss or damage to fixtures, facilities or
equipment installed or left on the Demised Premises.

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2.0 BASE RENT:

Landlord is due and Tenant shall pay Landlord, base rent (“Base Rent”) as
scheduled:

 

Months 1 through 12

   $ 19,569.92 per month

Months 13 through 24

   $ 19,961.32 per month

Months 25 through 36

   $ 22,766.47 per month

Months 37 through 48

   $ 23,221.80 per month

Months 49 through 60

   $ 23,686.23 per month

Months 61 through 72

   $ 24,159.96 per month

Months 73 through 84

   $ 24,643.16 per month

3.0 ADDITIONAL RENT:

Tenant shall reimburse to Landlord monthly, throughout the Term of the Lease and
any extension of this Lease, Tenant’s Share (as that term is hereinafter
defined) of the following Additional Rent:

Common Area Maintenance (CAM) expenses, Real Estate Taxes/Assessments, any
Utilities not paid directly by Tenant, and any Miscellaneous Charges or
Reimbursements.

Landlord may estimate annual CAM and Real Estate Taxes/Assessments expenses as a
basis for reimbursement for any calendar year and invoice in monthly
installments (see Exhibit C). During the Term of Lease and/or any extension of
this Lease, Landlord, within 120 days of each calendar year end, will provide to
Tenant a written statement of actual CAM and Real Estate Taxes/Assessments
expenses. If Tenant has underpaid its share of any of these expenses, Tenant
shall reimburse Landlord as invoiced within ten (10) days after receipt of such
invoice. If Tenant has overpaid its share of any of these expenses, Landlord
will credit such amount against the most current monthly invoice. If the Term of
Lease is less than one calendar year any reimbursement(s) will be prorated based
on time of occupancy for such year. Upon prior written notice to Landlord,
Tenant shall have the opportunity to audit the actual CAM and Real Estate
Taxes/Assessments expenses statement for a period of one (1) year after receipt
of said statement. Tenant waives its right to audit the actual CAM and Real
Estate Taxes/Assessments expenses if Tenant fails to exercise such right during
said one (1) year period.

Tenant’s Share is fifty and seventy-four one hundredths percent (50.74%), which
is the quotient of 28,388 rentable square feet in the Demised Premises divided
by 55,950 rentable square feet in the Building.

Landlord, at its election, may invoice for reimbursement(s) of any Utility usage
not paid directly by Tenant.

3.1 COMMON AREA MAINTENANCE EXPENSES (CAM):

Common Area Maintenance (CAM) shall include but not be limited to maintenance,
repair, replacement and care of all lighting, plumbing, roofs, parking surfaces,
landscaped areas, signs, snow removal, non-structural repair and maintenance of
the exterior of the Building, costs of equipment purchased and used for such
purposes, cleaning and cleaning supplies for the common areas, insurance
premiums for insurance required by this Lease, management fee up to five percent
(5%) of gross collected rents, and wages and fringe benefits of personnel up to
the level of property manager or equivalent employed for such work.
Additionally, during the Term of this Lease, any extension and/or renewal of
this Lease, CAM expenses shall include the annual cost or portion allocable to
the Building of any capital improvements made to the Building by Landlord

 

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which result in a reduction of expenses or required under any governmental law
or regulation that was not applicable at the time it was constructed. Landlord
shall amortize such costs over the useful life and at a reasonable rate of
interest.

Notwithstanding the foregoing, CAM shall exclude the following:

 

  (i) interest, amortization or other costs, including legal fees, associated
with any mortgage, loan or refinancing of all or any part of the Building or
sale of all or any part of the Building;

 

  (ii) amounts reimbursable from insurance proceeds, under warranty or by
Tenant, any other tenant in the Building or any other third party other than
pursuant to a CAM expense provision similar to this Section;

 

  (iii) interest, late charges or penalties incurred as a result of Landlord’s
failure to pay bills in a timely manner (unless such failure is directly related
to the failure of Tenant to pay Tenant’s Share of any such bill in a timely
manner);

 

  (iv) leasing or brokerage fees;

 

  (v) depreciation;

 

  (vi) costs incurred in connection with the transfer or disposition of all or a
portion of Landlord’s interest in the Building;

 

  (vii) costs of providing to other tenants services which are not available to
Tenant;

 

  (viii) attorneys’ fees and other legal costs incurred as a result of defaults
by, or litigation or other disputes with, other tenants of the Building;

 

  (ix) the portion of CAM which relate to more than one building or project to
the extent that cost should be allocated to a building or project which is not
occupied by Tenant, including, for example, employee costs, office costs,
parking lot maintenance and repairs.

 

  (x) expenses for the preparation of space or other work which Landlord
performs for any tenant or prospective tenant of the Building;

 

  (xi) accounting and legal fees relating to the ownership, construction,
leasing or sale of the Building; and accounting and legal fees paid or imputed
to full time employees of Landlord or any management agent;

 

  (xii) any amount paid to an entity or individual related to Landlord which
exceeds the amount which would be paid for similar goods or services on an
arms-length basis between unrelated parties;

 

  (xiii) the cost of correcting defects in the construction of the Building;

 

  (xiv) management fees to the extent they exceed five percent (5%) of the gross
receipts from the Building;

 

  (xv) any ground rent, air space rent or other rent incurred for the Building;

 

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  (xvi) the cost of correcting any applicable building or fire code violation(s)
or violation(s) of any other applicable law relating to the Building in effect
on the Commencement Date;

 

  (xvii) any costs (including any damages or future claims asserted against
Landlord in connection with the same) incurred to test, survey, cleanup,
contain, abate, remove or otherwise remedy Regulated Substances from the
Building which were present at the Building prior to the Commencement Date or
brought onto the Building after the Commencement Date by a party other than
Tenant or by those for whom Tenant is responsible for under this Lease;

 

  (xviii) any personal property taxes of Landlord for equipment or items not
used directly in the operation or maintenance of the Building;

 

  (xix) all overhead expenditures pertaining to the administration of the
Building, except to the extent expressly authorized under this Lease;

 

  (xx) rentals and other related expenses, if any, incurred in leasing items to
the extent that the cost of the purchase of that item would not be included as a
permitted capital expenditure hereunder;

 

  (xxi) contributions to CAM reserves if such reserves will not be used during
the calendar year in which such reserve is created;

 

  (xxii) all bad debt loss, rent loss or reserve for bad debt or rent loss; and

 

  (xxiii) any and all costs of Landlord’s office and office operation for the
Project for office space in excess of 500 square feet of rentable area, and all
supplies and materials used in connection therewith.

3.2 REAL ESTATE TAXES AND ASSESSMENTS:

Real Estate Taxes and Assessments shall mean all Real Estate Taxes, all
assessments and any taxes in lieu thereof payable on each calendar year, which
may be levied upon or assessed against the Building. Any tax year commencing
during any lease year shall be deemed to correspond to such lease year. In the
event the taxing authorities additionally include in such real estate and
assessments the value of any improvements made by Tenant, or of machinery,
equipment, fixtures, inventory or other personal property or assets of Tenant,
then Tenant shall pay all the taxes attributable to such items. Upon Tenant’s
request, Landlord will furnish a copy of the Real Estate Tax statement.

Landlord reserves, and Tenant hereby assigns to Landlord, the sole and exclusive
right to contest, protest, petition for review, or otherwise seek a reduction in
the Real Estate Taxes. Any reduction or credit reimbursed shall be passed on to
Tenant less costs to contest this provision and shall survive this Lease.

3.3 UTILITIES

Landlord shall provide mains and conduits to supply water, gas, electricity and
sanitary sewage to the Building. Tenant shall pay, when due, all charges for
sewer and water usage, garbage/refuse disposal/removal and recycling,
electricity, gas and other fuels,

 

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telephone/communication services and/or other utility services or energy source
furnished to the Demised Premises during the term of this Lease, or any
extension and/or renewal of this Lease. If Tenant’s usage of any utility is
deemed disproportionate as determined by Landlord, Landlord may elect to
submeter and bill Tenant accordingly. Landlord accepts no responsibility for any
disruption of any utility service due to accident, natural causes or
circumstances beyond Landlord’s control and/or the utility provider’s inability
to deliver said service.

3.4 MISCELLANEOUS CHARGES AND REIMBURSEMENTS

Miscellaneous Charges and Reimbursements shall include, without limitation,
reconciliation of Real Estate Taxes/Assessments, CAM and Utilities, service
requests facilitated by Landlord at the direction of Tenant, Tenant improvement
reimbursements, notes due Landlord and any other miscellaneous charge due
Landlord.

4.0 COVENANT TO PAY RENT:

The covenants of Tenant to pay the Base Rent and the Additional Rent are each
independent of any other covenant, condition, provision or agreement contained
in this Lease. Base Rent and Additional Rent shall be paid without setoff,
deduction, demand or counterclaim of any nature whatsoever, except as expressly
permitted by this Lease. All rents are due and payable, in advance, on the first
of the each month during the Term of Lease and any extensions of the Lease to
Landlord at:

2575 North Fairview Avenue, Suite 250

Roseville, Minnesota 55113

or such other address as Landlord shall designate to Lessee in writing.

5.0 OVERDUE PAYMENTS:

All Base Rent and Additional Rent under this Lease and any extension shall be
due on the first day of each calendar month, unless otherwise specified. Service
charges shall be imposed after the fifth (5th) day of each calendar month in the
amount of five percent (5%) of the outstanding balance due; provided, however,
no service charges shall be imposed for the initial delinquent payment during
any twelve (12) month period unless Tenant fails to pay Rent within five
(5) days after Landlord’s written demand therefor.

6.0 USE:

The Demised Premises shall be used and occupied by Tenant solely for the
purposes of a general office and warehouse use and legal uses incidental
thereto, and Tenant agrees that such use shall be in compliance with all
applicable laws, ordinances and governmental regulations affecting the Building
and Demised Premises. Tenant shall immediately discontinue any use of the
Demised Premises which is not in compliance with any applicable laws, ordinances
or governmental regulations. The Demised Premises shall not be used in such
manner that, in accordance with any requirement of law or of any public
authority, Landlord shall be obliged on account of the purpose or manner of said
use to make any addition or alteration to or in the Building. The Demised
Premises shall not be used in any manner which will increase the rates required
to be paid for public utility or for fire and extended coverage insurance
covering the Demised Premises. Tenant shall occupy the Demised Premises, conduct
its business and control its agents, employees, invitees and visitors in such a
way as is lawful, and reputable and will not

 

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permit or create any nuisance, noise, odor, or otherwise interfere with, annoy
or disturb any other tenant in the Building in its normal business operations or
Landlord in its management of the Building. Tenant’s use of the Demised Premises
shall conform to all Landlord’s reasonable and non-discriminating rules and
regulations relating to the use of the Building. Outside storage on the Building
of any type of equipment, property or materials owned or used on the Demised
Premises by Tenant or its customers and suppliers shall not be permitted.

7.0 LETTER OF CREDIT:

On the second anniversary of the Commencement Date and continuing until the
fifth anniversary of the Commencement Date, Tenant, at Tenant’s sole cost and
expense, shall deliver to Landlord an irrevocable, unconditional, stand-by
letter of credit in the amount of Two Hundred Thousand and 00/100 Dollars
($200,000.00) (such letter of credit together with any other renewal or
replacement letters of credit delivered or to be delivered by Tenant hereunder
shall be referred to herein collectively as the “Letter of Credit”). Any Letter
of Credit described hereunder shall be issued by a nationally recognized
financial institution reasonably acceptable to Landlord and Tenant. The Letter
of Credit shall be subject to the following terms and conditions:

 

  a. The Letter of Credit shall be maintained beginning on the second
anniversary of the Commencement Date and continue until the fifth anniversary of
the Commencement Date. Tenant shall periodically renew the Letter of Credit to
assure that it is maintained throughout the entirety of said period; provided,
in no event shall any single Letter of Credit have a term or maturity less than
twelve (12) months from the date it is issued, and any such periodic Letter of
Credit must be extended, renewed and/or replaced with a new Letter of Credit at
least thirty (30) days prior to the maturity date of the preceding periodic
Letter of Credit.

 

  b. Notwithstanding any contrary provision hereunder, upon the occurrence of
any default by Tenant (as specified in Section 21.0 a. hereof), Landlord may
draw upon the Letter of Credit in an amount equal to the amount payable by
Tenant as a consequence of such default by Tenant.

 

  c. No draw by Landlord shall be deemed a waiver of, or be deemed to have
cured, any default by Tenant; provided that a draw by Landlord shall be applied
to delinquent obligations of Tenant under the Lease and, if so applied, shall be
deemed to have cured Tenant’s default in the payment of such obligations to the
extent the proceeds of the draw are sufficient to cover the delinquent payment
obligations. The funds drawn by Landlord under the Letter of Credit shall be
non-refundable and shall remain the property of the Landlord, so long as such
funds are used to cure default of Tenant; any excess funds shall be returned to
Tenant.

 

  d. No claim or demand of set-off, deduction, or default under the Lease shall
be deemed an estoppel or defense to any draw under the Letter of Credit. The
delivery of the Letter of Credit to Landlord and the drawing upon the Letter of
Credit by Landlord shall be in addition to all other rights and remedies
available to Landlord under the Lease, or arising at law or in equity, and shall
not be in substitution or replacement thereof.

8.0 CARE AND REPAIR OF DEMISED PREMISES:

Tenant shall, at all times throughout the Term of Lease and any extensions, and
at its sole expense, keep and maintain the Demised Premises in a clean, safe,
sanitary and first class condition and in compliance with all applicable laws,
codes, ordinances, rules and regulations;

 

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provided, however, that Tenant is not required to make any alterations or
improvements in connection with such compliance except to the extent that such
compliance is required because of Tenant’s particular use of the Premises.
Tenant’s obligations hereunder shall include without limitation, the
maintenance, repair, and replacement, if necessary, of all interior walls,
partitions, doors and windows, all exterior entrances, windows, doors and docks,
the replacement of all broken glass, of any fixture/equipment/component of
heating, ventilation, air conditioning (HVAC) systems, all lighting systems,
plumbing systems and electrical systems. In the event that an HVAC rooftop unit
or ceiling hung unit heater requires replacement, the cost of such replacement
shall be shared between Landlord and Tenant, Tenant’s share to be based on a
ratio of the time of occupancy to the nearest one-half year to the estimated
useful life of the unit, unless caused by the misuse or neglect of Tenant, in
which case the cost of such replacement shall be the sole responsibility of
Tenant. Such estimations are fifteen (15) years for a roof top unit and ten
(10) years for a ceiling hung unit heater under normal conditions. When used in
this provision, the term “repairs” shall include replacements, and all such
repairs or replacements made by Tenant shall be of equal quality to the original
equipment or work. Tenant shall keep and maintain all portions of the Demised
Premises and the sidewalk and areas adjoining the same in a clean and orderly
condition, free of accumulation of dirt, rubbish, snow and ice (for
accumulations of less than or equal to one inch), regardless of any CAM
performed by Landlord. Tenant shall maintain a minimum temperature in the
Demised Premises of 40 degrees during the Lease Term.

Notwithstanding the foregoing, Landlord warrants that the HVAC system currently
serving the office portion of the Premises is in good working order, and capable
of meeting the temperature specifications set forth on Exhibit E attached hereto
and incorporated herein by reference. Landlord shall bear all costs of
maintenance and repair (and replacement, if necessary) of such HVAC system
during the first twelve (12) months of the term, to the extent necessary to
maintain the temperatures on Exhibit E on a consistent basis throughout the
Premises.

Notwithstanding anything in this Article 8.0 to the contrary, Tenant shall be
solely responsible to maintain the HVAC system serving only the lab areas of the
Demised Premises without any contribution, reimbursement or cost sharing by
Landlord for replacement of said HVAC system.

If Tenant fails, refuses or neglects to maintain or repair the Demised Premises
as required in this Lease after notice shall have been given Tenant, in
accordance with Article 17.0 of this Lease, Landlord may make such repairs or
replacements without liability to Landlord for any loss or damage that may
accrue to Tenant’s merchandise, fixtures or other property or to Tenant’s
business by reason thereof, and upon completion thereof, Tenant shall pay to
Landlord all reasonable costs plus ten percent (10%) for overhead incurred by
Landlord in making such repairs or replacements.

Landlord shall maintain, repair, and replace if necessary, at its expense (but
subject to inclusion in CAM pursuant to the provisions in Article 3.0), the
structural portions of the Building (including maintenance, repairs and
replacements to the roof of the Building), foundations, the roof and roof
membranes, and Common Areas, unless such repairs are required as a result of the
acts of Tenant, its employees, agents, assigns or invitees, in which case the
costs thereof shall be borne by Tenant and payable by Tenant to Landlord.

Except as otherwise provided herein, Landlord shall be responsible for all
outside maintenance of the Demised Premises, including grounds and parking
areas. All such maintenance which is the responsibility of Landlord shall be
provided as reasonably necessary to the comfortable use and occupancy of Demised
Premises during business hours, except Saturdays, Sundays and holidays, upon the
condition that Landlord shall not be liable for damages for its performance due
to causes beyond its control.

 

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9.0 HAZARDOUS MATERIALS:

Tenant shall not (either with or without negligence) cause or permit the escape,
disposal or release into or onto the Demised Premises or the Building of any
biologically or chemically active or other hazardous substances, or materials.
Tenant shall not allow the storage or use in the Demised Premises or the
Building of such substances or materials in any manner not sanctioned by law or
by the standards prevailing in the industry for the storage and use of such
substances or materials, nor allow to be brought into the or onto the Demised
premises or the Building any such materials or substances except in the ordinary
course of Tenant’s business, and then only after written notice is given to
Landlord of the identity of such substances or materials. Without limitation,
hazardous substances and materials shall include those described in the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. Section 9601 et seq., the Resource Conservation and Recovery
Act, as amended, 42 U.S.C. Section 6901 et seq., or any applicable state or
local laws and the regulations adopted under these acts. If any lender or
governmental agency shall ever require to ascertain whether or not there has
been any release of hazardous materials into or onto the Demised Premises or the
Building and a release is found which is determined to have been caused or
permitted by Tenant, then the reasonable cost thereof shall be reimbursed by
Tenant to Landlord upon demand as additional charges if such requirement applies
to the Demised Premises. In addition, Tenant shall execute reasonable
affidavits, representations and the like from time to time at Landlord’s request
concerning Tenant’s best knowledge and belief regarding the presence of
hazardous substances or materials on the Demised Premises. In all events, Tenant
shall indemnify Landlord from any release of hazardous materials on the Demised
Premises or the Building occurring while Tenant is in possession or elsewhere if
caused by Tenant or persons acting under Tenant. The within covenants shall
survive the expiration or earlier termination of the Term of this Lease.

10.0 PUBLIC LIABILITY INSURANCE:

Tenant shall during the Term hereof keep in full force and effect at its own
expense a policy or policies of public liability insurance with respect to the
Demised Premises and the business of Tenant, with companies reasonably
acceptable to Landlord, in which Landlord shall be named as an additional
insured under reasonable limits of liability not less than: $1,000,000 for
injury/death to any one person; $2,000,000 for injury/death to more than one
person, and $1,000,000 with respect to damage to property. Tenant shall further
provide for business interruption or rent loss insurance to cover a period of
not less than six (6) months. Such policy or policies shall provide that thirty
(30) days’ written notice must be given to Landlord prior to cancellation or
modification thereof. Tenant shall furnish certificates satisfactory to Landlord
at the time this Lease is executed that such coverage is in full force and
effect. Landlord shall during the Term hereof keep in full force and effect
policy or policies of public liability insurance with respect to the Building
under reasonable limits of liability not less than: $1,000,000 for injury/death
to any one person; $2,000,000 for injury/death to more than one person, and
$1,000,000 with respect to damage to property.

11.0 SIGNAGE AND DISPLAYS:

Any sign, lettering, picture, notice or advertisement, other than “Building
Standard Signage” which is vinyl lettering on the exterior entrance to the
Demised Premises provided by Landlord, installed on or in any part of the
Demised Premises and visible from the exterior of the Building, or visible from
the exterior of the Demised Premises, shall be subject to Landlord’s prior
written approval (which approval will not be unreasonably withheld) and shall be
installed at Tenant’s sole cost and expense. In the event that Landlord provides
monument signage for other tenants of the business park of which the Building is
a part, then Tenant shall also have the right to be

 

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included on such monument signage visible from County Road C. In the event of a
violation of the foregoing by Tenant, Landlord may remove the same without any
liability and may charge the expense incurred by such removal to Tenant. Tenant
agrees to maintain its signage in good repair, and to hold Landlord harmless
from any loss, cost, or damages resulting from the erection, existence,
maintenance, or removal of the signage.

12.0 ALTERATIONS, INSTALLATION, FIXTURES:

Unless otherwise stated, Tenant shall not make any alterations, additions or
improvements in or to the Demised Premises or add, disturb or in any way change
any plumbing or wiring without the prior written consent of Landlord (which
consent will not be unreasonably withheld). In the event alterations are
required by any governmental agency by reason of the use and occupancy of the
Demised Premises by Tenant, Tenant shall make such alterations at its own cost
and expense after first obtaining Landlord’s written approval of plans and
specifications, which approval shall not be unreasonably withheld, and
furnishing such indemnification as Landlord may reasonably require against
liens, costs, damages and expenses arising out of such alterations. Tenant shall
warrant to Landlord that all such alterations, additions, or improvements shall
be in strict compliance with all relevant laws, ordinances, governmental
regulations and insurance requirements. Construction of such alterations or
additions shall commence only upon Tenant obtaining and exhibiting to Landlord
the requisite approvals, licenses and permits and indemnification against liens.
All alterations, installations, physical additions or improvements to the
Demised Premises made by Tenant shall at once become the property of Landlord
and shall be surrendered to Landlord upon the termination of this Lease;
provided, however, this clause shall not apply to movable equipment or furniture
owned by Tenant, which may be removed by Tenant at the end of the Term.

13.0 ACCESS TO DEMISED PREMISES:

Tenant agrees to permit Landlord and the authorized representatives of Landlord
to enter the Demised Premises at all times during usual business hours and with
reasonable prior oral notice except in emergencies for the purpose of inspecting
the same and making any necessary repairs to the Demised Premises and performing
any work therein that may be necessary to comply with any laws, ordinances,
rules, regulations or requirements of any public authority or of the Board of
Fire Underwriters or any similar body or that Landlord may deem necessary to
prevent waste or deterioration in connection with the Demised Premises. Nothing
herein shall imply any duty upon the part of Landlord to do any such work which,
under any provision of this Lease, Tenant is required to perform and the
performance thereof by Landlord shall not constitute a waiver of Tenant’s
default to perform the same. Landlord may, during the progress of any work in
the Demised Premises or Building, keep and store upon the Demised Premises or
Building all necessary materials, tools, and equipment. Landlord shall not in
any event be liable for inconvenience, annoyance, disturbance, loss of business,
or other damage of Tenant, nor shall Tenant’s lease obligations be affected by
reason of making repairs or the performance of any work, including materials
handling into or through the Demised Premises or Building.

Landlord reserves the right to enter upon the Demised Premises (a) at any time
in the event of an emergency and (b) at reasonable hours and upon reasonable
prior oral notice to exhibit the Demised Premises to prospective purchasers or
others; and to exhibit the Demised Premises to prospective tenants and to
display “For Rent” or similar signs on windows or doors in the Demised Premises
during the last one hundred twenty (120) days of the Term of this Lease, all
without hindrance by Tenant.

 

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14.0 REMOVAL OF FIXTURES:

Notwithstanding anything contained in Article 12.0, 18.0, or elsewhere in this
Lease, if Landlord requests at the time of granting consent for the following,
then Tenant will promptly remove, at the sole cost and expense of Tenant, all
fixtures, equipment and alterations made by Tenant, subsequent to the initial
improvements made by Landlord on behalf of Tenant prior to the commencement of
this Lease, at the time Tenant vacates the Demised Premises, and Tenant will
promptly restore said Demised Premises to the condition that existed immediately
prior to said fixtures, equipment and alterations having been installed or made,
all at the sole cost and expense of Tenant.

15.0 ASSIGNMENT OR SUBLETTING:

Tenant agrees to use and occupy the Demised Premises throughout the entire Term
for the purpose herein specified and for no other purposes, and not to transfer
or assign this Lease or sublet said Demised Premises, or any part thereof,
whether by voluntary act, operation of law, or otherwise, without obtaining the
prior consent of Landlord in each instance, which may be withheld by Landlord,
in its sole discretion. Tenant shall seek such consent of Landlord by a written
request therefor, setting forth such information as Landlord may reasonably deem
necessary. Consent by Landlord to any assignment of this Lease or to any
subletting of the Demised Premises shall not be deemed a consent or waiver of
Landlord’s right under this Article as to any subsequent assignment or
subletting. Landlord’s right to assign this Lease is and shall remain
unqualified upon any sale or transfer of the Building and, providing the
purchaser succeeds to the interest of Landlord under this Lease, Landlord shall
thereupon be entirely freed of all obligations of Landlord hereunder and shall
not be subject to any liability resulting from any act or omission or event
occurring after such conveyance. No such assignment or subleasing shall relieve
Tenant from any of Tenant’s obligations in this Lease contained, nor shall any
assignment or sublease or other transfer of this Lease be effective unless the
assignee, subtenant or transferee shall at the time of such assignment, sublease
or transfer, assume in writing for the benefit of Landlord, its successors or
assigns, all of the terms, covenants, and conditions of this Lease thereafter to
be performed by Landlord and shall agree in writing to be bound thereby. Should
Tenant sublease in accordance with the terms of this Lease, fifty percent
(50%) of any increase in rental and other consideration received by Tenant over
the per square foot rental rate which is being paid by Tenant shall be forwarded
to and retained by Landlord, which increase shall be in addition to the Base
Rent and Additional Rent due Landlord under this Lease. Notwithstanding anything
in this Lease to the contrary, Tenant may, upon notice to Landlord but without
Landlord’s consent, assign the Lease or sublet all or any portion of the Demised
Premises to a Tenant Affiliate, provided that the net worth of such Tenant
Affiliate is equal to or greater than Twenty Million and 00/100 Dollars
($20,000,000.00) at the time of such assignment. If Tenant does so assign this
Lease or sublet all or any portion of the Demised Premises to a Tenant
Affiliate, Tenant will remain liable for all of Tenant’s obligations under this
Lease. A “Tenant Affiliate” is any party that is controlled by, under common
control with, or controls Tenant, or acquires all, or substantially all, of
Tenant’s assets or a controlling interest in Tenant’s stock.

16.0 SUCCESSORS AND ASSIGNS:

The terms, covenants and conditions hereof shall be binding upon and inure to
the successors and assigns of the parties hereto.

 

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17.0 NOTICES:

Any notice required or permitted under this Lease shall be deemed sufficiently
given or secured if sent by overnight courier, or registered or certified return
receipt mail, to Tenant at the Demised Premises and to Landlord at the address
then fixed for the payment of rent as provided in Article 4.0 of this Lease and
either party may by like written notice at any time designate a different
address to which notices shall subsequently by sent or rent to be paid.

18.0 SURRENDER:

On the Expiration Date or upon the termination hereof upon a day other than the
Expiration Date, Tenant shall peaceably surrender the Demised Premises in good
order, condition and repair (reasonable wear and tear and damage by casualty
only excepted); warehouse area in broomclean condition; office/restroom area
vacuumed and cleaned. On or before the Expiration Date or upon termination of
this Lease on a day other than the Expiration Date, Tenant shall, at its
expense, remove all trade fixtures, personal property and equipment and signs
from the Demised Premises and any property not removed shall be deemed to have
been abandoned. It is specifically agreed that any and all telephonic, coaxial,
ethernet, or other computer, word processing, facsimile, or electronic wiring
installed by Tenant within the Demised Premises (hereinafter “Wiring”) shall be
removed at Tenant’s cost at the expiration of the Term, unless Landlord has
specifically requested in writing that said Wiring shall remain, whereupon said
Wiring shall be surrendered with the Demised Premises as Landlord’s property.
Any damage caused in the removal of such items shall be repaired by Tenant and
at its expense. All alterations, additions, improvements and fixtures (other
than trade fixtures) which shall have been made or installed by Landlord or
Tenant upon the Demised Premises and all floor covering so installed shall
remain upon and be surrendered with the Demised Premises as a part thereof,
without disturbance, molestation or injury, and without charge, at the
expiration or termination of this Lease except any such items identified under
Article 14.0 hereof. If the Demised Premises are not surrendered on the
Expiration Date or the date of termination, Tenant shall indemnify Landlord
against loss or liability, claims, without limitation, made by any succeeding
Tenant founded on such delay. Tenant shall promptly surrender all keys for the
Demised Premises to Landlord at the place then fixed for payment of rent and
shall inform Landlord of combinations of any locks and safes on the Demised
Premises.

19.0 HOLDING OVER:

In the event of a holding over by Tenant after expiration or termination of this
Lease without the consent in writing of Landlord, Tenant shall be deemed a
tenant at sufferance and shall pay rent for such occupancy at the rate of one
and one-half times the last-current aggregate Base Rent and 100% of Additional
Rent, prorated for the entire holding over period, plus all reasonable
attorneys’ fees and expenses incurred by Landlord in enforcing its rights
hereunder, plus any other damages occasioned by such holding over. Except as
otherwise agreed, any holding over with the written consent of Landlord shall
constitute a month-to-month lease.

20.0 ABANDONMENT: Intentionally deleted.

21.0 DEFAULT OF TENANT:

 

  a.

In the event of any failure of Tenant to pay any rental due hereunder within ten
(10) days after the same becomes due, or any failure to perform any other terms,
conditions or covenants of this Lease to be observed or performed by Tenant for
more than thirty (30) days after written notice of such failure shall have been
given to Tenant (or, if such default is reasonably incapable of cure within
thirty (30) days as reasonably determined

 

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by Landlord, such reasonably longer period of time not to exceed a total of
sixty (60) days provided that Tenant commences the cure within thirty (30) days
and diligently pursues the same to completion within said sixty (60) day
period), or if Tenant or an agent of Tenant shall falsify any report required to
be furnished to Landlord pursuant to the terms of this Lease, or if Tenant or
any guarantor of this Lease shall become bankrupt or insolvent, or file any
debtor proceedings or any person shall take or have against Tenant or any
guarantor of this Lease in any court pursuant to any statute either of the
United States or of any state a petition in bankruptcy or insolvency or for
reorganization or for the appointment of a receiver or trustee of all or a
portion of Tenant’s or any such guarantor’s property, or if Tenant or any such
guarantor’s property, or if Tenant or any such guarantor makes an assignment for
the benefit of creditors, or petitions for or enters into an arrangement with
its creditors, or if Tenant shall abandon the Demised Premises pursuant to the
provisions in Article 20.0 above or suffer this Lease to be taken under any writ
of execution, then in any such event Tenant shall be in default hereunder, and
Landlord, in addition to other rights of remedies it may have, shall have the
immediate right of re-entry and may remove all persons and property from the
Demised Premises and such property may be removed and stored in a public
warehouse or elsewhere at the cost of, and for the account of Tenant, without
being guilty of trespass, or becoming liable for any loss or damage which may be
occasioned thereby.

 

  b.

Should Landlord elect to re-enter the Demised Premises, as herein provided, or
should it take possession of the Demised Premises pursuant to legal proceedings
or pursuant to any notice provided for by law, it may either terminate this
Lease or it may from time to time, without terminating this Lease, make such
alterations and repairs as may be necessary in order to relet the Demised
Premises, and relet the Demised Premises or any part thereof for such term or
terms (which may be for a term extending beyond the Term of this Lease) and at
such rental or rentals and upon such other terms and conditions as Landlord in
its sole discretion may deem advisable. Upon each such subletting all rentals
received by Landlord from such reletting shall be applied first to the payment
of any indebtedness other than rent due hereunder from Tenant to Landlord;
second, to the payment of any costs and expenses of such reletting, including
brokerage fees and attorneys’ fees and costs of such alterations and repairs;
third, to the payment of the rent due and unpaid hereunder, and the residue, if
any shall be held by Landlord and applied in payment of future rent as the same
may become due and payable hereunder. If such rentals received from such
reletting during any month be less than that to be paid during that month by
Tenant hereunder, Tenant, upon demand, shall pay any such deficiency to
Landlord. No such re-entry or taking possession of the Demised Premises by
Landlord shall be construed as an election on its part to terminate this Lease
unless a written notice of such intention be given to Tenant or unless the
termination thereof be decreed by a court of competent jurisdiction.
Notwithstanding any such reletting without termination, Landlord may at any time
after such re-entry and reletting elect to terminate this Lease for such
previous breach. Should Landlord at any time terminate this Lease for any such
breach, in addition to any other remedies it may have, it may recover from
Tenant all damages it may incur by reason of such breach, including the cost of
recovering the Demised Premises, attorneys’ fees, and costs, the unamortized
portion of any leasehold improvements made by Landlord for Tenant and including
the worth at the time of such termination of the excess, if any, of the amount
of rent and charges equivalent to rent

 

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reserved in this Lease for the remainder of the stated term over the then
reasonable rental value of the Demised Premises for the remainder of the stated
term, all of which amounts shall be immediately due and payable from Tenant to
Landlord.

 

  c. Landlord may, at its option, instead of exercising any other rights or
remedies available to it in this Lease or otherwise by law, statute or equity,
spend such money as is reasonably necessary to cure any default of Tenant herein
and the amount so spent, and costs incurred, including reasonable attorneys’
fees in curing such default, shall be paid by Tenant, as Additional Rent.

 

  d. Landlord Default. For purposes hereof, a “Landlord Default” exists if
Landlord fails to perform any of its obligations under this Lease within 30 days
after receiving notice from Tenant specifying the nature and extent of such
failure; provided, however, if the obligation is not reasonably curable within
such 30 day period, the time for cure will be extended for a maximum of thirty
(30) additional days so long as Landlord continues to use reasonable efforts to
effect a cure within such sixty (60) day period. If a Landlord Default has
occurred, then, in addition to all rights, powers or remedies permitted by law
or in equity, Tenant may cure such Landlord Default and charge the cost thereof
to Landlord. Landlord is liable for, and shall pay to Tenant within 30 days
after receiving Tenant’s invoice, all reasonable attorneys’ fees and other costs
incurred by Tenant as a result of a Landlord Default.

 

  e. In the event suit shall be brought for recovery of possession of the
Demised Premises, for the recovery of rent or any other amount due under the
provisions of this Lease, or because of the breach of any other covenant herein
contained to be kept or performed, and a breach shall be established, the
defaulting party shall pay to the non-defaulting party all expenses incurred
therefor, including reasonable attorney’s fees and costs, together with interest
on all such expenses at the rate of ten percent (10%) per annum from the date of
such breach of the covenants of this Lease until the date that such breach is
cured.

 

  f. Tenant hereby expressly waives any and all rights of redemption granted by
or under any present or future laws in the event of Tenant being evicted or
dispossessed for any cause, or in the event of Landlord obtaining possession of
the Demised Premises, by reason of any default hereunder, or otherwise. Tenant
also waives any demand for possession of the Demised Premises, and any demand
for payment of rent and any notice of intent to re-enter the Demised Premises,
or of intent to terminate this Lease, other than the notices above provided in
this Article, and any other notice or demand prescribed by any applicable
statutes or laws.

 

  g. No remedy herein or elsewhere in this Lease or otherwise by law, statute or
equity, conferred upon or reserved shall be exclusive of any other remedy, but
shall be cumulative, and may be exercised from time to time and as often as the
occasion may arise.

 

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22.0 EMINENT DOMAIN:

In the event of any eminent domain of condemnation proceeding or private sale in
lieu thereof in respect to the Building during the Term hereof, the following
provisions shall apply:

 

  a. If the whole of the Building shall be acquired or condemned by eminent
domain for any public or quasi-public purpose, the term of this lease shall
cease and terminate as of the date possession shall be taken in such proceedings
and all rentals shall be paid up to that date.

 

  b. If any part constituting less than the whole of the Building shall be
acquired or condemned as aforesaid, and in the event that such partial taking or
condemnation shall materially affect the Demised Premises so as to render the
Demises Premises unsuitable for the business of Tenant, then the term of this
Lease shall cease and terminate as of the date possession shall be taken by the
condemning authority and rent shall be paid to the date of such termination.

In the event of a partial taking or condemnation of the Building which shall not
materially affect the Demised Premises so as to render the Demised Premises
unsuitable for the business of Tenant, this Lease shall continue in full force
and effect with a proportionate abatement of the Base Rent and Additional Rent
based on the portion, if any of the Demised Premises taken. Landlord shall
restore the Building and the Demised Premises to substantially the same
condition as they were prior to such condemnation. Landlord shall commence
restoration and shall restore the Building and the Demised Premises with
reasonable promptness, subject to delays beyond Landlord’s control and delays in
the making of condemnation or sale proceeds adjustments by Landlord; and Tenant
shall have no right to terminate this Lease except as herein provided. Upon
completion of such restoration, the rent shall be adjusted based upon the
portion, if any, of the Demised Premises restored.

 

  c. In the event of any condemnation or taking as aforesaid, whether whole or
partial, Tenant shall not be entitled to any part of the award paid for such
condemnation and Landlord is to receive the full amount of such award, Tenant
hereby expressly waiving any right to claim to any part thereof.

 

  d. Although all damages in the event of any condemnation shall belong to
Landlord whether such damages are awarded as compensation for diminution in
value of the leasehold or to the fee of the Demised Premises, Tenant shall have
the right to claim and recover from the condemning authority, but not from
Landlord, such compensation as may be separately awarded or recoverable by
Tenant in Tenant’s own right. However, Tenant shall have no claim against
Landlord or make any claim with the condemning authority for the loss of its
leasehold estate, any unexpired term or loss of any possible renewal or
extension of said lease or loss of any possible value of said lease.

23.0 RULES AND REGULATIONS:

Tenant shall observe and comply with such reasonable and uniformly applied rules
and regulations as Landlord may prescribe, on written notice to Tenant for the
safety, care, cleanliness, and operation of the Building. To the extent of one
or more conflicts between the terms and provisions of this Lease, and the rules
and regulations, the terms and provisions of this Lease control.

 

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24.0 DAMAGE OR DESTRUCTION:

In the event of any damage or destruction to the Premises by fire or other cause
during the term hereof, the following provisions shall apply:

 

  a. If the Building is damaged by fire or any other cause to such extent that
the cost of restoration, as estimated by Landlord, will equal or exceed fifty
percent (50%) of the replacement value of the Building (exclusive of
foundations) just prior to the occurrence of the damage, then Landlord may, not
later than the sixtieth (60th) day following the damage, give Tenant written
notice of Landlord’s election to terminate this Lease.

 

  b. If the cost of restoration as estimated by Landlord will equal or exceed
fifty percent (50%) of said replacement value of the Building and if the Demised
Premises are not suitable as a result of said damage for the purposes for which
they are demised hereunder, in the reasonable opinion of Landlord and Tenant,
then Tenant may, no later than the sixtieth (60th) day following the damage,
give Landlord a written notice of election to terminate this Lease.

 

  c. If the cost of restoration as estimated by Landlord shall amount to less
than fifty percent (50%) of said replacement value of the Building, or if,
despite the cost, Landlord does not elect to terminate this Lease, Landlord
shall restore the Building and the Demised Premises with reasonable promptness,
subject to delays beyond Landlord’s control and delays in the making of
insurance adjustments by Landlord; and Tenant shall have no right to terminate
this Lease except as herein provided. Landlord shall not be responsible for
restoring or repairing leasehold improvements of Tenant.

 

  d. In the event either of the elections to terminate is properly exercised,
this Lease shall be deemed to terminate on the date of the receipt of the notice
of election and all rentals shall be paid up to that date. Tenant shall have no
claim against Landlord for the value of any unexpired term of this Lease.

 

  e. In any case where damage to the Building shall materially affect the
Demised Premises so as to render them unsuitable in whole or in part for the
purposes for which they are demised hereunder, then, unless such destruction was
wholly or partially caused by the negligence or breach of the terms of this
Lease by Tenant, its employees, contractors or licensees, a portion of the rent
based upon the amount of the extent to which the Demised Premises are rendered
unsuitable shall be abated until repaired or restored. If the destruction or
damage was wholly or partially caused by negligence or breach of the terms of
this Lease by Tenant as aforesaid and if Landlord shall elect to rebuild, the
rent shall not abate and Tenant shall remain liable for the same.

 

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25.0 CASUALTY INSURANCE:

 

  a. Landlord shall at all times during the Term of this Lease, at its expense
(but subject to inclusion in CAM pursuant t o Article 3.0), maintain a policy or
policies of insurance with premiums paid in advance issued by an insurance
company licensed to do business in the State of Minnesota insuring the Building
against loss or damage by fire, explosion or other insurable hazards and
contingencies for the full replacement value, provided that Landlord shall not
be obligated to insure any furniture, equipment, machinery, goods or supplies
not covered by this Lease which Tenant may bring upon the Demised Premises or
any additional improvements which Tenant may construct or install on the Demised
Premises.

 

  b. Tenant shall not carry any stock of goods or do anything in or about the
Demised Premises which will in any way impair or invalidate the obligation of
the insurer under any policy of insurance required by this Lease.

 

  c. Landlord hereby waives and releases all claims, liabilities and causes of
action against Tenant and its agents, servants and employees for loss or damage
to, or destruction of, the Demised Premises or Building or any portion thereof,
including the buildings and other improvements situated thereon, resulting from
fire, explosion or the other perils included in standard extended coverage
insurance, whether caused by the negligence of any of said persons or otherwise.
Likewise, Tenant hereby waives and releases all claims, liabilities and causes
of action against Landlord and its agents, servants and employees for loss of
damage to, or destruction of, any of the improvements, fixtures, equipment,
supplies, merchandise and other property, whether that of Tenant or of others
in, upon or about the Demised Premises resulting from fire, explosion or the
other perils included in standard coverage insurance, whether caused by the
negligence of any of said persons or otherwise. The waivers contained in this
Section remain in force whether or not insurers consent thereto.

 

  d. To the extent that the use of the Demised Premises by Tenant increases the
premium rate for insurance carried by Landlord on the improvements of which the
Demised Premises are a part, Tenant shall pay Landlord, the proportionate amount
of such premium increase. If Tenant installs any electrical equipment that
overloads the power lines to the building or its wiring, Tenant shall, at its
own expense, make whatever changes are necessary to comply with the requirements
of the insurance underwriter, insurance rating bureau and governmental
authorities having jurisdiction.

 

  e. Tenant shall during the Term, obtain and maintain in full force and effect
at its sole cost and expense a policy or policies of insurance insuring all of
its personal property located within the Demised Premises from time to time, as
well as all tenant improvements made thereto, against loss or damage by fire,
explosion or other such hazards and contingencies for the full replacement value
thereof. Such policy or policies shall provide thirty (30) days’ written notice
to Landlord prior to cancellation or modification thereof. Tenant shall furnish
certificates satisfactory to Landlord at the time this Lease is executed and
thereafter from time to time upon request by Landlord that such coverage is in
full force and effect.

 

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26.0 COVENANTS TO HOLD HARMLESS:

Unless the liability for damage or loss is caused by the negligence or willful
misconduct of Landlord, its agents or employees, Tenant shall hold harmless
Landlord from any liability for damages to any person or property in or upon the
Demised Premises and the Building, including the person and property of Tenant
and its employees and all persons in the Building at its or their invitation or
sufferance, and from all damages resulting from Tenant’s failure to perform the
covenants of this Lease. All property kept, maintained or stored on the Demised
Premises shall be so kept, maintained or stored at the sole risk of Tenant.
Tenant agrees to pay all sums of money in respect of any labor, service,
materials, supplies or equipment furnished or alleged to have been furnished to
Tenant in or about the Demised Premises, and not furnished on order of Landlord,
which may be secured by any mechanic’s, materialman’s or other lien to be
discharged at the time performance of any obligations to cure thereby matures,
provided that Tenant may contest such lien, but if such lien is reduced to final
judgment and if such judgment or process thereon is not stayed, or if stayed and
said stay expires, then and in each such event, Tenant shall forthwith pay and
discharge said judgment. Landlord shall have the right to post and maintain on
the Demised Premises, notices of non-responsibility under the laws of the State
of Minnesota.

Subject to Section 25(c), Landlord hereby agrees to indemnify and hold Tenant
harmless from and against any and all costs, damages, claims, liabilities and
expenses (including reasonable attorney fees) suffered by or claimed against
Tenant to the extent caused by (i) any negligent act or omission by Landlord, or
its employees, agents or invitees, or (ii) latent defects in the Building,
Premises or Common Area Facilities.

27.0 NON-LIABILITY:

Subject to the terms and conditions of Article 26.0 hereof, Landlord shall not
be liable for any damage to property of Tenant or of others located on the
Demised Premises, nor for the loss or damage to any property of Tenant or of
others by theft or otherwise. Without limiting the foregoing, Landlord shall not
be liable for any injury or damage to persons or property resulting from fire,
explosion, falling plaster, steam, gas, electricity, water, rain or snow or
leaks from any part of the Premises or from the pipes, appliances, or plumbing
works or from the roof, street or subsurface or from any other place or by
dampness or by any other cause of whatsoever nature. Landlord shall not be
liable for any such damage caused by other tenants or persons in the Demised
Premises, occupants or adjacent property, of the buildings, or the public or
caused by operations in construction of any private, public or quasi-public
work. Landlord shall not be liable for any latent defect in the Demised
Premises. All property of Tenant kept or stored on the Demised Premises shall be
so kept or stored at the risk of Tenant only and Tenant shall hold Landlord
harmless from any claims arising out of damage to the same, including
subrogation claims by Tenant’s insurance carrier.

28.0 SUBORDINATION:

This Lease shall be subordinated to any mortgage that may now exist or that may
hereafter be placed upon the Demised Premises and to any and all advances made
thereunder, and to the interest upon the indebtedness evidenced by such
mortgages, and to all renewals, replacements and extensions thereof; provided,
however, that Tenant’s possession of the Demised Premises will not be disturbed
as long as Tenant is not in default beyond applicable cure periods under this
Lease. In the event of execution by Landlord after the date of this Lease of any
such mortgage, renewal, replacement or extension, Tenant agrees to execute a
reasonable subordination agreement with the holder thereof which agreement shall
provide that:

 

  a. Such holder shall not disturb the possession and other rights of Tenant
under this Lease so long as Tenant is not in default hereunder.

 

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  b. In the event of acquisition of title to the Demised Premises by such
holder, such holder shall accept Tenant as tenant of the Demised Premises under
the terms and conditions of this Lease and shall perform all the obligations of
Landlord hereunder, and

 

  c. The Tenant shall recognize such holder as Landlord hereunder.

Tenant shall, upon receipt of a written request from Landlord therefor, execute
and deliver to Landlord or to any proposed holder of a mortgage or trust deed or
to any proposed purchaser of the Demised Premises a certificate in recordable
form, certifying that this Lease is in full force and effect, and that there are
no offsets against rent or defenses to Tenant’s performance under this Lease, or
setting forth any such offsets or defenses claimed by Tenant as the case may be.
Tenant shall execute and deliver any such subordination agreement or other such
documents within twenty (20) days of written request therefor. The failure of
Tenant to do so within such time frame shall constitute an immediate default
hereunder without the need for Landlord to provide any notice and/or opportunity
to cure as set forth in Section 21.0 a hereof. Tenant hereby irrevocably
appoints Landlord its attorney-in-fact to execute any such subordination
agreement or other such document in the name of Tenant upon the failure of
Tenant to perform its obligations under this Article 28.0 as required hereunder.

29.0 ATTORNMENT:

In the event of a sale or assignment of Landlord’s interest, in the Building in
which the Demised Premises are located, or this Lease, or if the Building comes
into custody or possession of a mortgagee or any other party whether because of
a mortgage foreclosure, or otherwise, Tenant shall attorn to such assignee or
other party and recognize such party as Landlord hereunder; provided, however,
Tenant’s peaceable possession will not be disturbed so long as Tenant faithfully
performs its obligations under this Lease. Tenant shall execute, on demand, any
reasonable attornment agreement required by any such party to be executed,
containing such provisions as such party may require. Landlord shall have no
further obligations under this Lease after any such assignment.

30.0 NOVATION IN THE EVENT OF SALE:

In the event of the sale of the Building, Landlord shall be and hereby is
relieved of all of the covenants and obligations created hereby accruing from
and after the date of sale, and such sale shall result automatically in the
purchaser assuming and agreeing to carry out all the covenants and obligations
of Landlord herein. Notwithstanding the foregoing provisions of this
Section 30.0, Landlord, in the event of a sale of the Building, shall cause to
be included in this agreement of sale and purchase a covenant whereby the
purchaser of the Building assumes and agrees to carry out all of the covenants
and obligations of Landlord herein.

Tenant agrees at any time and from time to time upon not less than ten
(10) business days’ prior written request by Landlord to execute, acknowledge
and deliver to Landlord a statement in writing certifying that this Lease is
unmodified and in full force and effect as modified and stating the
modifications, and the dates to which the Base Rent and other charges have been
paid in advance, if any, it being intended that any such statement delivered
pursuant to this paragraph may be relied upon by any prospective purchaser of
the fee or mortgagee or assignee or any mortgage upon the fee of the Demised
Premises.

 

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31.0 QUIET ENJOYMENT:

Landlord warrants that it has full right to execute and to perform this Lease
and to grant the estate demised, and that Tenant, upon payment of the rents and
other amounts due and the performance of all the terms, conditions, covenants
and agreements on Tenant’s part to be observed and performed under this Lease,
may peaceably and quietly enjoy the Demised Premises for the business uses
permitted hereunder, subject, nevertheless, to the terms and conditions of this
Lease.

32.0 RECORDING:

Tenant shall not record this Lease without the written consent of Landlord.
However, upon the request of either party hereto, the other party shall join in
the execution of the Memorandum of Lease for the purposes of recordation. Said
Memorandum of Lease shall describe the parties, the Demised Premises and the
term of the Lease and shall incorporate this Lease by reference.

33.0 CONSENTS BY LESSOR:

Except as otherwise specifically provided for in this Lease, whenever provision
is made under this Lease for Tenant securing the consent or approval by
Landlord, such consent or approval shall only be in writing and shall not be
unreasonably withheld.

34.0 INTENT OF PARTIES:

Except as otherwise provided herein, Tenant covenants and agrees that if it
shall any time fail to pay any cost or expense required to be paid by it, or
fail to take out, pay for, maintain or deliver any of the insurance policies
above required, or fails to make any other payment or perform any other act on
its part to be made or performed as in this Lease provided, then Landlord, may
after giving Tenant written notice and reasonable opportunity to cure, but shall
not be obligated so to do, and without waiving or releasing Tenant from any
obligations of Tenant in this Lease contained, pay any such cost or expense,
effect any such insurance coverage and pay premiums therefor, and may make any
other payment or perform any other act on the part of Tenant to be made and
performed as in this Lease provided, in such manner and to such extent as
Landlord may deem desirable, and in exercising any such right, to also pay all
necessary and incidental reasonable costs and expenses, employ counsel and incur
and pay reasonable attorneys’ fees. All sums so paid by Landlord and all
necessary and incidental costs and expenses in connection with the performance
of any such act by Landlord, together with interest thereon at the rate of ten
percent (10%) per annum from the date of making such expenditures, by Landlord,
shall be deemed Additional Rent hereunder, and shall be payable to Landlord on
demand. Tenant covenants to pay any such sum or sums with interest as aforesaid
and Landlord shall have the same rights and remedies in the event of the
non-payment thereof by Tenant as in the case of default by Tenant in the payment
of the Base Rent payable under this Lease.

35.0 GENERAL:

 

  a. The Lease does not create the relationship of principal and agent or of
partnership or of joint venture or of any association between Landlord and
Tenant, the sole relationship between the parties hereto being that of landlord
and tenant.

 

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  b. No waiver of any default hereunder shall be implied from any omission to
take any action on account of such default if such default persists or is
repeated, and no express waiver shall affect any default other than the default
specified in the express waiver and that only for the time and to the extent
therein stated. One or more waivers shall not then be construed as a waiver of a
subsequent breach of the same covenant, term or condition. The consent or
approval of any act requiring consent or approval shall not waive or render
unnecessary consent to or approval of any subsequent similar act. No action
required or permitted to be taken by or on behalf of Landlord under the terms or
provisions of this Lease shall be deemed to constitute an eviction or
disturbance of Tenant’s possession of the Demised Premises. All preliminary
negotiations are merged into and incorporated in this Lease. The laws of the
State of Minnesota shall govern the validity, performance and enforcement of
this Lease.

 

  c. This Lease and the exhibits, if any, attached hereto and forming a part
hereof, constitute the entire agreement between Landlord and Tenant affecting
the Demised Premises and there are no other agreements, either oral or written,
between them other than herein set forth. No subsequent alteration, amendment,
change or addition to this Lease shall be binding upon Landlord or Tenant unless
reduced to writing and executed in the same form and manner in which this Lease
is executed.

 

  d. If any agreement, covenant or condition of this Lease or the application
thereof to any person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such
agreement, covenant or condition to persons or circumstances other than those as
to which it is held invalid or unenforceable, shall not be affected thereby and
each agreement, covenant or condition of this Lease shall be valid and be
enforced to the fullest extent permitted by law.

 

  e. The captions are inserted only as a matter of convenience and for
reference, and in no way define, limit or describe the scope of this Lease nor
the intent or any provision thereof.

 

  f. Submission of this instrument to Tenant or proposed Tenant or its agents or
attorneys for examination, review, consideration or signature does not
constitute or imply an offer to lease, reservation of space, or option to lease,
and this instrument shall have no binding legal effect until execution hereof by
both Landlord and Tenant or its agents.

 

  g. This Lease shall be construed under the laws of the State of Minnesota.

 

  h. Each individual executing this Lease on behalf of the parties hereto is
duly authorized to execute and deliver this Lease on behalf of said party.

 

  i. No receipt or acceptance of less than an amount owed shall be deemed to be
other than a partial payment on account for any due and unpaid stipulated
amount; no endorsement or statement of any check or any letter or other writing
accompanying any check or payment shall be deemed an accord in satisfaction, and
a party may accept and negotiate such check or payment without prejudice to its
rights to (i) recover the remaining balance or (ii) pursue any other remedy
provided in this Lease.

 

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  j. Time is of the essence with respect to the due performance of the terms,
covenants and conditions herein contained.

36.0 TENANT IMPROVEMENTS:

Landlord will cause those certain improvements to the Demised Premises, as shown
on Exhibit D attached to this Lease, to be constructed by Landlord’s contractor
at Landlord’s sole expense on plans and specifications to be developed and
mutually agreed upon by both Landlord and Tenant (the “Approved Plans and
Specifications”). All construction shall be performed in a good and workmanlike
manner, and in accordance with the Approved Plans and Specifications. So long as
this Lease is executed no later than August 1, 2008, construction shall be
completed by October 31, 2008, and punchlist items shall be completed by
November 30, 2008. The Approved Plans and Specifications will be executed by
both Landlord and Tenant and attached as Exhibit D to this Lease as soon as both
Landlord and Tenant have agreed to the same. Any additional tenant improvements,
as well as change orders to the Approved Plans and Specifications, shall be made
at the sole cost and expense of Tenant, subject to Landlord’s prior written
approval and subject to all other provisions of this Lease, including compliance
with all applicable governmental laws, ordinances and regulations. Tenant is not
required to remove any improvements made under this Section 36.

37.0 FORCE MAJEURE:

Either party’s failure to perform the terms and conditions of this Lease, in
whole or in part, other than any term requiring the payment of money, shall not
be deemed a breach or a default hereunder or give rise to any liability of such
party to the other if such failure is attributable to any unforeseeable event
beyond such party’s reasonable control and not caused by the negligent acts or
omissions or the willful misconduct of such party, including, without
limitation, flood, drought, earthquake, storm, pestilence, lightning, and other
natural catastrophes and acts of God; epidemic, war riot, civic disturbance or
disobedience, and act of the public enemy; fire, accident, wreck, washout, and
explosion; strike, lockout, labor dispute, and failure, threat of failure, or
sabotage of such party’s facilities; delay in transportation or car shortages,
or inability to obtain necessary labor, materials, components, equipment,
services, energy, or utilities through such party’s usual and regular sources at
usual and regular prices; and any law, regulation, order or injunction of a
court or governmental authority, whether valid or invalid and including, without
limitation, embargoes, priorities, requisitions, and allocations or restrictions
of facilities, equipment or operations. In the event of the occurrence of such a
force majeure event, the party unable to perform promptly shall notify the other
party.

38.0 OPTION TO RENEW:

Provided the Lease is in full force and effect and Tenant is not in default
beyond any applicable cure period under any of the other terms and conditions of
the Lease, at the time of either notification of renewal or commencement of the
Renewal Term (as that term is hereinafter defined), then Tenant shall have the
right to renew the Lease for one (1) period of five (5) years (the “Renewal
Term”), for the Demised Premises being leased by Tenant as of the date the
Renewal Term is to commence, on the same terms and conditions set forth in the
Lease, except as modified by the terms, covenants and conditions set forth
below:

 

  a.

If Tenant elects to exercise the option, then Tenant shall provide Landlord with
written notice no later than the date which is 180 days prior to the expiration
of the initial Term, time being of the essence. If Tenant fails to timely
provide such notice, Tenant shall have no right or additional right to extend or
renew the Term

 

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of this Lease and this Lease shall expire at the end of the initial Term. The
notice shall be given in the manner provided in the Lease for the giving of
notices to Landlord.

 

  b. If Tenant elects to exercise the option to renew, then the Base Rent to be
paid by Tenant to Landlord during the Renewal Term shall be at the rate which is
two percent (2%) greater than the Base Rent during the previous year in the
initial Term.

 

  c. The option set forth in this Article is not transferable the parties hereto
acknowledge and agree that the option to renew as set forth in this Article
shall be “personal” to Tenant executing this Lease, and that in no event will
any assignee or sublessee (other than a Tenant Affiliate) have any rights to
exercise any rights set forth in this Article.

39.0 RIGHT OF FIRST OFFER TO LEASE AVAILABLE SPACE: At any time after the
initial lease-up of any space vacant as of October 1, 2008, Tenant shall,
subject to the terms and conditions set forth in this Article, have the right of
first offer (the “Right of First Offer”), to lease any other contiguous space to
the Demised Premises that has or will “become available” (as that term is
hereinafter defined) within the Building (the “Offer Space”).

 

  a. Tenant’s Right of First Offer is subject to and as conditioned upon (i) the
Lease must be in full force and effect; (ii) Tenant shall not be in default
herein; (iii) Tenant’s offer to lease the Offer Space must be for a term which
is co-terminus with the Term of this Lease (as extended pursuant to the
provisions set forth in Article 39.0 above); and (iv) Tenant’s offer to lease
the Offer Space must meet such other terms and conditions as are set forth in
this Article.

 

  b. After any part of the Offered Space has or will “become available”,
Landlord shall not, during the Term of this Lease (as extended pursuant to the
provisions set forth in Article 39.0 above), offer on the market or lease to
another tenant that space within the Offer Space that has or will “become
available” without first offering Tenant the right to lease that space as
provided in this Article. Space shall be deemed to “become available” when the
lease for space occupied by a tenant other than Tenant herein, expires or is
otherwise terminated. Offer Space shall not be deemed to “become available” if
the space is: (i) assigned or subleased by the current tenant of the space or
(ii) re-leased by the current tenant of the space by renewal, extension, or
re-negotiation.

 

  c.

Landlord agrees that prior to entering into a lease with another tenant for
Offer Space, Landlord shall so notify Tenant, in writing, which notice shall be
accompanies by a term sheet for such Offer Space (the “Term Sheet”), setting for
the terms and conditions under which the Landlord is willing to lease such Offer
Space to Tenant. Tenant shall have a period of five (5) business days after
receipt of such notice and the Term Sheet (the “Acceptance Period”) within which
to notify Landlord, in writing, that it elects to lease such space on the terms
(including a required minimum lease term as set forth in Section (a) above) and
conditions set forth in such Term Sheet. If Tenant makes such election within
the Acceptance Period, an appropriate amendment to this Lease shall be entered
into by Landlord and Tenant to add the Offer Space to the Demised Premises on
the terms set forth in the Term Sheet submitted by Landlord. If Tenant does not
make the aforesaid election within the Acceptance Period, or if Landlord and
Tenant do not enter into an amendment to this Lease incorporating such space on
the terms set forth in the Term Sheet within thirty (30) days after receipt by
Landlord of Tenant’s written election to lease such Offer Space, Tenant shall be
deemed to have waived its rights with respect to the space set forth in
Landlord’s notice, Tenant’s Right of First Offer shall

 

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automatically terminate and be of no further force and effect, and Landlord
shall be free to lease such Offer Space to any other party free of any claim of
Tenant.

 

  d. If this Lease or Tenant’s right to possession of the Demised Premises shall
terminate in any manner whatsoever before Tenant shall exercise its rights under
this Article, or if Tenant shall have subleased or assigned all or any portion
of the Demised Premises, then immediately upon such termination, sublease, or
assignment, this Article and Tenant’s rights hereunder shall simultaneously
terminate and become null and void. Such right is personal to Tenant. Under no
circumstances whatsoever shall the assignee under a complete or partial
assignment of the Lease, or a subtenant under a sublease of the Demised
Premises, have any right to exercise any rights under this Article or have any
right to receive any notice from Landlord.

40.0 BROKERAGE. Landlord and Tenant represent and warrant to one another that
neither has worked with any broker regarding the lease of the Demised Premises
other than Tenant, who is represented by TaTonka Real Estate Advisors
(“TaTonka”). Landlord shall pay a commission to TaTonka in the amount of $2.50
per rentable square foot in the Demised Premises, which commission is payable
upon execution of this Lease.

IN WITNESS WHEREOF, Landlord and Tenant have executed this lease in form and
manner sufficient to bind them at law, as of the day and year first above
written.

 

LANDLORD:     TENANT: ROSEVILLE PROPERTIES MANAGEMENT COMPANY, as agent for
Commers-Klodt III     ENTEROMEDICS, INC. /s/ Daniel P. Commers     /s/ Mark B.
Knudson Signature     Signature           Name (print)     Name (print)       
   Title     Title           Date Signed     Date Signed

 

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EXHIBIT A

SITE PLAN

(See Attached)

 

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EXHIBIT B

FLOOR PLAN

(See Attached)

 

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EXHIBIT C

COMMON AREA MAINTENANCE

2800-2860 Patton Road, Roseville Business Commons

2008          ESTIMATED COMMON AREA MAINTENANCE (CAM) EXPENSES

 

Bldg. SF: 55950      Non Hughes SF: 37797

 

     $/Year    $/SF/Yr    

Rationale.....

Property/Liability Insurance

   $ 7,000    $ 0.13     Confirmed premium

Snow Removal

   $ 6,800    $ 0.12     Nov-March contract plus salt/sand

Lawn Care

   $ 3,800    $ 0.07     Apr-Oct contract, irrigation repairs

Roof Maintenance

   $ 300    $ 0.01     Repairs, annual inspection

Parking Lot Repair/Replacement

   $ 500    $ 0.01     Repairs, sweeping, striping

Building Repairs

   $ 500    $ 0.01     Estimate

Window Cleaning

   $ 400    $ 0.01     Exterior only - 2x/year

Maintenance Labor

   $ 800    $ 0.01     Estimate of 1 hr./month @$75/hr.

HVAC Scheduled Maintenance*

   $ 5,100    $ 0.09     4x/year inspec/filters + condens clean

Maintenance Supplies

   $ 200    $ 0.00     Estimate

Exterior Lighting

   $ 1,700    $ 0 03     Estimate

FireSprinkler Alarm Monitoring

   $ 1,200    $ 0.02     Monitor contract, 2 phone lines, Inspection

Administration/Management Fees

   $ 39,000    $ 0.70     Estimate on % of collected rents                  

TOTALS:

   $ 67,300    $ 1.20  /SF/Yr                    

 

*       HVAC scheduled maintenance for Integ/Restore Medical only billed
separately

 

***  Sewer/Water billed quarterly

 

2008          Est. Property Tax:

   $ 2.67  /SF/Yr  

 

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EXHIBIT D

APPROVED PLANS AND SPECIFICATIONS

(See Attached)

 

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EXHIBIT E

TEMPERATURES

Temperature / Humidity Ranges for Comfort

 

Conditions

  

Relative Humidity

   Acceptable Operating Temperatures       °C    °F

Summer (light clothing)

  

If 30%, then

If 60%, then

   24.5 - 28

23 - 25.5

   76 - 82

74 - 78

Winter (warm clothing)

  

If 30%, then

If 60%, then

   20.5 - 25.5

20 - 24

   69 - 78

68 - 75

 

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