SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C.  20549

                                    FORM 10-K

(Mark One)
   [X]        ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended October 31, 1998

                                       OR

  [ ]       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                 For the Transition period from              to

                        Commission File Number:  0-11518

                                PPT VISION, INC.
             (Exact name of registrant as specified in its charter)

               MINNESOTA                             41-1413345
      ---------------------------            --------------------------
      (State or other jurisdiction                (I.R.S. Employer
   of incorporation or organization)            Identification No.)

                             10321 West 70th Street
                             Eden Prairie, MN  55344
              -----------------------------------------------------
              (Address of principal executive offices and zip code)

       Registrant's telephone number, including area code:  (612) 995-9500

        Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:  Common Stock ($.10
par value)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
                                   YES  X     NO
                                       ---    ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  ( )

As of January 4, 1999, assuming as market value the closing sale price of $5.00
as reported by the Nasdaq System on that date, the aggregate market value of
shares of Common Stock held by non-affiliates was approximately $21 million.

As of January 4, 1999, 5,396,359 shares of common stock, $.10 par value were
outstanding.

Documents Incorporated by Reference:  The Company's Proxy Statement for its
Annual Meeting of Shareholders to be held March 11, 1999 is incorporated by
reference into Part III of this Form 10-K.

Page 2

                                TABLE OF CONTENTS
                                -----------------

PART I                                                                Page
                                                                      ----

     Item 1.   Business..............................................   3
                  Important Factors Regarding
                     Forward-Looking Statements......................  14
                  Executive Officers of the Company..................  17
     Item 2.   Properties............................................  18
     Item 3.   Legal Proceedings.....................................  18
     Item 4.   Submission of Matters for a
                  Vote of Security Holders...........................  18

PART II

     Item 5.   Market for Registrant's Common
                  Equity and Related Stockholder Matters.............  19
     Item 6.   Selected Financial Data...............................  20
     Item 7.   Management's Discussion and Analysis of Financial
                  Condition and Results of Operations................  22
     Item 7A.  Quantitative and Qualitative Disclosures About
                  Market Risk........................................  26
     Item 8.   Financial Statements and Supplementary Data...........  26
     Item 9.   Changes in and Disagreements with Accountants on
                  Accounting and Financial Disclosure................  26

PART III

     Item 10.  Directors and Executive Officers of the Registrant....  27
     Item 11.  Executive Compensation................................  27
     Item 12.  Security Ownership of Certain
                  Beneficial Owners and Management...................  27
     Item 13.  Certain Relationships and Related Transactions........  27

PART IV

     Item 14.  Exhibits, Financial Statement Schedules, and Reports
                  on Form 8-K........................................  28

     Signatures......................................................  30

Page 3

                                    BUSINESS
                                    --------

OVERVIEW

  PPT Vision, Inc. ("PPT Vision" or the "Company") is a leading designer,
manufacturer, marketer and integrator of a complete family of machine vision
systems for end user manufacturers, system integrators and machine builders. The
Company's machine vision systems consist of a combination of proprietary
computer software and hardware, cameras and lighting, working together to
capture and analyze images of moving parts to determine the quality of
manufactured parts and control manufacturing processes. PPT Vision's systems
enable manufacturers to achieve 100% on-line inspection, thus achieving zero
defect production, in situations where previously only random sampling or less
precise human inspection was used as a means of monitoring quality. In addition
to functioning as a quality control tool, PPT Vision systems provide
manufacturers a window on their manufacturing processes by producing real-time
statistical process control feedback. This allows manufacturers to take earlier
corrective action to improve their manufacturing process.

  The Company's machine vision systems are used for a broad range of
manufacturing applications, including electronic and mechanical assembly
verification, verification of printed characters, packaging integrity, surface
flaw detection and gauging and measurement tasks. The Company's vision systems
are sold throughout the Americas, Europe and Asia to a broad range of industry
categories, including automotive, electronic and semiconductor components,
consumer goods, medical devices, pharmaceuticals and plastics. Major
manufacturing end users of PPT Vision systems include AMP, Abbott Labs, Berg
Electronics, Chrysler, the Delphi Electronic Division of General Motors,
Imation, Johnson & Johnson, Kemet, Micron Technology, Molex, Philip Morris,
Siemens, 3M and United Technologies.

  PPT Vision believes that it has a leadership position as the most vertically
integrated developer of machine vision systems and solutions for a wide range
of manufacturing applications. Through this approach, PPT Vision can rapidly
and cost-effectively provide machine vision system solutions to a wide variety
of manufacturing end users while enabling them to concentrate their engineering
and manufacturing expertise on the products they manufacture. PPT Vision's
library of machine vision software tools enables end users to implement machine
vision solutions to a growing number of manufacturing applications quickly and
cost effectively.

BACKGROUND

  A machine vision system consists of computer software and hardware working
together with cameras and lighting to perform image analysis and image
processing for automated inspection, measurement and identification functions
in the manufacturing process. Commercial use of machine vision technology for
manufacturing quality control began to emerge in the early 1980s. However,
machine vision systems at that time were complex to program and maintain,
difficult to install, limited in performance and not cost effective. Through
advances in microprocessor and software technologies, these barriers have been
removed, enabling machine vision to emerge as a powerful process control
technology that allows manufacturers to improve quality and increase
productivity.

  The machine vision market is large and highly fragmented. The Automated
Imaging Association ("AIA") estimates that the North American market for machine
vision systems in 1997 was approximately $1.2 billion, with worldwide levels
estimated at approximately $4.0 billion. The AIA expects this market to grow at
approximately 16% per year through the year 2002. According to the AIA, the
majority of the estimated 200 companies in the North American machine vision
market have less than $5 million in annual revenues. Demand for machine vision
systems comes from end user manufacturers who apply these systems as an integral
part of their manufacturing process, original equipment manufacturers ("OEMs")
who incorporate machine vision systems into their products, systems integrators
and machine builders. The AIA estimates that a substantial majority of the North
American market for machine vision systems consists of sales to end user
manufacturers.

  A key factor in the expansion of the machine vision market is the growth in
the demand for machine vision systems in the semiconductor and electronics
industries. The growth in demand for personal computers, cellular
communications and other electronic devices, as well as the increase in
electronic components inside other products such as consumer appliances and
automobiles, is stimulating demand for electronic and semiconductor components.
In an effort to rapidly ramp up manufacturing capability while at the same time
introducing innovative new designs and improving quality, manufacturers of
these components are increasingly turning to machine vision as a vital part of
their manufacturing process.

  The growth of the end user machine vision market is also being driven by
global competitive trends, which have led manufacturers worldwide to
dramatically redesign manufacturing processes in order to reduce cost and
increase productivity and quality. In order to meet today's manufacturing
quality requirements, statistical sampling methods are insufficient and 100%
on-line inspection is required. To accomplish these objectives, manufacturers
are increasingly adopting machine vision solutions.

  Manufacturers are demanding expanded capabilities from machine vision
systems, including faster processing capabilities and greater ease of use.
Manufacturers are also demanding more comprehensive services from machine
vision providers, including application engineering, technical support and
training. Furthermore, manufacturers are seeking the ability to monitor trends,
to better comprehend the manufacturing process and to identify problems. In
addition, manufacturers are being challenged to maintain high production levels
that require rapid set up times, flexibility and seamless networking with the
host manufacturing control system to provide comprehensive diagnostic and
process control feedback.

THE PPT VISION SOLUTION

  The Company's machine vision systems are primarily targeted at providing
manufacturers with 100% on-line inspection in high speed discrete part
manufacturing applications. This typically replaces older off-line random
sampling techniques or human vision inspection techniques as a means of
monitoring quality, thus enabling manufacturers to achieve zero defect
production.

  PPT Vision's family of machine vision systems, which include its proprietary
Vision Program Manager ("VPM") graphical programming software, provide
significant performance advantages that meet manufacturers' critical
requirements. These requirements include high speed, flexibility, ease-of-use,
networkability and statistical feedback, all without sacrificing performance.
All PPT Vision systems are supported by the Company's focus on providing its
customers with complete solutions, not just components, and a major commitment
to providing its customers with value-added application engineering services.

  PPT Vision has developed products that have specific advantages in terms of
speed and ease-of-use. Many of the Company's machine vision systems are capable
of operating speeds of over 12,000 parts per minute performing 100% on-line
inspection. This speed can be critical to successfully employing machine vision
in many applications. PPT Vision also pioneered the use of an icon-based visual
programming system (i.e. VPM) operating in the Microsoft(R) Windows(TM)
environment. Users are able to program the Company's systems by creating a
flowchart of icons linked together rather than having to write a computer
program in a programming language such as C or using a complex, pull-down menu-
based system. This results in lower cost and time for implementation.

  The Company is pursuing what it believes is the most fully vertically
integrated business model in the machine vision industry. PPT Vision develops
its own image acquisition and processing hardware, image analysis software,
application specific software tools and general purpose graphical user
interface. The Company also provides lighting solutions and value-added
application engineering services on a direct basis to manufacturers. These
capabilities enable PPT Vision to provide its customers with (i) application
specific software tools such as the Connector Tool used for inspection of fully
assembled electronic connectors, (ii) complete application specific products
such as the PPT8600 in-tray inspection system which provides high speed two-
dimensional ("2D") inspection and three-dimensional ("3D") scanning of ball-grid
array ("BGA") and leaded components, and (iii) complete custom solutions. This
strategy enables PPT Vision to leverage its investment in core software and
hardware architectures while providing improved service for the end user
manufacturing customers. In addition, PPT Vision markets its vision systems to
manufacturing system integrators and machine builders who address the end user
market with unique expertise in specific vertical markets. Many system
integrators and machine builders prefer to use the Company's complete vision
systems, which enable them to reduce programming development time, save money
and concentrate their expertise on material handling and integration issues. The
Company believes that this business model gives it a decisive competitive
advantage in providing cost effective, complete solutions to the end user
machine vision market.

PPT VISION STRATEGY

  The Company's objective is to be a worldwide leader in the design,
manufacture, marketing and integration of machine vision systems for automated
manufacturing applications in the end user machine vision market. Through the
successful integration of the Company's five core competencies, including
image acquisition, image processing, application development software, optics
and illumination and vision system integration, the Company believes it will
be able to meet its objective and successfully implement its strategy.

  Key elements of the Company's strategy include:

  * Provide Complete Solutions to End Users: The Company focuses on providing
    complete machine vision solutions to end user manufacturers, system
    integrators and machine builders. PPT Vision is pursuing what it believes
    to be the most fully vertically integrated business model in the
    industry, including the design, manufacturing, marketing and integration
    of complete machine vision solutions. The Company believes this provides
    it with a competitive advantage in delivering cost effective complete
    vision solutions.

  * Extend Technology Leadership in Speed and Ease-of-Use: The Company is
    continuing to aggressively invest in next generation software and
    hardware architectures that will expand its lead in speed, ease-of-use
    and the ability to deliver cost effective complete solutions to its
    customers.

  * Target Expanding Markets Through Continued Development of Application
    Specific Software Tools and Hardware Products: The Company's application
    specific software tools are a proven solution for a wide variety of
    electronic component inspection applications. In response to the worldwide
    expansion of the semiconductor and electronics industries, the Company is
    developing additional software tools and hardware products for electronic
    component, electronics and semiconductor applications.

  * Provide a Superior Level of Value-Added Application Engineering Support:
    The Company delivers a high level of value-added application engineering
    support to its end user customers through its own in-house applications
    engineering resources. Manufacturing end users increasingly want to
    concentrate their engineering expertise on the products they manufacture,
    not on engineering machine vision systems. They are seeking complete
    machine vision solutions with the associated application engineering
    support on an on-going basis.
  * Increase International Market Presence: The Company is aggressively focusing
    on increasing its market share in the worldwide machine vision market. The
    Company believes international markets represent a significant opportunity
    and intends to capture a significant share of this market through investment
    and expansion in its international sales distribution and support
    infrastructure.

PRODUCTS

  PPT Vision's systems consist of proprietary software and hardware working
together with cameras and lighting to capture and analyze images of parts on-
line. The four key process steps in the PPT Vision solution are lighting and
optics, image acquisition, image processing and outputs. In the lighting and
optics step, cameras, lenses and lighting options are configured to capture a
high-definition image of each part as it passes the camera. Image acquisition
involves capturing an image at an extremely high rate of speed and preparing the
image for further processing. In image processing, the machine vision system
measures critical part features and compares algorithmically the digital image
to a preset standard that has been programmed into the system. The output
function typically involves sending the results of the inspection process to the
production line controller or the host manufacturing control system, as well as
providing real-time process control data which can be used to improve the
production process over time.

  Software Operating System and Tools. All PPT Vision systems run on proprietary
software in a Microsoft(R) Windows(TM) environment using the Company's VPM user
interface. VPM is an icon-based, graphical language that is extremely flexible
and easy to use. It allows the Company's customers to create complete inspection
solutions without the need for knowledge of computer programming languages.
Instead of writing a computer program in a programming language such as C or
using a complex, pull-down menu-based system, the vision system is set up by
creating visual flowcharts. Clicking a trackball, the user graphically grabs
icons (representing machine vision functions) out of system toolboxes and
arranges them in the workspace on the system monitor. The icons are then
connected with different colored lines to indicate execution and data flow
throughout the inspection routine.

  Machine vision functions are performed by the Company's extensive set of
software tools. PPT Vision has developed a library of over 40 vision tools
contained in four toolboxes covering imaging, input/output ("I/O"), utility
and control functions. The Company's imaging toolbox contains all system tools
directly associated with image acquisition, processing and analysis. These
tools provide access to all of the Company's vision algorithms, which are the
vital core of all inspections performed by its vision systems. The I/O toolbox
holds all the tools which permit an inspection developer to control vision
system input and output options. These tools allow for system networking, data
collection and application control. The tools in the utility and control
toolboxes access functions such as counters, reset and display functions, math
and logical operations, data collection and screen controls. These toolboxes
also provide control of data flow to a variety of peripherals such as disk
drives, serial ports and Microsoft(R) Visual Basic(TM) programs.

  Hardware Architecture. PPT Vision's machine vision processor includes the
Company's proprietary high performance board set with a DSP (digital signal
processor) and high speed pipeline architecture along with an integrated PC for
inspection set-up and networking and fully integrated I/O capability. All PPT
Vision systems are capable of capturing full framed video images at a rate of up
to 3,600 images per minute, in both strobed and shuttered modes. Most
competitors are limited to capturing full frame images at 1,800 images per
minute, which is the industry standard. Much higher inspection rates are
achieved through the use of the Company's exclusive partial scanning technology
and split-screen imaging, which enables speeds of over 12,000 parts per minute.

  PPT Vision Product Family. The Company's newest machine vision systems are the
Passport(R) DSL(TM) and Scout(R) DSL(TM) (Digital Serial Link).  The DSL systems
are the world's first completely digital machine vision systems and network.
DSL-based systems are an integrated network of cameras, lighting, image
processors and hubs, which together form a complete machine vision system.  The
Passport DSL and Scout DSL systems are completely digital, which results in much
greater accuracy and repeatability than traditional analog systems. The Passport
DSL is housed in an industrially rugged enclosure while the Scout DSL is
packaged in a non-industrial style enclosure. To complement the new DSL family,
the Company has also developed the DSL6000 digital camera.

  The Company also offers the Passport 440, Passport 240, and Scout machine
vision systems.  The Passport 440 is designed to operate with up to four
asynchronously functioning cameras for multiple inspection views and complex
imaging tasks. The Passport 240 has all of the basic capabilities of the
Passport 440 in a two-camera model. Both systems are housed in industrially
rugged enclosures and are capable of operating at speeds of over 12,000
inspections per minute. The Scout is a cost-effective machine vision system
designed for industrial applications that do not require rugged enclosures. It
is packaged in a non-industrial style enclosure and is capable of running two
cameras with similar speed and power to the Passport 240.

  In addition, the Company sells a broad range of peripheral services and
components, including applications engineering, installation and training
services, custom lighting solutions, fixturing, cameras, cabling and various
software options.

MARKETS AND CUSTOMERS

  The Company sells its products to a broad range of industries, including
manufacturers of electronic and semiconductor components, pharmaceuticals,
medical devices, automotive components, consumer products and plastics. As of
October 31, 1998, the Company had sold 2,564 machine vision systems to over 250
customers since inception.

  In each of the past several years, the Company has had one or more customers
that have accounted for ten percent or more of the Company's net revenues.
During the fiscal year ended October 31, 1998, sales to one customer, Simac
Masic B.V., a European distributor for the Company, represented 16% of net
revenues.  The loss of, or significant curtailment of purchases by, any of the
Company's principal customers could have a material adverse effect on the
Company's results of operations.

SALES, MARKETING AND CUSTOMER SUPPORT

  The Company sells its products primarily on a direct basis in the United
States to end users, system integrators, machine builders and OEMs. Outside the
United States, the Company sells primarily through a network of distributors
covering Europe, Asia and South America. The Company markets its products
through appearances at industry trade shows, advertising in industry journals,
articles published in industry and technical journals and through direct-selling
in specific vertical markets. In addition, the Company's strong customer
relationships serve as valuable references.

  The Company focuses on delivering a high level of value-added applications
engineering support to its end user customers through its own in-house
applications engineering resources. The Company also provides extensive
training opportunities for its customers, either at the Company's facilities or
on-site at the customer's facilities.

  The Company's sales and applications engineering departments are structured
along a team concept, with each team having dedicated sales and applications
engineering resources. The Company believes this team approach provides it with
increased flexibility in responding to customers' needs.

  In September of 1997 the Company created a new corporate group, the
Microelectronics Product Group ("MPG"), to develop and market high-speed
inspection equipment for the electronics and semiconductor industries. The first
product offering from the group is the PPT8600 3D and 2D in-tray inspection
system for BGA and leaded components, including semiconductor packages and
electronic connectors.

  The following table sets forth the percentage of the Company's net revenues
(including sales delivered through international distributors) by geographic
location during the past three years:

                                                    YEAR ENDED
                                                   OCTOBER 31,
                                                  --------------
                                                  1998 1997 1996
                                                  ---- ---- ----
      North America.............................. 62%   78%  73%
      Europe..................................... 18%   14%  14%
      Far East................................... 18%    8%  13%
      South America..............................  2%   --   --

  Substantially all of the Company's export sales are negotiated, invoiced and
paid in United States dollars.


BACKLOG

  The Company does not believe backlog is a key indicator of future revenues in
the end user machine vision market. PPT Vision products are typically shipped
within 30 days after receipt of an order. The Company believes that maintaining
as short a time as practical for delivery is a competitive advantage in the end
user machine vision market. The nature of the end user machine vision market is
that customers do not normally place orders for large multiples of units with
scheduled deliveries over many months. Rather, end user machine vision
addresses a specific application or problem at a specific manufacturing site.

RESEARCH AND PRODUCT DEVELOPMENT

  PPT Vision's products are distinguished by the Company's proprietary
technology and its significant commitment to research and product development
efforts. The Company's research and product development efforts are focused on
its five core competencies, including image acquisition, imaging processing,
application development software, optics and illumination and vision system
integration. The Company believes that the integration of these core
competencies is essential to achieving long term success in the machine vision
market. The Company's five core competencies can be described as follows:

    Image Acquisition. This refers to the means and methods by which an image
  is captured, stored, and then made available for subsequent processing and
  display. Image acquisition combines the disciplines of photo-optics and
  electrical engineering.

    Imaging Processing. This refers to the means and methods whereby an image
  is analyzed or enhanced to produce some desired information, measurements
  or results. Image processing combines the disciplines of software
  engineering, mathematics, algorithm development and electrical engineering
  to implement efficient solutions to computationally complex problems.
  Typical image processing tasks include real-time inspection, guidance,
  gauging and recognition.

    Application Development Software. This refers to the means and methods
  whereby a machine vision system is configured and controlled. The
  development and support of applications development software requires
  expertise in the disciplines of object-oriented programming, graphical
  programming environments, man-machine interfaces, device drivers and
  general software engineering.

    Optics and Illumination. This refers to the means and methods by which a
  scene is illuminated and optically presented to an input device such as a
  video camera. Special optics and illumination techniques are often used to
  reveal features in an image which would otherwise go undetected or to
  optimize an image for subsequent processing. Strobed illumination is often
  used to "freeze" the motion of continuously moving parts. Optics and
  illumination draw on skills from the disciplines of physics, mechanical
  engineering and electrical engineering.

    Vision System Integration. This refers to the means and methods whereby a
  machine vision system is interfaced to and combined with other factory
  automation equipment for purposes of creating a complete solution for the
  customer. This may include the development of application specific solutions
  for certain vertical market applications along with mechanical fixturing for
  mounting camera and lighting components, networking and programmable
  controllers for process control, and reject mechanisms for ejection of
  defective parts.

Various configurations of the Company's products include proprietary design
work performed by the Company's employees in each of these five areas.

  PPT Vision believes that continued and timely development of new products and
enhancements to existing product characteristics is essential to maintaining its
competitive position. The Company has committed and expects to continue to
commit substantial resources to its research and development effort, which plays
a significant role in maintaining and advancing its position as a leading
provider of complete machine vision systems. The Company's current research and
development efforts are directed to increasing performance in image acquisition,
image processing and application development software, which could produce
systems with greater speed and accuracy while also providing customers with more
expanded software tools. These efforts include the Company's traditional two-
dimensional ("2D") machine vision systems as well as three- and one-dimensional
("3D" and "1D") sensor products. Key software products under development will
enable support for different hardware and user interfaces, as well as increasing
the development speed of application specific software tools. The Company also
intends to expand its offerings of application specific software and hardware
products for the industries it identifies as being poised to exhibit significant
growth in demand for machine vision solutions, which includes electronics and
semiconductors.

  Research and development expenditures were $2.9 million, $2.3 million and $1.8
million in the fiscal years ended October 31, 1998, 1997, and 1996,
respectively.

MANUFACTURING

  The Company assembles, configures and tests its products at its suburban
Minneapolis facility. The Company's printed circuit boards are custom built by
several manufacturers. Most of the components used in the Company's machine
vision systems are available off-the-shelf. However, some components are
available from only a single supplier or from a limited number of suppliers.
The Company typically purchases inventory and builds products in response to
quarterly sales forecasts, enabling it to ship products within 30 days after
receipt of an order.

  Much of the Company's product manufacturing, consisting primarily of circuit
board manufacturing and assembly and machined parts production, is contracted
with outside vendors. Company personnel inspect incoming parts and perform
final assembly and testing of finished products. The Company believes that its
outsourcing strategy enables it to employ its resources on the key core
competency areas from which it derives its competitive advantages.

COMPETITION

  The machine vision industry is highly fragmented. Recent data provided by the
AIA show that there were approximately 200 machine vision companies in North
America in 1997, of which the majority had revenues of less than $5 million.
Currently, no competitor holds a significant aggregate market share percentage,
although some dominate individual niches within the overall machine vision
industry. The Company believes that over the next several years, the industry
will experience a continuing trend toward consolidation. However, given the
application specific nature of the industry, the Company also believes that the
machine vision industry will continue to have a relatively large number of
competitors.

  The Company believes the major competitive factors in the industry are
performance, quality, support and price. Although the Company believes that its
products are unique, competitors offer technologies and systems that are capable
of certain of the functions performed by the Company's products. The Company
faces competition from a number of companies in the machine vision market, some
of which have greater manufacturing and marketing capabilities and greater
financial, technological and personnel resources. Certain competitors in this
market include the RVSI Acuity CiMatrix division of Robotic Vision Systems, Inc.
and Cognex Corporation.

  Although the Company believes that its current products offer several
advantages in terms of speed and ease-of-use and although the Company has
attempted to protect the proprietary nature of such products, it is possible
that any of the Company's products could be duplicated by other companies in
the same general market. There can be no assurances that the Company would be
able to compete with similar products produced by a competitor.

PATENTS AND PROPRIETARY RIGHTS

  The Company relies on a combination of patent, copyright, trademark and trade
secret laws to establish its proprietary rights in its products. The Company has
applied for foreign and domestic patents which are now pending with respect to
several key technologies. The Company owns several issued and pending United
States and international patents for various inventions used in machine-vision,
automated inspection and illumination systems. The Company believes that the
patents it owns may have been useful in protecting the Company's proprietary
products and may be useful in protecting potential future products. The Company
also believes its ability to efficiently develop and sell high performance, cost
effective vision systems on a timely basis, whether patented or not, is crucial
to the Company's future success. The Company requires each of its employees to
enter into standard agreements pursuant to which the employee agrees to keep
confidential all proprietary information of the Company and to assign to the
Company all rights  in any proprietary information or technology made or
contributed by the employee during his or her employment or made thereafter as a
result of any inventions conceived or work done during such employment. Despite
these precautions, it may be possible for a third party to copy or otherwise
obtain and use the Company's products or technology without authorization or to
develop similar technology independently. In addition, effective patent,
copyright, trademark and trade secret protection may be unavailable or limited
in certain foreign countries.

  A number of users of machine-vision technology have received notice of alleged
patent infringement from, and/or have been sued by, the Lemelson Medical,
Education and Research Foundation Limited Partnership ("Lemelson Foundation")
alleging that their use of machine-vision technology in their production
processes infringes certain patents issued to Jerome H. Lemelson.  Certain of
these users have notified the Company that, in the event it is subsequently
determined that their use of the Company's products in their production
processes infringes any of Mr. Lemelson's patents, they may seek indemnification
from the Company for damages or expenses resulting from this matter. The Company
believes that it has defenses to such indemnification claims. To date, the
Company has received no actual claims for indemnification.  The Company cannot
predict the outcomes from the claims of alleged infringement made by the
Lemelson Foundation or the effect of such outcomes on the operating results of
the Company.

  The Company has obtained United States federal registration for its "PPT",
"PPT Vision", "Passport" and "Scout" trademarks. The Company intends to file for
federal registration of additional trademarks in the future. Although no
assurance can be given as to the strength or scope of the Company's trademarks,
the Company believes that its trademarks have been and will be useful in
developing and protecting market recognition for its products.

EMPLOYEES

  As of January 5, 1999, the Company had 98 employees, including 38 employees
in research and development, 35 in sales and marketing, 19 in manufacturing and
6 in finance and administration. To date, the Company has been successful in
attracting and retaining qualified technical personnel, although there can be no
assurance that this success will continue. None of the Company's employees are
covered by collective bargaining agreements or are members of a union. The
Company has never experienced a work stoppage and believes that its relations
with its employees are excellent.

IMPORTANT FACTORS REGARDING FORWARD-LOOKING STATEMENTS

  Various forward-looking statements have been made in this Annual Report on
Form 10-K.  Forward-looking statements may also be made in the Company's other
reports filed under the Securities Exchange Act of 1934, in its press releases
and in other documents. In addition, from time to time, the Company through its
management may make oral forward-looking statements.

  Forward-looking statements are subject to risks and uncertainties, including
those identified below, which could cause actual results to differ materially
from such statements.  The words "anticipate", "believe", "expect", "intend",
"optimistic", "will" or similar expressions are intended to identify forward-
looking statements. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date on which they are
made.  The Company undertakes no obligation to update publicly or revise any
forward-looking statements.

  Important factors that could cause actual results to differ materially from
the Company's forward-looking statements, as well as affect the Company's
ability to achieve its financial and other goals, include, but are not limited
to, the following:

  Technological Change and New Product Development. The market for the Company's
products is characterized by rapidly changing technology. The Company's future
success will continue to depend upon its ability to enhance its current products
and to develop and introduce new products that keep pace with technological
developments and evolving industry standards, respond to changes in customer
requirements and achieve market acceptance. Any failure by the Company to
anticipate or respond adequately to technological developments and customer
requirements, or any significant delays in product development or introduction,
could have a material adverse effect on the Company's business, results of
operations, financial condition and liquidity. In addition, there can be no
assurance the new products and services or product and service enhancements, if
any, developed by the Company will achieve market acceptance.

  Dependence Upon Principal Customers. In each of the past several years, the
Company has had one or more customers that have accounted for ten percent or
more of the Company's net revenues. During the fiscal year ended October 31,
1998, sales to one customer, Simac Masic B.V., a European distributor for the
Company, represented 16% of net revenues. The loss of, or significant
curtailment of purchases by, any of the Company's principal customers could have
a material adverse effect on the Company's results of operations.

  Cyclicality of Capital Spending by Customers. A significant portion of the
Company's revenues are derived from sales to various segments of the electronic
component industry, such as metal stamping, electronic connectors and passive
components. The markets for these segments, and for the electronic component
industry in general, can be cyclical, resulting in varying amounts of capital
spending. Any significant downturn in capital spending in these markets, or in
any other markets served by the Company's products, could have a material
adverse effect on the Company's business and results of operations.

  Management of Growth. The Company's revenues have increased at an average
annual rate of 18% over the past five years. The Company's future success will
depend on the  ability of its officers and key employees to manage growth
successfully through maintenance of appropriate operational, financial and
management information systems and to attract, retain, motivate and effectively
manage its employees. If the Company's management is unable to manage growth
effectively, the Company's business, results of operations, financial condition
and liquidity could be materially and adversely affected.

  Proprietary Technology. The Company relies heavily on its image acquisition
and image processing hardware designs, along with proprietary software
technology. Although the Company has been issued patents, or obtained licenses
to patents, in the past on certain technology and has patents pending on new
technologies, it currently relies most heavily on protecting its proprietary
information as trade secrets. There can be no assurance that the steps taken by
the Company will be adequate to prevent misappropriation of its technology by
third parties or will be adequate under the laws of some foreign countries,
which may not protect the Company's proprietary rights to the same extent as do
laws of the United States. In addition, the possibility exists that others may
"reverse engineer" the Company's products in order to determine their method of
operation and then introduce competing products. Further, many high technology
markets, including segments of the machine vision industry, are characterized by
the existence of a large number of patents and frequent litigation for financial
gain that is based on patents with broad, and often questionable, application.
As the number of the Company's products increases, the markets in which its
products are sold expands and the functionality of those products grows and
overlaps with products offered by competitors. As a result, the Company believes
that it may become increasingly subject to infringement claims in the future.
Although the Company is not aware that any of its products or proprietary rights
infringe upon the valid rights of third parties, there can be no assurance that
infringement claims will not be asserted against the Company in the future or
that any such claims will not require the Company to enter into royalty
arrangements or result in costly litigation.

  Quarterly Fluctuations. The Company has experienced quarterly fluctuations in
operating results and anticipates that these fluctuations will continue. These
fluctuations have been caused by various factors, including the order flow of
its principal customers, the timing and acceptance of new product introductions
and enhancements and the timing of product shipments and marketing. Future
operating results may fluctuate as a result of these and other factors,
including the Company's ability to continue to develop innovative products, the
announcement or introduction of new products by the Company's competitors, the
Company's product and customer mix, the level of competition and overall trends
in the economy.

  Dependence on Outside Contractors and Suppliers. The Company currently
contracts with third party assembly houses for a substantial portion of its
components and assembly needs. Although the Company endeavors to inspect and
internally test most components prior to final assembly, reliance on outside
contractors reduces its control over quality and delivery schedules. The
failure by one or more of these subcontractors to deliver quality components in
a timely manner could have a material adverse effect on the Company's results of
operations. In addition, a number of the components integral to the functioning
of the Company's products are available from only a single supplier or from a
limited number of suppliers. Any interruption in or termination of supply of
these components, or a material change in the purchase terms, including pricing,
of any of these components, or a reduction in their quality or reliability,
could have a material adverse effect on the Company's business or results of
operations.

  International Revenue. In the years ended October 31, 1998, 1997 and 1996,
sales of the Company's products to customers outside North America accounted for
approximately 38%, 22% and 27%, respectively, of the Company's net revenues. The
Company anticipates that international revenue will continue to account for a
significant portion of its net revenues. The Company's operating results are
subject to the risks inherent in international sales, including various
regulatory requirements, political and economic changes and disruptions,
transportation delays and difficulties in staffing and managing foreign sales
operations and distributor relationships. In addition, fluctuations in exchange
rates may render the Company's products less price competitive relative to local
product offerings. There can  be no assurance that these factors will not have a
material adverse effect on the Company's future international sales and,
consequently, on the Company's operating results.

  Competition. The Company competes with other vendors of machine vision
systems, some of which may have greater financial and other resources than the
Company. There can be no assurance that the Company will be able to compete
successfully in the future or that the Company will not be required to incur
significant costs in connection with its engineering research, development,
marketing and customer service efforts to remain competitive. Competitive
pressures may result in price erosion or other factors which will adversely
affect the Company's financial performance.

  Dependence on Key Personnel. The Company's success depends in large part upon
the continued services of many of its highly skilled personnel involved in
management, research and product development and sales, and upon its ability to
attract and retain additional highly qualified employees. The loss of services
of these key personnel could have a material adverse effect on the Company. The
Company does not have key-person life insurance on any of its employees.

  Utilization of Net Operating Loss. The utilization of the net operating loss
carryforward is dependent upon the Company's ability to generate sufficient
taxable income during the carryforward period.  Management does not believe that
a valuation allowance is currently considered necessary based on an analysis of
likely future taxable income. If the establishment of a valuation allowance
should be determined to be necessary in the future, there would be an adverse
impact on the reported earnings of the Company.

  Year 2000. As noted below in Item 6, Management's Discussion and Analysis of
Financial Condition and Results of Operations--Year 2000 Readiness, the Company
believes it has addressed the Year 2000 issue.

EXECUTIVE OFFICERS OF THE COMPANY

  The executive officers of the Company are as follows:

NAME                            AGE  POSITION
-----                           ---  --------
Joseph C. Christenson..........  40  President, Director
Thomas R. Northenscold.........  40  Chief Financial Officer,
                                     Assistant Secretary
Larry G. Paulson...............  47  Vice President of Research and Development,
                                     Director
Arye Malek.....................  42  Vice President of Marketing

  Joseph C. Christenson has been President of the Company since January 1989
and a director since December 1987. Prior to being elected President of the
Company, he had been its Chief Operating Officer and Chief Financial Officer
from December 1987 to December 1988, General Manager and Chief Financial
Officer from August 1986 to November 1987, and financial analyst and marketing
manager since joining the Company in May 1985. Mr. Christenson has a Masters in
Business Administration from the University of Michigan and a Bachelor of Arts
degree from St. Olaf College.

  Thomas R. Northenscold has been Chief Financial Officer of the Company since
February 1995. Prior to that, he had been the Senior Vice President of
Operations in the City Directory Division of R.L. Polk and Company, a directory
publishing company, from April 1992 to April 1994. Mr. Northenscold was
previously employed at Cardiac Pacemakers, Inc., a medical device company, in
several finance and operations positions from June 1985 to April 1992. He has a
Masters in Business Administration in finance from the University of Michigan
and a Bachelor of Science degree from Mankato State University.

  Larry G. Paulson was a co-founder of the Company and has been Vice President
of Research and Development and a director of the Company since December 1981.
Mr. Paulson is also a Registered Professional Engineer and holds Bachelors and
Masters Degrees in Science from the University of Minnesota.

  Arye Malek has been the Vice President of Marketing of the Company since May
1996. He joined the Company in May 1990 as a Senior Account Manager and became
Director of International Operations in November 1992. Mr. Malek holds a
Bachelor of Science Degree from the University of Minnesota.

Item 2.  PROPERTIES
-------------------
  The Company leases approximately 28,400 square feet of office and
manufacturing space in suburban Minneapolis pursuant to a seven-year lease
beginning in March 1994.  Rent payments for its facilities commenced at $7,093
per month during the first year of the lease and increase over the term of the
lease to $16,551 during the final twelve months of the lease. In July of 1998
the Company entered into a new ten-year lease agreement for office and
manufacturing space in a facility in suburban Minneapolis (see Exhibit 10.8).
The Company is in negotiation to assign the lease on its current facility and
anticipates executing such an assignment prior to the commencement of the new
lease. The incremental costs of this assignment are not expected to be
substantial.  Under the terms of the new lease, the Company will take occupancy
of approximately 59,000 square feet of space in March of 1999.  At some time
during months 42 to 60 of this lease, the Company will take occupancy of the
remaining space in the building, which is approximately 21,000 square feet. Rent
payments for the new facility will be $50,310 per month during the period in
which the Company occupies the initial 59,000 square feet (no less than 41
months and no more than 59 months).  During the remainder of the lease, rental
payments for the entire facility will range between $69,227 and $72,604 per
month. The Company also leases space for its regional sales and support offices
in Massachusetts, Michigan and North Carolina.

Item 3. LEGAL PROCEEDINGS
-------------------------
  None.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-----------------------------------------------------------
  None.


                                     PART II
                                     -------

Item 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
------------------------------------------------------------------------------

                          PRICE RANGE OF COMMON STOCK

  The Company's Common Stock trades on the Nasdaq National Market tier of The
Nasdaq Stock Market under the symbol "PPTV." The following table sets forth the
high and low sales prices of the Company's Common Stock on the Nasdaq National
Market as reported by Nasdaq.


                                                                    HIGH   LOW
                                                                   ------ -----
      FISCAL YEAR ENDED OCTOBER 31, 1997
        First Quarter............................................. $ 9.75 $6.50
        Second Quarter............................................   9.00  5.56
        Third Quarter.............................................   8.62  6.25
        Fourth Quarter............................................  10.38  7.62
      FISCAL YEAR ENDING OCTOBER 31, 1998
        First Quarter............................................. $ 9.12 $6.62
        Second Quarter............................................   9.88  6.88
        Third Quarter.............................................   9.50  6.38
        Fourth Quarter............................................   8.00  4.75

  The Company estimates that there were approximately 3,100 beneficial holders
of the Company's Common Stock at January 5, 1999.

                                DIVIDEND POLICY

  The Company has never declared or paid any dividends on its Common Stock. The
Company currently intends to retain any earnings for use in its operations and
expansion of its business and therefore does not anticipate paying any cash
dividends in the foreseeable future.

Item 6.  SELECTED FINANCIAL DATA
--------------------------------
<TABLE>
                                                    YEAR ENDED OCTOBER 31,
                                 --------------------------------------------------------------
                                    1998         1997         1996         1995         1994
                                 -----------  -----------  -----------   ----------  ----------
<S>                              <C>          <C>          <C>           <C>         <C>
INCOME STATEMENT DATA:
 Net revenues..................  $13,512,000  $12,055,000  $12,693,000   $9,750,000  $6,587,000
 Cost of sales.................    5,666,000    4,894,000    5,044,000    4,442,000   3,026,000
                                 -----------  -----------  -----------   ----------  ----------
  Gross profit.................    7,846,000    7,161,000    7,649,000    5,308,000   3,561,000
 Selling expenses..............    4,857,000    3,727,000    2,897,000    2,279,000   1,970,000
 General and administrative
  expenses.....................    1,294,000    1,177,000      976,000      851,000     711,000
 Research and development
  expenses.....................    2,879,000    2,339,000    1,827,000    1,299,000   1,133,000
                                 -----------  -----------  -----------  -----------  ----------
  Income (loss) from
   operations..................   (1,184,000)     (82,000)   1,949,000      879,000    (253,000)
 Other income
   (expense), net..............    1,009,000    1,147,000      453,000       61,000      40,000
                                 -----------  -----------  -----------  -----------  ----------
  Income (loss) before taxes...     (175,000)   1,065,000    2,402,000      940,000    (213,000)
 Income tax benefit (expense)..      278,000     (405,000)   1,309,000      407,000       --
                                 -----------  -----------  -----------  -----------  ----------
  Net income (loss)............  $   103,000  $   660,000  $ 3,711,000   $1,347,000  $ (213,000)
                                 ===========  ===========  ===========   ==========  ==========
 Diluted earnings (loss) per
  share........................  $    0.02    $    0.12    $    0.84     $   0.37    $  (0.06)
                                 ===========  ===========  ===========   ==========  ==========
 Common and common equivalent
  shares outstanding...........    5,511,000    5,495,000    4,410,000    3,650,000   3,455,000
                                 ===========  ===========  ===========   ==========  ==========
</TABLE>

<TABLE>
                                                            OCTOBER 31,
                                    ------------------------------------------------------------
                                       1998         1997         1996         1995        1994
                                    -----------  -----------  -----------  ----------  ----------
<S>                                 <C>          <C>          <C>          <C>         <C>
BALANCE SHEET DATA:
 Working capital................... $20,495,000  $22,887,000  $24,083,000  $4,131,000  $3,253,000
 Total assets......................  29,575,000   29,986,000   28,056,000   6,098,000   4,449,000
 Shareholders' equity..............  27,871,000   27,535,000   26,809,000   5,145,000   3,719,000

</TABLE>

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Comparison of Year Ended October 31, 1998 to Year Ended October 31, 1997
------------------------------------------------------------------------
  Net Revenues: Net revenues increased 12% to $13,512,000 in fiscal 1998,
compared to net revenues of $12,055,000 in fiscal 1997.  Unit sales of the
Company's machine vision systems increased to 510 in fiscal 1998 versus 482 in
fiscal 1997.  Net revenues increased primarily due to strong sales outside of
North America.  Gross revenues in fiscal 1998 decreased 11% in North America and
increased 95% outside North America.  The decline in revenues in North America
was primarily due to lower sales in the electronics segment.  The increase in
revenues outside North America is primarily due to strength in the Asia/Pacific
region. Sales to customers outside North America represented 38% of gross
revenues in fiscal 1998, compared to 22% in fiscal 1997.

  Gross Profit: Gross profit increased 10 percent to $7,846,000 in fiscal 1998,
compared to $7,161,000 in fiscal 1997. Gross profit as a percentage of net
revenues for fiscal 1998 decreased to 58%, compared with 59% in fiscal 1997. The
increase in gross profit in 1998 is primarily due to the increase in sales. The
decrease in gross profit as a percentage of net sales is primarily related to
the increase in international sales, which are primarily through distributors
and therefore are generally at a lower gross margin.  The Company anticipates
that the gross profit as a percentage of net revenues may fluctuate from quarter
to quarter during fiscal 1999, but should remain at or near the levels achieved
in fiscal 1998.

  Selling Expenses: Selling expenses increased 30% to $4,857,000 in fiscal 1998,
compared to $3,727,000 in fiscal 1997. As a percentage of net revenues, fiscal
1998 selling expenses increased to 36%, compared with 31% in fiscal 1997.  The
increase in expenditures is primarily the result of investments required to
launch the Microelectronics Product Group ("MPG") as well as the opening of
sales and support offices in Michigan and North Carolina. Although the Company
will limit the rate of growth in selling expenses, it is anticipated that
selling expenses may increase somewhat in fiscal 1999 as the Company makes the
necessary investments to support strategic initiatives.  However, the Company
believes that for the whole of fiscal 1999, selling expenses will not increase
substantially as a percentage of net revenues compared to fiscal 1998, depending
on the level of sales growth.

  General and Administrative Expenses: General and administrative expenses
increased 10% to $1,294,000 in fiscal 1998, compared to $1,177,000 in fiscal
1997. As a percentage of net revenues, general and administrative expenses
remained relatively constant at 10% for fiscal 1998, compared to fiscal 1997.
The increase in expenditures is primarily attributable to increased expenses
associated with operating the Company as it prepares for continued growth. The
Company believes that during fiscal 1999, general and administrative expenses
may increase somewhat as the Company makes the necessary investments to support
strategic initiatives.  However, the Company believes that during fiscal 1999,
general and administrative expenses will not increase substantially as a
percentage of net revenues compared to fiscal 1998, depending on the level of
sales growth.

  Research and Development Expenses: Research and development expenses increased
23% to $2,879,000 in fiscal 1998, compared to $2,339,000 in fiscal 1997.
Research and development expenses as a percentage of net revenues for fiscal
1998 increased to 21%, compared to 19% for fiscal 1997. The increase in
expenditures is mainly due to resource commitments required to support new
product development programs.  The Company believes that during fiscal 1999,
research and development expenses may increase as the Company commits the
resources necessary to support strategic initiatives.  However, the Company
believes that during fiscal 1999, research and development expenses will not
increase substantially as a percentage of net revenues compared to fiscal 1998,
depending on the level of sales growth.

  Interest income decreased 11% to $998,000 in fiscal 1998, compared to
$1,124,000 in fiscal 1997.  The decrease in interest income is primarily due to
the decline in balances of cash, cash equivalents and investments.

  Income Tax Benefit: In fiscal 1998, an income tax benefit of $278,000 was
recorded.  This income tax benefit primarily resulted from the recording of
$210,000 of tax credits which were mainly associated with research & development
activities. Income tax expense was $405,000 in fiscal 1997.


Comparison of Year Ended October 31, 1997 to Year Ended October 31, 1996
------------------------------------------------------------------------
  Net Revenues: Net revenues decreased 5% to $12,055,000 in fiscal 1997,
compared to net revenues of $12,693,000 in fiscal 1996, although unit sales of
the Company's machine vision systems increased to 481 in fiscal 1997 versus 465
in fiscal 1996.  Net revenues decreased primarily because of lower average
selling prices per system due to changes in product mix.  Net revenues in fiscal
1997 were also affected by slowdowns in deliveries to customers in the
electronics segment, which mainly occurred during the first half of fiscal 1997.
Much of this slowdown was experienced in markets outside of North America.
Gross revenues in fiscal 1997 increased 1% in North America and decreased 24%
outside North America.  Sales to customers outside North America represented 22%
of gross revenues in fiscal 1997, compared to 27% in fiscal 1996.

  Gross Profit: Gross profit decreased 6 percent to $7,161,000 in fiscal 1997,
compared to $7,649,000 in fiscal 1996. Gross profit as a percentage of net
revenues for fiscal 1997 decreased to 59%, compared with 60% in fiscal 1996. The
decrease in gross profit in 1997 is primarily due to the decline in sales.

  Selling Expenses: Selling expenses increased 29% to $3,727,000 in fiscal 1997,
compared to $2,897,000 in fiscal 1996. As a percentage of net revenues, fiscal
1997 selling expenses increased to 31%, compared with 23% in fiscal 1996.  The
increase in expenditures is primarily the result of the addition of several
application engineers and sales people in the latter part of fiscal 1996.

  General and Administrative Expenses: General and administrative expenses
increased 21% to $1,177,000 in fiscal 1997, compared to $976,000 in fiscal 1996.
As a percentage of net revenues, general and administrative expenses increased
to 10% for fiscal 1997, compared to 8% for fiscal 1996.  The increase in
expenditures is primarily attributable to increased expenses associated with
operating the Company as it prepares for continued growth.  In addition, the
Company incurred a one-time charge during the third quarter of fiscal 1997 due
to the write-off of a receivable involving a bankruptcy.  The increase as a
percentage of net revenues is mainly related to the decline in sales.

  Research and Development Expenses: Research and development expenses increased
28% to $2,339,000 in fiscal 1997, compared to $1,827,000 in fiscal 1996.
Research and development expenses as a percentage of net revenues for fiscal
1997 increased to 19%, compared to 14% for fiscal 1996.  The increase in
expenditures is mainly due to new product development programs and increased
permanent staffing and contract personnel to support these efforts.

  Interest income increased 154% to $1,124,000 in fiscal 1997, compared to
$442,000 in fiscal 1996.  The increase in interest income is primarily due to a
full year of interest on the proceeds of a public stock offering completed in
June of 1996.

  Income Tax Benefit: Income tax expense was $405,000 in fiscal 1998.  In fiscal
1997, an income tax benefit of $1,309,000 was recorded to fully recognize the
potential future tax benefits of loss carry forwards and net deductible
temporary differences available to offset taxable income in future periods. As a
result of this full recognition, in fiscal 1997 the Company began reporting
earnings on a fully-taxed basis.


LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
  Working capital decreased to $20,495,000 at October 31, 1998 from $22,887,000
at October 31, 1997.  The Company financed its operations in fiscal 1998 through
internally generated cash flow and existing cash and cash equivalents. Net cash
provided from operating activities in fiscal 1998 was $865,000. Accounts
receivable decreased $852,000 due to improvement in collections as well as a
decrease in sales in the fourth quarter of fiscal 1998 compared to the same
period in fiscal 1997. Inventories increased $266,000 in fiscal 1998 primarily
due to raw material purchases to support new products.

  In September of 1997 the Company entered into a license agreement with Medar,
Inc. ("Medar") under which it acquired the exclusive worldwide rights to use of
Medar's patented 3D scanning technology (United States Patent No. 5,646,733) for
applications in the electronics and semiconductor industries ("1997 Medar
Agreement").  Under the terms of the agreement, the Company agreed to pay Medar
an initial license fee of $1,500,000 based on the achievement of certain
developmental milestones plus a royalty based on sales. The first $500,000 due
under this license agreement was paid upon execution of the agreement.  An
additional $500,000 was paid to Medar under this license agreement during the
second quarter of fiscal 1998.

  In May of 1998 the Company entered into an Agreement to Assign and License
Patent with Medar ("1998 Medar Agreement") under which it acquired ownership of
United States Patent No. 5,646,733 ("Scanning Phase Measurement Method and
System for an Object at a Vision Station").  The 1998 Medar Agreement terminated
the previous 1997 Medar Agreement.  Under the terms of the 1998 Medar Agreement,
the Company paid Medar a fee of $1,500,000 in May of 1998.  The Company also
agreed to pay Medar the final $500,000 fee based on the achievement of certain
developmental milestones.

  The Company used $3,081,000 of cash for investing activities, primarily for
the purchase of fixed assets and investment in other long-term assets.  The
Company used $1,344,000 of cash for the purchase of fixed assets, mainly
consisting of computer, lab and manufacturing equipment.  The Company used
$2,442,000 of cash for investment in other long-term assets, mainly consisting
of a payments made to Medar under the terms of the previously mentioned
agreements.  Investments consist of short-term investment grade securities. In
addition, the Company generated $175,000 in cash flow from its financing
activities, primarily as a result of issuances of its Common Stock through the
employee stock purchase plan and upon exercise of stock options.  In September
of 1998 the Board of Directors of PPT Vision, Inc. authorized the Company to
repurchase up to 750,000 shares of its Common Stock.  The Company used $92,000
of cash to repurchase 17,800 shares of its Common Stock in fiscal 1998.

  Current assets decreased to $22,097,000 at October 31, 1998 from $25,202,000
at October 31, 1997.  Investments decreased to $15,009,000 at October 31, 1998
from $15,515,000 at October 31, 1997. Cash and cash equivalents decreased to
$1,986,000 at October 31, 1998 from $4,027,000 at October 31, 1997.  These
decreases were primarily related to the payments made to Medar.

  The Company's current liabilities decreased to $1,602,000 at October 31, 1998
from $2,315,000 at October 31, 1997. The current liabilities at October 31, 1997
included a $1,000,000 short-term liability related to the 1997 Medar Agreement.
During fiscal 1998, one payment of $500,000 was made against this short-term
liability prior to the termination of the 1997 Medar Agreement.  The remaining
developmental milestone from the 1997 Medar Agreement was incorporated into the
1998 Medar Agreement along with the associated $500,000 fee, which remained as a
short-term liability.  During fiscal 1998, $200,000 was paid against this short-
term liability, leaving a balance of $300,000 at October 31, 1998.

  The Company expects that its capital expenditures for fiscal 1999 may increase
slightly from the $1.3 million in fiscal 1998, primarily for computer, lab and
manufacturing equipment.  At October 31, 1998, the Company had commitments for
approximately $315,000 of capital equipment.  The Company is also obligated to
pay an additional $300,000 under the terms of the Agreement to Assign and
License Patent with Medar, subject to the achievement by Medar of certain
developmental milestones. The Company believes that its cash flow from
operations, existing cash and cash equivalents, and investments at October 31,
1998 will be adequate for its working capital and capital resource needs during
fiscal 1999.

YEAR 2000 READINESS
-------------------
  The Company has analyzed the potential impact of the year 2000 issue on both
the Company's products and on critical business systems and development systems
used in the Company's internal operations. In response to the year 2000 issue,
the Company upgraded its current enterprise resource planning ("ERP") system to
the most recent revision level, which is year 2000 compliant. The cost of this
upgrade was included in the normal annual maintenance fee that the Company pays
to the provider of the software. Regarding its own product offerings, the
Company has tested the software and hardware included in its products and
believes that all current products are year 2000 compliant.  To date, the
incremental costs to the Company associated with the year 2000 issue have been
minimal. The Company believes that the costs of addressing any remaining year
2000 issues will not have a material adverse impact on the Company's financial
position. Based on the Company's review of its own products and critical
business systems and development systems, the Company has not felt it necessary
to put in place formal contingency plans.  However, the Company will take
appropriate and timely action to resolve any significant year 2000 issues that
become apparent.


Item 7A. Quantitative and Qualitative Disclosures About Market Risk
-------------------------------------------------------------------
  Not applicable.

Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
----------------------------------------------------
  See Item 14 for a list of the financial statements included in this Form 10-K.

Item 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE
------------------------------------------------------------------------
  Not applicable.

                                    PART III
                                    --------

Item 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------------------------------
  Information required under this item with respect to directors is contained
in the section "Election of Directors" in the Company's Proxy Statement for the
Annual Meeting of Shareholders to be held in March 1999 (the "1999 Proxy
Statement"), a definitive copy of which will be filed with the Commission within
120 days of the close of the past fiscal year, and is incorporated herein by
reference.

  Information concerning executive officers is set forth in the Section
entitled "Executive Officers of the Company" in Part I of this Form 10-K
pursuant to Instruction 3 to paragraph (b) of Item 401 of Regulation S-K.

Item 11.  EXECUTIVE COMPENSATION
--------------------------------
  Information required under this item is contained in the sections entitled
"Executive Compensation," "Employment Agreements" and "Stock Option Plan" in the
Company's 1999 Proxy Statement and is incorporated herein by reference.

Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
------------------------------------------------------------------------
  Information required under this item is contained in the section entitled
"Shareholdings of Principal Shareholders, Directors and Officers" in the
Company's 1999 Proxy Statement and is incorporated herein by reference.

Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------
  Information required under this item is contained in the section entitled
"Certain Transactions" in the Company's 1999 Proxy Statement which is
incorporated herein by reference.

                                     PART IV
                                     -------

Item 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
--------------------------------------------------------------------------

     (a)  Documents filed as Part of this Report

          (1)  FINANCIAL STATEMENTS.  The following financial statements of the
               Company are hereby included in this Form 10-K.
                                                                      Page
                                                                      ----
               Report of Independent Accountants.....................  32
               Income Statements for the three years ended
                    October 31, 1998, 1997 and 1996..................  33
               Balance Sheets as of October 31, 1998 and 1997........  34
               Statements of Cash Flows for the Years
                    ended October 31, 1998, 1997 and 1996............  35
               Statements of Shareholders' Equity for the Years
                    ended October 31, 1998, 1997 and 1996............  36
               Notes to Financial Statements.........................  37

          (2)  FINANCIAL STATEMENT SCHEDULES FOR THE THREE YEARS
               ENDED OCTOBER 31, 1998


               VIII.  Valuation and Qualifying Accounts..............  47

     All other schedules are omitted because they are not
     applicable or the required information is shown in the
     Financial Statements or the notes thereto.

     (b)  Reports on Form 8-K
          -------------------

     No reports on Form 8-K were filed during the
     quarter ended October 31, 1998.

     (c)  Listing of Exhibits
          -------------------
Exhibit
  No.                           Description                           Page
-------  ----------------------------------------------------------   ----
3.1.....  Restated Articles of Incorporation of Registrant
          (incorporated by reference to Exhibit 3.1 of 1996 Form 10-K)

3.2.....  By-Laws of Registrant
          (incorporated by reference to Exhibit 3.2 of 1996 Form 10-K)

10.1....  Lease Agreement dated February 11, 1993 for facilities at
          10321 West 70th Street, Eden Prairie, Minnesota
          (incorporated by reference to Exhibit 10.3 of 1993 Form 10-K)

10.2....  Employment Agreement with Joseph C. Christenson dated as of
          May 7, 1984 (incorporated by reference from Exhibit 10.4 to
          May 15, 1996 Form S-2)

10.3....  Employment Agreement with Larry G. Paulson dated as of
          February 1, 1984 (incorporated by reference from
          Exhibit 10.5 to May 15, 1996 Form S-2)

10.4....  Employment Agreement with Tom Northenscold dated as of
          February 27, 1995 (incorporated by reference from
          Exhibit 10.6 to May 15, 1996 Form S-2)

10.5....  Employment Agreement with Arye Malek dated as of
          May 1, 1990 (incorporated by reference from
          Exhibit 10.7 to May 15, 1996 Form S-2)

10.6*...  PPT Vision, Inc. 1988 Stock Option Plan, as amended
          (incorporated by reference to Exhibit 10.6 of 1997 Form 10-K)

10.7*...  PPT Vision, Inc. 1997 Stock Option Plan
          (incorporated by reference to Exhibit 10.7 of 1997 Form 10-K)

10.8....  Lease Agreement dated July 17, 1998 for facilities at......  48
          the Prairie Crossroads Corporate Center,
          Eden Prairie, Minnesota

21......  The Company has no subsidiaries

23......  Consent of PricewaterhouseCoopers LLP......................  72

27......  Financial Data Schedule....................................  73


*Indicates compensatory plan

                                   SIGNATURES
                                   ----------
     Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

                                PPT VISION, INC.

Date:  January 29, 1999                 By:/s/Joseph C. Christenson
                                           ----------------------------
                                               Joseph C. Christenson
                                           (Principal Executive Officer)

Date:  January 29, 1999                 By:/s/Thomas R. Northenscold
                                           ----------------------------
                                              Thomas R. Northenscold
                                          (Principal Accounting Officer)
                                             Chief Financial Officer

                        Signatures and Power of Attorney

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons on behalf of the Registrant, in
the capacities, and on the dates, indicated.  Each person whose signature
appears below constitutes and appoints Joseph C. Christenson and Thomas R.
Northenscold as his true and lawful attorneys-in-fact and agents, each acting
alone, with full power of substitution and resubstitution, for him and in his
name, place, and stead, in any and all capacities, to sign any or all amendments
to this Annual Report on Form 10-K and to file the same, with the exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission.

        Date                                   Signature and Title
        ----                                   -------------------

  January 29, 1999                         /s/Joseph C. Christenson
                                           ----------------------------
                                              Joseph C. Christenson
                                               President, Director
                                           (Principal Executive Officer)

  January 29, 1999                         /s/Thomas R. Northenscold
                                           ----------------------------
                                              Thomas R. Northenscold
                                          (Principal Accounting Officer)
                                              Chief Financial Officer

  January 29, 1999                         /s/Larry G. Paulson
                                           ----------------------------
                                           Larry G. Paulson
                                            Vice President of Research
                                            and Development, Director

  January 29, 1999                         /s/Bruce C. Huber
                                           ----------------------------
                                             Bruce C. Huber, Director

  January 29, 1999                         /s/David C. Malmberg
                                           ----------------------------
                                           David C. Malmberg, Director

  January 29, 1999                         /s/Peter R. Peterson
                                           ----------------------------
                                           Peter R. Peterson, Director






REPORT OF INDEPENDENT ACCOUNTANTS


To the Shareholders and Board of Directors of PPT Vision, Inc.

In our opinion, the financial statements listed in the index appearing under
Item 14(a)(1) and (2) present fairly, in all material respects, the financial
position of PPT Vision, Inc. at October 31, 1998 and 1997, and the results of
its operations and cash flows for each of the three fiscal years in the period
ended October 31, 1998 in conformity with generally accepted accounting
principles.  These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits.  We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.

/s/PricewaterhouseCoopers LLP
-----------------------------
PricewaterhouseCoopers LLP
Minneapolis, MN
November 20, 1998


                                PPT VISION, INC.

                               INCOME STATEMENTS


                                               YEAR ENDED OCTOBER 31,
                                         -----------------------------------
                                            1998         1997         1996
                                         -----------  -----------  -----------

Net revenues............................ $13,512,000  $12,055,000  $12,693,000
Cost of sales...........................   5,666,000    4,894,000    5,044,000
                                         -----------  -----------  -----------
    Gross profit........................   7,846,000    7,161,000    7,649,000
                                         -----------  -----------  -----------
Expenses:
  Selling...............................   4,857,000    3,727,000    2,897,000
  General and administrative............   1,294,000    1,177,000      976,000
  Research and development..............   2,879,000    2,339,000    1,827,000
                                         -----------  -----------  -----------
    Total expenses......................   9,030,000    7,243,000    5,700,000
                                         -----------  -----------  -----------
Income (loss) from operations...........  (1,184,000)     (82,000)   1,949,000
Interest income.........................     998,000    1,124,000      442,000
Other income............................      11,000       23,000       11,000
                                         -----------  -----------  -----------
Income (loss) before taxes..............    (175,000)   1,065,000    2,402,000
Income tax benefit (expense)............     278,000     (405,000)   1,309,000
                                         -----------  -----------  -----------
    Net income.......................... $   103,000      660,000  $ 3,711,000
                                         ===========  ===========  ===========

  Basic earnings per share.............. $    0.02    $    0.12    $    0.88
                                         ===========  ===========  ===========
  Diluted earnings per share............ $    0.02    $    0.12    $    0.84
                                         ===========  ===========  ===========

  Common shares outstanding.............   5,425,000    5,376,000    4,237,000
  Common and common equivalent
    shares outstanding..................   5,511,000    5,495,000    4,410,000
                                         ===========  ===========  ===========



    The accompanying notes are an integral part of the financial statements


                                PPT VISION, INC.
                                 BALANCE SHEETS

                                                           OCTOBER 31,
                                                    -------------------------
                                                       1998          1997
                                                    -----------   -----------
ASSETS
Current assets
  Cash and cash equivalents........................ $ 1,986,000   $ 4,027,000
  Investments......................................  15,009,000    15,515,000
  Accounts receivable, net.........................   2,841,000     3,693,000
  Inventories......................................   2,007,000     1,741,000
  Other current assets.............................     254,000       226,000
                                                    -----------   -----------
    Total current assets...........................  22,097,000    25,202,000
Fixed assets, net..................................   2,254,000     1,546,000
Other assets, net..................................   3,536,000     1,828,000
Deferred income taxes..............................   1,688,000     1,410,000
                                                    -----------   -----------
    Total assets................................... $29,575,000   $29,986,000
                                                    ===========   ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
  Accounts payable................................. $   943,000   $ 1,010,000
  Accrued compensation.............................      39,000        60,000
  Accrued expenses.................................     320,000       245,000
  Other short-term liabilities.....................     300,000     1,000,000
                                                    -----------   -----------
    Total current liabilities......................   1,602,000     2,315,000

Deferred rent......................................     102,000       136,000

Commitments and contingencies (Note 8)

Shareholders' equity
  Common Stock $.10 par value; authorized
   10,000,000 shares;
   issued and outstanding 5,440,583 and 5,387,355..     544,000      539,000
  Capital in excess of par value...................  29,725,000   29,555,000
  Accumulated (deficit)............................  (2,407,000)  (2,510,000)
  Unrealized gain (loss), investments..............       9,000      (49,000)
                                                    -----------   -----------
    Total shareholders' equity.....................  27,871,000   27,535,000
                                                    -----------   -----------
    Total liabilities and shareholders' equity..... $29,575,000   $29,986,000
                                                    ===========   ===========

    The accompanying notes are an integral part of the financial statements


                                PPT VISION, INC.
                            STATEMENTS OF CASH FLOWS

                                                 YEAR ENDED OCTOBER 31,
                                         --------------------------------------
                                             1998         1997         1996
                                         ------------ ------------ ------------

Net income...............................$    103,000 $    660,000 $  3,711,000
Adjustment to reconcile net income to net
  cash provided by operating activities:
  Depreciation and amortization..........     670,000      422,000      286,000
  Deferred rent..........................     (34,000)     (30,000)      (6,000)
  Deferred income tax benefit............    (278,000)     405,000   (1,408,000)
  Accrued interest income................    (137,000)    (322,000)    (149,000)
  Realized gain on sales of investments..      (4,000)      (2,000)      (4,000)
Change in assets and liabilities:
  Accounts receivable....................     852,000      758,000   (1,764,000)
  Inventories............................    (266,000)    (513,000)    (285,000)
  Other assets...........................     (28,000)     (55,000)    (104,000)
  Restricted cash........................       --         135,000       78,000
  Accounts payable.......................     (67,000)     256,000      190,000
  Accrued compensation...................     (21,000)      (2,000)       7,000
  Accrued expenses.......................      75,000      (20,000)     103,000
                                         ------------ ------------ ------------
    Total adjustments....................     762,000    1,032,000   (3,056,000)
                                         ------------ ------------ ------------
Net cash provided by operating activities     865,000    1,692,000      655,000
Cash flows from investing activities:
  Purchase of fixed assets...............  (1,344,000)  (1,095,000)    (662,000)
  Purchase of investments................ (23,148,000) (21,353,000) (17,007,000)
  Sales and maturities of investments....  23,853,000   21,248,000    2,025,000
  Net investment in other
    long-term assets.....................  (2,442,000)    (759,000)     (20,000)
                                         ------------ ------------ ------------
Net cash used by investing activities....  (3,081,000)  (1,959,000) (15,664,000)
Cash flows from financing activities:
  Proceeds from issuance of common stock.     267,000      115,000   17,953,000
  Repurchases of common stock............     (92,000)       --           --
                                         ------------ ------------ ------------
Net cash provided by financing activities     175,000      115,000   17,953,000
                                         ------------ ------------ ------------
Net (decrease) increase in cash and
  cash equivalents.......................  (2,041,000)    (152,000)   2,944,000
Cash and cash equivalents at beginning
  of year................................   4,027,000    4,179,000    1,235,000
                                         ------------ ------------ ------------
Cash and cash equivalents at end of year $  1,986,000 $  4,027,000 $  4,179,000
                                         ============ ============ ============

Supplemental disclosure of cash flow information:
 Cash paid during the year for:
  Income tax.............................$     70,000 $      3,000 $     89,000
  Interest...............................       --           --           1,000

    The accompanying notes are an integral part of the financial statements

                                PPT VISION, INC.
                       STATEMENTS OF SHAREHOLDERS' EQUITY
                                        
                                                        CAPITAL IN
                                     COMMON    COMMON    EXCESS OF  ACCUMULATED
                                     SHARES     STOCK    PAR VALUE   (DEFICIT)
                                    --------- --------- ----------- -----------
October 31, 1995................... 3,578,705 $358,000  $11,668,000 $(6,881,000)
  Stock issued through public
   offering (net of issue costs)... 1,600,000  160,000   17,459,000
  Stock issued through the
   exercise of stock options.......    94,526    9,000      123,000
  Stock issued through the
   employee stock purchase plan....    35,691    4,000       74,000
  Stock issued through the
   exercise of warrants............    49,500    5,000      119,000
  Net income.......................                                   3,711,000
                                    --------- --------- ----------- -----------
  October 31, 1996................. 5,358,422  536,000   29,443,000  (3,170,000)
  Stock issued through the
   exercise of stock options.......    23,705    2,000       77,000
  Stock issued through the
   employee stock purchase plan....     5,228    1,000       35,000
  Net income.......................                                     660,000
                                    --------- --------- ----------- -----------
  October 31, 1997................. 5,387,355  539,000   29,555,000  (2,510,000)
  Stock issued through the
   exercise of stock options.......    48,005    5,000      134,000
  Stock issued through the
   employee stock purchase plan....    25,648    2,000      147,000
  Stock swapped to exercise
   stock options...................    (2,625)   --         (21,000)
  Stock repurchased................   (17,800)  (2,000)     (90,000)
  Net income.......................                                     103,000
                                    --------- --------- ----------- -----------
  October 31, 1998................. 5,440,583 $544,000  $29,725,000 $(2,407,000)
                                    ========= ========= =========== ============

The accompanying notes are an integral part of the financial statements

                                PPT VISION, INC.

                         NOTES TO FINANCIAL STATEMENTS

NOTE 1: ORGANIZATION AND OPERATIONS

  The Company designs, manufactures, markets and integrates machine vision
based automated inspection systems. The systems are used to improve
productivity and quality by automating inspection tasks in manufacturing
applications such as assembly verification, flaw detection, character
verification or measurement tasks.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ACCOUNTS RECEIVABLE

  Accounts receivable are shown net of allowance for doubtful accounts of
$29,424 at October 31, 1998, and $30,026 at October 31, 1997.

INVENTORIES

  Inventories are stated at the lower of cost or market, with costs determined
on a first-in, first-out ("FIFO") basis. As of October 31, 1998 and 1997
inventories consist of the following:

                                                         OCTOBER 31,
                                                   -----------------------
                                                      1998         1997
                                                   ----------   ----------
      Manufactured and purchased parts............ $1,648,000   $1,223,000
      Work-in-process.............................    339,000      448,000
      Finished goods..............................     20,000       70,000
                                                   ----------   ----------
          Totals.................................. $2,007,000   $1,741,000
                                                   ==========   ==========


FAIR VALUE OF FINANCIAL INSTRUMENTS

  The Company's financial instruments consist of cash and cash equivalents,
investments, short-term trade receivables and payables for which current
carrying amounts approximate fair market value.

OTHER ASSETS

  Other assets at October 31, 1998 and 1997 consist of the following:

                                                               OCTOBER 31,
                                                         ----------------------
                                                            1998        1997
                                                         ----------  ----------
      Patent and trademark.............................  $3,340,000  $1,654,000
      Investment in a related party....................      53,000      53,000
      Software development costs, net..................     251,000     196,000
                                                         ----------  ----------
                                                          3,644,000   1,903,000
      Less accumulated amortization....................    (108,000)    (75,000)
                                                         ----------  ----------
          Total other assets...........................  $3,536,000  $1,828,000
                                                         ==========  ==========

  The patent and trademark balance of $3,340,000 as of October 31, 1998 includes
$3,046,000 which represents the current value of United States Patent No.
5,646,733, ("Scanning Phase Measurement Method and System for an Object at a
Vision Station") which was purchased from Medar, Inc. in fiscal year 1998.
Patent and trademark costs are amortized over five to ten years.

  The investment in a related party represents common stock the Company intends
to hold as an investment and is recorded at cost. During 1994, the Company
adopted Statement of Financial Accounting Standards ("SFAS") No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" SFAS. No. 115
requires certain investments in debt and equity securities to be recorded at
fair market value. No adjustment to market value was recorded as of October 31,
1998 and 1997 as the difference was not material.

  Software development costs are treated in accordance with SFAS No. 86,
"Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise
Marketed."  Certain software development costs totaling $55,000 were capitalized
during the fiscal year ended October 31, 1998.  No amortization expense has yet
been recorded related to these software development costs.


OTHER SHORT-TERM LIABILITIES

  In May of 1998 the Company entered into an Agreement to Assign and License
Patent, with Medar, Inc. ("Medar") under which it acquired ownership of United
States Patent No. 5,646,733 ("Scanning Phase Measurement Method and System for
an Object at a Vision Station").  This 1998 agreement terminated a previous
agreement entered into by the Company and Medar in September of 1997.  Under
the terms of the 1998 agreement, the Company agreed to pay Medar a fee of
$500,000 based on the achievement of certain developmental milestones.  At
October 31, 1998, $300,000 of that $500,000 was not paid and comprised the
$300,000 short-term liability.

FIXED ASSETS

  Fixed assets consist of furniture, fixtures and equipment and are stated at
cost net of accumulated depreciation. Depreciation is computed for book purposes
on a straight-line basis over the estimated useful life of the asset and for tax
purposes over five and ten years using accelerated and straight-line methods. At
October 31, 1998 and 1997 furniture, fixtures and equipment consisted of the
following:

                                                             OCTOBER 31,
                                                       -----------------------
                                                           1998        1997
                                                        ----------  ----------
      Equipment.......................................  $4,536,000  $3,271,000
      Furniture and fixtures..........................     517,000     438,000
                                                        ----------  ----------
                                                         5,053,000   3,709,000
      Less accumulated depreciation...................  (2,799,000) (2,163,000)
                                                        ----------  ----------
          Total fixed assets..........................  $2,254,000  $1,546,000
                                                        ==========  ==========


REVENUE RECOGNITION

  The Company records sales revenue upon shipment to the customer.

RESEARCH AND DEVELOPMENT

  Expenditures for research and development are expensed as incurred.

INCOME TAXES

  Income taxes are provided on the liability method. Under the liability
method, deferred income taxes are provided on the difference in basis of assets
and liabilities between financial reporting and tax returns using expected tax
rates.

EARNINGS PER SHARE

  In the quarter ended January 31, 1998, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share."  SFAS No.
128 simplifies the standards required under current accounting rules for
computing earnings per share and replaces the presentation of primary earnings
per share and fully diluted earnings per share with a presentation of basic
earnings per share ("basic EPS") and diluted earnings per share ("diluted EPS").
Basic EPS excludes dilution and is determined by dividing income available to
common stockholders by the weighted average number of common shares outstanding
during the period.  Diluted EPS reflects the potential dilution that could occur
if securities and other contracts to issue common stock were exercised or
converted into common stock.  Diluted EPS is computed similarly to fully diluted
earnings per share under current accounting rules.  The following information
presents the Company's computations of basic and diluted EPS for the periods
presented in the income statements.

                                  Income         Shares       Per Share
                               (Numerator)   (Denominator)      Amount
                                ----------    ------------      ------
Fiscal 1998:
  Basic EPS...................  $  103,000     5,425,000         $0.02
  Effect of dilutive employee
   stock options..............                    86,000
                                ---------------------------------------
  Diluted EPS.................  $  103,000     5,511,000         $0.02

Fiscal 1997:
  Basic EPS...................  $  660,000     5,375,000         $0.12
  Effect of dilutive employee
   stock options..............                   120,000
                                ---------------------------------------
  Diluted EPS.................  $  660,000     5,495,000         $0.12

Fiscal 1996:
  Basic EPS...................  $3,711,000     4,237,000         $0.88
  Effect of dilutive employee
   stock options..............                   173,000         (0.04)
                                ---------------------------------------
  Diluted EPS.................  $3,711,000     4,410,000         $0.84

CASH FLOWS

  For purposes of reporting cash flows, cash and cash equivalents include cash
on hand and investments with original maturities of three months or less.

  Non-cash transactions in fiscal years 1998, 1997 and 1996 consisted of $5,690,
$6,228 and $10,568, respectively, related to the transfer of long-term assets to
inventory.

ESTIMATES BY MANAGEMENT

  The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

STOCK SPLIT

  On March 14, 1996, the Board of Directors approved a three-for-two stock split
in the form of a fifty percent (50%) stock dividend.  The distribution of shares
was made on April 5, 1996 to shareholders of record as of March 25, 1996.  All
historical share and per share data included in the financial statements have
been restated to reflect the stock split.


NOTE 3: CUSTOMER INFORMATION

SIGNIFICANT CUSTOMER INFORMATION

  During 1998, 1997 and 1996, revenue from one customer accounted for 16%, 14%
and 14% of net revenues respectively.  During 1997 and 1996, revenue from
another customer accounted for 14% and 12% of net revenues respectively.

CUSTOMER GEOGRAPHIC DATA

  North American and export sales as a percentage of net revenues in 1998, 1997
and 1996 are as follows:

                                YEAR ENDED
                                OCTOBER 31,
                             ----------------
                             1998  1997  1996
                             ----  ----  ----
      North America.........  62%   78%   73%
      Europe................  18%   14%   14%
      Far East..............  18%    8%   13%
      South America.........   2%   --    --

NOTE 4: ACCRUED EXPENSES

  Accrued expenses at October 31, 1998 and 1997 include:

                                                                 OCTOBER 31,
                                                              ----------------
                                                                1998     1997
                                                              -------- --------
      Vacation............................................... $ 19,000 $ 25,000
      Employee stock purchase plan payroll deductions........   82,000   78,000
      Taxes payable..........................................  110,000   78,000
      Other..................................................  109,000   64,000
                                                              -------- --------
          Total.............................................. $320,000 $245,000
                                                              ======== ========

NOTE 5: COMMON STOCK OPTIONS AND WARRANTS

  Under the Company's 1988 Stock Option Plan and 1997 Stock Option Plan the
Company may issue options to purchase up to 1,100,000 shares of common stock to
employees and directors.  Options are granted at prices equal to the average of
the high and low prices on the date of the grant. The granting of options and
their vesting is within the discretion of the Company's Board of Directors.

  A summary of stock options issued and outstanding under these plans is as
follows:

                                                            NUMBER OF SHARES
                                                       -------------------------
                                                        EMPLOYEE    WEIGHTED AVG
                                                         OPTIONS    OPTION PRICE
                                                       -----------  ------------
Balance at October 31, 1995...........................     275,786     $ 2.55
  Granted.............................................     126,850     $11.81
  Exercised...........................................     (94,526)    $ 1.41
  Forfeited...........................................        (350)    $ 9.86
                                                       -----------  ------------
Balance at October 31, 1996...........................     307,760     $ 6.70
  Granted.............................................     364,200     $ 6.91
  Exercised...........................................     (23,705)    $ 3.34
  Forfeited...........................................    (126,375)    $11.68
                                                       -----------  ------------
Balance at October 31, 1997...........................     521,880     $ 5.79
  Granted.............................................      59,150     $ 6.81
  Exercised...........................................     (48,005)    $ 2.89
  Forfeited...........................................      (9,075)    $ 6.91
                                                       -----------  ------------
Balance at October 31, 1998...........................     523,950     $ 6.15
                                                       ===========  ============
As of October 31, 1998:
  Price Range of Outstanding Options
    Options...........................................$2.33-$12.00
    Expiration dates..................................  1998-2005
    Options exercisable...............................   238,089

  In May of 1997, 122,150 options granted in fiscal years 1996 and 1997 with
exercise prices ranging from $7.19 to $18.13 were repriced to $6.875 per share,
the market price at the time of the repricing.  The repricing is reflected in
the table above as a grant cancellation and a new grant issuance.

  The estimated weighted average grant-date fair value of stock options granted
is as follows: 1998--$3.39 and 1997--$4.23.  The Company accounts for stock
options and other equity instruments in accordance with APB Opinion No. 25,
"Accounting for Stock Issued to Employees."  Statement of Financial Accounting
Standards ("SFAS")No. 123, "Accounting for Stock-Based Compensation," was issued
in October 1995.  SFAS No. 123 establishes a fair value based method of
accounting for employee stock based compensation plans and encourages companies
to adopt that method.  However, it also allows companies to continue to apply
the intrinsic value based method currently prescribed under APB Opinion No. 25,
provided certain pro forma disclosures are made.  Had the Company's stock option
plans and its stock purchase plans compensation costs been determined based on
the fair value at the option grant dates for awards consistent with the
accounting provision of SFAS No. 123 the Company's net income and earnings per
share for fiscal years 1998 and 1997 would have been adjusted to the pro forma
amount indicated below:

  Fiscal Year Ended October 31,                  1998          1997
  -----------------------------               ----------    ----------
  Net income..................As reported...  $  103,000    $  660,000
                              Pro forma.....  $ (606,000)   $  197,000
  Diluted earnings per share..As reported...  $    0.02     $    0.12
                              Pro forma.....  $   (0.11)    $    0.04

  The following table summarizes stock options outstanding and exercisable at
October 31, 1998.

                       Outstanding                              Exercisable
--------------------------------------------------------  ----------------------
                             Weighted
                              Average        Weighted               Weighted
    Exercise                Contractual       Average               Average
  Price Range    Options  Life Remaining  Exercise Price  Options Exercise Price
---------------  -------  --------------  --------------  ------- --------------
$ 2.33 - $ 3.00   64,275       0.75          $ 2.89        64,275     $ 2.89
$ 3.17 - $ 6.84   52,975       1.51          $ 3.93        45,275     $ 3.67
$ 6.88 - $ 6.94  385,050       5.58          $ 6.88       119,714     $ 6.88
$ 7.00 - $12.00   21,650       5.70          $ 8.48         8,825     $ 9.74
                 -------  --------------  --------------  ------- --------------
                 523,950       4.58          $ 6.15       238,089     $ 5.30

  The fair value of options granted under the Company's fixed stock option plans
during fiscal 1998 and 1997 was estimated on the dates of grant using the Black-
Scholes options-pricing model.  The assumptions for fiscal 1998 and 1997 were as
follows:

    Fiscal Year Ended October 31,          1998         1997
    ---------------------------------  -----------  -----------
    Risk free interest rates.........  4.7% - 5.1%  5.6% - 5.9%
    Expected life....................      6.0          6.9
    Expected volatility..............   44% - 53%       54%
    Expected dividends...............       0%           0%

  Pro forma compensation cost related to shares purchased under the Company's
Employee Stock Purchase Plan is measured based on the discount from market
value.  The effects of applying SFAS No. 123 does not apply to awards prior to
fiscal 1996, and additional awards in future years are anticipated.

  In September of 1997, the Company issued a warrant to purchase 25,000 shares
of common stock with an exercise price of $12.00 and an expiration date of
September of 2004.

NOTE 6: STOCK OFFERINGS

  In June of 1996, the Company completed a public stock offering, issuing
1,600,000 shares of common stock at $12.00 per share, that raised $17.6 million
net of offering costs of $1.6 million.

NOTE 7: EMPLOYEE STOCK PURCHASE PLAN

  In March 1995 shareholders approved the adoption of the 1995 Employee Stock
Purchase Plan to replace the 1990 Employee Stock Purchase Plan which expired in
1995. Under the terms of the 1995 Plan, 225,000 shares have been reserved for
issuance under the Plan.

  The fourth phase of the 1995 Plan began on June 1, 1998 and employees were
granted the right to purchase 33,801 shares at $5.84 per share under the Plan.

  The third phase of the 1995 Plan ended on May 31, 1998 and employees purchased
25,648 shares at $5.84 per share under the Plan.

  The second phase of the 1995 Plan ended on May 31, 1997 and employees
purchased 5,228 shares at $6.69 per share under the Plan.


NOTE 8: COMMITMENTS & CONTINGENCIES

  Rental expense under operating leases was $239,000, $188,000, and $170,987 in
1998, 1997, and 1996 respectively. Minimum future rental payments due under
noncancelable operating lease agreements are as follows:

             1999............................    687,000
             2000............................    899,000
             2001............................    699,000
             2002............................    604,000
             2003............................    604,000
             Thereafter......................  4,557,000
                                              ----------
                 Total....................... $8,050,000
                                              ==========


NOTE 9: EMPLOYEE SAVING PLAN

  The Company provides a supplementary retirement savings plan which is
structured in accordance with Section 401(k) of the Internal Revenue Code.
Employees eligible for the Plan may contribute from one to fifteen percent of
their monthly earnings on a pre-tax basis subject to annual contribution
limitations. The Company makes matching contributions of one dollar for each
dollar contributed by each Plan participant up to a maximum of $2,000 annually.
The Company's contributions under this program were approximately $152,000,
$66,000, and $52,000 for the years ended October 31, 1998, 1997 and 1996
respectively.

NOTE 10: INCOME TAXES

  The provision for income taxes differs from the statutory U.S. federal tax
rate of 34% applied to earnings before income taxes as follows:

                                              YEAR ENDED OCTOBER 31,
                                              ----------------------
                                                1998          1997
                                             ---------     ---------
Expected tax provision at statutory rate...  $ (59,000)     $ 362,000
State income tax provision, net of federal
  Tax effect...............................     (7,000)        42,000
Permanent differences......................      5,000         11,000
Tax credits and other......................   (217,000)       (10,000)
                                             ---------      ---------
 Totals....................................  $(278,000)     $ 405,000
                                             =========      =========


Deferred tax assets (liabilities) are comprised of the following at October 31:

                                              YEAR ENDED OCTOBER 31,
                                              ----------------------
                                                1998           1997
                                             ----------     ----------
Depreciation...............................  $   55,000     $   93,000
Deferred rent..............................      38,000         52,000
Other......................................    (147,000)      (199,000)
                                             ----------     ----------
Net operating loss carryforwards...........   1,126,000        959,000
Credit carryforwards.......................     616,000        505,000
                                             ----------     ----------
Net deferred tax asset.....................  $1,688,000     $1,410,000
                                             ==========     ==========

At October 31, 1998, the Company has available net operating loss and tax credit
carryforwards for income tax purposes of approximately $3.3 million and
$715,000, respectively.  These carryforwards expire in the years ending October
31, 2001 through October 31, 2018.  No current income tax provision was recorded
in the fiscal year ended October 31, 1998 due to the current year taxable loss.
No current income tax provision was recorded in the fiscal year ended October
31, 1997 due to the utilization of net operating loss carryforwards.  The entire
tax provisions for fiscal years 1998 and 1997 consist of deferred taxes.

The utilization of the net operating loss and tax credit carryforwards is
dependent upon the Company's ability to generate sufficient taxable income
during the carryforward period.  Management does not believe that a valuation
allowance is currently considered necessary based on an analysis of likely
future taxable income.


                                  SCHEDULE VIII


Valuation and Qualifying Accounts

Allowance for Doubtful Accounts:

                              Balance at  Additions   Deductions  Balance at
                              Beginning   Charged to  and Write-    End of
                              of Period    Earnings      offs       Period
                              ----------  ----------  ----------  ----------
Year Ended October 31, 1996   $35,000     $  2,000    ($  2,000)  $35,000

Year Ended October 31, 1997   $35,000     $ 95,000    ($100,000)  $30,000

Year Ended October 31, 1998   $30,000     $ 10,000    ($ 11,000)  $29,000


                               EXHIBIT 10.8: LEASE
                               -------------------

                             ARTICLE 1.  LEASE TERMS

1.1  LANDLORD AND TENANT.  This lease ("Lease") is entered into this 17th day of
July,  1998  by  and  between  CSM PROPERTIES, INC.,  a  Minnesota  corporation,
("Landlord") and PPT VISION, INC., a Minnesota corporation, ("Tenant").

1.2   PREMISES.  Landlord hereby rents, leases, lets and demises to  Tenant  the
following  described  property ("Premises"), as illustrated  on  the  site  plan
attached  hereto  as EXHIBIT A:  approximately 58,900 square  feet  of  finished
space  in the VALLEY VIEW BUSINESS CENTER located at the intersection of  Valley
View Road and Prairie Center Drive in Eden Prairie, Minnesota, and consisting of
approximately 81,046 square feet ("Building").  Tenant's lease of  the  Premises
shall  include the right to use, in common with others and subject to the  other
provisions of this Lease, any common facilities included within the Building and
the  property  of  which the Premises and the Building are a part,  all  without
additional charge hereunder, including parking spaces adjacent to the  Premises.
During  the  term  of this Lease, Landlord shall provide for use  by  Tenant,  a
minimum of 3.5 parking spaces for 1,000 square feet of rentable area within  the
Premises.

For  the purposes of this Lease, the determination of the number of total square
feet  in  the  Premises, and the number of rentable square feet in the  Building
shall  be  made by measuring from the exterior face of exterior walls, and  from
the  midline or centerpoint of interior or party walls.  "As-built" measurements
will  be  taken  of  the  Building and Premises  as  soon  as  construction  has
progressed  to  the  point  where such measurement is possible.   Landlord  will
certify  such  "as  built" measurements to Tenant and thereafter,  Landlord  and
Tenant  shall execute an addendum to this Lease in the form of attached  EXHIBIT
B,  confirming said measurements and establishing (i) the rentable area  of  the
Building;  (ii)  the rentable area of the Premises, which shall equal  the  area
established by the "as built" measurements, and a pro-rata share of  the  square
foot  area  of  the  building mechanical room; (iii) the  Base  Rent;  and  (iv)
Tenant's  pro rata share, to reflect the actual total square foot  area  of  the
Building  and  Premises; and such addendum shall thereupon  be  deemed  attached
hereto,  incorporated herein, and by this reference made a part of  this  Lease.
Landlord's calculation of the rentable area of the Premises and of the  Building
shall be subject to confirmation by Tenant's space planner or architect, and  if
Landlord or its architect or surveyor cannot reach agreement with Tenant's space
planner  or its architect, the dispute will be submitted to a mutually  selected
architect for final determination.

1.3   LEASE  TERM.   The  term of this Lease shall commence  on  March  1,  1999
("Commencement  Date")  and  shall terminate one  hundred  twenty  (120)  months
thereafter  on  February 28, 2009, ("Lease Term") unless  sooner  terminated  as
hereinafter  provided.  In the event that Tenant does not  vacate  the  Premises
upon  the  expiration or termination of this Lease, Tenant shall be a tenant  at
will  for the holdover period and all of the terms and provisions of this  Lease
shall be applicable during that period, except that Tenant shall pay Landlord as
base  rental for the period of such holdover an amount equal to one and one-half
(1.5)  times  the  base rent which would have been payable  by  Tenant  had  the
holdover  period been a part of the original term of this Lease,  together  with
all  additional rent as provided in this Lease.  After the expiration or earlier
termination  of this Lease, Tenant agrees to vacate and deliver the Premises  to
Landlord  upon Tenant's receipt of notice from Landlord to vacate.   The  rental
payable  during the holdover period shall be payable to Landlord on demand.   No
holding  over by Tenant, whether with or without the consent of Landlord,  shall
operate to extend the term of this Lease.

1.4  BASE RENT.  Base Rent is:

                                                       Per Rentable
                    Months         Monthly Base Rent*  Square Foot
                    ------         -----------------   -----------
     Initial Term:  1-60           $50,310.42          $10.25
                    60-120         $52,764.58          $10.75

     Option Term:   121-180        market              market
                    181-240        market              market

     * Subject to adjustement as provided in Section 1.2 above.

1.5                      PERMITTED    USE:         Office,   warehouse,    light
                         manufacturing,  training and marketing  activities,  as
                         well as ancillary uses consistent therewith.

1.6                      SECURITY  DEPOSIT:   Fifty Thousand, Three Hundred  Ten
                         and 42/100 Dollars ($50,310.42).

1.7                      PRO-RATA  SHARE:      Seventy-Two  and  67/100  percent
                         (72.67%), subject to
                         adjustment as provided in Section 1.2 and 2.2 hereof.

1.8  ADDRESSES.

     LANDLORD'S ADDRESS:           TENANT'S ADDRESS:

                                   After Lease Commencement:
     CSM PROPERTIES, INC.          PPT VISION, INC.
     2575 UNIVERSITY AVE. W.       xxxx VALLEY VIEW ROAD
     SUITE 150                     EDEN PRAIRIE, MN
     ST. PAUL, MN  55114-1024
     (612) 646-1717                Prior to Lease Commencement:
                                   PPT VISION, INC.
                                   10321 W. 70TH ST.
                                   EDEN PRAIRIE, MN  55344-3446

            ARTICLE 2.  RENT, OPERATING EXPENSES AND SECURITY DEPOSIT

2.1   BASE RENT.  Tenant agrees to pay monthly as base rent during the  term  of
this  Lease the sum of money set forth in Section 1.4 of this Lease, as  amended
in  the  Addendum to this Lease (EXHIBIT B), which amount shall  be  payable  to
Landlord at the address shown above.  One monthly installment shall be  due  and
payable  on or before the Commencement Date; provided, if the Commencement  Date
should  be  a  date  other than the first day of a calendar month,  the  monthly
rental set forth above shall be prorated to the end of that calendar month,  and
all  succeeding installments of rent shall be due and payable on or  before  the
first  day  of  each succeeding calendar month during the term  of  this  Lease.
Tenant  shall  pay,  as additional rent, all other sums due  under  this  Lease.
Notwithstanding  anything in this Lease to the contrary, if  Landlord,  for  any
reason  whatsoever (other than Tenant's default), cannot deliver  possession  of
the  Premises  to the Tenant on the Commencement Date, this Lease shall  not  be
void  or voidable, nor shall Landlord be liable for any loss or damage resulting
therefrom,  but  all  rent shall be abated until Landlord  delivers  possession,
which date of delivery shall be then deemed to be the Commencement Date, and the
expiration of the Lease Term shall be extended accordingly.  Landlord agrees  to
provide  Tenant  early occupancy of the Premises on February 15,  1999  for  the
purpose  of  installing Tenant's fixtures, under the same terms  and  conditions
contained herein, exclusive of payment of rent and operating expenses,  provided
that  Tenant's work shall not and does not interfere with Landlord's  completion
of  its  work.   In the event that Landlord fails to substantially complete  and
deliver the Premises to Tenant on or before June 1, 1999, unless such failure is
attributable to Tenant's default, Tenant shall have the option to terminate this
Lease,  with  no further obligation, by delivering written notice of termination
to  Landlord on before June 5, 1999.  Substantial completion shall exclude punch
list items in the interior of the Premises, exterior landscaping and parking lot
construction (except that Landlord shall provide Class 5 parking areas and drive
lanes   to  reasonably  accommodate  Tenant's  truck  traffic  and  car  parking
requirements), which shall be completed by July 1, 1999.

2.2   OPERATING EXPENSES.  Tenant shall also pay as additional rent Tenant's pro
rata  share  of the operating expenses of Landlord for the Building  and  common
elements  and  areas appurtenant to the Building.  Landlord may  invoice  Tenant
monthly for Tenant's pro rata share of the estimated operating expenses for each
calendar  year,  which  amount shall be adjusted from time-to-time  by  Landlord
based upon anticipated operating expenses.  Within six (6) months following  the
close of each calendar year, Landlord shall provide Tenant an accounting showing
in reasonable detail the computations of additional rent due under this Section.
In the event the accounting shows that the total of the monthly payments made by
Tenant  exceeds the amount of additional rent due by Tenant under this  Section,
the accounting shall be accompanied by evidence of a credit to Tenant's account.
In any event the accounting shows that the total of the monthly payments made by
Tenant  is  less  than the amount of additional rent due by  Tenant  under  this
Section,  the  accounting shall be accompanied by an invoice for the  additional
rent.   Notwithstanding any other provisions in this Lease, during the  year  in
which this Lease terminates, Landlord, prior to the termination date, shall have
the  option  to  invoice  Tenant for Tenant's pro rata share  of  the  operating
expenses based upon the previous year's operating expenses.  If this Lease shall
terminate on a day other than the last day of a calendar year, the amount of any
additional  rent  payable  by  Tenant  applicable  to  the  year  in  which  the
termination shall occur shall be prorated on the ratio that the number  of  days
from  the  commencement of the calendar year to and including  such  termination
date  bears  to  365.  Tenant agrees to pay any additional rent due  under  this
Section  within thirty (30) days following receipt of the invoice or  accounting
showing  additional rent due.  Tenant's pro rata share set forth in Section  1.7
shall,  subject  to  adjustment  as provided in  Section  1.2,  be  equal  to  a
percentage  based  upon a fraction, the numerator of which is the  net  rentable
area  of  the  Premises as set forth in Article 1 and the denominator  of  which
shall be the net rentable area of the Building, as the same may change from time
to time.

For a period of one hundred eighty (180) days following Tenant's  receipt of the
operating  expense reconciliation for the previous calendar year,  Tenant  shall
have  the  right  to  audit  Landlord's books and records  as  they  pertain  to
operating  expenses  for the immediate preceding calendar  year,  in  Landlord's
office and with reasonable notice.  If Tenant does not conduct such audit within
said one hundred (180) day period, Tenant shall be deemed to automatically waive
and  release its right to audit for such calendar year.  The cost of said  audit
shall be borne by Tenant unless the audit discloses that Tenant has overpaid its
proportionate share of operating expenses for the calendar year in  question  by
more  than three percent (3%), in which case the reasonable expense of the audit
shall  be  borne  by  Landlord.   If the audit reveals  that  Landlord's  actual
statement was incorrect in any amount, the resulting excess or deficiency  shall
be promptly paid by or reimbursed to Tenant as the case may be.

2.3   DEFINITION OF OPERATING EXPENSES.  The term "operating expenses"  includes
all  expenses incurred by Landlord with respect to the maintenance and operation
of  the  Building, common elements and common areas, including, but not  limited
to,  the  following:   maintenance, repair and replacement  costs;  electricity,
fuel,  water,  sewer, gas and other common Building utility  charges;  equipment
used  for  maintenance  and  operation of the  Building;  operational  expenses;
exterior  window  washing  and  janitorial services;  trash  and  snow  removal;
landscaping  and pest control; management fees (not to exceed two  and  one-half
percent  (2.5%)  of  gross rents), wages and benefits payable  to  employees  of
Landlord  whose duties are directly connected with the operation and maintenance
of the Building; all services, supplies, repairs, replacements or other expenses
for  maintaining  and  operating the Building or project including  parking  and
common  areas;  improvements made to the Building which are required  under  any
governmental  law or regulation that was not applicable to the Building  at  the
time  it  was  constructed; installation of any device or other equipment  which
improves the operating efficiency of any system within the Premises and  thereby
reduces operating expenses; all other expenses which would generally be regarded
as  operating,  repair, replacement and maintenance expenses; all real  property
taxes and installments of special assessments, including dues and assessments by
means of deed restrictions and/or owners' associations which accrue against  the
Building  during  the term of this Lease and legal fees incurred  in  connection
with actions to reduce the same; and all insurance premiums Landlord is required
to pay or deems necessary to pay, including fire and extended coverage, and rent
loss  and  public  liability  insurance, with respect  to  the  Building.   When
reasonably  possible,  Landlord  agrees to competitively  bid  all  common  area
maintenance components of operating expenses with respect to the Building.

The term "operating expenses" shall not include the following:

          A.     Capital  expenditures;  provided  that  such  costs  shall   be
          includable  in  operating  expenses  on  an  amortized  basis,   which
          amortization shall occur over the useful life of the item of  expense,
          at an amortization rate as reasonably determined by Landlord;

          B.    Income  or  franchise taxes payable by Landlord  except  to  the
          extent`         imposed in lieu of real or personal property taxes  or
          special assessments;

          C.    Tenant  improvements, leasing commissions  and  advertising  and
          marketing costs for leasing of space;

          D.     Costs  (including,  without  limitation,  permit,  license  and
          inspection  fees)  of  any alterations, renovations,  improvements  or
          decorations made for specific tenants of the Building;

          E.   Depreciation;

          F.    Principal or interest payments on any mortgages relating to  the
          Building or the property, lease rentals or expenses paid or payable on
          any ground or underlying lease or any fees (including attorneys' fees)
          and costs incurred in obtaining such mortgages or ground or underlying
          leases;

          G.    Costs  of formation and operation of Landlord as a legal  entity
          and  defending  Landlord's  title to  or  interest  in  the  Building,
          including, without limitation, attorneys' fees;

          H.    Costs of the procurement, negotiation and enforcement of  tenant
          leases,  including, without limitation, attorneys' fees  and  brokers'
          commissions;

          I.   The cost of correcting latent defects in the initial construction
          of  the  Building  and the Premises, and the Building's  elements  and
          equipment,   to  the  extent  such items are  covered  by  contractor,
          subcontractor or manufacturer's warranty.

          J.   Any advertising and promotional expenditures;

          K.    Executive  salaries above the grade of general  manager  of  the
          Building  and  such  portion of the salaries  of  off-site  management
          personnel  to  the  extent that their duties  include  work  on  other
          buildings;

          L.   Any interest, penalty charges or capital improvements incurred by
          Landlord  due  to  the  violation  of  any  law  existing  as  of  the
          Commencement  Date  or failure to timely pay obligations  of  Landlord
          other  than  interest on special assessments, amortization of  capital
          expenditures  otherwise  includable in  operating  expenses,  and  any
          interest and penalties which result from Tenant's failure to pay  when
          due any rent which has not been abated under the terms of this Lease.

          M.    Expenses  for  which  Landlord is reimbursed  (net  of  cost  of
          collection),   including  without  limitation,   reimbursements   from
          insurance  or from Tenant or other tenants (such as reimbursement  for
          repairs)  or  pursuant  to  contractors'  or  others'  warranties   or
          condemnation, but excluding those expenses reimbursed by Tenant or  by
          other  tenants in the form of payments of a share of actual  operating
          expenses;

          N.   Cost of repairs due to condemnation;

          O.    Expenses incurred in connection with services (including special
          service  from Landlord's employees) or other benefits of a type  which
          are not available to Tenant, but which are available to another tenant
          of the Building;

          P.    Any  rental  of  equipment which, if  purchased,  would  not  be
          included  in  actual  operating expenses, other  than  items  such  as
          scaffolding  which  are used on an occasional  or  sporadic  basis  in
          performing Building maintenance and repairs;

          Q.    Any  amount paid to any affiliate of Landlord for  any  item  or
          service to the extent it would exceed the reasonably competitive  cost
          or  rate  for  such  item  or service provided  by  unrelated  parties
          determined as of the time the contract or purchase order was made;

          R.    Any  cost  resulting from the negligence or intentional  act  of
          Landlord, its agents or employees;

          S.    Bad  debt  loss, rent loss or reserves therefor,  provided  that
          actual operating expenses will in any event include the cost of rental
          and business interruption insurance;

          T.    Amounts  required  to  be escrowed by Landlord  as  replacement,
          repair  or  similar  reserves  by  any  lessor  under  any  ground  or
          underlying  lease  or holder of a mortgage or deed  of  trust  on  the
          Building  or the property, but any amounts withdrawn from such  escrow
          will  be  included  in actual operating expenses to  the  extent  such
          amounts would have been includable in operating expenses had they been
          funded from other sources;

          U.    The  costs  (or  any amortization thereof) of  any  alterations,
          additions, changes, replacements, improvements, repairs or other items
          which  are  properly  capitalized under currently accepted  accounting
          principles, provided that such costs shall be includable in  operating
          expenses  on an amortized basis, which amortization shall  occur  over
          the  useful  life  of  the repair, replacement or improvement,  at  an
          amortization  rate equal to its useful life, as reasonably  determined
          by Landlord.

2.4   INCREASE IN INSURANCE PREMIUMS.  If an increase in any insurance  premiums
paid  by Landlord for the Building is caused by Tenant's use of the Premises  or
if  Tenant  vacates the Premises and causes an increase in such  premiums,  then
Tenant shall pay as additional rent the amount of such increase to Landlord.

2.5   SECURITY DEPOSIT.  The security deposit set forth in Section 1.6 shall  be
held by Landlord for the performance of Tenant's covenants and obligations under
this Lease, it being expressly understood that the security deposit shall not be
considered  an  advance payment of rental or a measure of Landlord's  damage  in
case  of  default  by Tenant.  Upon the occurrence of any event  of  default  by
Tenant or breach by Tenant of Tenant's covenants under this Lease, Landlord may,
from  time to time, without prejudice to any other remedy, after written  notice
to  Tenant,  use the security deposit to the extent necessary to make  good  any
arrears  of  rent,  or to repair any damage or injury, or  pay  any  expense  or
liability incurred by Landlord as a result of the event of default or breach  of
covenant, and any remaining balance of the security deposit shall be returned by
Landlord to Tenant upon termination of this Lease.  In the event that Tenant  is
not  in  Default under Section 11 of this Lease, upon the termination  of  lease
month  sixty  (60),  Landlord agrees to refund said security deposit  to  Tenant
within  thirty  (30) days of Tenant's written request.  If any  portion  of  the
security deposit is so used or applied, Tenant shall, upon ten (10) days written
notice from Landlord, deposit with Landlord by cash or cashier's check an amount
sufficient to restore the security deposit to its original amount within  thirty
(30) days of written notice to Tenant.


                          ARTICLE 3.  OCCUPANCY AND USE

3.1  USE.  Tenant warrants and represents to Landlord that the Premises shall be
used  and  occupied  only for the purpose as set forth in Section  1.5.   Tenant
shall  occupy  the  Premises,  conduct its  business  and  control  its  agents,
employees,  invitees and visitors in such a manner as is lawful,  reputable  and
will  not create a nuisance.  Tenant shall not permit any operation which  emits
any  odor  or  matter  which intrudes into other portions  of  the  Building  or
otherwise  interferes with, annoys or disturbs any other lessee  in  its  normal
business operations or Landlord in its management of the Building.  Tenant shall
not  permit any waste on the Premises to be used in any way which would, in  the
opinion  of Landlord, be extra hazardous on account of fire or which  would,  in
any way, increase or render void the fire insurance on the Building.

3.2   SIGNS.   No  sign of any type or description shall be erected,  placed  or
painted in or about the Premises or Building which are visible from the exterior
of  the Premises, except those signs submitted to Landlord in writing, and which
signs  are  in  conformance  with Landlord's sign criteria  attached  hereto  as
EXHIBIT  C.   Tenant  shall have the option to install, at  its  sole  cost  and
expense, a sign on Landlord's monument sign for the project.  Said sign shall be
subject  to Landlord's approval and may occupy up to seventy-five percent  (75%)
of the area of the sign devoted to tenant identification.

3.3  COMPLIANCE WITH LAWS, RULES AND REGULATIONS.  Tenant, at Tenant's sole cost
and  expense,  shall  comply  with  all  laws,  ordinances,  orders,  rules  and
regulations  of  state, federal, municipal or other agencies  or  bodies  having
jurisdiction over the use, condition or occupancy of the Premises, provided that
compliance is required because of Tenant's specific use of the Premises.  Tenant
will comply with the reasonable rules and regulations of the Building adopted by
Landlord,  so long as and to the extent consistent with the terms and conditions
of  this Lease.  Landlord shall have the right at all times to change and  amend
the  rules  and regulations in any reasonable manner as may be deemed  advisable
for  the safety, care, cleanliness, preservation of good order and operation  or
use  of the Building or the Premises.  All rules and regulations of the Building
will  be  sent by Landlord to Tenant in writing and shall thereafter be  carried
out and observed by Tenant.

3.4   WARRANTY  OF  POSSESSION.   Tenant, on  paying  rent  and  performing  its
obligations under this Lease, shall peacefully and quietly have, hold and  enjoy
the  Premises during the term of this Lease.  Landlord warrants that it has  the
right  and  authority to execute this Lease.  Except to the extent  of  its  own
negligence or willful act or omission, Landlord shall not be responsible for the
acts  or  omissions of any other tenant of the Building who may  interfere  with
Tenant's use of the Premises.

3.5   RIGHT OF ACCESS.  Landlord or its authorized agents shall, at any and  all
reasonable times, have the right to enter the Premises to inspect the  same,  to
show  the  Premises to prospective purchasers, lessees, mortgagees, insurers  or
other  interested parties, and to alter, improve or repair the Premises  or  any
other  portion of the Building.  Tenant hereby waives any claim for damages  for
injury  or inconvenience to or interference with Tenant's business, any loss  of
occupancy or use of the Premises, and any other loss occasioned thereby.  Tenant
shall not change Landlord's lock system or in any other manner prohibit Landlord
from  entering the Premises.  Landlord shall have the right to use any  and  all
means  which  Landlord may deem proper to open any door in an emergency  without
liability  therefor.  Tenant shall permit Landlord to erect, use,  maintain  and
repair pipes, cables, conduits, plumbing, vents and wires in, to and through the
Premises as often and to the extent that Landlord may now or hereafter  deem  to
be necessary or appropriate for the proper use, operation and maintenance of the
Building.

Notwithstanding  the foregoing, Landlord, except in the event of  an  emergency,
shall  supply  Tenant with at least 24 hours advance notice of its intention  to
enter  the  Premises  and  to  identify those  expected  to  accompany  Landlord
therefor.  In entering the Premises or carrying out any work under this section,
Landlord  shall exercise reasonable efforts to minimize disruption  of  Tenant's
use  of  the Premises and operation of its business, and shall repair any damage
to  the  Premises caused by the work.  Such entry or work shall not be construed
as  an  eviction  of  Tenant, work an abatement of rent or relieve  Tenant  from
fulfilling any obligation in this Lease.  To the extent, however,  the  Premises
are  rendered  unusable by Tenant in its business by reason of the negligent  or
willful  acts or omissions of Landlord Base Rent and Tenant's share of operating
expenses  and  any operating expense adjustment therefor will be proportionately
reduced from three business days after notice from Tenant that the Premises  are
unusable until the Premises are again rendered usable.


                    ARTICLE 4.  UTILITIES AND ACTS OF OTHERS

4.1   BUILDING  SERVICES.  Tenant shall pay when due, all charges for  utilities
furnished to or for the use or benefit of Tenant or the Premises.  Tenant  shall
have  no  claim  for rebate of rent on account of any interruption  in  service.
Reduction,  interruption or termination of any service provided by  Landlord  or
any  other  supplier because of necessary repairs, installation or improvements,
Landlord's  failure  to  perform any service under this section,  or  any  cause
beyond the reasonable control of Landlord, shall not be construed as an eviction
of  Tenant,  work  an  abatement of rent or relieve Tenant from  fulfilling  any
obligation  of  this Lease.  To the extent, however, the Premises  are  rendered
unusable  by Tenant in its business by reason of:  (i) any event caused  by  the
negligent  or  willful act or omission of Landlord, Base Rent and that  part  of
Tenant's  share of operating expenses and any operating expense adjustment  will
be proportionately reduced from three (3) business days after notice from Tenant
to  Landlord  that  the  Premises are unusable, until  the  Premises  are  again
rendered usable; or (ii) any event not contributed to by Landlord, Base Rent and
that  part  of  Tenant's share of operating expenses and any  operating  expense
adjustment  will  be  proportionately reduced, from fifteen (15)  business  days
after  notice from Tenant to Landlord that the Premises are unusable, until  the
Premises  are again rendered usable.  If any of the equipment or machinery  used
by  Landlord  in supplying the services breaks down or for any cause  ceases  to
function properly, Landlord shall use reasonable diligence to make the necessary
repair or replacement.

4.2   THEFT  OR BURGLARY.  Landlord shall not be liable to Tenant for losses  to
Tenant's  property  or  personal injury caused by  criminal  acts  or  entry  by
unauthorized  persons into the Premises or the Building, except  to  the  extent
caused or attributable to the negligence or willful act or omission of Landlord.


                       ARTICLE 5.  REPAIRS AND MAINTENANCE

5.1.  LANDLORD REPAIRS.  Landlord shall only be obligated to maintain the  roof,
foundation,  parking, driveway and other common areas, the structural  soundness
and  integrity  of  the  exterior walls, doors, corridors and  other  structures
serving   the  Premises,  including  utility  services.   Landlord's   cost   of
maintaining,  replacing and repairing the items set forth in  this  section  may
qualify  for inclusion in operating expenses to the extent specified in Sections
2.2   and  2.3  herein.  Landlord shall perform its duties  of  maintenance  and
repair as specified herein in a first class manner consistent with buildings  of
similar age, construction and features in the market.

5.2   TENANT  REPAIRS.  Tenant shall, at all times throughout the term  of  this
Lease,  including  renewals and extensions, and at its sole  expense,  keep  and
maintain  the Premises in a clean, safe, sanitary and first class condition  and
in   compliance  with  all  applicable  laws,  codes,  ordinances,   rules   and
regulations.  Tenant's obligations hereunder shall include, but not  be  limited
to,  the  maintenance,  repair and replacement, if necessary,  of  all  heating,
ventilation,  air  conditioning, lighting and plumbing fixtures  and  equipment,
fixtures,  motors  and  machinery, all interior  walls,  partitions,  doors  and
windows,  including  the  regular  painting  thereof,  all  exterior  entrances,
windows, doors and docks and the replacement of all broken glass.  When used  in
this  provision, the term "repairs" shall include replacements or renewals  when
necessary, and all such repairs made by the Tenant shall be equal in quality and
class to the original work.  The Tenant shall keep and maintain all portions  of
the  Premises  and  the sidewalk and areas adjoining the same  in  a  clean  and
orderly  condition, free of accumulation of dirt, rubbish,  snow  and  ice.   If
Tenant fails, refuses or neglects to maintain or repair the Premises as required
in this Lease after notice shall have been given Tenant, in accordance with this
Lease,  Landlord may make such repairs without liability to Tenant 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 costs plus fifteen percent (15%) for overhead incurred
by Landlord in making such repairs upon presentation to Tenant of bill therefor.

5.3.  TENANT DAMAGES.  Tenant shall not allow any damage to be committed on  any
portion  of the Premises or Building or common areas, and at the termination  of
this Lease, by lapse of time or otherwise, Tenant shall deliver the Premises  to
Landlord in as good condition as existed at the Commencement Date of this Lease,
ordinary  wear and tear excepted.  The cost and expense of repairs necessary  to
restore the condition of the Premises shall be borne by Tenant.

                    ARTICLE 6.  ALTERATIONS AND IMPROVEMENTS

6.1   SHELL IMPROVEMENTS.  Landlord will complete the shell improvements to  the
Building  and Premises in accordance with the specifications attached hereto  as
EXHIBIT D.

6.2   INTERIOR IMPROVEMENTS.  At Landlord's sole cost and expense, Landlord will
complete  the  construction  of the interior improvements  to  the  Premises  in
accordance  with  the  approved  floor plan depicted  in  EXHIBIT  E,  including
preparation of construction documents, and in accordance with the specifications
agreed upon by Tenant and Landlord, which specifications are attached hereto  as
EXHIBIT F.  Any changes or modifications to the approved plan and specifications
caused  or  requested by Tenant which result in an increase in the cost  of  the
interior improvements shall be at Tenant's sole cost and expense, shall be  made
and  accepted  by  written change orders or agreement  signed  by  Landlord  and
Tenant, and shall constitute an amendment to this Lease.

The interior improvements shall be substantially completed by February 15, 1999.

6.3   TENANT  IMPROVEMENTS.  Tenant shall not make  or  allow  to  be  made  any
structural  alterations or physical additions, or non-structural alterations  or
physical  additions  costing in excess of $15,000.00,  in  or  to  the  Premises
without  first obtaining the written consent of Landlord, which consent may  not
be  unreasonably denied.  Any alterations, physical additions or improvements to
the  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,  Landlord,  at its option, may require Tenant to  remove  any  physical
additions and/or repair any alterations in order to restore the Premises to  the
conditions  existing at the time Tenant took possession, all  costs  of  removal
and/or alterations to be borne by Tenant.

                       ARTICLE 7.  CASUALTY AND INSURANCE

7.1   SUBSTANTIAL DESTRUCTION.  If all or a substantial portion of the  Premises
or the Building should be totally destroyed by fire or other casualty, or if the
Premises  or the Building should be damaged so that rebuilding cannot reasonably
be  completed within two hundred seventy (270) working days after  the  date  of
written  notification by Tenant to Landlord of the destruction, or if  insurance
proceeds are not made available to Landlord, or are inadequate, for restoration,
this Lease shall terminate at the option of either Landlord or Tenant by written
notice  to  the other within sixty (60) days following the occurrence,  and  the
rent shall be abated for the unexpired portion of the Lease effective as of  the
date of the occurrence.

7.2   PARTIAL DESTRUCTION.  If the Premises should be partially damaged by  fire
or  other casualty, and rebuilding or repairs can reasonably be completed within
one  hundred fifty (150)  working days from the date of written notification  by
Tenant  to Landlord of the destruction, and insurance proceeds are adequate  and
available  to  Landlord  for restoration, this Lease shall  not  terminate,  and
Landlord shall at its sole risk and expense proceed with reasonable diligence to
rebuild  or repair the Building or other improvements to substantially the  same
condition in which they existed prior to the damage.  If the Premises are to  be
rebuilt  or  repaired  and are untenantable in whole or in  part  following  the
damage,  the  rent  payable under this Lease during the  period  for  which  the
Premises,  in whole or in part, are untenantable shall be adjusted  to  such  an
extent  as  may  be fair and reasonable under the circumstances,  provided  that
under  no circumstances shall Tenant be required to pay rent for any portion  of
the Premises that is untenantable.

7.3   PROPERTY INSURANCE.  Landlord shall not be obligated in any way or  manner
to  insure  any personal property (including, but not limited to, any furniture,
machinery,  goods  or  supplies) of Tenant upon  or  within  the  Premises,  any
fixtures  installed or paid for by Tenant upon or within the  Premises,  or  any
improvements which Tenant may construct on the Premises.  Tenant shall  maintain
property insurance on its personal property and shall also maintain plate  glass
insurance.  Tenant shall have no right in or claim to the proceeds of any policy
of  insurance maintained by Landlord even if the cost of such insurance is borne
by  Tenant  as  set  forth in Article 2.  Landlord agrees to  provide  Tenant  a
summary of its insurance coverages upon execution of this Lease by both parties.

7.4    WAIVER   OF  SUBROGATION.   Anything  in  this  Lease  to  the   contrary
withstanding,  Landlord and Tenant hereby waive and release each  other  of  and
from  any  and all right of recovery, claim, action or cause of action,  against
each  other,  their agents, officers and employees, for any loss or damage  that
may occur to the Premises, the improvements of the Building or personal property
within  the Building, by reason of fire or the elements, regardless of cause  or
origin,  including negligence of Landlord or Tenant and their  agents,  officers
and  employees, provided that the claims released are subject to  the  insurance
coverages  required  to  be procured by either party  hereunder.   Landlord  and
Tenant agree immediately to give their respective insurance companies which have
issued  policies of insurance covering all risk of direct physical loss, written
notice of the terms of the mutual waivers contained in this Section.

7.5  HOLD HARMLESS.  Landlord shall not be liable to Tenant's employees, agents,
invitees, licensees or visitors, or to any other person, for an injury to person
or  damage to property on or about the Premises caused by any act or omission of
Tenant, its agents, servants or employees, or of any other person entering  upon
the  Premises  under express or implied invitation by Tenant, or caused  by  the
improvements  located  on the Premises becoming out of repair,  the  failure  or
cessation  of any service provided by Landlord (including security  service  and
devices),  or  caused by leakage of gas, oil, water or steam or  by  electricity
emanating from the Premises, provided that any of the same are not caused by the
negligence  or willful act or omission of Landlord.  Tenant agrees to  indemnify
and  hold  harmless Landlord of and from any loss, attorney's fees, expenses  or
claims arising out of any such damage or injury.  Tenant shall not be liable  to
Landlord  or its employees, agents, invitees, licensees or visitors, or  to  any
other  person, for an injury to person or damage to property in the Building  or
common areas serving the Building caused by any act or omission of Landlord, its
agents,  servants or employees.  Landlord agrees to indemnify and hold  harmless
Tenant of and from any loss, attorneys' fees, expenses or claims arising out  of
any such damage or injury.


7.6  PUBLIC LIABILITY INSURANCE.  Tenant shall, during the term hereof, keep  in
full  force  and effect at its expense a policy or policies of public  liability
insurance with respect to the Premises and the business of Tenant, on terms  and
with  companies  approved  in writing by Landlord,  in  which  both  Tenant  and
Landlord  shall  be covered by being named as insured parties  under  reasonable
limits  of  liability  not  less than $1,000,000, or such  greater  coverage  as
Landlord  may reasonably require, combined single limit coverage for  injury  or
death.   Such  policy or policies shall provide that thirty (30)  days'  written
notice  must  be given to Landlord prior to cancellation thereof.  Tenant  shall
furnish  evidence  satisfactory to Landlord at the time this Lease  is  executed
that such coverage is in full force and effect.


                            ARTICLE 8.  CONDEMNATION

8.1   SUBSTANTIAL TAKING.  If all or a substantial part of the Premises is taken
for  any  public  or quasi-public use under any governmental law,  ordinance  or
regulation,  or by right of eminent domain or by purchase in lieu  thereof,  and
the  taking  would prevent or materially interfere with the use of the  Premises
for  the purpose for which it is then being used, this Lease shall terminate and
the rent shall be abated during the unexpired portion of this Lease effective on
the date physical possession is taken by the condemning authority.  Tenant shall
have no claim to the condemnation award or proceeds in lieu thereof, except that
Tenant shall be entitled to a separate award for the cost of removing and moving
its personal property.

8.2  PARTIAL TAKING.  If all or a substantial part of the Premises are taken for
any  public  or  quasi-public  use  under any  governmental  law,  ordinance  or
regulation,  or by right of eminent domain or by purchase in lieu  thereof,  and
this  Lease  is  not terminated as provided in Section 8.1 above, then  Landlord
shall  restore the Premises so as to permit effective use and occupancy  thereof
by Tenant, and the rent payable under this Lease during the unexpired portion of
the term shall be adjusted to such an extent as may be fair and reasonable under
the  circumstances.   Tenant shall have no claim to the  condemnation  award  or
proceeds  in  lieu  thereof which are or may be payable to  Landlord,  provided,
however, that Tenant shall be entitled to apply for and receive a separate award
as  allowed  by  law,  for damages that Tenant sustains by reason  of  any  such
taking.


                       ARTICLE 9.  ASSIGNMENT OR SUBLEASE

9.1   LANDLORD ASSIGNMENT.  Landlord shall have the right to sell,  transfer  or
assign, in whole or in part, its rights and obligations under this Lease and  in
the  Building.  Any such sale, transfer or assignment shall operate  to  release
Landlord from any and all liabilities under this Lease arising after the date of
such sale, assignment or transfer.

9.2   TENANT  ASSIGNMENT.  Tenant shall not assign, in whole or  in  part,  this
Lease,  or allow it to be assigned, in whole or in part, by operation of law  or
otherwise  (including assignment by merger where the surviving corporation  does
not  have  a net worth at least equal to the net worth of Tenant as of the  date
hereof,  or  by  dissolution, which  merger or dissolution shall  be  deemed  an
assignment) or mortgage or pledge the same, or sublet the Premises, in whole  or
in  part,  without the prior written consent of Landlord, and in no event  shall
said  such assignment or sublease ever release Tenant or any guarantor from  any
obligation  or liability hereunder.  Notwithstanding anything in this  Lease  to
the contrary, in the event of any assignment or sublease, any option or right of
first  refusal  granted  to  Tenant shall not be assignable  by  Tenant  to  any
assignee or sublessee.  No assignee or sublessee of the Premises or any  portion
thereof may assign or sublet the Premises or any portion thereof.

9.3  CONDITIONS OF ASSIGNMENT.  If Tenant desires to assign or sublet all or any
part  of the Premises, it shall so notify Landlord at least thirty (30) days  in
advance of the date on which Tenant desires to make such assignment or sublease.
Tenant shall provide Landlord with a copy of the proposed assignment or sublease
and such information as Landlord might request concerning the proposed sublessee
or  assignee  to allow Landlord to make informed judgments as to  the  financial
condition,  reputation,  operations and general  desirability  of  the  proposed
sublessee  or  assignee.  Within fifteen (15) days after Landlord's  receipt  of
Tenant's proposed assignment or sublease and all required information concerning
the  proposed  sublease or assignee, Landlord shall have the following  options:
(1)  consent  to the proposed assignment or sublease, and, if the rent  due  and
payable  by  any  assignee or sublessee under any such permitted  assignment  or
sublease (or a combination of the rent payable under such assignment or sublease
plus  any  bonus  or  any other consideration or any payment  incident  thereto)
exceeds  the rent payable under this Lease for such space, Tenant shall  pay  to
Landlord  all  such excess rent and other excess consideration within  ten  (10)
days  following  receipt  thereof  by Tenant; or  (2)  refuse,  with  reasonable
discretion  and  judgement, to consent to the proposed assignment  or  sublease,
which  refusal  shall  be deemed to have been exercised  unless  Landlord  gives
Tenant  written notice providing otherwise.  Upon the occurrence of an event  of
default,  if  all  or  any  part of the Premises are then  assigned  or  sublet,
Landlord,  in addition to any other remedies provided by this Lease or  provided
by  law, may, at its option, collect directly from the assignee or sublessee all
rents  becoming  due  to Tenant by reason of the assignment  or  sublease.   Any
collection  directly  by Landlord from the assignee or sublessee  shall  not  be
construed to constitute a novation or a release of Tenant or any guarantor  from
the  further  performance  of its obligations under this  Lease.   No  permitted
assignment or subletting pursuant to the terms of this section shall result in a
release  of Tenant of its obligations under this Lease, which obligations  shall
remain  in  full  force and effect throughout the Lease Term,  unless  expressly
released, in writing, by Landlord.

9.4   RIGHTS OF MORTGAGE.  Tenant accepts this Lease subject and subordinate  to
any  recorded mortgage presently existing or hereafter created upon the Building
and  to  all existing recorded restrictions, covenants, easements and agreements
with  respect to the Building.  Landlord is hereby irrevocably vested with  full
power  and  authority to subordinate Tenant's interest under this Lease  to  any
first  mortgage  lien hereafter placed on the Premises, and Tenant  agrees  upon
request  to execute additional instruments subordinating this Lease as  Landlord
may require.  If the interests of Landlord under this Lease shall be transferred
by  reason  of  foreclosure or other proceedings for enforcement  of  any  first
mortgage  or  deed  of  trust on the Premises, Tenant  shall  be  bound  to  the
transferee  (sometimes called the "Purchaser") at the option of  the  Purchaser,
under  the terms, covenants and conditions of this Lease for the balance of  the
term  remaining, including any extensions or renewals, with the same  force  and
effect as if the Purchaser were Landlord under this Lease, and, if requested  by
the  Purchaser,  Tenant agrees to attorn to the Purchaser, including  the  first
mortgagee  under  any  such mortgage if it be the Purchaser,  as  its  Landlord.
Notwithstanding  the foregoing, Tenant shall not be required to  attorn  to  any
successor in interest to Landlord unless such successor has delivered to  Tenant
a  written agreement reasonably satisfactory to Tenant that this Lease  and  all
Tenant's  rights  under this Lease shall not be disturbed by such  successor  so
long as an event of Default is not continuing under this Lease.  Further, Tenant
shall not be disturbed in its possession of the Premises so long as an event  of
Default is not continuing under this Lease.

9.5   TENANT'S  STATEMENT.  Tenant agrees to furnish, from time to time,  within
twenty  (20)  days  after  receipt  of a request  from  Landlord  or  Landlord's
mortgagee, a statement certifying, if applicable, the following:  Tenant  is  in
possession  of the Premises; the Premises are acceptable; the Lease is  in  full
force  and  effect;  the Lease is unmodified; Tenant claims no  present  charge,
lien,  or claim or offset against rent; the rent is paid for the current  month,
but is not prepaid for more than one month and will not be prepaid for more than
one  month  in advance; there is no existing default by reason of  some  act  or
omission  by  Landlord; and such other matters as may be reasonably required  by
Landlord  or Landlord's mortgagee.  Tenant's failure to deliver such  statement,
in  addition  to being a default under this Lease, shall be deemed to  establish
conclusively that this Lease is in full force and effect except as  declared  by
Landlord,  that Landlord is not in default of any of its obligations under  this
Lease, and that Landlord has not received more than one month's rent in advance.
Tenant  agrees  to furnish, up to once per year, within twenty (20)  days  after
receipt  of  a request from Landlord, a current financial statement  of  Tenant,
certified as true and correct by Tenant, provided that the form of the financial
statement   shall  be  such  form  generally  available  in  Tenant's  published
statements.


               ARTICLE 10.  LANDLORD'S LIEN AND SECURITY AGREEMENT
(Intentionally Omitted)

                        ARTICLE 11.  DEFAULT AND REMEDIES

11.1  DEFAULT BY TENANT.  The following shall be deemed to be events of  default
("Default") by Tenant under this Lease:  (1) Tenant shall fail to pay  when  due
any  installment of rent or any other payment required pursuant to  this  Lease,
and such failure is not cured within five (5) business days after written notice
to  Tenant; (2) Tenant shall fail to comply with any term, provision or covenant
of  this Lease, other than the payment of rent or other sums due hereunder,  and
the failure is not cured within thirty (30) days after written notice to Tenant;
(3)  Tenant  shall file a petition or an involuntary petition is  filed  against
Tenant;  or  Tenant  becomes  insolvent under any applicable  federal  or  state
bankruptcy or insolvency law; or Tenant admits that it cannot meet its financial
obligations as they become due; or a receiver or trustee shall be appointed  for
all  or  substantially  all of the assets of Tenant;  or  Tenant  shall  make  a
transfer  in fraud of creditors or shall make an assignment for the  benefit  of
creditors; or (4) Tenant shall do or permit to be done any act which results  in
a lien being filed against the Premises or the Building and/or project of which
the  Premises  are a part, except if such a lien is filed, Tenant shall,  within
ten  (10) days of Landlord's written notice to Tenant, provide Landlord  with  a
bond in the amount of said lien, and Tenant shall diligently pursue a release of
said lien.

In  the  event that an order for relief is entered in any case under  Title  11,
U.S.C. (the "Bankruptcy Code") in which Tenant is the debtor and:  (A) Tenant as
debtor-in-possession,  or  any trustee who may be appointed  in  the  case  (the
"Trustee") seeks to assume the lease, then Tenant, or Trustee if applicable,  in
addition  to providing adequate assurance described in applicable provisions  of
the  Bankruptcy Code, shall provide adequate assurance to Landlord  of  Tenant's
future  performance under the Lease by depositing with  Landlord a sum equal  to
the  lesser of twenty-five percent (25%) of the rental and other charges due for
the  balance of the Lease term or six (6) months' rent ("Security"), to be  held
(without any allowance for interest thereon) to secure Tenant's obligation under
the  Lease, and (B) Tenant, or Trustee if applicable, seeks to assign the  Lease
after  assumption  of the same, then Tenant, in addition to  providing  adequate
assurance  described  in  applicable provisions of the  Bankruptcy  Code,  shall
provide  adequate  assurance  to  Landlord of  the  proposed  assignee's  future
performance  under  the Lease by depositing with Landlord a  sum  equal  to  the
Security  to  be  held  (without any allowance or interest  thereon)  to  secure
performance under the Lease.  Nothing contained herein expresses or implies,  or
shall  be  construed  to  express  or imply,  that  Landlord  is  consenting  to
assumption  and/or  assignment of the Lease by Tenant,  and  Landlord  expressly
reserves all of its rights to object to any assumption and/or assignment of  the
Lease.   Neither Tenant nor any Trustee shall conduct or permit the  conduct  of
any "fire", "bankruptcy", "going out of business" or auction sale in or from the
Premises.

11.2 REMEDIES FOR TENANT'S DEFAULT.  Upon the occurrence of a Default as defined
above, Landlord may elect either (i) to cancel and terminate this Lease and this
Lease shall not be treated as an asset of Tenant's bankruptcy estate, or (ii) to
terminate  Tenant's right to possession only without cancelling and  terminating
Tenant's  continued liability under this Lease.  Notwithstanding the  fact  that
initially  Landlord elects under (ii) to terminate Tenant's right to  possession
only,  Landlord  shall have the continuing right to cancel  and  terminate  this
Lease  by  giving  three  (3) days' written notice to  Tenant  of  such  further
election, and shall have the right to pursue any remedy at law or in equity that
may be available to Landlord.

In  the  event of election under (ii) to terminate Tenant's right to  possession
only,  Landlord may, at Landlord's option, enter the Premises and take and  hold
possession thereof, without such entry into possession terminating this Lease or
releasing Tenant in whole or in part from Tenant's obligation to pay all amounts
hereunder for the full stated term.  Upon such reentry, Landlord may remove  all
persons  and  property from the Premises and such property may  be  removed  and
stored  in  a public warehouse or elsewhere at the cost and for the  account  of
Tenant,  without becoming liable for any loss or damage which may be  occasioned
thereby.   Such  reentry  shall be conducted in the following  manner:   without
resort  to  judicial process or notice of any kind if Tenant  has  abandoned  or
voluntarily surrendered possession of the Premises; and, otherwise, by resort to
judicial  process.  Upon and after entry into possession without termination  of
the  Lease,  Landlord may, but is not obligated to, relet the Premises,  or  any
part  thereof,  to any one other than the Tenant, for such time  and  upon  such
terms  as Landlord, in Landlord's sole discretion, shall determine, but Landlord
shall  use  reasonable  efforts  to  relet  the  Premises.   Landlord  may  make
alterations  and  repairs  to  the Premises to the  extent  deemed  by  Landlord
necessary or desirable to relet the Premises.

     Upon such reentry, Tenant shall be liable to Landlord as follows:

          A.    For all attorneys' fees incurred by Landlord in connection  with
          exercising any remedy hereunder;

          B.    For  the  unpaid installments of base rent, additional  rent  or
          other  unpaid  sums  which were due prior to such  reentry,  including
          interest   and  late  payment  fees,  which  sums  shall  be   payable
          immediately.

          C.    For  the installments of base rent, additional rent,  and  other
          sums  falling  due pursuant to the provisions of this  Lease  for  the
          period   after  reentry  during  which  the  Premises  remain  vacant,
          including  late  payment charges and interest,  which  sums  shall  be
          payable as they become due hereunder.

          D.    For  all expenses incurred in releasing the Premises,  including
          leasing  commissions,  attorneys' fees, and  costs  of  alteration  or
          repairs,  which  shall be payable by Tenant as they  are  incurred  by
          Landlord; and

          E.    While  the Premises are subject to any new lease or leases  made
          pursuant  to  this  Section,  for the  amount  by  which  the  monthly
          installments payable under such new lease or leases is less  than  the
          monthly  installment for all charges payable pursuant to  this  Lease,
          which deficiencies shall be payable monthly.

Notwithstanding  Landlord's election to terminate Tenant's right  to  possession
only,  and notwithstanding any reletting without termination, Landlord,  at  any
time  thereafter, may elect to terminate this Lease, and to recover (in lieu  of
the amounts which would thereafter be payable pursuant to the foregoing, but not
in  diminution of the amounts payable as provided above before termination),  as
damages for loss of bargain and not as a penalty, an aggregate sum equal to  the
amount  by which the present value of the rental value of the Premises  for  the
portion  of  the term unexpired at the time of such election is  less  than  the
present  value of the base rent, percentage rent, and additional  rent  and  all
other  charges which would have been payable by Tenant for the unexpired portion
of  the  term  of this Lease (using an eight percent (8%) interest rate),  which
deficiency  and all expenses incident thereto, including commissions, attorneys'
fees, expenses of alterations and repairs, shall be due to Landlord as of the
time  Landlord exercises said election, notwithstanding that the  term  had  not
expired.   If Landlord, after such reentry, leases the Premises, then  the  rent
payable under such new lease shall be conclusive evidence of the rental value of
the unexpired portion of the term of this Lease.

If  this  Lease  shall be terminated by reason of bankruptcy  or  insolvency  of
Tenant, Landlord shall be entitled to recover from Tenant or Tenant's estate, as
liquidated  damages  for  loss  of bargain and not  as  a  penalty,  the  amount
determined by the immediately preceding paragraph.

11.3  LANDLORD'S RIGHT TO PERFORM FOR ACCOUNT OF TENANT.  If Tenant shall be  in
Default  under  this Lease, Landlord may cure the Default at any  time  for  the
account  and at the expense of Tenant.  If Landlord cures a Default on the  part
of  Tenant, Tenant shall reimburse Landlord upon demand for any amount  expended
by  Landlord  in  connection  with  the  cure,  including,  without  limitation,
attorneys' fees and interest.

11.4  INTEREST, ATTORNEY'S FEES AND LATE CHARGE.  In the event of a  Default  by
Tenant:   (1)  if a monetary default, interest shall accrue on any sum  due  and
unpaid  at the Reference Rate (prime rate) of interest established from time  to
time  by  US Bank N.A., Minneapolis, Minnesota, plus four percent (4%), and,  if
Landlord  places in the hands of an attorney the enforcement of all or any  part
of  this  Lease, the collection of any rent due or to become due or recovery  of
the  possession  of  the  Premises, Tenant agrees to  pay  Landlord's  costs  of
collection,  including  reasonable attorney's  fees  for  the  services  of  the
attorney,  whether suit is actually filed or not.  Other remedies for nonpayment
of  rent notwithstanding, if the monthly rental payment or any other payment due
from  Tenant  to  Landlord is not received by Landlord on or  before  the  tenth
(10th)  day  of  the month for which the rent is due, a late payment  charge  of
three  percent  (3%)  of such past due amount shall become due  and  payable  in
addition to such amounts owed under this Lease.

11.5 ADDITIONAL REMEDIES, WAIVERS, ETC.

          A.    The rights and remedies of Landlord set forth herein shall be in
          addition  to any other right and remedy now and hereafter provided  by
          law.  All rights and remedies shall be cumulative and not exclusive of
          each  other.   Landlord may exercise its rights and  remedies  at  any
          times,  in  any  order, to any extent, and as often as Landlord  deems
          advisable  without  regard to whether the exercise  of  one  right  or
          remedy precedes, concurs with or succeeds the exercise of another.

          B.    A  single  or  partial exercise of a right or remedy  shall  not
          preclude a further exercise thereof, or the exercise of another  right
          or remedy from time to time.

          C.    No delay or omission by Landlord in exercising a right or remedy
          shall  exhaust  or  impair  the same or constitute  a  waiver  of,  or
          acquiescence to, a Default.

          D.    No waiver of Default shall extend to or affect any other Default
          or impair any right or remedy with respect thereto.

          E.    No  action or inaction by Landlord shall constitute a waiver  of
          Default.

          F.   No waiver of a Default shall be effective unless it is in writing
          and signed by Landlord.


                             ARTICLE 12.  RELOCATION
(Intentionally Omitted)


               ARTICLE 13.  AMENDMENT AND LIMITATION OF WARRANTIES

13.1  ENTIRE  AGREEMENT.   IT  IS EXPRESSLY AGREED  BY  TENANT,  AS  A  MATERIAL
CONSIDERATION  FOR  THE  EXECUTION OF THIS LEASE,  THAT  THIS  LEASE,  WITH  THE
SPECIFIC  REFERENCES TO WRITTEN EXTRINSIC DOCUMENTS, IS THE ENTIRE AGREEMENT  OF
THE  PARTIES:  THAT THERE ARE, AND WERE, NO VERBAL REPRESENTATIONS,  WARRANTIES,
UNDERSTANDINGS, STIPULATIONS, AGREEMENTS OR PROMISES PERTAINING TO THIS LEASE OR
TO  THE  EXPRESSLY  MENTIONED WRITTEN EXTRINSIC DOCUMENTS  NOT  INCORPORATED  IN
WRITING IN THIS LEASE.

13.2  AMENDMENT.   THIS LEASE MAY NOT BE ALTERED, WAIVED,  AMENDED  OR  EXTENDED
EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY LANDLORD AND TENANT.

13.3  LIMITATION OF WARRANTIES.  LANDLORD AND TENANT EXPRESSLY AGREE THAT  THERE
ARE AND SHALL BE NO IMPLIED WARRANTIES OF MERCHANTABILITY, HABITABILITY, FITNESS
FOR  A  PARTICULAR PURPOSE OR OF ANY OTHER KIND ARISING OUT OF THIS  LEASE,  AND
THERE  ARE NO WARRANTIES WHICH EXTEND BEYOND THOSE EXPRESSLY SET FORTH  IN  THIS
LEASE.


                           ARTICLE 14.  MISCELLANEOUS

14.1 SUCCESSORS AND ASSIGNS.  This Lease shall be binding upon and inure to  the
benefit   of   Landlord  and  Tenant  and  their  respective   heirs,   personal
representatives,  successors and assigns.  It is hereby  covenanted  and  agreed
that  should Landlord's interest in the Premises cease to exist for  any  reason
during  this Lease, then notwithstanding the happening of such event this  Lease
nevertheless  shall remain unimpaired and in full force and effect,  and  Tenant
hereunder  agrees to attorn to the then owner of the Premises, and the successor
owners  shall  execute  an  appropriate instrument  recognizing  the  terms  and
conditions  of  this Lease and agree not to disturb the Tenant in  its  use  and
enjoyment of the Premises so long as Tenant is not in Default hereunder.

14.2 USE OR RENT TAX.  If applicable in the jurisdiction where the Premises  are
issued,  Tenant shall pay and be liable for all rental, sales and use  taxes  or
other  similar  taxes, if any, levied or imposed by any city, state,  county  or
other governmental body having authority, such payments to be in addition to all
other  payments required to be paid to Landlord under the terms of  this  Lease,
except  that  payments shall not include taxes on Landlord's income.   Any  such
payment  shall  be  paid concurrently with the payment of the  rent,  additional
rent,  operating  expenses or other charge upon which the tax is  based  as  set
forth above.

14.3 ACT OF GOD.  Unless otherwise specifically provided in this Lease, Landlord
shall not be required to perform any covenant or obligation in this Lease, or be
liable  in  damages to Tenant, so long as the performance or non-performance  of
the  covenant or obligation is delayed, caused or prevented by an  act  of  God,
force majeure or by Tenant.

14.4  HEADINGS.  The section headings appearing in this Lease are inserted  only
as a matter of convenience and in no way define, limit, construe or describe the
scope or intent of any Section.

14.5 NOTICE.  All rent and other payments required to be made by Tenant shall be
payable  to  Landlord  at the address set forth in Section  1.8.   All  payments
required  to  be made by Landlord to Tenant shall be payable at the address  set
forth in Section 1.8, or at any other address within the United States as Tenant
may  specify  from  time  to time by written notice.   Any  notice  or  document
required or permitted to be delivered by the terms of this Lease shall be deemed
to be delivered (whether or not actually received) three (3) days after the date
such  notice is deposited in the United States Mail, postage prepaid,  certified
mail,  return  receipt  requested, addressed to the parties  at  the  respective
addresses set forth in Section 1.8.

14.6  TENANT'S AUTHORITY.  If Tenant executes this Lease as a corporation,  each
of  the  persons executing this Lease on behalf of Tenant does hereby personally
represent and warrant that Tenant is a duly authorized and existing corporation,
that  Tenant is qualified to do business in the state in which the Premises  are
located,  that the corporation has full right and authority to enter  into  this
Lease,  and  that each person signing on behalf of the corporation is authorized
to do so.

14.7 HAZARDOUS SUBSTANCES.  Tenant, its agents or employees, shall not bring  or
permit  to  remain  on  the  Premises or Building  any  asbestos,  petroleum  or
petroleum  products,  explosives,  toxic materials,  or  substances  defined  as
hazardous  wastes,  hazardous  materials,  or  hazardous  substances  under  any
federal,  state, or local law or regulation ("Hazardous Materials"),  except  in
such  quantities as are common for businesses of the type operated by Tenant  in
premises  similar to those occupied by Tenant, provided that any such  materials
are  handled  by  Tenant in compliance with all applicable  environmental  laws.
Tenant's  violation  of  the foregoing prohibition shall constitute  a  material
breach  and  default  hereunder and Tenant shall indemnify,  hold  harmless  and
defend  Landlord  from and against any claims, damages, penalties,  liabilities,
and  costs  (including reasonable attorney fees and court costs)  caused  by  or
arising  out of (i) a violation of the foregoing prohibition by Tenant  or  (ii)
the  presence of any Hazardous Materials on, under, or about the Premises or the
Building during the term of the Lease to the extent caused by or arising out  of
the  actions of Tenant, its agents or employees.  Tenant shall clean up, remove,
remediate and repair any soil or ground water contamination and damage caused by
the  presence and any release of any Hazardous Materials in, on, under or  about
the  Premises or the Building during the term of the Lease caused by or arising,
in  whole or in part, out of the actions of Tenant, its agents or employees,  in
conformance  with the requirements of applicable law.  Tenant shall  immediately
give  Landlord  written notice of any suspected breach of this  paragraph;  upon
learning  of  the presence of any release of any Hazardous Materials,  and  upon
receiving  any  notices  from  governmental  agencies  pertaining  to  Hazardous
Materials  which  may affect the Premises or the Building.  The  obligations  of
Tenant  hereunder shall survive the expiration or earlier termination,  for  any
reason, of this Lease.

14.8 SEVERABILITY.  If any provision of this Lease or the application thereof to
any person or circumstances shall be invalid or unenforceable to any extent, the
remainder of this Lease and the application of such provisions to other  persons
or  circumstances  shall not be affected thereby and shall be  enforced  to  the
greatest extent permitted by law.

14.9  LANDLORD'S  LIABILITY.  If Landlord shall be in default under  this  Lease
and,  if as a consequence of such default, Tenant shall recover a money judgment
against Landlord, such judgment shall be satisfied only out of the right,  title
and  interest of Landlord in the Building as the same may then be encumbered and
neither  Landlord nor any person or entity comprising Landlord shall  be  liable
for  any  deficiency.  In no event shall Tenant have the right to levy execution
against  any  property of Landlord nor any person or entity comprising  Landlord
other than its interest in the Building as herein expressly provided.

14.10      BROKERAGE.  Landlord and Tenant each represents and warrants  to  the
other that there is no obligation to pay any brokerage fee, commission, finder's
fee  or other similar charge in connection with this Lease, other than fees  due
to  Bill  Ritter of Welsh Companies, which are the responsibility  of  Landlord.
Each  party covenants that it will defend, indemnify and hold harmless the other
party  from and against any loss or liability by reason of brokerage or  similar
services alleged to have been rendered to, at the instance of, or agreed upon by
said  indemnifying  party.  Notwithstanding anything  herein  to  the  contrary,
Landlord and Tenant agree that there shall be no brokerage fee or commission due
on expansions, options or renewals by Tenant.

14.11      MANAGEMENT AGENT.  Landlord hereby notifies Tenant  that  the  person
authorized  to execute this Lease and manage the Premises is CSM Corporation,  a
Minnesota  corporation, which has been appointed to act as the agent in  leasing
management  and  operation of the Building for Landlord  and  is  authorized  to
accept  service of process and receive or give receipts for notices and  demands
on  behalf of Landlord.  Landlord reserves the right to change the identity  and
status of its duly authorized agent upon written notice to Tenant.

14.12      CONTINGENCY.   In the event that Landlord has not received  necessary
approvals to proceed with the Home Depot Stores/PPT Vision Eden Prairie  project
or  has  not  entered  into a lease agreement with Home  Depot  Stores  for  the
property  adjacent  to  the  Premises (designated as "Building  B"  on  attached
EXHIBIT  A) on or before August 5, 1998, then Landlord or Tenant shall have  the
option  to  terminate this Lease with no further obligation to the  other  party
upon written notice to the other party on or before August 7, 1998.

14.13      EXPANSION  SPACE.  At any time during lease months forty-two  through
sixty  (42-60)  (the  "Delivery Period"), Landlord agrees to  lease  and  Tenant
agrees  to accept, an additional, approximate 21,146 square feet of lease  space
("Expansion  Space"), as depicted on EXHIBIT A, under the  following  terms  and
conditions contained in this Lease, with the following modifications:

          A.    The delivery date for the Expansion Space shall occur during the
          Delivery  Period  and shall be determined by Landlord,  provided  that
          Landlord  will provide Tenant with not less than six (6) months  prior
          written notice of said delivery date.

          B.    The  base rental rate for the Expansion Space shall be the  same
          per  square foot rate as the rate applicable to the original  Premises
          pursuant  to  Section  1.4, plus, if applicable, the  amortization  of
          "expansion space carrying costs" (as defined in this section).

          C.    The  term of the Expansion Space shall commence on the  delivery
          date of the Expansion Space and shall expire coterminous with the term
          of Tenant's existing lease.

          D.   In the event that some or all of the Expansion Space is delivered
          to Tenant with existing office improvements in place, then the area of
          the  Expansion  Space  with  existing  office  improvements  shall  be
          provided to Tenant in the "as is" condition.

          E.   In the event that some or all of the Expansion Space is delivered
          to  Tenant  with building shell or warehouse finishes in  place,  then
          Landlord  agrees to provide a tenant improvement allowance  of  up  to
          $15.00  per square foot for areas with shell or warehouse finishes  in
          place.   Landlord  agrees  to coordinate,  design  and  construct  the
          improvements  to the shell or warehouse finish areas of the  Expansion
          Space under the same procedure depicted in Section 6.2.

          F.    Landlord's notice to Tenant shall include an amendment  to  this
          Lease  establishing  the  delivery date of the  Expansion  Space,  the
          rentable  square  foot area of the Expansion Space  and  the  existing
          office  space, the amount of improvement allowance funds available  to
          Tenant,  the  base  rental rate and monthly rental for  the  Expansion
          Space,  and Tenant's pro-rata share of operating expenses adjusted  to
          reflect  the Expansion Space.  Additional rent and operating  expenses
          payable  on  the Expansion Space shall commence upon delivery  of  the
          Expansion Space, whether or not construction of tenant improvements to
          the Expansion Space are necessary or complete.

          G.    It shall be a condition of Landlord's obligation to provide  the
          Expansion Space that Tenant is not in Default under Section 11 or this
          Lease.

          H.    From the Commencement Date until the earlier of:  (1)  the  date
          Landlord  delivers  the Expansion Space to Tenant;  or  (2)  the  date
          Landlord  leases  the Expansion Space to an outside party  during  the
          period  between the Commencement Date and the Expansion Space delivery
          date; Tenant shall accrue an obligation to Landlord in an amount equal
          to  $4,000.00 per month (or a lesser amount during months  of  partial
          occupancy,  based  on partial month and/or partial space  occupancies,
          determined  on  a  pro-rata  basis) to  compensate  Landlord  for  its
          carrying  expenses  associated with the  Expansion  Space  ("Expansion
          Space  Carrying  Costs"),  which shall be  payable  to  Landlord  upon
          delivery  of  the  Expansion  Space to  Tenant.   Landlord  agrees  to
          exercise  good faith efforts to lease the Expansion Space  during  the
          period  between the Commencement Date and the Expansion Space delivery
          date.

          I.    In the event that the Expansion Space is available prior to  the
          Delivery  Period,  Tenant  may, with three (3)  months  prior  written
          notice  to  Landlord, lease the Expansion Space prior to the  Delivery
          Period  under the same terms and conditions depicted in this  section,
          except that the additional base rent and operating expenses payable on
          the  Expansion Space shall commence three (3) months from the date  of
          Tenant's  notice to Landlord, whether or not construction of  Tenant's
          improvements to the Expansion Space is necessarily complete.

                 Landlord's   notice   to   Tenant  shall   contain   reasonable
          documentation of Tenant's Expansion Space Carrying Costs obligation to
          the  notice date, and an estimate of Tenant's remaining obligation for
          payment  of  Expansion  Space Carrying Costs, if  applicable.   Tenant
          shall be required to pay the full amount to Landlord within sixty (60)
          days  of  Landlord's notice, or elect to have such sum  amortized   as
          additional base rent for the Premises and the Expansion Space over the
          remaining  term  of  this  Lease,  commencing  with  delivery  of  the
          Expansion Space, at an amortization rate of ten percent (10%).

14.14      RIGHT  TO  TERMINATE.   Tenant shall have  the  one  time  option  to
terminate this Lease, with no further obligation, upon the expiration  of  lease
month  eighty-four  (84)  with delivery of written  notice  indicating  Tenant's
irrevocable  intent to exercise its termination right, and payment  of  a  lease
termination fee in the amount of $500,000.00, delivered to Landlord prior to the
expiration  of  lease  month seventy-two (72).  The  termination  fee  shall  be
payable fifty percent (50%) upon the date of notice and fifty percent (50%) upon
the  date  which is ninety (90) days prior to the effective date of termination.
It  shall be a condition of Tenant's Right to Terminate that Tenant shall not be
in default under Section 11 of this Lease.

14.15      MARKET  RATE  OPTION.  Upon two hundred seventy  (270)  days  written
notice,  Tenant  may extend the term of this Lease for two (2) additional  sixty
(60)  month  terms under the same conditions contained herein, except  that  the
Base  Rental  shall  be  adjusted  to reflect the  prevailing  market  rate  for
comparable  space  in the Eden Prairie, Minnesota area.  In no  case  shall  the
adjusted  rate(s)  be less than the latest rate paid by the  Tenant  during  the
primary  term or previous extension term of this Lease.  It shall be a condition
of  the exercise of this option that the Tenant not be in Default per Section 11
of this Lease, and further, it shall be a condition of Tenant's second option to
extend that Tenant has exercised and faithfully completed its first option term.
In  the  event  that Tenant has not provided timely notice of  its  election  to
exercise its option to extend as depicted in this section, said option to extend
shall be null and void and of no further force and effect.

14.16      LANDLORD DEFAULT.  In the event of any default in the performance  of
any  obligation  of Landlord under this Lease, Tenant will deliver  to  Landlord
written notice listing the reasons for Landlord's default and Landlord will have
thirty  (30) days following receipt of such notice to cure such default  or,  in
the  event  the  default cannot reasonably be cured within  a  thirty  (30)  day
period, to commence action and proceed diligently to cure such default.  A  copy
of  such notice to Landlord will be sent to any lessor under any ground lease or
holder  of any other mortgage or deed of trust of which Tenant has been notified
in writing, and any such lessor or holder will also have the same rights to cure
such  default.   Tenant shall be entitled to recover from Landlord  any  damages
arising out of Landlord's breach of this Lease and to exercise any other  rights
or remedies provided at law or in equity.

14.17     SUBMISSION OF LEASE.  Submission of this Lease to Tenant for signature
does not constitute a reservation of space or an option to lease.  This Lease is
not effective until execution by and delivery to both Landlord and Tenant.


IN  WITNESS WHEREOF, Landlord and Tenant have executed this Lease effective  the
day and year first above written.


LANDLORD                                TENANT

CSM PROPERTIES, INC.                    PPT VISION, INC.


BY:   /s/David Carland                  BY:   /s/Joseph C. Christenson

ITS:  Vice President                    ITS:  President


                 EXHIBIT 23:  CONSENT OF INDEPENDENT ACCOUNTANTS
                 -----------------------------------------------


We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8, Numbers 33-39459, 33-61266, 333-00665 and 333-48065 of
PPT Vision, Inc. of our report dated November 20, 1998 appearing in this Annual
Report on Form 10-K.


/s/ PricewaterhouseCoopers LLP
------------------------------
PricewaterhouseCoopers, LLP
Minneapolis, Minnesota
January 29, 1999