Document:

FIFTH AMENDMENT

                                       TO
                    REVOLVING CREDIT AGREEMENT (UNGUARANTEED)

     Fifth Amendment dated as of June 30, 2000 to Revolving Credit Agreement
(the "Fifth Amendment"), by and among APPNET SYSTEMS, INC., a Delaware
corporation (the "Borrower"), FLEET NATIONAL BANK (formerly known as BANKBOSTON,
N.A.) and the other lending institutions listed on Schedule 1 to the Credit
Agreement (as hereinafter defined) (the "Banks"), amending certain provisions of
the Revolving Credit Agreement dated as of January 8, 1999 (as amended and in
effect from time to time, the "Credit Agreement") by and among the Borrower, the
Banks, Fleet National Bank (formerly known as BankBoston, N.A.) as agent for the
Banks (the "Agent") and Antares Capital Corporation as co-agent for the Banks.
Terms not otherwise defined herein which are defined in the Credit Agreement
shall have the same respective meanings herein as therein.

     WHEREAS, the Borrower and the Banks have agreed to modify certain terms and
conditions of the Credit Agreement as specifically set forth in this Fifth
Amendment;

     NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

     ss.1. Amendment to Section 10 of the Credit Agreement. Section 10.7 of the
Credit Agreement is hereby amended by deletingss.10.7 in its entirety and
restating it as follows:

          10.7. Capital Expenditures. The Borrower will not make, or permit any
     Subsidiary of the Borrower to make, Capital Expenditures, other than
     Capital Expenditures which the Majority Banks reasonably determine are made
     for nonrecurring one-time infrastructure purchases or leases by the
     Borrower, in any fiscal year that exceed, in the aggregate, $15,000,000 for
     any fiscal year.

     ss.2. Amendment to Condition in Consent Letter. Pursuant to the terms of
the Limited Consent dated as of August 16, 1999 (the "Letter"), the Borrower
agreed that it shall maintain a monthly Maximum DSO Requirement (as defined in
the Letter) of not greater than 82, which Maximum DSO Requirement shall be
tested at the end of each calendar month, at which time the Borrower shall
provide all calculations requested by the Agent and the Banks to demonstrate
such compliance. The parties hereto hereby agree that the monthly Maximum DSO
Requirement is hereby amended by deleting the number "82" which appears in such
requirement and substituting in place thereof the number "90".

<PAGE>
                                      -2-

     ss.3. Conditions to Effectiveness. This Fifth Amendment shall not become
effective until the Agent receives a counterpart of this Fifth Amendment,
executed by the Borrower, each Subsidiary and the Banks

     ss.4. Representations and Warranties. The Borrower hereby represents that,
on and as of the date hereof, each of the representations and warranties made by
it in ss.7 of the Credit Agreement remain true as of the date hereof (except to
the extent of changes resulting from transactions contemplated or permitted by
the Credit Agreement and the other Loan Documents and changes occurring in the
ordinary course of business that singly or in the aggregate are not materially
adverse, and to the extent that such representations and warranties relate
expressly to an earlier date), provided, that all references therein to the
Credit Agreement shall refer to such Credit Agreement as amended hereby. In
addition, the Borrower hereby represents and warrants that the execution and
delivery by the Borrower and its Subsidiaries of this Fifth Amendment and the
performance by the Borrower and its Subsidiaries of all of its agreements and
obligations under the Credit Agreement and the other Loan Documents as amended
hereby are within the corporate authority of each of the Borrower and its
Subsidiaries and has been duly authorized by all necessary corporate action on
the part of the Borrower and its Subsidiaries.

     ss.5. Ratification, Etc. Except as expressly amended hereby, the Credit
Agreement and all documents, instruments and agreements related thereto,
including, but not limited to the Security Documents, are hereby ratified and
confirmed in all respects and shall continue in full force and effect. The
Credit Agreement and this Fifth Amendment shall be read and construed as a
single agreement. All references in the Credit Agreement or any related
agreement or instrument to the Credit Agreement shall hereafter refer to the
Credit Agreement as amended hereby.

     ss.6. No Waiver. Nothing contained herein shall constitute a waiver of,
impair or otherwise affect any Obligations, any other obligation of the Borrower
or any rights of the Agent or the Banks consequent thereon.

     ss.7. Counterparts. This Fifth Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but which together shall
constitute one and the same instrument.

     ss.8. Governing Law. THIS FIFTH AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
(WITHOUT REFERENCE TO CONFLICT OF LAWS).

<PAGE>

                                      -3-

     IN WITNESS WHEREOF, the parties hereto have executed this Fifth Amendment
as a document under seal as of the date first above written.

                                  APPNET SYSTEMS, INC.

                                  By: /s/
                                     ----------------------------------------
                                  Title:

                                  FLEET NATIONAL BANK (formerly
                                  know as BankBoston, N.A.)

                                  By: /s/
                                     ----------------------------------------
                                       Jay L. Massimo, Director

                                  ANTARES CAPITAL CORPORATION

                                  By: /s/
                                     ----------------------------------------
                                  Title:

<PAGE>
                                      -4-

                            RATIFICATION OF GUARANTY

     Each of the undersigned guarantors hereby acknowledges and consents to the
foregoing Fifth Amendment as of June 30, 2000 and agrees that each of the
Guaranty dated as of January 8, 1999, March 4, 1999 and March 10, 1999 from each
of the undersigned guarantors remains in full force and effect, and each of the
guarantors confirms and ratifies all of its obligations thereunder.

                                  APPNET OF MICHIGAN, INC.

                                  By: /s/
                                     -------------------------------------------
                                  Title:

                                  APPNET OF MARYLAND, INC.

                                  By: /s/
                                     -------------------------------------------
                                  Title:

                                  SOFTWARE SERVICES CORPORATION

                                  By: /s/
                                     -------------------------------------------
                                  Title:

                                  NEW MEDIA PUBLISHING, INC.

                                  By: /s/
                                     -------------------------------------------
                                  Title:

                                  RESEARCH & PLANNING, INC.

                                  By: /s/
                                     ------------------------------------------
                                  Title:
<PAGE>
                                      -5-

                                  CENTURY COMPUTING, INCORPORATED

                                  By: /s/
                                     -------------------------------------------
                                  Title:

                                  THE KODIAK GROUP, INC.

                                  By: /s/
                                     -------------------------------------------
                                  Title:

                                  I33 COMMUNICATION CORP.

                                  By: /s/
                                     -------------------------------------------
                                  Title:

                                  SIGMA6, INC.

                                  By: /s/
                                     -------------------------------------------
                                  Title:

                                  SALZINGER ACQUISITION CORP.

                                  By: /s/
                                     -------------------------------------------
                                  Title:<TABLE>
<CAPTION>
                                TABLE OF CONTENTS

                                                                                                               PAGE
                                                                                                               ----
<S>                                                                                                              <C>
1.       Premises and Term........................................................................................1

2.       Base Rent, Late Payment Charges and Security Deposit.....................................................1

3.       Use......................................................................................................1

4.       Operating Costs; Additional Rent.........................................................................2

5.       Landlord's Responsibilities..............................................................................3

6.       Tenant's Responsibilities................................................................................3

7.       Alterations; Condition of Premises Upon Expiration.......................................................3

8.       Signs/Window Coverings...................................................................................4

9.       Inspection...............................................................................................4

10.      Utilities................................................................................................4

11.      Assignment and Subletting................................................................................4

12.      Fire and Casualty Damage.................................................................................4

13.      Liability, Waiver and Release............................................................................5

14.      Insurance.  .............................................................................................5

15.      Condemnation.............................................................................................6

16.      Holding Over.............................................................................................6

17.      Quiet Enjoyment..........................................................................................6

18.      Events of Default........................................................................................7

19.      Remedies.................................................................................................7

20.      Landlord's Lien..........................................................................................8

21.      Mortgages................................................................................................8

22.      Mechanic's Liens.........................................................................................8

23.      Notices..................................................................................................8

24.      Hazardous Substances.....................................................................................9

25.      Expense of Enforcement...................................................................................9

26.      Substitution of Premises.................................................................................9

27.      Transfer of Landlord's Interest; Limitation of Liability.................................................9

28.      Right of Landlord to Perform.............................................................................9

                                      -i-
<PAGE>

29.      Miscellaneous...........................................................................................10

30.      Right to Renew Lease....................................................................................11

31.      Market Rent.............................................................................................11

32.      Exhibits................................................................................................12

</TABLE>

                                      -ii-
<PAGE>

                                   DATA SHEET

<TABLE>

<S>                                 <C>
DATE OF LEASE:                      April 29, 2000

LANDLORD:                           ST. PAUL PROPERTIES, INC., a Delaware corporation

LANDLORD'S ADDRESS FOR RENT:        St. Paul Properties, Inc. c/o United Properties LLC
                                    NW-9044
                                    P.O. Box 1450
                                    Minneapolis, Minnesota 55485-9044

TENANT:                             ATS Medical, Inc., a Minnesota corporation

TENANT'S ADDRESS:                   Suite 175, 3800 Annapolis Lane, Plymouth, Minnesota, 55447

PREMISES:                           Approximately  19,909  rentable square feet, as designated on Exhibit A
                                    and  approximately  22,909 as of December  1, 2001,  as  designated  on
                                    Exhibit A-1, and described in Paragraph  32 of the lease agreement.

COMMENCEMENT DATE:                  August 1, 2000,  as the same may be  modified  pursuant  to  Paragraph 1 of the
                                    lease agreement and Exhibit E.

EXPIRATION DATE:                    July 31, 2006, as the same may be modified pursuant to Exhibit E.

TERM:                               Seventy-two (72) months, beginning on the Commencement Date, and
                                    ending on the Expiration Date, unless earlier terminated or as
                                    extended as provided in the lease agreement.

BASE RENT:                          Base Rent shall be due hereunder as follows:

                                    Period                    Annual Base Rent            Monthly Base Rent

                                    Commencement Date through
                                    November 30, 2001              $86,604.12                  $7,217.01

                                    December 1, 2001 through
                                    July 31, 2003                  $99,654.12                  $8,304.51

                                    August 1, 2003 through
                                    July 31, 2006                 $111,566.88                  $9,297.24

USE:                                Office/Warehouse

ADDRESSES FOR NOTICES:              Landlord:                                   with a copy to Landlord's  Managing Agent:

                                    St. Paul Properties, Inc.                   United Properties LLC
                                    385 Washington Street                       3500 West 80th Street,
                                                                                Suite 200
                                    St. Paul, Minnesota  55102                  Bloomington, Minnesota 55431
                                    Attn:  Vice President, Asset Management     Attn: Vice President,
                                                                                Property Management

                                    Tenant:

                                    ATS Medical, Inc.
                                    Attn:  Jack Jungbauer
                                    3905 Annapolis Lane North, Suite 105
                                    Plymouth, MN 55447

SECURITY DEPOSIT:                   $0.00

PHASE:                              Phase II, Plymouth  Business  Center,  consisting of 2 building(s) with
                                    a combined rentable square footage of 139,510.

TENANT'S PROPORTIONATE SHARE:       Commencement Date through November 30, 2001: Fourteen and 27/100 percent
                                    (14.27%), of Phase II, Plymouth  Business Center, which is determined
                                    by dividing 19,909 into 139,510.

                                    December 1, 2001 through Expiration Date, and extensions of Term, if
                                    any: Sixteen and 42/100 percent (16.42%), of Phase II, Plymouth
                                    Business Center, which is determined by dividing 22,909 into 139,510.

BUILDING:                           3800 Annapolis Lane North, the building in which the Premises are
                                    located, which building is a part of Phase II, Plymouth Business
                                    Center.

TENANT'S BROKER:                    N/A

The information in this Data Sheet is incorporated in and made a part of this lease agreement.

</TABLE>

                                        2
<PAGE>

                                 LEASE AGREEMENT

         THIS LEASE AGREEMENT ("Lease") is between Landlord and Tenant as of the
Date of Lease.

                              W I T N E S S E T H:

         1. PREMISES AND TERM. In consideration of the obligation of Tenant to
pay Rent (as defined in Paragraph 4(g)), and in consideration of the other
terms, provisions and covenants hereof, Landlord hereby leases to Tenant, and
Tenant hereby takes from Landlord the Premises designated on the Data Sheet, as
shown crosshatched on the plan attached hereto as Exhibit A, which Premises are
located in the Building, together with all rights, privileges, easements,
appurtenances, and immunities belonging to or in any way pertaining to the
Premises.

         TO HAVE AND TO HOLD the same for the Term, provided, however, that in
the event the Commencement Date is a date other than the first day of a calendar
month, said Term shall be extended for said number of months in addition to the
remainder of the calendar month following the Commencement Date, and provided
further that if Tenant begins to conduct business in all or any portion of the
Premises before the Commencement Date, all terms and conditions of this Lease
shall apply to such period, except that, on the Commencement Date, and in
addition to any other Rent due and payable on the Commencement Date pursuant to
this Lease, Tenant shall pay to Landlord a rental in respect of the period from
the date Tenant begins to conduct business in the Premises to the Commencement
Date, which rental shall be that proportion of Rent payable for the first year
of the Term which the number of days in such period bears to 365.

         Notwithstanding the foregoing, if the Premises shall, on the scheduled
Commencement Date of the Term, not be ready for occupancy by the Tenant due to
the possession or occupancy thereof by any person not lawfully entitled thereto,
or because construction has not yet been completed, or by reason of any Building
operations, repair or remodeling to be done by Landlord, Landlord shall use good
faith efforts to complete such construction, Building operations, repair or
remodeling and to deliver possession of the Premises to Tenant. Landlord, using
such good faith efforts, shall not in any way be liable for failure to obtain
possession of the Premises for Tenant or to timely complete such construction,
Building operations, repair or remodeling, but the Rent payable by Tenant under
this Lease shall abate until the date Landlord is able to tender possession of
the Premises to Tenant, which date shall be deemed the "Commencement Date;" and
the Term shall be automatically extended so as to include the full number of
months stated on the Data Sheet except that if the Commencement Date is other
than the first day of a calendar month, such Term shall also be extended for the
remainder of the calendar month in which possession is tendered. Notwithstanding
the foregoing, if the Premises have not been delivered to Tenant by June 10,
2000, Tenant shall have the right to terminate this Lease by written notice
given to Landlord not later than June 15, 2000, it being understood and agreed
that if Tenant fails to give the notice described in the preceding clause on or
before June 15, 2000, Tenant shall have no right to terminate this Lease, this
Lease shall remain of full force and effect and the parties shall be bound
hereby. If the Premises are delivered after May 31, 2000, but on or before June
10, 2000, the Commencement Date shall be deemed to be the date of actual
delivery of the Premises and the Term shall be automatically extended so as to
include the full number of months stated on the Data Sheet except that if the
Commencement Date is other than May 31, 2000, or June 1, 2000, the Term shall
also be extended for the remainder of the calendar month in which possession is
tendered.

         The taking of possession by Tenant shall be deemed conclusively to
establish that the Premises (a) have been completed in accordance with the
provisions of the Work Letter Agreement attached hereto as Exhibit B, (b) are in
good and satisfactory condition as of when possession was so taken and (c)
consist of the number of rentable square feet stated on the Data Sheet, it being
understood and agreed that the number of rentable square feet in the Premises
shall be based on the outside dimensions of the rooflines of the Premises and
shall also include a proportionate share of a mechanical room serving the
Premises and other premises in the Building. Upon delivery of the Premises,
Tenant shall execute and deliver to Landlord a letter of accepting the Premises
and confirming the Commencement Date, such letter to be in the form attached
hereto as Exhibit E.

         2.       BASE RENT, LATE PAYMENT CHARGES AND SECURITY DEPOSIT.

         (a) Base Rent. Tenant agrees to pay to Landlord Base Rent for the
Premises, in advance, without demand, deduction or set off, for the entire Term
at the rate stated in the Data Sheet, except that the monthly installment which
otherwise shall be due on the Commencement Date shall be due and payable on the
date hereof. Thereafter, one such monthly installment shall be due and payable
without demand on or before the first day of each calendar month succeeding the
Commencement Date during the Term.

         (b)      Late Charge; Interest. If Tenant fails to pay any installment
                  of Rent, including any amount treated as Additional Rent (as
                  defined in Paragraph 4(g)) of this Lease, or other sums
                  hereunder prior to the date such installment or other charge
                  becomes delinquent pursuant to Paragraph 18, Tenant shall pay
                  to Landlord on demand a late charge of $500.00 for each late
                  installment or other charge to help defray the additional cost
                  to Landlord for processing such late payments, and such late
                  charge shall be Additional Rent. In addition to the foregoing,
                  to the extent Rent is not paid on or before the date the same
                  becomes delinquent pursuant to Paragraph 18, all unpaid Rent
                  shall accrue interest from the first day of each month at a
                  rate which is the lesser of (i) eighteen percent (18%) per
                  annum; or (ii) the highest amount permitted by applicable law
                  and such interest shall constitute Additional Rent and shall
                  be payable with the next installment of Base Rent falling due.
                  The provision for the payment of such late charge and interest
                  shall be in addition to all of Landlord's other rights and
                  remedies hereunder or at law and shall not be construed as
                  liquidated damages or as limiting Landlord's remedies in any
                  manner.
         (c)      Security Deposit. INTENTIONALLY DELETED.

         3. USE. The Premises shall be used only for the Use stated on the Data
Sheet and for such other lawful purposes as may be incidental thereto. Outside
storage, including without limitation, trucks and other vehicles, garbage
containers and outdoor furniture are prohibited without Landlord's prior written
consent, except that Landlord hereby acknowledges and consents to the
installation of an above-ground liquid nitrogen storage tank (the "Tank") at the
location shown on Exhibit A and in accordance with specifications delivered to
Landlord in accordance with the Approved Plans (as defined in Exhibit B. Tenant
shall, at its own cost and expense, obtain any and

<PAGE>

all licenses and permits necessary for Tenant's Use. Tenant shall comply with
all governmental laws, ordinances and regulations applicable to the Use of the
Premises, and shall promptly comply with all governmental orders and directives
for the correction, prevention and abatement of nuisance in or upon, or
connected with, the Premises, all at Tenant's sole expense. Tenant shall not
receive, store or otherwise handle on the Premises any product, material or
merchandise which is explosive or highly flammable. Tenant will not permit the
Premises to be used for any purpose or in any manner (including without
limitation any method of storage) which would render the insurance on the
Building or the property on which the Phase is located ("Property") void or the
insurance risk more hazardous or cause the State Board of Insurance or other
insurance authority to disallow any sprinkler credits. If any increase in the
fire and extended coverage insurance premiums paid by Landlord for the Building
is caused by Tenant's use and occupancy of the Premises, then Tenant shall pay
to Landlord the amount of such increase, upon demand, as Additional Rent.
Notwithstanding the foregoing, Landlord hereby consents to the storage and use
of consumables and supplies, including nitrogen gas, propane gas and
methyltrichlorosilene gas ("MTS") as are required by Tenant for the production
of pyrolytic carbon components for products manufactured by Tenant; provided
however, that Tenant agrees that (a) the consumables and supplies described
above constitute "Hazardous Substances" as defined in Paragraph 24 of this Lease
such that the provisions of such Paragraph 24 shall govern the storage, use and
disposal of such consumables and supplies; and (b) Landlord has made no warranty
or representation that the storage and use of such consumables and supplies is a
lawful use of the Premises under the zoning or other ordinance of the City of
Plymouth, it being understood and agreed that the risk of non-compliance with
such zoning or other ordinances shall be borne solely by Tenant and any refusal
by the City of Plymouth to grant building permits or certificates of occupancy
for Tenant's proposed use of the Premises, including the storage and use of the
above-referenced consumables and supplies shall not void this Lease, but, on the
contrary, this Lease shall remain of full force and effect and the parties shall
remain bound hereby.

         4.       OPERATING COSTS; ADDITIONAL RENT.

         (a) Operating Costs. Upon demand, Tenant shall pay to Landlord, during
the Term, Tenant's proportionate share of Operating Costs, as defined below,
calculated on the basis of Tenant's Proportionate Share stated on the Data
Sheet.

As used in this Lease, the term "Operating Costs" shall mean any and all
expenses, costs and disbursements of any kind and nature whatsoever incurred by
Landlord in connection with the ownership, management, maintenance, operation
and repair of the Property, the Phase or the Building which Landlord shall pay
or become obligated to pay in respect of a calendar year (regardless of when
such Operating Costs were incurred). Operating Costs shall include, without
limitation, the costs of maintenance, repairs, and, subject to the provisions of
Paragraph 5 hereof, replacements to the Building, including, downspouts,
gutters, painting, sprinkler systems, roof and walls; the costs of maintaining
and repairing parking lots, parking structures and easements; property
management fees, salaries, fringe benefits and related costs payable to
employees of Landlord's Managing Agent whose duties are connected with the
Property; insurance costs, all heating and air conditioning costs, electricity,
sewer and water and other utility costs not separately metered to tenants,
landscape maintenance, trash and snow removal, Taxes, as defined in Paragraph
4(e), and costs and expenses incurred by Landlord in protesting any assessments,
levies or the tax rate, provided, however, that Operating Costs shall not
include the following: (i) costs of alterations of any tenant's premises,
including the Premises; (ii) costs of curing construction defects to the base
Building; (iii) depreciation; (iv) interest and principal payments on mortgages,
and other debt costs; (v) real estate brokers' leasing commissions or
compensation; (vi) any cost or expenditure (or portion thereof) for which
Landlord is reimbursed, whether by insurance proceeds or otherwise; (vii) cost
of any service furnished to any other occupant of the Building which Landlord
does not provide to Tenant hereunder; and (viii) the full replacement of (A)
roofs, (B) exterior walls (as defined in Paragraph 5) and (C) foundations.
Notwithstanding anything contained herein to the contrary, any structural
repairs or replacements to the Building, or of any capital improvements made
after the Date of Lease which are intended to reduce Operating Costs or of any
capital improvements which are required under any governmental laws,
regulations, or ordinances which were not applicable to the Building at the time
it was constructed, including, without limitation, the ADA (as defined in
Paragraph 5 hereof), shall be included in Operating Costs.

         (b) Estimated Operating Costs. Promptly after the commencement of this
Lease and during January of each year or as soon thereafter as practicable,
Landlord shall give Tenant written notice of its estimate of amounts payable
under Paragraph 4(a) for such calendar year. On or before the first day of each
month thereafter, Tenant shall pay to Landlord one/twelfth (1/12th) of such
estimated amounts, provided that if such notice is not given in January, Tenant
shall continue to pay on the basis of the prior year's estimate until the first
day of the month after the month in which such notice is given, at which time,
in addition to paying the first installment of the estimated amount provided by
Landlord for such year, Tenant shall also pay the difference, if any, between
the current year's estimate and the previous year's estimate for the period from
January 1 of such year through the last day of the month in which the notice was
given. If at any time it appears to Landlord that the amounts payable under
Paragraph 4(a) for the then current calendar year will vary from its estimate by
more than five percent (5%), Landlord may, by written notice to Tenant, revise
its estimate for such year, and subsequent payments by Tenant for such year
shall be based upon such revised estimate.

Within ninety (90) days after the end of each calendar year or as soon
thereafter as practicable, Landlord shall deliver to Tenant a summary of the
total Operating Costs for the previous calendar year and Tenant's proportionate
share thereof which shall be based upon Tenant's Proportionate Share as stated
in the Data Sheet. If such summary shows an amount due from Tenant that is less
than the estimated payments previously paid by Tenant (the "Excess Amount"),
Landlord shall credit the Excess Amount against Operating Costs next falling due
hereunder until the Excess Amount is exhausted; provided however, that if the
summary shows an Excess Amount for the year in which this Lease expired, the
summary shall be accompanied by a refund of the Excess Amount to Tenant. If such
summary shows an amount due from Tenant that is more than the estimated payments
previously paid by Tenant, Tenant shall pay the deficiency to Landlord, as
Additional Rent, within thirty (30) days after delivery of the summary.

         (c) Right to Audit. Tenant or its representatives shall have the right
to examine Landlord's books and records of Operating Costs during normal
business hours within twenty (20) days following the furnishing of the summary
to Tenant. Unless Tenant takes written exception to any item within thirty (30)
days following the furnishing of the summary to Tenant (which item shall be paid
in any event), such summary shall be considered as final and accepted by Tenant.

         (d) Accrual Accounting. If Landlord selects the accrual accounting
method rather than the cash accounting method for operating expense purposes,
Operating Costs shall be deemed to have been paid when such expenses have
accrued; provided however

<PAGE>

that accruals for expenses associated with improvements to be made after the
Expiration Date (as the same may be extended) shall not become an obligation of
Tenant.

         (e) Taxes. Landlord agrees to pay before they become delinquent all
taxes, installments of special assessments and governmental charges of any kind
and nature whatsoever, (herein collectively referred to as "Taxes") lawfully due
and payable with respect to the Building, the Phase and the Property. In
addition, Tenant shall be liable for all taxes levied or assessed against
personal property, furniture or fixtures placed by Tenant in the Premises. If
any such taxes for which Tenant is liable are levied or assessed against
Landlord or Landlord's property and if Landlord elects to pay the same or if the
assessed value of Landlord's property is increased by inclusion of personal
property, furniture or fixtures placed by Tenant in the Premises, and Landlord
elects to pay the taxes based on such increase, Tenant shall pay to Landlord
upon demand that part of such taxes.

         (f) Change in Method of Taxation. If at any time during the Term, the
present method of taxation shall be changed so that in lieu of the whole or any
part of any Taxes (including personal property taxes described in Paragraph 4(e)
hereof), assessments or governmental charges levied, assessed or imposed on real
estate and the improvements thereon, there shall be levied, assessed or imposed
on Landlord a capital levy or other tax directly on the Rent or any portion
thereof and/or a franchise tax, assessment, levy or charge measured by or based,
in whole or in part, upon such Rent or any portion thereof for the present or
any future building or buildings on the Property, then all such taxes,
assessments, levies or charges, or the part thereof so measured or based, shall
be deemed to be included within the term "Taxes" for the purposes hereof.

         (g) Definition of "Rent". Any amounts in addition to Base Rent and
Operating Costs, including, without limitation, any costs payable by Tenant to
Landlord stated in the Work Letter Agreement attached hereto as Exhibit B,
chargebacks for work performed by Landlord for the benefit of Tenant, if any,
and other costs payable by Tenant to Landlord hereunder, if any, (collectively
the "Additional Rent") shall be an obligation of Tenant hereunder and all such
Additional Rent shall be due and payable upon demand. Base Rent, Operating Costs
and Additional Rent may be referred to collectively as "Rent."

         5. LANDLORD'S RESPONSIBILITIES. Except for reasonable wear and tear and
any casualty covered by the provisions of Paragraph 12(a) against which Tenant
was obligated to insure under this Lease, Landlord shall maintain all parts of
the Building, other than other tenants' premises and the Premises, making all
necessary repairs and replacements, whether ordinary or extraordinary,
structural or nonstructural, including downspouts, gutters, irrigation sprinkler
system; regularly mow any grass, remove weeds and perform general landscape
maintenance; and maintain and repair the parking lot and driveway areas;
provided however, that Landlord shall be responsible, at its sole cost and
expense, for the full replacement of roofs, exterior walls and foundations and
for the compliance with Title III of the Americans With Disabilities Act of
1990, as amended as of the Date of Lease (the "ADA"), as to the exterior walls
of the Premises, including access to the Building and maintenance of parking.
Tenant shall immediately give Landlord written notice of any defect or need for
repairs. Landlord's liability with respect to any defects, repairs or
maintenance for which Landlord is responsible under any of the provisions of
this Lease shall be limited to the cost of such repairs or maintenance or the
curing of such defect. The term "exterior walls" as used in this Lease shall not
include windows, glass or plate glass, doors, special store fronts or office
entries.

         6.       TENANT'S RESPONSIBILITIES.

         (a) Maintenance of Premises. Tenant shall, at its own cost and expense,
keep and maintain all parts of the Premises (except as provided in Paragraph 5)
in good condition, promptly making all necessary repairs and replacements,
including but not limited to, windows, glass and plate glass, doors, any special
entry, interior walls and finish work, floors and floor covering, heating and
air conditioning systems, electrical systems, dock boards, truck doors, dock
bumpers, dock seals, plumbing work and fixtures, termite and pest extermination,
regular removal of trash and debris and keeping the parking areas, driveways,
alleys and the whole of the Premises in a clean and sanitary condition, and
Tenant shall comply with the ADA. Tenant shall not be obligated to repair any
damage caused by fire, tornado or other casualty covered by the insurance to be
maintained by Landlord pursuant to Paragraph 12(a), except that Tenant shall be
obligated to repair all wind damage to glass unless caused by a tornado.

         (b) Damage to Demising Walls. Tenant shall not damage any demising wall
or disturb the integrity and support provided by any demising wall and shall, at
its sole cost and expense, promptly repair any damage or injury to any demising
wall caused by Tenant or its employees, agents or invitees.

         (c) Parking. Tenant and its employees, customers and licensees shall
have the nonexclusive right to use, in common with the other parties occupying
the Phase, common parking areas, if any (exclusive of any parking or work load
areas designated or to be designated by Landlord for the exclusive use of Tenant
or other tenants occupying or to be occupying other portions of the Phase),
driveways and alleys adjacent to the Building, subject to such reasonable rules
and regulations as Landlord may from time to time prescribe.

         (d) Preventive Maintenance. Tenant shall, at its own cost and expense,
enter into a regularly scheduled preventive maintenance/service contract with a
maintenance contractor for servicing all hot water, heating and air conditioning
systems and equipment serving the Premises. The maintenance contractor and the
contract must be approved by Landlord, which approval shall not be unreasonably
withheld. The service contract must include all services suggested by the
equipment manufacturer in the operation/maintenance manual and must become
effective (and a copy thereof delivered to Landlord) within thirty (30) days
after the date Tenant takes possession of the Premises.

         (e) Costs Payable by Tenant. Upon demand by Landlord, Tenant shall pay,
as Additional Rent, the cost and expense of repairing any damage to the Premises
resulting from and/or caused in whole or in part by the negligence or misconduct
of Tenant, its agents, servants, employees, contractors, patrons, customers, or
any other person entering upon the property as a result of Tenant's business
activities or caused by Tenant's default hereunder to the extent the cost of
repairing such damage is not reimbursed by the insurance to be maintained by
Landlord under Paragraph 12(a).

<PAGE>

         7. ALTERATIONS; CONDITION OF PREMISES UPON EXPIRATION. Tenant shall not
make any alterations, additions or improvements to the Premises (including but
not limited to roof and wall penetrations) without the prior written consent of
Landlord. Tenant may, without the consent of Landlord, but at its own cost and
expense and in a good workmanlike manner erect such shelves, bins, machinery and
trade fixtures as it may deem advisable, without altering the basic character of
the Building and without overloading or damaging such Building, and in each case
complying with all applicable governmental laws, ordinances, regulations and
other requirements. Prior to commencing any such alterations, additions or
improvements Tenant shall provide such assurances to Landlord, including,
without limitation, waivers of lien, surety company performance and payment
bonds and/or personal guaranties of persons of substance, as Landlord shall
require to assure payment of the costs thereof and to protect Landlord against
any loss from mechanics', laborers', materialmen's or other liens. All
alterations, additions, installations, improvements and partitions erected by
Tenant, including, without limitation, all telephone and data communications
cabling ("Cabling"), shall be and remain the property of Tenant during the Term
and Tenant shall, unless Landlord otherwise elects as provided below, remove all
alterations, additions, installations, improvements (including the improvements
constructed by Tenant pursuant to Exhibit B attached hereto) and partitions,
including, without limitation, the Cabling, erected or installed by Tenant and
restore the Premises to their original condition by the earliest of (a) the
Expiration Date, (b) the date of termination of this Lease prior to the
Expiration Date or (c) the vacating of the Premises without termination of this
Lease (said earliest date may be referred to as the "Restoration Date");
provided, however, that if Landlord so elects, in writing, prior to the
Restoration Date, such alterations, additions, installations, improvements,
partitions and Cabling (other than trade fixtures and personal property of
Tenant) shall become the property of Landlord as of the Restoration Date and
shall be delivered to the Landlord with the Premises. All shelves, bins,
machinery and trade fixtures installed by Tenant shall be removed by Tenant by
the Restoration Date if required by Landlord, and upon any such removal Tenant
shall restore the Premises to their original condition. All such removals and
restoration shall be accomplished in a good and workmanlike manner and shall not
damage the primary structural qualities of the Building.

         8. SIGNS/WINDOW COVERINGS. All signage visible from the exterior of the
Premises shall, at all times, comply with Exhibit D. Tenant shall not, without
the prior written consent of Landlord, install or affix any window coverings,
draperies, signs, window or door lettering or advertising media of any type on
the Property, the Building or in or on the Premises which are visible from the
exterior of the Building. Tenant shall remove any permitted signs and window
coverings, but not blinds, not later than the Restoration Date. Any such
installations and removals shall be made in such manner as to avoid injury or
defacement of the Building and other improvements, and Tenant shall repair any
injury or defacement, including, without limitation, discoloration caused by
such installation and/or removal.

         9. INSPECTION. Landlord and Landlord's agents and representatives shall
have the right to enter and inspect the Premises at any reasonable time for the
purpose of ascertaining the condition of the Premises or in order to make such
repairs and perform such actions as may be required or permitted to be made by
Landlord under the terms of this Lease. Landlord and Landlord's agents and
representatives shall have the right to enter the Premises at any reasonable
time for the purpose of showing the Premises and, during the period that is six
(6) months prior to the end of the Term, Landlord and Landlord's agents shall
have the right to erect a sign on the Premises indicating the Premises are
available for lease.

         10. UTILITIES. Tenant shall pay for all water, gas, heat, light, power,
telephone, sewer and sprinkler charges and other utilities and services
separately metered for the Premises, together with any taxes, penalties,
surcharges or the like pertaining thereto and shall furnish and install all
replacement electric light bulbs and tubes. Landlord shall not be liable for any
interruption or failure of utility services, communications or data services
serving the Building or the Premises arising from any cause whatsoever.

         11.      ASSIGNMENT AND SUBLETTING.

         (a) Assignment and Subletting. Tenant shall not have the right to
assign or pledge this Lease or to sublet the whole or any part of the Premises,
whether voluntarily or by operation of law, or permit the use or occupancy of
the Premises by anyone other than Tenant, without the prior written consent of
Landlord, and such restrictions shall be binding upon any assignee or subtenant
to which Landlord has consented. The foregoing prohibition includes, without
limitation, any subletting or assignment which would otherwise occur by merger,
consolidation, reorganization, transfer or other change in Tenant's corporate,
partnership or proprietary structure. Notwithstanding any permitted assignment
or subletting, Tenant shall at all times remain directly, primarily and fully
responsible and liable for the payment of the Rent and for compliance with all
of its other obligations under the terms, provisions and covenants of this
Lease. Upon the occurrence of an Event of Default, if the Premises or any part
thereof are then assigned or sublet, Landlord, in addition to any other remedies
herein provided or provided by law, may, at its option, collect directly from
any assignee or subtenant all amounts due and becoming due to Tenant under such
assignment or sublease and apply such amounts against any sums due to Landlord
from Tenant hereunder, and no such collection shall be construed to constitute a
novation or release of Tenant from the further performance of Tenant's
obligations hereunder. Landlord's acceptance of any Rent following any
assignment or other transfer prohibited by this Paragraph 11 shall not be deemed
to be a consent by Landlord to such assignment or other transfer (including,
without limitation, a prohibited sublease) nor shall the same be deemed a waiver
of any right or remedy of Landlord hereunder for breach of this Paragraph 11.

If Landlord grants its consent to any sublease or assignment, Tenant shall pay
Landlord, as Additional Rent (a) one hundred percent (100%) of amounts payable
to Tenant under the sublease or assignment and (b) Landlord's attorneys' fees
incurred with respect to such assignment or sublease. In addition, if Tenant has
any options to extend or renew the Term, such options shall not be available to
any subtenant or assignee, directly or indirectly, except to a permitted
transferee pursuant to subparagraph 11(c) or 11(d) below. If Tenant assigns this
Lease or sublets all or a portion of the Premises without first obtaining
Landlord's consent, as required by this Paragraph 11(a), said assignment or
sublease shall be null and void and of no force or effect. Landlord's consent to
an assignment, sublease or other transfer of any interest of Tenant in this
Lease or in the Premises shall not be deemed to be a consent to any subsequent
assignment, transfer, use or occupation.

Tenant shall, at Tenant's own cost and expense, discharge in full any
outstanding commission obligation on the part of Landlord with respect to this
Lease, and any commissions which may be due and owing as a result of any
proposed assignment or subletting, whether or not the Premises are recaptured
pursuant to subparagraph (b) below and rented by Landlord to the proposed tenant
or any other tenant. The parties agree that there will be no commission
obligation arising from a transfer pursuant to subparagraph 11(c) or 11(d)
below.

<PAGE>

         (b) Right of Recapture. In addition, but not in limitation of,
Landlord's right to approve of any subtenant or assignee, Landlord shall have
the option, in its sole discretion, in the event of any proposed subletting or
assignment, to terminate this Lease, or in the case of a proposed subletting of
less than the entire Premises, to recapture the portion of the Premises to be
sublet, as of the date the subletting or assignment is to be effective; provided
however that the right of recapture shall not be available to Landlord if the
transfer is to be made pursuant to either subparagraph 11(c) or 11(d) below .
The option shall be exercised, if at all, by Landlord giving Tenant written
notice thereof within thirty (30) days following Landlord's receipt of Tenant's
written notice as required above. If this Lease shall be terminated with respect
to the entire Premises pursuant to this subparagraph, the Term shall end on the
date stated in Tenant's notice as the effective date of the sublease or
assignment as if that date had been the Expiration Date. If Landlord recaptures
only a portion of the Premises under this subparagraph, the Base Rent during the
remainder of the Term shall abate proportionately based on the Base Rent payable
hereunder as of the date immediately prior to such recapture.

         (c) Permitted Transfer to an Affiliate of Tenant. Provided Tenant is
not then in default under this Lease, and subject to subparagraph 11(b) hereof,
Landlord shall not withhold its consent to a proposed assignment or sublease to
an affiliate of Tenant subject to the following conditions:

         (i)      Tenant notifies Landlord, in writing (the "Transfer Request"),
                  that it wishes to assign the Lease or sublease all or a
                  portion of the Premises at least thirty (30) days prior to the
                  date of such assignment or sublease and provides therewith
                  copies of the proposed assignment or sublease documents;

         (ii)     the Transfer Request shall be accompanied by a writing
                  satisfactory to Landlord, in Landlord's sole discretion,
                  whereby the proposed assignee assumes and agrees to perform
                  the Lease and Tenant's obligations hereunder;

         (iii)    Tenant shall provide, simultaneously with its delivery of the
                  Transfer Request, a guaranty of Tenant's obligations under the
                  Lease by Tenant's ultimate parent entity;

         (iv)     Simultaneously with Tenant's delivery of the Transfer Request,
                  Tenant shall pay to Landlord a fee of One Thousand and
                  no/100ths Dollars ($1,000.00) in order to reimburse Landlord
                  for all of Landlord's internal costs and expenses with respect
                  to the transfer, including, without limitation, costs incurred
                  in connection with the review of financial materials, meeting
                  with representatives of transferor and/or transferee and
                  preparation, review, approval and execution of the required
                  transfer documentation and, in addition, Tenant shall
                  reimburse Landlord for any out-of-pocket costs and expenses,
                  including attorneys' fees, incurred by Landlord with respect
                  to such transfer;

         (v)      any guarantor of Tenant's obligations under this Lease shall
                  continue to remain liable under its guaranty, and, Tenant
                  shall cause such guarantor to execute such documents as
                  Landlord deems necessary for the confirmation by such
                  guarantor of its guaranty, it being understood and agreed that
                  the provisions of this subparagraph (v) are in addition to,
                  and not in substitution for, the provisions of subparagraph
                  (iii) above;

         (vi)     there shall be no change in the Use of the Premises by the
                  assignee or sublessee;

         (vii)    the assignee or sublessee is not a tenant of Landlord in the
                  Project or a prospective tenant of the Project then working
                  with Landlord or Landlord's leasing agent.

For the purposes of this Lease, "affiliate" shall mean, with respect to a party,
any person or entity that controls, is controlled by or is under common control
with such party, with "control" and its derivatives meaning (x) as to a publicly
held company, ownership of 10 percent or more of the voting interests of the
entity in question; or (y) as to all other entities, 50 percent or more of the
voting interests in the entity in question.

Tenant's assignment of this Lease or sublease of all or a portion of the
Premises without first complying with the provisions of this subparagraph 11(c)
shall constitute an Event of Default under this Lease, and shall entitle
Landlord to the exercise of all of its rights and remedies hereunder, at law or
in equity. In addition, said assignment or sublease shall be null and void and
of no force or effect. Landlord's consent to an assignment, sublease or other
transfer of any interest of Tenant in this Lease or in the Premises shall not be
deemed to be a consent to any subsequent assignment, transfer, use or
occupation. The right granted by this subparagraph 11(c) shall be personal to
Tenant and a permitted transferee under this subparagraph 11(c) and subparagraph
11(d) below and shall not be available to any assignee, sublessee or other
transferee of Tenant's interest in this Lease or the Premises.

Notwithstanding anything in this subparagraph 11(c) to the contrary, Landlord
shall have no obligation to consider any proposed assignment or subletting if,
at the time of the delivery of the Transfer Request, Tenant is in default of
this Lease.

         (d) Permitted Transfer Upon Sale of Tenant's Business. Provided Tenant
is not then in default under this Lease, and notwithstanding the prohibition on
assignment and subleasing described in subparagraph 11(a) hereof, Tenant shall
have the right to assign this Lease or sublet all or a portion of the Premises
to an entity which is the purchaser of all or substantially all of the ownership
interests in Tenant, whether by merger, consolidation or otherwise upon Tenant's
compliance with the following conditions:

         (i)      Tenant notifies Landlord, in writing (the "Transfer Notice"),
                  of such assignment or sublease at least thirty (30) days prior
                  to the date of such assignment or sublease and provides
                  therewith copies of the proposed assignment or sublease
                  documents;

         (ii)     the Transfer Notice shall be accompanied by a writing
                  satisfactory to Landlord, in Landlord's sole discretion,
                  whereby the purchaser assumes and agrees to perform the Lease
                  and Tenant's obligations hereunder;

<PAGE>

         (iii)    simultaneously with the delivery of the Transfer Notice,
                  Tenant provides Landlord with financial statements
                  satisfactory to Landlord which show that the purchaser, after
                  completion of the merger or consolidation, will have a net
                  worth equal to the greater of:

                  (A)      Tenant's net worth as of the date of this Lease; or

                  (B)      a net worth of at least the net worth of tenants to
                           whom Landlord is then in the process of leasing
                           similar square footage in the Project, it being
                           understood and agreed that if Landlord is then
                           requiring new tenants of such similar spaces to
                           enhance their credit by virtue of security deposits,
                           letters of credit or similar vehicles, Landlord may
                           require that the purchaser comply with such credit
                           enhancement requirements;

         (iv)     simultaneously with Tenant's delivery of the Transfer Notice,
                  Tenant shall pay to Landlord a fee of One Thousand and
                  no/100ths Dollars ($1,000.00) in order to reimburse Landlord
                  for all of Landlord's internal costs and expenses with respect
                  to the transfer, including, without limitation, costs incurred
                  in connection with the review of financial materials, meeting
                  with representatives of transferor and/or transferee and
                  preparation, review, approval and execution of the required
                  transfer documentation and, in addition, Tenant shall
                  reimburse Landlord for any out-of-pocket costs and expenses,
                  including attorneys' fees, incurred by Landlord with respect
                  to such transfer;

         (v)      any guarantor of Tenant's obligations under this Lease shall
                  continue to remain liable under its guaranty, and, Tenant
                  shall cause such guarantor to execute such documents as
                  Landlord deems necessary for the confirmation by such
                  guarantor of its guaranty;

         (vi)     there shall be no change in the Use of the Premises by the
                  purchaser; and

         (vii)    the purchaser is not a tenant of Landlord in the Project or a
                  prospective tenant of the Project then working with Landlord
                  or Landlord's leasing agent.

Tenant's assignment of this Lease or sublease of all or a portion of the
Premises without first complying with the provisions of this subparagraph 11(d)
shall constitute an Event of Default under this Lease, and shall entitle
Landlord to the exercise of all of its rights and remedies hereunder, at law or
in equity. In addition, said assignment or sublease shall be null and void and
of no force or effect. Landlord's consent to an assignment, sublease or other
transfer of any interest of Tenant in this Lease or in the Premises shall no be
deemed to be a consent to any subsequent assignment, transfer, use or
occupation. The right granted by this subparagraph 11(d) shall be personal to
Tenant and a permitted transferee of Tenant pursuant to subparagraph 11(c) and
this subparagraph 11(d) and shall not be available to any assignee, sublessee or
other transferee of Tenant's interest in this Lease or the Premises.

Notwithstanding anything in this subparagraph 11(d) to the contrary, Landlord
shall have no obligation to consider any proposed assignment or subletting if,
at the time of the delivery of the Transfer Request, Tenant is in default of
this Lease.

         12.      FIRE AND CASUALTY DAMAGE.

         (a) Notice of Casualty. If the Building should be damaged or destroyed
by fire, tornado or other casualty, Tenant shall give immediate oral and written
notice thereof to Landlord's Managing Agent.

         (b) Termination of Lease. If the Building should be damaged or
destroyed by fire, tornado or other casualty, or if it should be so damaged
thereby that rebuilding or repairs cannot in Landlord's estimation be completed
within two hundred (200) days after the date upon which Landlord is notified by
Tenant of such damage, this Lease shall terminate and Base Rent and Operating
Costs shall be abated during the unexpired portion of this Lease, effective upon
the date of the occurrence of such damage.

         (c) Repair of Premises. If the Building should be damaged by any peril
covered by the insurance to be provided by Landlord under Paragraph 14(a), but
only to such extent that rebuilding or repairs can, in Landlord's estimation, be
completed within two hundred (200) days after the date upon which Landlord is
notified by Tenant of such damage (except that Landlord may elect not to rebuild
if such damage occurs during the last year of the Term), this Lease shall not
terminate, and Landlord shall, at its sole cost and expense, proceed with
reasonable diligence to rebuild and repair the Building to substantially the
condition in which it existed prior to such damage, except that Landlord shall
not be required to rebuild, repair or replace any part of the partitions,
fixtures, additions and other improvements which may have been placed in, on or
about the Premises by Tenant. If the Premises are untenantable in whole or in
part following such damage, Base Rent and Operating Costs payable hereunder
during the period in which the Premises are untenantable shall be reduced to
such extent as may be fair and reasonable under all of the circumstances, but in
no case shall Base Rent and Operating Costs be greater than the proportionate
share of the Premises which is usable by Tenant for the conduct of all or a
portion of its business therein. In the event that Landlord should fail to
complete such repairs and rebuilding within two hundred (200) days after the
date upon which Landlord is notified by Tenant of such damage (unless any such
delay is due to changes, deletions or additions in construction requested by
Tenant, strikes, lockouts, casualties, force majeure, war, material or labor
shortages, governmental regulation or control or other causes beyond the
reasonable control of Landlord, in which event such period shall be extended for
the amount of time Landlord is so delayed), Tenant may at its option, upon
thirty (30) days prior written notice, terminate this Lease as Tenant's
exclusive remedy, whereupon all rights and obligations of the parties to each
other under this Lease shall cease and terminate.

         (d) Application of Proceeds. Notwithstanding anything herein to the
contrary, in the event the holder of any indebtedness secured by a mortgage or
deed of trust covering the Premises or the Building requires that the insurance
proceeds be applied to such indebtedness, the Landlord shall have the right to
terminate this Lease by delivering written notice of termination to Tenant
within fifteen (15) days after such requirement is made by any such holder,
whereupon all rights and obligations of the parties to each other under this
Lease shall cease and terminate.

<PAGE>

         (e) Removal of Personal Property. In the event of any damage to the
Building or the Premises by any peril contemplated by this Paragraph 12, Tenant
shall, promptly after the occurrence of such damage and at its sole cost and
expense, remove from the Premises any personal property on the Premises
belonging to any of Tenant, its agents, employees, contractors, licensees or
invitees. Tenant hereby indemnifies, holds harmless and agrees to defend
Landlord from any loss, liability, damage, judgment, cost or expense, including
attorneys' fees through all appellate levels arising out of any claim of damage
or injury by any of Tenant, its agents, employees, contractors, licensees or
invitees as to itself or themselves or their respective properties arising as a
result of the removal or failure to remove such personal property. Landlord and
Tenant agree that Landlord shall have no obligation to secure the Building or
the Premises in the event of a casualty and that the risk of loss, by
destruction, theft or otherwise, to the personal property of Tenant, its agents,
employees, contractors, licensees or invitees shall be borne, as between
Landlord and Tenant, entirely by Tenant.

         13.      LIABILITY, WAIVER AND RELEASE.

         (a) No Liability. Landlord shall not be liable for and Tenant will
indemnify and hold Landlord harmless from any loss, liability, claims, suits,
costs and expenses, including attorneys' fees, arising out of any claim of
injury or damage on or about the Premises arising from any cause whatsoever
other than Landlord's gross negligence or willful misconduct. Landlord shall not
be liable to Tenant or Tenant's agents, employees, contractors, licensees or
invitees for any damage to persons or property arising from any cause whatsoever
except Landlord's gross negligence or willful misconduct and Tenant assumes all
risks of damage to such persons or property. Landlord shall not be liable or
responsible for any loss or damage to any property or person occasioned by
theft, fire, force majeure, public enemy, injunction, riot, strike,
insurrection, war, court order, requisition or order of governmental body or
authority, or other matter beyond control of Landlord, or for any injury or
damage or inconvenience, which may arise through repair or alteration of any
part of the Building, or failure to make repairs, or from any cause whatever
except Landlord's willful acts or gross negligence.

         (b) Waiver and Release. Except as provided below, each of Landlord and
Tenant agrees to rely entirely upon its own property insurance with respect to
any damage, loss or injury to its property.

Each of Landlord and Tenant hereby releases the other and the other party's
directors, officers, employees, agents and others acting on the other party's
behalf (collectively, the "released parties") from all claims and all liability
or responsibility to the releasing party and to any person claiming through or
under the releasing party, by way of subrogation or otherwise, for any loss or
damage to the releasing party's business or property caused by fire or other
peril, even if such fire or other peril was caused in whole or in part by the
negligence or other act or omission of one or more of the released parties.
Notwithstanding the foregoing, the release from liability and waiver or
subrogation provided for shall (i) only be effective to the extent that the loss
or damage to the releasing party's business or property is actually covered by
insurance; and (ii) not apply to the extent of any deductible (or deductibles)
applying under such insurance.

         14.      Insurance.

         (a) Landlord's Insurance. Landlord shall maintain in effect at all
times during the Term a policy or policies of insurance insuring the Building
against loss or damage by fire, explosion or other insurable hazards and
contingencies for the full replacement value. Landlord shall also obtain a
commercial general liability insurance policy in an amount equal to the amount
maintained by a prudent landlord with office-industrial property in the
northwest quadrant of the Minneapolis/St. Paul metropolitan area. Landlord shall
not insure any personal property of Tenant or any additional improvements which
Tenant may construct or install on the Premises. Landlord may self-insure the
exposures described above. Subject to the provisions of Paragraphs 12(b), 12(c)
and 12(d), such insurance shall be for the sole benefit of Landlord and under
its sole control.

         (b)      Tenant's Insurance.

                  (i)      Tenant shall, at its sole cost and expense, maintain
in effect at all times during the Term a commercial general liability insurance
policy, on an "occurrence" rather than on a "claims made" basis, with a total
combined policy limit of at least $2,000,000.00. The policy shall include, but
not be limited to, coverages for Bodily Injury, Property Damage, Personal Injury
and Contractual Liability (applying to this Lease), or an equivalent form (or
forms) affording coverage at least as broad. Landlord and Landlord's Managing
Agent shall be named as Additional Insureds under the policy.

                  (ii)     Tenant shall, at its sole cost and expense, maintain
in effect at all times during the Term, a policy or polices of insurance
covering all of Tenant's improvements, fixtures, inventory and other personal
property in the Premises against loss by fire and other hazards covered by an
"all-risk" form of policy, in an amount equal to the full replacement cost
thereof, without deduction for physical depreciation. Such insurance shall
include Valuable papers and Records coverage providing for the Reproduction
Costs measure of recovery and coverage for damage to Electronic Data Processing
Equipment and Media, including coverage of the perils of mechanical breakdown
and electronic disturbance.

                  (iii)    Tenant shall, at its sole cost and expense, maintain
in effect at all times during the Term, a policy of insurance covering business
interruption for a period of at least 365 days.

                  (iv)     If the use of the Premises by Tenant increases the
premium rate for insurance carried by Landlord on the Building, Tenant shall pay
Landlord, upon demand, as Additional Rent, the amount of such premium increase.

                  (v)      Tenant, upon actual knowledge or receipt of written
notice by Landlord, shall not carry any stock of goods, inventory, or Hazardous
Substances (as defined in this Lease) or do anything in or about the Premises
which will in any way impair or invalidate the obligation of the insurer under
any policy of insurance required by this Lease.

                  (vi)     Insurance policies required by this Paragraph 14(b)
shall be in a form reasonably acceptable to Landlord, with an insurer or
insurers having a Best rating of A-,X or better and qualified to do business in
the State of Minnesota, and shall require at least thirty (30) days prior
written notice to Landlord (and, if requested by Landlord, Landlord's
mortgagee(s)), of termination, cancellation, non-

<PAGE>

renewal or material alteration. The liability insurance under subparagraph
14(b)(i) shall be primary with respect to Landlord and its agents and not
participating with any other available insurance.

Prior to the Commencement Date, on each anniversary of the Commencement Date and
at such other times as Landlord may request, Tenant shall deliver to Landlord a
certificate evidencing such policies, or other evidence reasonably satisfactory
to Landlord, confirming (A) the terms of the insurance, (B) that the premiums
have been paid at least one (1) year in advance, and (C) that the policies are
in full force and effect. If Tenant has a blanket insurance policy providing
coverage for several properties of Tenant, including the Premises, Landlord will
accept a certificate of such insurance, provided:

                  (1)      the certificate states the amounts of insurance and
                           types of coverage;
                  (2)      the amounts are at least equal to the amounts that
                           would be required in this Lease; and
                  (3)      the policy complies with the other requirements in
                           this Lease.

         15.      CONDEMNATION.

         (a) Total Taking. If the whole or any substantial part of the Building
is taken for any public or quasi-public use under governmental law, ordinance or
regulation, or by right of eminent domain, or by private purchase in lieu
thereof and the taking would prevent or materially interfere with the use of the
Premises or the Building for the purpose of which they are being used, this
Lease shall terminate and the Base Rent and Operating Costs shall be abated
during the unexpired portion of this Lease effective when the physical taking of
the Property shall occur.

         (b) Partial Taking. If part of the Premises shall be taken for any
public or quasi-public use under any governmental law, ordinance or regulation,
or by right of eminent domain, or by private purchase in lieu thereof, and this
Lease is not terminated as provided in the subparagraph above, this Lease shall
not terminate but the Base Rent and Operating Costs payable hereunder during the
unexpired portion of this Lease shall be reduced to such extent as may be fair
and reasonable under all of the circumstances, but in no case shall Base Rent
and Operating Costs be greater than the proportionate share of the Premises
which is usable by Tenant for the conduct of all or a portion of its business
therein.

         (c) Awards. In the event of any such taking or private purchase in lieu
thereof, Landlord and Tenant shall each be entitled to receive and retain such
separate awards and/or portion of lump sum awards as may be allocated to their
respective interests in any condemnation proceedings, provided that Tenant shall
not be entitled to receive any award for Tenant's loss of its leasehold interest
or other property which would have become the property of Landlord upon
termination of this Lease; the right to such award being hereby assigned to
Landlord.

         16. HOLDING OVER. Tenant will, at the termination of this Lease by
lapse of time or otherwise, yield up immediate possession to Landlord. If Tenant
retains possession of the Premises or any part thereof after such termination,
then, subject to the last sentence of this Paragraph, such holding over shall
constitute creation of a month to month tenancy, upon the terms and conditions
of this Lease; provided, however, that the monthly rental for such holding over
shall, in addition to all other sums which are to be paid by Tenant hereunder,
whether or not as Additional Rent, be equal to two hundred percent (200%) of the
Rent being paid monthly to Landlord under this Lease immediately prior to such
termination. In addition to and not in limitation of the foregoing, Tenant shall
also pay to Landlord all damages sustained by Landlord resulting from retention
of possession by Tenant, including the loss of any proposed subsequent tenant
for any portion of the Premises. The provisions of this Paragraph shall not
constitute a waiver by Landlord of any right of re-entry as herein set forth;
nor shall receipt of any rent or other sums or any other act in apparent
affirmance of the tenancy operate (a) as an extension of the Term; (b) a waiver
of Landlord's right to terminate Tenant's right to possession of the Premises;
or (c) a waiver of the right to terminate this Lease for a breach of any of the
terms, covenants, or obligations herein on Tenant's part to be performed.

         17. QUIET ENJOYMENT. Landlord covenants that it now has, or will
acquire before Tenant takes possession of the Premises, insurable title to the
Premises. Landlord represents and warrants that it has full right and authority
to enter into this Lease and that Tenant, upon paying the Rent and performing
its other covenants and agreements under this Lease, shall peaceably and quietly
have, hold and enjoy the Premises for the Term, subject to the terms and
provisions of this Lease.

         18. EVENTS OF DEFAULT. Each of the following events shall be deemed to
be an Event of Default by Tenant under this Lease:

         (a)      Tenant shall fail to pay any installment or other payment of
                  Rent required herein when due, and such failure shall continue
                  for a period of five (5) days from the date such payment was
                  due;
         (b)      Tenant shall become insolvent, or shall make a transfer in
                  fraud of creditors, or shall make an assignment for the
                  benefit of creditors;
         (c)      Tenant shall file a petition under any section or chapter of
                  the federal bankruptcy laws, or under any similar law or
                  statute of the United States or any State, including, without
                  limitation, a liquidation, rehabilitation or other insolvency
                  statute, whether now or hereafter in effect; or an order for
                  relief shall be entered against Tenant in any such bankruptcy
                  or insolvency proceedings filed against Tenant thereunder or
                  Tenant shall be adjudged bankrupt or insolvent in proceedings
                  filed against Tenant thereunder;
         (d)      A receiver or trustee shall be appointed for all or
                  substantially all of the assets of Tenant;
         (e)      Tenant shall generally not pay its debts as such debts become
                  due;
         (f)      Tenant shall vacate or abandon all or a substantial portion of
                  the Premises; provided however, that such vacation or
                  abandonment shall not constitute a default hereunder unless,
                  in Landlord's reasonable estimation, Tenant has failed to
                  comply with its obligations to maintain the Premises as
                  required under this Lease;

<PAGE>

         (g)      Tenant shall fail to discharge any lien placed upon the
                  Premises in violation of Paragraph 22 hereof;
         (h)      Tenant shall fail to insure and provide evidence of such
                  insurance in accordance with Paragraph 14(b);
         (i)      Tenant shall fail to relocate to New Premises pursuant to
                  Paragraph 26, it being understood and agreed that Tenant shall
                  not be entitled to the benefit of Paragraph 16 as a result of
                  such failure; or
         (j)      Tenant shall fail to comply with any term, provision or
                  covenant of this Lease (other than the foregoing in this
                  Paragraph 18), and shall not cure such failure within thirty
                  (30) days after written notice thereof from Landlord to
                  Tenant.

         19. Remedies. Upon the occurrence of any of such events of default
described in Paragraph 18 hereof, Landlord shall have the option to pursue any
one or more of the following remedies without any further notice or demand
whatsoever.

         (a)      Landlord may, at its election, terminate this Lease or
                  terminate Tenant's right to possession only, without
                  terminating the Lease;

         (b)      Upon any termination of this Lease, whether by lapse of time
                  or otherwise, or upon any termination of Tenant's right to
                  possession without termination of this Lease, Tenant shall
                  surrender possession and vacate the Premises immediately and
                  deliver possession thereof to Landlord, and Tenant hereby
                  grants to Landlord full and free license to enter into and
                  upon the Premises in such event with or without process of law
                  and to repossess Landlord of the Premises as of Landlord's
                  former estate and to expel or remove Tenant and any others who
                  may be occupying or within the Premises and to alter all locks
                  and other security devices at the Premises and to remove any
                  and all property therefrom, without being deemed in any manner
                  guilty of trespass, eviction or forcible entry or detainer,
                  and without incurring any liability for any damage resulting
                  therefrom. Tenant hereby waives any right to claim damage for
                  such re-entry and expulsion, and such entry and possession
                  shall not terminate this Lease or release Tenant, in whole or
                  in part, from any obligation, including Tenant's obligation to
                  pay all Rent payable by Tenant hereunder, for the Term or any
                  other right given to Landlord hereunder or by operation of
                  law;

         (c)      Landlord may, but need not, relet the Premises or any part
                  thereof for such Rent and upon such terms as Landlord, in its
                  sole discretion, shall determine (including the right to relet
                  the Premises as part of a larger area and the right to change
                  the character or the use made of the Premises), and Landlord
                  shall not be required to accept any tenant offered by Tenant
                  or to observe any instructions given by Tenant about such
                  reletting. In any such case, Landlord may make repairs,
                  alterations and additions in or to the Premises, and
                  redecorate the same to the extent Landlord deems necessary or
                  desirable, in its sole discretion. All Rent and other sums
                  received by Landlord from any such reletting shall be applied
                  as follows: first, to the payment of any indebtedness other
                  than Rent due hereunder from Tenant to Landlord; second, to
                  the payment of any costs and expenses of such alterations and
                  repairs; third, to the payment of Landlord's expenses of
                  reletting, including, without limitation, broker's
                  commissions, reasonable attorney fees and lease inducements,
                  such as moving or leasehold improvement allowances; fourth, to
                  the payment of Rent due and unpaid hereunder; and the residue,
                  if any, shall be held by Landlord and applied in payment of
                  future Rent as the same may become due and payable hereunder.
                  If such Rent and other sums received from such reletting
                  during any month be less than the Rent to be paid during said
                  month by Tenant hereunder, Tenant shall pay such deficiency to
                  Landlord. Such deficiency shall be calculated and paid
                  monthly. Notwithstanding any such re-entry by Landlord,
                  Landlord may at any time hereafter elect to terminate this
                  Lease for such previous breach.

         (d)      Tenant acknowledges that the damages Landlord would incur in
                  connection with terminating this Lease following a default by
                  Tenant would be difficult to estimate or ascertain. Therefore,
                  Tenant agrees that, in the event Landlord elects to terminate
                  this Lease, Landlord may, in addition to other remedies
                  available at law or in equity, declare all Rent payable under
                  this Lease immediately due and payable and recover from
                  Tenant, as liquidated damages, and not as a penalty, an amount
                  equal to the sum of the following: (i) all unpaid Rent that is
                  payable by Tenant hereunder and that accrues through the
                  effective date of termination; plus (ii) the cost of repairs,
                  alterations and/or redecoration of the Premises that Landlord
                  determines are necessary, in landlord's sole discretion; plus
                  (iii) a sum of money equal to the entire amount of Rent that
                  would be payable under the Lease for the lesser of (A) the
                  three (3) year period commencing upon the effective date of
                  termination, or (B) the period commencing upon the effective
                  date of termination and ending upon the original date of the
                  expiration of the Term, which amount shall be immediately due
                  and payable upon demand, but which amount shall be discounted
                  to present value using a discount rate equal to the discount
                  rate of the Federal Reserve Bank of Minneapolis as of the date
                  of termination plus one percent (1%); plus (iv) to the extent
                  not included in the calculation of Rent payable pursuant to
                  subparagraph (ii) above, a sum of money equal to the remaining
                  principal balance of the original cost of any leasing
                  commissions and leasehold improvements in the Premises paid
                  for by Landlord on the effective date of termination, together
                  with interest at a rate of twelve percent (12%) per annum
                  amortized over the entire Term, assuming amortization based
                  upon equal monthly payments of principal and interest. For
                  purposes of calculating the amount of Rent that would be
                  payable under the Lease for the period succeeding the
                  effective date of termination, such Rent shall be computed on
                  the basis of the average monthly amount of Rent accruing
                  during the twenty-four (24) month period immediately preceding
                  the default to which such termination relates (exclusive of
                  any months in which Tenant received "free" or abated Base Rent
                  concessions); provided, however, if the default occurs prior
                  to the expiration of the first twenty-four (24) months of the
                  Lease, then the Rent shall be computed on the basis of the
                  average monthly amount of Rent accruing during all months
                  preceding the month in which said default occurred (exclusive
                  of any months in which Tenant received "free" or abated Base
                  Rent concessions).

         (e)      Any and all property which may be removed from the Premises by
                  Landlord pursuant to the authority of the Lease or of law, to
                  which Tenant is or may be entitled, may be handled, removed
                  and stored, as the case may be, by or at the direction of
                  Landlord at the risk, cost and expense of Tenant, and Landlord
                  shall in no event be responsible for the value, preservation
                  or safekeeping thereof. Tenant shall pay to Landlord, upon
                  demand, any and all expenses incurred in such

<PAGE>

                  removal and all storage charges against such property so long
                  as the same shall be in Landlord's possession or under
                  Landlord's control. Any such property of Tenant not retaken by
                  Tenant from storage within thirty (30) days after removal from
                  the Premises shall, at Landlord's option, be deemed conveyed
                  by Tenant to Landlord under this Lease as by a bill of sale
                  without further payment or credit by Landlord to Tenant.

Pursuit of any of the foregoing remedies shall not preclude pursuit of any of
the other remedies herein provided or any other remedies provided by law, nor
shall pursuit of any remedy herein provided constitute a forfeiture or waiver of
any Rent due to Landlord hereunder or of any damages accruing to Landlord by
reason of the violation of any of the terms, provisions and covenants herein
contained. No act or thing done by the Landlord or its agents during the Term
shall be deemed a termination of this Lease or an acceptance of the surrender of
the Premises, and no agreement to terminate this Lease or accept a surrender of
said Premises shall be valid unless in writing signed by Landlord. No waiver by
Landlord of any violation or breach of any of the terms, provisions and
covenants herein contained shall be deemed or construed to constitute a waiver
of any other violation or breach of any of the terms, provisions and covenants
herein contained. Landlord's acceptance of the payment of Rent or other payments
hereunder after the occurrence of an Event of Default shall not be construed as
a waiver of such default, unless Landlord so notifies Tenant in writing.
Forbearance by Landlord to enforce one or more of the remedies herein provided
upon an Event of Default shall not be deemed or construed to constitute a waiver
of such default or of Landlord's right to enforce any such remedies with respect
to such default or any subsequent default.

         20.      LANDLORD'S LIEN.  INTENTIONALLY DELETED

         21. MORTGAGES. This Lease is and shall be subject and subordinate to
any mortgage(s) now or at any time hereafter constituting a lien or charge upon
the Property or the Premises, provided, however, that if the holder of any such
mortgage elects to have Tenant's interest in this Lease superior to any such
instrument, then by notice to Tenant from such holder, this Lease shall be
deemed superior to such lien, whether this Lease was executed before or after
said mortgage. Tenant shall at any time hereafter on demand execute any
instruments, releases or other documents which may be required by any mortgagee
for the purpose of subjecting and subordinating this Lease to the lien of any
such mortgage.

         22. MECHANIC'S LIENS. Tenant shall keep the Premises and the Property
free from any mechanics', materialmen's, contractors' or other liens arising
from, or any claims for damages growing out of, any work performed, materials
furnished or obligations incurred by or on behalf of Tenant. If such a lien is
filed against the Premises or the Property or any portion thereof as a result of
work performed, materials furnished or obligations incurred by or on behalf of
Tenant, Tenant, at its sole cost and expense, shall cause such lien to be
removed within five (5) business days after Tenant becomes aware of the filing
of such lien. Tenant hereby agrees to defend and indemnify Landlord and to hold
Landlord harmless from and against any such lien or claim or action thereon, and
shall reimburse Landlord, as Additional Rent for Landlord's costs of suit and
all attorneys' fees and costs incurred in connection with the removal of any
such lien, claim or action. Landlord hereby reserves the right, at any time and
from time to time during the construction of the Premises or any subsequent
alteration to enter onto the Premises and post and review notices in accordance
with Minn. Stat. ss.514.06, as the same may be amended.

         23. NOTICES. All Rent payments, bills, statements, notices or
communications, required or desired to be given hereunder shall be in writing
and shall be deemed effective and received (a) upon personal delivery; (b) five
(5) days after deposit in the United States mail, certified mail, return receipt
requested, postage prepaid; or (c) one (1) business day after deposit with a
national overnight air courier, fees prepaid, to Landlord or Tenant, as the case
may be, at the notice or Rent payment addresses for each party stated on the
Data Sheet. Either party may designate an additional or another address upon
giving written notice to the other party at the address for notices for such
party stated on the Data Sheet pursuant to this Paragraph 23. Any return of any
access cards or keys or other similar devices shall be made to Landlord's
Managing Agent, at the address stated on the Data Sheet. Landlord's Managing
Agent shall give and receive notices in the manner prescribed by this Section,
and a copy of all notices given to Landlord shall be given to Landlord's
Managing Agent in the manner prescribed by this Paragraph 23. For the purposes
of this Lease, "Business Day" shall mean a day which is not a Saturday, a Sunday
or a legal holiday of the State of Minnesota.

         If and when included within the term "Landlord," as used in this
instrument, there are more than one person, firm or corporation, all shall
jointly arrange among themselves for their joint execution of such a notice
specifying some individual at some specific address for the receipt of notices
and payments to Landlord; if and when included within the term "Tenant," as used
in this instrument, there are more than one person, firm or corporation, all
shall jointly arrange among themselves for their joint execution of such a
notice specifying some individual at some specific address within the
continental United States for the receipt of notices and payments to Tenant. All
parties included within the terms "Landlord" and "Tenant," respectively, shall
be bound by notices given in accordance with the provisions of this paragraph to
the same effect as if each had received such notice.

         24. HAZARDOUS SUBSTANCES. Tenant shall at all times comply with all
applicable local, state and federal laws, ordinances and regulations relating to
Hazardous Substances. "Hazardous Substances" means (1) any oil, petroleum
product, flammable substances, explosives, radioactive materials, hazardous
wastes or substances, toxic wastes or substances, infectious wastes or
substances or any other wastes, materials or pollutants that (A) pose a hazard
to the Premises, Building or Property or to persons on or about the Premises,
Building or Property or (B) cause the Premises, Building or Property to be in
violation of any hazardous materials laws; (2) asbestos in any form which,
urea-formaldehyde foam insulation, transformers or other equipment that contains
dielectric fluid containing polychlorinated biphenyl, or radon gas; (3) any
chemical, materials or substance defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials," "extremely
hazardous waste," "restricted hazardous waste," "infectious waste," or "toxic
substances," or words of similar import under any applicable local, state or
federal law or under the regulations adopted or publications promulgated
pursuant thereto, including, but not limited to, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. ss.ss.
9601, et seq.; the Hazardous Materials Transportation Act, as amended, 42 U.S.C.
ss.ss. 6901, et seq.; the Federal Water Pollution Control Act, as amended, 33
U.S.C. ss.ss. 1251, et seq.; (4) any other chemical, material or substance,
exposure to which is prohibited, limited or regulated by any governmental
authority or may or could pose a hazard to the health and safety of the
occupants of the Premises, Building or Property or the owners and/or occupants
of property adjacent to or surrounding the Property, or any other person or
entity coming upon the Property or adjacent property; and (5) any other
chemical, material or substance that may or could pose a hazard to the
environment, including, without limitation, nitrogen gas, propane gas and
methyltrichlorosilene gas ("MTS") as

<PAGE>

are required by Tenant for the production of pyrolytic carbon components for
products manufactured by Tenant. Tenant shall not: (i) use the Premises,
Building or Property for the storage of Hazardous Substances except for such
activities that are part of the course of tenant's ordinary business (the
"Permitted Activities"); provided, such Permitted Activities are conducted in
accordance with all applicable laws, orders, regulations and ordinances and have
been approved in advance in writing by Landlord; (ii) use the Premises, Building
or Property as a landfill or dump; or (iii) install any underground tanks of any
type at the Property. Tenant shall at its own expense maintain in effect any and
all permits, licenses or other governmental approvals, if any, required for
Tenant's use of the Premises and require the same of any subtenants. Tenant
shall make and cause any subtenant to make all disclosures required of Tenant by
any laws, and shall comply and cause subtenant to comply with all orders
concerning Tenant's use of the Premises issued by any governmental authority
having jurisdiction over the Premises and take all action required by such
governmental authorities to bring the Tenant's activities on the Premises into
compliance with all environmental and other laws, rules, regulations and
ordinances affecting the Premises. If at any time Tenant shall become aware, or
have reasonable cause to believe, that any Hazardous Substance has been released
or has otherwise come to be located on or beneath the Property, Tenant shall
give written notice of that condition to Landlord immediately after Tenant
becomes so aware. Tenant shall be responsible for, and shall indemnify, defend
and hold Landlord harmless from and against, all environmental claims, demands,
damages and liabilities, including, without limitation, court costs and
reasonable attorney fees, if any, arising out of, or in connection with, the
generation, storage, disposal or other presence of any Hazardous Substance in,
on or about the Premises, Building or Property during the Term or that Tenant or
its subtenants caused or permitted. The indemnification provided by this
Paragraph 24 shall survive the termination of this Lease. Notwithstanding the
provisions of Paragraph 13 of this Lease to the contrary, Tenant shall defend
and hereby does indemnify and hold Landlord harmless from and against any and
all claims, actions, proceedings, judgments, damages, costs and expenses,
including attorneys' fees and costs through all appellate levels arising from
the storage, use, release, threatened release, transportation or other
disposition of Hazardous Substances on and about the Premises and in the conduct
of Tenant's business.

         25. EXPENSE OF ENFORCEMENT. Tenant shall pay Landlord, upon demand
therefor, for all costs and reasonable attorneys' fees and expenses incurred by
Landlord in seeking enforcement against Tenant, any assignee or sublessee of
Tenant, or any guarantor of Tenant's obligations under this Lease, of Tenant's
or such party's obligations under this Lease, including, without limitation, the
collection of Rent and the termination of Tenant's right to possession of the
Premises. Such payment shall constitute Additional Rent payable in accordance
with Paragraph 4. Notwithstanding the foregoing, if Landlord commences any
action against Tenant, including, without limitation, an action in unlawful
detainer, which action settles at or prior to any trial in connection therewith,
Landlord shall be entitled to recover from Tenant Landlord's reasonable
attorneys' fees and disbursements and the same shall be payable by Tenant to
Landlord with the next installment of Rent falling due and shall constitute
Additional Rent hereunder.

         26.      SUBSTITUTION OF PREMISES. INTENTIONALLY DELETED

         27.      TRANSFER OF LANDLORD'S INTEREST; LIMITATION OF LIABILITY.

         (a) Transfer of Landlord's Interest. The term "Landlord" shall mean
only the owner, at any time of the Property, and in the event of the transfer by
such owner of its interest in the Property, such owner's grantee or successor
shall upon such transfer, become "Landlord" under this Lease. If any owner
transfers its interest in the Premises or the Property or any portion thereof,
other than a transfer for security purposes, such owner shall automatically be
relieved of any and all obligations and liabilities on the part of such owner as
"Landlord" accruing after the date of such transfer, including, without
limitation, such owner's obligation to return the Security Deposit following
assignment or transfer thereof to such owner's transferee. The new landlord
shall be bound by the terms of this Lease and shall assume all of the
responsibilities and liabilities hereunder accruing from and after the date of
the transfer.

         (b) Limitation of Landlord's Liability. If Landlord is ever adjudged by
any court to be liable to Tenant, Tenant specifically agrees to look solely to
Landlord's interest in the Phase, and the rents, issues, profits and proceeds of
sale deriving therefrom for the recovery of any judgment from Landlord, it being
agreed that none of Landlord, its directors, officers, shareholders, managing
agents, employees or agents shall be personally liable for any such judgment. In
no event shall Landlord ever be liable to Tenant, Tenant's agents, servants or
employees, or to any person or entity claiming by or through Tenant, for any
consequential, indirect, special or similar types of damages.

         28. RIGHT OF LANDLORD TO PERFORM. If Tenant shall fail to pay any sum
of money other than Rent required to be paid by it under this Lease, or shall
fail to perform any other act on its part to be performed under this Lease,
Landlord may, but shall not be so obligated, and without waiving or releasing
Tenant from any obligations of Tenant, after the end of the fifth calendar day
after notifying Tenant of Tenant's obligation to perform, make any such payment
or perform any such other act on Tenant's part to be made or performed;
provided, however, that in the event of emergency, Landlord shall have the right
to perform Tenant's obligations prior to the expiration of the five-day period
specified above. If Landlord performs Tenant's obligations pursuant to this
Paragraph 28, Landlord shall have the right to use the Security Deposit to pay
such expenses, or pay such expenses directly and reimburse itself from the
Security Deposit or to the extent the cost of such performance exceeds the
Security Deposit, Landlord may pay for the cost of such performance from its own
funds, or from a combination of the Security Deposit and its own funds and all
such amounts shall be repaid to Landlord by Tenant as Additional Rent, payable
with the next installment of Base Rent falling due.

         29.      MISCELLANEOUS.

         (a) Gender; etc. Words of any gender used in this Lease shall be held
and construed to include any other gender, and words in the singular number
shall be held to include the plural, unless the context otherwise requires.

         (b) Binding Effect. The terms, provisions and covenants and conditions
contained in this Lease shall apply to, inure to the benefit of, and be binding
upon, the parties hereto and upon their respective heirs, legal representatives,
successors and permitted assigns, except as otherwise herein expressly provided.
Tenant agrees to furnish promptly upon demand, a corporate resolution, proof of
due authorization by partners, or other appropriate documentation evidencing the
due authorization of Tenant to enter into this Lease. Nothing herein contained
shall give any other tenant in the Building any enforceable rights either
against Landlord or Tenant as a result of the covenants and obligations of
either party stated herein.

<PAGE>

         (c) Captions. The captions inserted in this Lease are for convenience
only and in no way define, limit or otherwise describe the scope or intent of
this Lease, or any provision hereof, or in any way affect the interpretation of
this Lease.

         (d) Estoppel. Tenant agrees from time to time within ten (10) business
days after request of Landlord, to deliver to Landlord, or Landlord's designee
an estoppel certificate in a form designated by Landlord. It is understood and
agreed that Tenant's obligation to furnish such estoppel certificates in a
timely fashion is a material inducement for Landlord's execution of this Lease,
and that, if Tenant fails timely to deliver any estoppel certificate
contemplated by this subparagraph (d), Tenant shall be liable to Landlord for
all losses incurred by Landlord as a result of such failure, including, without
limitation, attorneys' fees and court costs through all appellate levels.

         (e) Amendment. This Lease may not be altered, changed or amended except
by an instrument in writing signed by both parties hereto.

         (f) Survival of Obligations. All obligations of Tenant hereunder not
fully performed as of the expiration or earlier termination of the Term shall
survive the expiration or earlier termination of the Term, including without
limitation, all payment obligations with respect to Operating Costs and all
obligations concerning the condition of the Premises. Upon the expiration or
earlier termination of the Term, Tenant shall pay to Landlord the amount as
estimated by Landlord, necessary (i) to repair and restore the Premises as
provided herein; and (ii) to discharge Tenant's obligation for Operating Costs
or other amounts due Landlord. All such amounts shall be used and held by
Landlord for payment of such obligations of Tenant, with Tenant being liable for
any additional costs upon demand by Landlord, or with any excess to be returned
to Tenant after all such obligations have been determined and satisfied. Any
security deposit held by Landlord shall be credited against the amount payable
by Tenant under this subparagraph.

         (g) Joint and Several. If there be more than one Tenant, the
obligations hereunder imposed upon Tenant shall be joint and several.

         (h) Brokers. Tenant represents and warrants that it has dealt with no
broker, agent or other person in connection with this transaction or that no
broker, agent or other person brought about this transaction, other than
Tenant's Broker, if any, listed on the Data Sheet, and Tenant agrees to defend,
indemnify and hold Landlord harmless from and against any claims by any other
broker, agent or other person claiming a commission or other form of
compensation by virtue of having dealt with Tenant with regard to this leasing
transaction.

         (i) Severability. If any clause or provision of this Lease is illegal,
invalid or unenforceable under present or future laws effective during the Term,
then and in that event, it is the intention of the parties hereto that the
remainder of this Lease shall not be affected thereby, and it is also the
intention of the parties to this Lease that in lieu of each clause or provision
of this Lease that is illegal, invalid or unenforceable, there be added as a
part of this Lease a clause or provision as similar in terms to such illegal,
invalid or unenforceable clause or provision as may be possible and be legal,
valid and enforceable.

         (j) Offer to Lease. Because the Premises are on the open market and are
currently being shown, this Lease shall be treated as an offer and shall not be
valid or binding unless and until accepted by Landlord in writing.

         (k) Waiver of Jury Trial; Jurisdiction. EACH OF LANDLORD AND TENANT
HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION RELATING TO THIS LEASE.
At the option of Landlord, this Lease shall be enforced in any United States
District Court for the Federal District of Minnesota or state court of the State
of Minnesota sitting in the State of Minnesota, and Tenant consents to the
jurisdiction and venue of any such court and waives any argument that venue in
such forums is not proper or convenient.

         (l) Complete Agreement. This Lease contains all of the agreements and
understandings relating to the leasing of the Premises and the obligations of
Landlord and Tenant in connection with such leasing. Landlord has not made, and
Tenant is not relying upon, any warranties or representations, promises or
statements made by Landlord or any agent of landlord, except as expressly stated
herein. This Lease supersedes any and all prior agreements and understandings
between Landlord and Tenant and alone expresses the agreement of the parties.

         (m) Governing Law. This Lease, the rights of the parties hereunder and
the interpretation hereof shall be governed by, and construed in accordance
with, the internal laws of the State of Minnesota, without giving effect to
conflict of laws principles thereof.

         (n) Construction. The parties agree that counsel for both parties have
reviewed this Agreement. Accordingly, neither party shall be deemed to have
drafted this Agreement and it shall not be construed against either party by
virtue of the drafting thereof in the event of a dispute.

         30. RIGHT TO RENEW LEASE. Landlord hereby grants to Tenant a one-time
option to renew the Lease as to the Premises upon the terms and conditions of
this Paragraph 30 if:

         (a) Tenant is not in default under this Lease, as the same may have
been renewed beyond any time to cure at the time such option is exercised; and

         (b) Tenant gives Landlord written notice of the exercise of the renewal
of this Lease not earlier than the fifth anniversary of the Commencement Date
and not later than nine months prior to the end of the Term (the "Renewal Notice
or Exercise"), time being of the essence. Tenant's failure to notify Landlord of
its intent to exercise its option to renew the Term granted herein on or before
the dates specified in this subparagraph (b) for such renewal shall be deemed a
waiver of Tenant's right to exercise its option to renew.

If Tenant elects to renew this Lease under this Paragraph 30, the following
terms and conditions shall apply:

         (1)      The renewal term in question shall commence upon the
                  expiration of the Term and continue thereafter for a period of
                  three (3) years.

<PAGE>

         (2)      Base Rent for the Premises for the renewal term shall be
                  Market Rent (as defined in Paragraph 31 of this Lease); and

         (3)      All of the other terms and conditions contained in this Lease,
                  as it may have been amended from time to time, shall be as set
                  out in this Lease, it being understood that there shall be no
                  rights of renewal or extension except as provided in this
                  Paragraph 30, and, upon the exercise of the right of renewal
                  granted by this Paragraph 30, this Paragraph 30 shall be of no
                  further force or effect and Tenant shall have no right to
                  further renew or extend the Term at the expiration of the
                  renewal term.

Within fifteen (15) business days after request thereof from Landlord, Tenant
shall execute and deliver to Landlord those instruments which Landlord may
request to evidence the renewal described in this Paragraph 30. The rights of
Tenant under this Paragraph 30 shall not be severed from this Lease or
separately sold, assigned, or otherwise transferred, and shall expire on the
expiration or earlier termination of this Lease. Notwithstanding the foregoing,
the renewal option contemplated in this Paragraph 30 shall automatically
terminate and become null and void and of no further force and effect upon the
earlier to occur of (i) the expiration or termination of this Lease; (ii) the
termination of the Tenant's right to possession of the Premises; or (iii) the
failure of Tenant to timely or properly exercise the rights granted by this
Paragraph 30. The right contemplated by this Paragraph shall not survive the
expiration or termination of this Lease, and shall not be available to any
assignee, sublessee, or successor to Tenant's interests hereunder, except a
transferee under subparagraph 11(c) or 11(d) of this Lease.

         31. MARKET RENT. "Market Rent' means the amount of base rent, which may
or may not include concessions, improvements, and other matters (exclusive of
Operating Costs) which Landlord would receive by then renting similar space
(including similar square footage) for premises in the project in which the
Building is located. Within 45 days after Tenant exercised its right to renew
the Term pursuant to Paragraph 30, Landlord shall give Tenant notice of Market
Rent for the renewal term (the "Market Rent Notice"). If Tenant does not agree
with Landlord's determination of Market Rent as set forth in the Market Rent
Notice, Tenant shall so notify Landlord in writing within ten (10) days after
Tenant's receipt of Market Rent Notice ("Tenant's Notice"). Landlord and Tenant
shall, for ten (10) days after Landlord's receipt of Tenant's Notice, negotiate
in good faith to come to an agreement as to Market Rent for the renewal term or
any further renewal thereof. If Landlord and Tenant are unable to agree upon
Market Rent within said ten day period, then, notwithstanding the provisions of
Paragraph 30, Tenant shall have the right to rescind the Renewal Notice of
Exercise by written notice (the "Recission Notice") to Landlord given not later
than twenty (20) days after the date of Tenant's Notice, it being understood and
agreed that if the Rescission Notice is not given within such time period,
Tenant shall be deemed to have waived its right to rescind the Renewal Notice of
Exercise. In such case, to the extend that the Renewal Notice of Exercise is
effective exercised, Landlord and Tenant shall execute and deliver and amendment
to this Lease which amendment shall be executed and delivered within ten (10)
days following the determination of Market Rent. Tenant's failure to give
Tenant's Notice within the time period provided above shall be deemed an
acceptance of Landlord's determination of Market Rent, and the Term shall be
deemed renewed pursuant to the Renewal Notice of Exercise.

         32. ADDITION TO PREMISES. Landlord and Tenant agree that, as of
December 1, 2001, Tenant shall commence to lease additional premises as depicted
on Exhibit A-1 attached hereto (the "Additional Premises"), and that,
accordingly, Base Rent and Tenant's Proportionate Share shall be adjusted to
take into account the leasing of the Additional Premises. From and after
December 1, 2001, any reference in this Lease to the "Premises" shall be deemed
to be a reference to the Premises as described on Exhibit A and the Additional
Premises. All of the terms and conditions of this Lease shall apply to the
Additional Premises. Tenant shall lease the Additional Premises in their
then-AS-IS WITH ALL FAULTS condition, with all alterations to be made in
accordance with Paragraph 7 of this Lease. The lease of the Additional Premises
shall be expire on the Expiration Date as set forth in the Data Sheet and,
should Tenant exercise its right to renew pursuant to Paragraph 30 hereof, the
renewal shall also include the Additional Premises.

         33. EXHIBITS. Exhibits A, A-1, B, B-1, C, D, E and F attached hereto
are hereby incorporated by reference.

         IN WITNESS WHEREOF, the parties have executed this Lease as of the date
below.

ST. PAUL PROPERTIES, INC.                     ATS MEDICAL, INC.

By:      /s/  R. William Inserra              By:     /s/  Richard W. Kramp
         -----------------------                      ---------------------
         Its:     Vice President                      Its:     President/COO
                  --------------                               -------------

         Date: May 2, 2000                            Date: April 29, 2000
               -----------                                  --------------

<PAGE>

                                    EXHIBIT A

                                    PREMISES

<PAGE>

                                   EXHIBIT A-1

                               ADDITIONAL PREMISES

<PAGE>

                                    EXHIBIT B

                              WORK LETTER AGREEMENT
                              Tenant Performs Work

         This Work Letter Agreement ("Work Letter") is dated April 29, 2000, and
forms a part of that certain Lease Agreement (the "Lease") dated April 29, 2000,
between ATS MEDICAL, INC., a Minnesota corporation ("Tenant") and ST. PAUL
PROPERTIES, INC., a Delaware corporation ("Landlord") relating to certain
premises ("Premises") as defined in the Data Sheet. Capitalized terms used
herein, unless otherwise defined in this Work Letter, shall have the respective
meanings ascribed to them in the Lease.

         For and in consideration of the agreement to lease the Premises and the
mutual covenants contained herein and in the Lease, Landlord and Tenant hereby
agree as follows:

         1.       Work.

                  (a) Tenant accepts the Premises in its "as-is" condition with
ALL FAULTS, except that Landlord agrees to construct, provide or furnish, as
applicable, those items as set forth in the attached Exhibit B-1, it being
understood and agreed that Landlord may perform the work described on said
Exhibit B-1 contemporaneously with Tenant's performance of the Work (as
hereinafter defined).

                  (b) Tenant, at its sole cost and expense, shall perform, or
cause to be performed, the work (the "Work") in the Premises provided for in the
Approved Plans (as defined in Paragraph 2 hereof). Subject to Tenant's
satisfaction of the conditions specified in this Work Letter, Tenant shall be
entitled to a disbursement of Landlord's Contribution as defined in Paragraph
8(b) below.

         2.       Pre-Construction Activities.

                  (a) On or before June 30, 2000, Tenant shall submit the
         following information and items to Landlord for Landlord's review and
         approval:

                           (i) A construction schedule containing the major
                  components of the Work, including the scheduled commencement
                  date of construction of the Work and the estimated date of
                  completion of construction.

                           (ii) An itemized statement of estimated construction
                  costs, including fees for permits and architectural and
                  engineering fees.

                           (iii) Tenant's current financial statements which
                  shall be satisfactory to Landlord, in Landlord's sole
                  discretion, and shall demonstrate that Tenant has the
                  financial capability to pay the cost of the Work as and when
                  payments become due.

                           (iv) The names and addresses of architects,
                  contractors and material suppliers of all tiers to be engaged
                  by Tenant for the Work (individually, a "Tenant Contractor,"
                  and collectively, "Tenant's Contractors"). Landlord has the
                  right to approve or disapprove all or any one or more of
                  Tenant's Contractors. Landlord may, at its election, designate
                  a list of approved contractors for performance of those
                  portions of work involving electrical, mechanical, plumbing,
                  heating, air conditioning or life safety systems, from which
                  Tenant must select its contractors for such designated
                  portions of work. Landlord hereby approves Michaud, Cooley,
                  Erickson as the architect/engineer for all architectural,
                  electrical, mechanical, HVAC and life safety systems.

                           (v) Certified copies of insurance policies or
                  certificates of insurance as hereinafter described. Tenant
                  shall not permit Tenant's Contractors to commence work until
                  the required insurance has been obtained and certified copies
                  of policies or certificates have been delivered to Landlord.

                           (vi) At Landlord's election, payment and performance
                  bonds issued by an insurance company with an A.M. Best rating
                  of at least A-,X and qualified to conduct business in the
                  State of Minnesota, for all of Tenant's Contractors naming
                  Landlord (or an agent, designee or representative appointed by
                  Landlord's written notice to Tenant given prior to Tenant's
                  procurement of paid bonds) as a dual obligee, it being
                  understood and agreed that Landlord shall not require such
                  bonds if Landlord approves the financial capacity of Tenant's
                  general contractor.
                           (vii) The Plans (as hereinafter defined) for the
                  Work, which Plans shall be subject to Landlord's approval in
                  accordance with Paragraph 2(b) below.

                  Tenant will update such information and items by notice to
Landlord of any changes.

                  (b) As used herein the term "Approved Plans" shall mean the
         Plans (as hereinafter defined), as and when approved in writing by
         Landlord. As used herein, the term "Plans" shall mean the full and
         detailed architectural and engineering plans and specifications
         covering the Work (including, without limitation, architectural,
         mechanical and electrical working drawings for the Work), which Plans
         shall include "tie-ins" to existing utility service at the Building, it
         being understood and agreed that Landlord shall not be obligated to
         provide additional utility capacity or tie-ins at other than the
         location of such utility service in the Building, except as provided in
         Exhibit B-1 attached to this Work Letter. The Plans shall be subject to
         Landlord's approval and the approval of all local governmental
         authorities requiring approval of the work and/or the Approved Plan.
         Landlord shall give its approval or disapproval (giving general reasons
         in case of disapproval) of the Plans within ten (10) working days after
         their delivery to Landlord. Landlord agrees not to unreasonably
         withhold its approval of said Plans; provided, however, that Landlord
         shall not be deemed to have acted unreasonably if it withholds its
         approval of the Plans because, in Landlord's reasonable opinion: the
         Work as shown in the Plans is likely to adversely affect Building
         systems, the structure of the Building or the safety of the Building
         and/or its occupants; the Work as shown on the Plans might impair
         Landlord's ability to furnish services to Tenant or other tenants; the
         Work would increase the cost of operating the Building; the Work would
         violate any governmental laws, rules or ordinances

                                      B-1
<PAGE>

         (or interpretations thereof); the Work contains or uses hazardous or
         toxic materials or substances; the Work would adversely affect the
         appearance of the Building; the Work might adversely affect another
         tenant's premises; the Work might, in Landlord's sole opinion,
         adversely affect Landlord's ability to re-lease the Premises; or the
         Work is prohibited by any mortgage or trust deed encumbering the
         Building. The foregoing reasons, however, shall not be exclusive of the
         reasons for which Landlord may withhold consent, whether or not such
         other reasons are similar or dissimilar to the foregoing. If Landlord
         notifies Tenant that changes are required to the final Plans submitted
         by Tenant, Tenant shall, within three (3) business days thereafter,
         submit to Landlord, for its approval, the Plans amended in accordance
         with the changes so required. The Plans shall also be revised, and the
         Work shall be changed, all at Tenant's cost and expense, to incorporate
         any work required in the Premises by any local governmental field
         inspector. Landlord's approval of the Plans shall in no way be deemed
         to be (i) an acceptance or approval of any element therein contained
         which is in violation of any applicable laws, ordinances, regulations
         or other governmental requirements, or (ii) an assurance that work done
         pursuant to the Approved Plans will comply with all applicable laws (or
         with the interpretations thereof) or satisfy Tenant's objectives and
         needs. Notwithstanding the foregoing, Landlord acknowledges that
         Landlord has been informed that Tenant intends to use the Premises as
         provided in Paragraph 3 of the Lease, and subject to the conditions of
         said Paragraph 3 and of Paragraph 24 of the Lease, Landlord hereby
         accepts and approves such use.

                  (c) No Work shall be undertaken or commenced by Tenant in the
         Premises until (i) Tenant has delivered, and Landlord has approved, all
         items shown in Paragraph 2(a) above, (ii) all necessary building
         permits and other consents and approvals have been applied for and
         obtained by Tenant, and (iii) Tenant has complied with Landlord's
         requirements pursuant to Section 2(a)(iii) above. Notwithstanding the
         foregoing, Landlord hereby agrees that Tenant may commence the portions
         of the Work for which permits have been obtained, even if Tenant has
         not then obtained permits for all of the Work. Nothing in the preceding
         sentence shall be deemed to allow Tenant to postpone the scheduled
         Commencement Date as set forth in the Data Sheet, notwithstanding that
         Tenant has not obtained permits for the Work.

         3. Delays. In the event Tenant fails to deliver in sufficient and
accurate detail the information required under Paragraph 2 above on or before
the respective dates specified in said Paragraph 2, or in the event Tenant, for
any reason, fails to complete the Work on or before the Commencement Date,
Tenant shall be responsible for Rent and all other obligations under the Lease
from and after the Commencement Date regardless of the degree of completion of
the Work on such date, and no such delay in completion of the Work shall relieve
Tenant of any of its obligations under the Lease.

         4. Supervisory Fees. Tenant shall pay Landlord a supervisory fee in an
amount equal to ten percent (10%) of the direct cost of the materials and labor
for the Work (and all change orders with respect thereto) to defray Landlord's
administrative and overhead expense incurred to review the Plans and coordinate
with Tenant's on-site project manager the staging and progress of the Work.

         5. Change Orders. All changes to the Approved Plans requested by Tenant
must be approved by Landlord in advance of the implementation of such changes as
part of the Work; provided however, that Tenant shall not be required to obtain
Landlord's consent to changes to the Approved Plans which cost less than
$15,000, unless such changes affect the structure of the Building or any one or
more of the HVAC, electrical, mechanical or plumbing systems of the Building in
which case Landlord's consent shall be required. Upon the completion of the
Work, Tenant shall deliver to Landlord a complete set of so-called "as-built"
plans. All delays caused by Tenant-initiated change orders, including, without
limitation, any stoppage of work during the change order review process, are
solely the responsibility of Tenant and shall cause no delay in the commencement
of the Lease or the Rent and other obligations therein set forth. All increases
in the cost of the Work resulting from such change orders shall be borne by
Tenant.

         6. Standards And Conditions of Tenant's Performance. All work done in
or upon the Premises by Tenant shall be done according to the standards stated
in this Paragraph 6, except as the same may be modified in the Approved Plans
approved by or on behalf of Landlord and Tenant.

                  (a) Tenant's Approved Plans and all design and construction of
         the Work shall comply with all applicable statutes, ordinances,
         regulations, laws, codes and industry standards, including, but not
         limited to, requirements of Landlord's fire insurance underwriters.

                  (b) Tenant shall, at its own cost and expense, obtain all
         required building permits, occupancy permits and other consents and
         approvals which may be required by the City of Plymouth, the State of
         Minnesota, the United States of America or any other governmental
         entity or agency with jurisdiction. Tenant's failure to obtain such
         permits shall not cause a delay in the commencement of the Term or the
         obligation to pay Rent or any other obligations under the Lease.

                  (c) Tenant's Contractors shall be licensed contractors,
         possessing good labor relations, capable of performing quality
         workmanship and working in harmony with Landlord's contractors and
         subcontractors and with other contractors and subcontractors in the
         Building, and Tenant shall take such steps as are necessary to ensure
         that there are no labor disputes or strikes during the course of the
         Work. All work shall be coordinated with any other construction or
         other work in the Building in order not to adversely affect
         construction work being performed by or for Landlord or its tenants.

                  (d) Landlord shall have the right, but not the obligation, to
         perform, on behalf of and for the account of Tenant, subject to
         reimbursement by Tenant, any work which pertains to patching of the
         Work and other work in the Building provided the same has not been
         performed by Tenant or its contractors or has been performed in a
         defective manner and Landlord has given Tenant notice of
         non-performance or defective work and such work has not been performed
         or corrected within ten (10) days after the effective date of the
         notice, except in an emergency, when no notice shall be required.

                  (e) Tenant shall use only new, first-class materials in the
         Work, except where explicitly shown in the Approved Plans. All Work
         shall be done in a good and workmanlike manner. Tenant shall obtain
         contractors' warranties in favor of both Landlord and Tenant of at
         least one (1) year duration from the completion of the Work against
         defects in workmanship and materials on all work performed and
         equipment installed in the Premises as part of the Work.

                                      B-2
<PAGE>

                  (f) Tenant and Tenant's Contractors shall make all efforts and
         take all steps appropriate to assure that all construction activities
         undertaken comport with the reasonable expectations of all tenants and
         other occupants of a fully-occupied (or substantially fully occupied)
         first-class building and do not unreasonably interfere with the
         operation of the Building or with other tenants and occupants of the
         Building. In any event, Tenant shall comply with all reasonable rules
         and regulations existing from time to time at the Building. Tenant and
         Tenant's Contractors shall take all precautionary steps to minimize
         dust, noise, odors, and construction traffic, and to protect their
         facilities and the facilities of others affected by the Work and to
         properly police same. Construction equipment and materials are to be
         kept within the Premises and delivery and loading of equipment and
         materials shall be done at such locations and at such time as Landlord
         shall direct so as not to burden the construction or operation of the
         Building. If and as required by Landlord, the Premises shall be sealed
         off from the balance of the Building so as to minimize the disbursement
         of dirt, debris and noise.

                  (g) Landlord shall have the right to order Tenant or any of
         Tenant's Contractors who violate the requirements imposed on Tenant or
         Tenant's Contractors in performing work to cease work and remove its
         equipment and employees from the Building. No such action by Landlord
         shall delay the commencement of the Lease or the obligation to pay Rent
         or any other obligations therein set forth.

                  (h) Utility costs or charges for any service to the Premises
         shall be the responsibility of Tenant from the date Tenant is obligated
         to commence or commences the Work and shall be paid for by Tenant at
         Landlord's standard rates then in effect. Tenant shall pay for all
         support services provided by Landlord's contractors at Tenant's request
         or at Landlord's discretion resulting from breaches or defaults by
         Tenant under this Work Letter. Tenant shall arrange and pay for removal
         of construction debris and shall not place debris in the Building's
         waste containers. If required by Landlord prior to the commencement of
         the Work, Tenant shall sort and separate its waste and debris for
         recycling and/or environmental law compliance purposes.

                  (i) Tenant shall permit access to the Premises, and the Work
         shall be subject to inspection by Landlord and Landlord's architects,
         engineers, contractors and other representatives, at all times during
         the period in which the Work is being constructed and installed, and
         following completion of the Work.

                  (j) Tenant shall proceed with its work expeditiously,
         continuously and efficiently, and shall complete the same on or before
         the Commencement Date, it being understood and agreed that, whether the
         Work has or has not been completed, Tenant shall commence to pay Rent
         on the Commencement Date. Tenant shall notify Landlord upon completion
         of the Work and shall furnish Landlord (and Landlord's title insurance
         company, if any) with such further documentation as may be necessary
         under Paragraph 8 below.

                  (k) Subject to the limitations in Paragraph 5 of this Work
         Letter, Tenant shall have no authority to deviate from the Approved
         Plans in performance of the Work, except as authorized by Landlord and
         its designated representative in writing. Tenant shall within thirty
         (30) days after completion of the Work furnish to Landlord "as-built"
         drawings of the Work prepared by a certified architect.

                  (l) Landlord shall have the right to run utility lines, pipes,
         conduits, duct work and component parts of all mechanical and
         electrical systems where necessary or desirable through the Premises,
         to repair, alter, replace or remove the same, and to require Tenant to
         install and maintain proper access panels thereto.

                  (m) Tenant shall impose on and enforce all applicable terms of
         this Work Letter against Tenant's architect and Tenant's Contractors.

                  7.       Insurance and Indemnification.

                  (a) In addition to any insurance which may be required under
         the Lease, Tenant shall secure, pay for and maintain or cause Tenant's
         Contractors to secure, pay for and maintain during the continuance of
         construction and fixturing work within the Building or Premises,
         insurance in the following minimum coverages and the following minimum
         limits of liability:

                           (i) Worker's Compensation and Employer's Liability
                  Insurance with limits of not less than such amounts as may be
                  required from time to time by law.

                           (ii) Comprehensive General Liability Insurance
                  (including Contractors' Protective Liability) in an amount not
                  less than $2,000,000.00 (combined single limit). Such
                  insurance shall provide for explosion and collapse, completed
                  operations coverage and broad form blanket contractual
                  liability coverage and shall insure Tenant's Contractors
                  against any and all claims for bodily injury, including death
                  resulting therefrom, and damage to the property of others and
                  arising from its operations under the contracts whether such
                  operations are performed by Tenant's Contractors or by anyone
                  directly or indirectly employed by any of them.

                           (iii) Comprehensive Automobile Liability Insurance,
                  including the ownership, maintenance and operation of any
                  automotive equipment, owned, hired, or non-owned in an amount
                  not less than $500,000.00 for each person in one accident, and
                  $1,000,000.00 for injuries sustained by two or more persons in
                  any one accident and property damage liability in an amount
                  not less than $1,000,000.00 for each accident. Such insurance
                  shall insure Tenant's Contractors against any and all claims
                  for bodily injury, including death resulting therefrom, and
                  damage to the property of others arising from its operations
                  under the contracts, whether such operations are performed by
                  Tenant's Contractors, or by anyone directly or indirectly
                  employed by any of them.

                           (iv) "All-risk" builder's risk insurance upon the
                  entire Work to the full insurable value thereof. This
                  insurance shall include the interests of Landlord and Tenant
                  (and their respective contractors and subcontractors of any
                  tier to the extent of any insurable interest therein) in the
                  Work and shall insure against the perils of fire and extended
                  coverage and shall include "all-risk" builder's risk insurance
                  for physical loss or damage including, without duplication

                                      B-3
<PAGE>

                  of coverage, theft, vandalism and malicious mischief. If
                  portions of the Work stored off the site of the Building or in
                  transit to said site are not covered under said "all-risk"
                  builder's risk insurance, then Tenant shall effect and
                  maintain similar property insurance on such portions of the
                  Work. Any loss insured under said "all-risk" builder's risk
                  insurance shall be adjusted between Landlord and Tenant and
                  made payable to Landlord, as trustee for the insureds, as
                  their interests may appear.

                  All policies (except the worker's compensation policy) shall
                  be endorsed to include as additional insured parties the
                  parties listed on, or required by, the Lease, Landlord's
                  contractors, Landlord's architects, and their respective
                  beneficiaries, partners, directors, officers, employees and
                  agents, and such additional persons as Landlord may designate.
                  The waiver of subrogation provisions contained in the Lease
                  shall apply to all insurance policies (except the worker's
                  compensation policy) to be obtained by Tenant pursuant to this
                  paragraph. The insurance policy endorsements shall also
                  provide that all additional insured parties shall be given
                  thirty (30) days' prior written notice of any reduction,
                  cancellation or non-renewal of coverage and shall provide that
                  the insurance coverage afforded to the additional insured
                  parties thereunder shall be primary to any insurance carried
                  independently by said additional insured parties.
                  Additionally, where applicable, each policy shall contain a
                  cross-liability and severability of interest clause.

                  (b) Without limitation of the indemnification provisions
         contained in the Lease, to the fullest extent permitted by law Tenant
         agrees to indemnify, protect, defend and hold harmless Landlord, the
         parties listed, or required by, the Lease to be named as additional
         insureds, Landlord's contractors, Landlord's architects, and their
         respective beneficiaries, partners, directors, trustees, officers,
         employees and agents, from and against all claims, liabilities, losses,
         damages and expenses of whatever nature arising out of or in connection
         with the Work or the entry of Tenant or Tenant's Contractors into the
         Building and the Premises, without limitation, mechanic's liens, the
         cost of any repairs to the Premises or Building necessitated by
         activities of Tenant or Tenant's Contractors, bodily injury to persons
         or damage to the property of Tenant, its employees, agents, invitees,
         licensees or others. It is understood and agreed that the foregoing
         indemnity shall be in addition to the insurance requirements described
         above and shall not be in discharge of or in substitution for same or
         any other indemnity or insurance provision of the Lease.

         8.       Landlord's Contribution: Excess Amounts.

                  (a) Upon completion of the Work, Tenant shall furnish Landlord
         with full and final waivers of liens and contractors' and architects'
         affidavits and statements, in such form as may be required by Landlord,
         Landlord's title insurance company and Landlord's construction or
         permanent lender, if any, from all parties performing labor or
         supplying materials or services in connection with the Work showing
         that all of said parties have been compensated in full and waiving all
         liens in connection with the Premises and Building. Tenant shall submit
         to Landlord a detailed breakdown of Tenant's total construction costs,
         together with such evidence of payment as is satisfactory to Landlord.

                  (b) Upon completion of the Work and Tenant's satisfaction of
         all requirements of this Work Letter, Landlord shall make a dollar
         contribution in the amount of $0.00 ("Landlord's Contribution") for
         application to the extent thereof to the cost of the Work. If the cost
         of the Work exceeds Landlord's Contribution, Tenant shall have sole
         responsibility for the payment of such excess cost. If the cost of the
         Work is less than Landlord's Contribution, Landlord shall be entitled
         to any payment or credit for such excess amount. Notwithstanding
         anything herein to the contrary, Landlord may deduct from Landlord's
         Contribution any amounts due to Landlord or its architects or engineers
         pursuant to this Work Letter before disbursing any other portion of
         Landlord's Contribution.

         9. On-Site Project Manager. As a condition of Tenant's right to
commence and perform the Work, Tenant shall engage the services of an on-site
project manager approved in advance by and reasonably acceptable to Landlord,
who will be charged with the task of performing daily supervision of the Work.
Such on-site manager shall be familiar with all rules and regulations and
procedures of the Building and all personnel of the Building engaged directly or
indirectly in the management, operation and construction of the Building. Such
on-site project manager shall be accountable and responsible to Tenant and to
Landlord and, where necessary, shall serve as a liaison between Landlord and
Tenant with respect to the Work. The entire cost and expense of the on-site
project manager shall be borne and paid for by Tenant (subject to Tenant's right
to use all or any part of Landlord's Contribution to reimburse Tenant for the
same.) Landlord hereby accepts the on-site project manager appointed by Michaud
Cooley Erickson and agrees to provide the name, address and telephone number of
such person prior to the commencement of the Work.

         10.      Miscellaneous.

                  (a) Time is of the essence of this Work Letter Agreement.

                  (b) If Tenant fails to make any payment relating to the Work
         as required hereunder, Landlord, at its option, may complete the Work
         pursuant to the Approved Plans and continue to hold Tenant liable for
         the costs thereof and all other costs due to Landlord. Tenant's failure
         to pay any amounts owed by Tenant hereunder when due or Tenant's
         failure to perform its obligations hereunder shall also constitute a
         default under the Lease and Landlord shall have all the rights and
         remedies granted to Landlord under the Lease for nonpayment of any
         amounts owed thereunder or failure by Tenant to perform its obligations
         thereunder.

                  (c) Notices under this Work Letter shall be given in the same
         manner as under the Lease.

                  (d) The headings in this Work Letter are for convenience only.

                  (e) This Work Letter sets forth the entire agreement of Tenant
         and Landlord regarding the Work. This Work Letter may only be amended
         if in writing, duly executed by both Landlord and Tenant.

                  (f) All amounts due from Tenant hereunder shall be deemed to
         be Rent due under the Lease.

                                      B-4
<PAGE>

         11. Limitation of Landlord's Liability. If Landlord is ever adjudged by
any court to be liable to Tenant, Tenant specifically agrees to look solely to
Landlord's interest in the Phase for the recovery of any judgment from Landlord,
it being agreed that none of Landlord, its directors, officers, shareholders,
managing agents, employees or agents shall be personally liable for any such
judgment. In no event shall Landlord ever be liable to Tenant, Tenant's agents,
servants or employees, or to any person or entity claiming by or through Tenant,
for any consequential, indirect, special or similar types of damages.

         12. Lease Provisions. The terms and provisions of the Lease are hereby
amended and supplemented. In the event of any conflict between the provisions of
the Lease and the provisions of this Work Letter, the provisions of this Work
Letter shall control. All amounts payable by Tenant to Landlord under this Work
Letter shall be deemed to be Additional Rent under the Lease and, upon any
default in the payment of same, Landlord shall have all of the rights and
remedies provided for in the Lease. The pursuit of any remedies by Tenant in
connection with any breach by Landlord of its obligations under this Work Letter
shall be subject to the provisions of Paragraph 11 hereof and subject to any
other limitations stated in the Lease.

         IN WITNESS WHEREOF, this Work Letter Agreement is executed as of the
date first written above.

ST. PAUL PROPERTIES, INC.                ATS MEDICAL, INC.

By:      /s/  R. William Inserra         By:      /s/  Richard W. Kramp
         -----------------------                  ---------------------
         Its:     Vice President                  Its:     President/COO
                  --------------                           -------------

                                      B-5
<PAGE>

                                   EXHIBIT B-1

                                 LANDLORD'S WORK

1.       Demise Premises as shown on Exhibit A to the Lease, including replacing
         internal passage doors with demising wall material.

2.       Separate utilities serving Premises such that utilities serve only the
         Premises.

3.       Separate HVAC systems serving the Premises such that HVAC system serves
         only the Premises.

4.       Provide an additional 1000 AMPS/480 Volt power to the rear interior of
         the Premises.

<PAGE>

                                    EXHIBIT C

                            RULES AND REGULATIONS FOR
                            PLYMOUTH BUSINESS CENTER

         1. The sidewalks, passages and stairways, if any, shall not be
obstructed by Tenant or used for any purpose other than for ingress to and
egress from the Premises. The passages, entrances, stairways, if any, balconies,
if any, and roof are not for the use of the general public, and Landlord shall
in all cases retain the right to control and prevent access thereto of all
persons whose presence in the judgment of Landlord shall be prejudicial to the
safety, character, reputation and interests to the Building and its tenants;
provided that nothing herein contained shall be construed to prevent such access
to person with whom Tenant normally deals in the ordinary course of its business
unless such persons are engaged in illegal activities. Tenant and its employees
shall not go upon the roof of the Building without the written consent of the
Landlord.

         2. The sashes, sash doors, windows, glass lights and any lights or
skylights that reflect or admit light into halls, from the building exterior or
other places into the building shall not be covered or obstructed. Any curtains,
blinds, shades, or screens attached or hung to any of the prior mentioned areas
must have prior approval of Landlord. Landlord will provide standard window
coverings on exterior windows and other glass if appropriate and Landlord
reserves the right to regulate position of such coverings.

         3. In case of invasion, riot, public excitement or other commotion,
Landlord reserves the right to prevent access to the Building during the
continuance of same. Landlord shall in no case be liable for damages for the
admission or exclusion of any person to or from the Building. Landlord has the
right to evacuate the Building in the event of an emergency or catastrophe.

         4. Two door keys for doors to leased premises shall be furnished at the
commencement of a lease by Landlord. All duplicate keys shall be purchased only
from the Landlord. One security card per each of Tenant's employees so
authorized by Tenant will be issued for all approved personnel to permit
after-hour access, and Landlord reserves the right to assess a fee to Tenant for
the replacement of lost keys or cards. Tenant shall not alter any lock, or
install new or additional locks or bolts, on any door without the prior written
approval of Landlord. In the event such alteration or installation is approved
by Landlord, Tenant shall supply Landlord with a key for any such lock or bolt.
Tenant, upon the termination of the tenancy, shall deliver to Landlord all the
keys, locks, bolts, cabinets, safes or vaults, or the means of opening any
lockable device and security cards of offices, rooms and toilet rooms which
shall have been furnished Tenant or which Tenant shall have had made, and in the
event of loss of any keys or security cards so furnished shall pay the Landlord
therefor.

         5. All deliveries, including intra-company deliveries, must be made via
service entrances. Tenant agrees to adhere to floor loading maximum levels as
stated by Landlord. All damage done to the Building by the delivery or removal
of such items, or by reason of their presence in the Building, shall be paid to
Landlord upon demand by Tenant and shall constitute Additional Rent under the
Lease.
         6. Parking area and parking policies will be established by Landlord,
and Tenant agrees to adhere to said policies. UPON A COMPLAINT BY TENANT AND
OTHER TENANTS OF THE BUILDING AND AT ANY OTHER TIME, Landlord reserves the right
to IMPLEMENT AND institute new parking policies as they are determined to
benefit overall Building operations. Tenant agrees to leave no cars, vans or
other vehicles overnight or over any weekend in any parking area. Tenant further
agrees that its employees will not park in the visitor parking areas at any
time.

         7. If Tenant desires signal, communication, alarm or other utility or
service connection installed or changed, the same shall be made at the expense
of Tenant, with approval and under direction of Landlord, it being understood
and agreed that (a) no audible alarm shall be installed unless specifically
approved in writing by Landlord prior to installation; and (b) only Tenant shall
be obligated to respond to such signal, communication, alarm or other utility or
service connection, and none of Landlord, Landlord's Managing Agent or other
employee, agent or contractor of Landlord shall, under any circumstances have
any obligation to Tenant or others to respond to such alarm or be liable to
Tenant or any party claiming by or through Tenant for any failure to do so. Any
installations, and the boring or cutting for wires, shall be made at the sole
cost and expense of Tenant and under control and direction of Landlord. Landlord
retains in all cases the right to require (x) the installation and use of such
electrical-protecting devices that prevents the transmission of excessive
current or electricity into or transmission of excessive current or electricity
into or through the Building (y) the changing of wires and of their installation
and arrangement underground or otherwise as Landlord may direct, and (z)
compliance on the part of all using or seeking access to such wires with such
rules as Landlord may establish relating thereto. All such wires used by Tenant
must be clearly tagged at the distribution boards and junction box and elsewhere
in the Building, with (h) the number of the Premises to which said wires lead,
(i) the purpose for which said wires are used and (j) the name of the company
operating same.

         Tenant agrees to instruct all approved communication, and computer and
other cabling installers to attach cable in wire hangers from the deck or in any
designated building floor or ceiling system cable location. Tenant will not
allow installers to lay any cabling on top of the suspended layer ceiling
system.

         8. Tenant shall give Landlord prompt notice of all accidents to or
defects in air conditioning equipment, plumbing, electrical facilities or any
part of appurtenances of the Premises.

         9. Tenant assumes full responsibility for protecting its space from
theft, robbery, and pilferage, which includes keeping doors locked and other
means of entry to the space closed and secured. Landlord shall be in no way
responsible to Tenant, its agents, employees, licensees, contractors or invitees
for any loss of property from the Premises or public areas or for any damages to
any property thereon from any cause whatsoever.

         10. Tenant shall not install or operate machinery or any mechanical
devices of a nature not directly related to Tenant's ordinary use of the
Premises without the prior written permission of the Landlord. Tenant shall not
place in or move about the Premises any safe or other heavy article which, in
Landlord's reasonable opinion may damage the Premises (including the slab) or
overload the floor

                                      C-1
<PAGE>

of the Premises, shall not mark on or drive nails, screw or drill into the
partitions, woodwork or plaster (except as may be incidental to the hanging of
wall decorations) and shall not in any way deface the Premises or any part
thereof.

         11. No person or contractor not employed by Landlord shall be used to
perform window washing, decorating, repair or other work in the leased Premises
without the express written consent of Landlord.

         12. The directories of the Building shall be used exclusively for the
display of the name and location only of the tenants of the Building, including
Tenant, and will be provided at the expense of Landlord. Any additional names
requested by Tenant to be displayed in the directories must be approved by
Landlord and, if approved, will be provided at the sole expense of Tenant.

         13. Tenant shall not and shall ensure that its agents, servants,
employees, licensees, contractors or invitees shall not:

         (a)      enter into or upon the roof of the Building or any storage,
                  electrical or telephone closet, or heating, ventilation,
                  air-conditioning, mechanical or elevator machinery housing
                  areas;

         (b)      use any additional method of heating or air conditioning the
                  Premises, including, without limitation, space heaters of any
                  kind or nature;

         (c)      sweep or throw any dirt or other substance into ANY
                  passageway, sidewalk or parking area;

         (d)      bring in or keep in or about the Premises any firearms,
                  vehicles, bicycles, motorcycles or animals of any kind;

         (e)      deposit any trash, refuse or other substance of any kind
                  within or out of the Building, except in the refuse containers
                  provided therefor;

         (f)      permit the operation of any device that may produce an odor,
                  cause music, vibrations of air waves to be heard or felt
                  outside the Premises, or which may emit electrical waves that
                  shall impair radio, television or any other form of
                  communication system; or

         (g)      permit the carrying of a lighted cigar, cigarette, pipe or any
                  other lighted smoking equipment or permit smoking of
                  cigarettes, cigars or pipes (i) in the common areas of the
                  Building, including, without limitation, restrooms, except
                  common areas which have been designated by Landlord in writing
                  as smoking areas; or (ii) within ten (10) yards of any door
                  leading into the Building or any building comprising a part
                  thereof.

         14. Tenant will not install any radio or television antennas or
receptor dish or any device on the roof or grounds without the prior written
approval of Landlord. Tenant understands that rentals are charged for roof space
in the event any roof installation is approved in writing by Landlord. Landlord
reserves the right to require removal of any approved installed device in the
event it is necessary to do so in Landlord's opinion.

         15. No sign, light, name placard, poster advertisement or notice
visible from the exterior of any demised premises, shall be placed, inscribed,
painted or affixed by Tenant on any part of the Building without the prior
written approval of Landlord. All signs or letterings on doors, or otherwise,
approved by Landlord shall be inscribed, painted or affixed at the sole cost and
expense of Tenant, by a person approved by Landlord.

         16. The toilet-rooms, toilet, urinals, wash bowls and water apparatus
shall not be used for any purpose other than those for which they were
constructed or installed, and no sweeping, rubbish, chemicals or other
unsuitable substances shall be thrown or placed therein. Tenant shall bear the
expense of repairing and cleaning up any breakage, stoppage or damage resulting
from violation(s) of this rule by Tenant or its agents, servants, employees,
invitees, licensees or visitors.

         17. Tenant must have Landlord's prior written consent before using the
name of the Building and/or pictures of the Building in advertising or other
publicity.

         18. Tenant shall not make any room-to-room canvass to solicit business
from other tenants in the Building, and shall not exhibit, sell or offer to
sell, use, rent or exchange in or from the Premises unless ordinarily embraced
within Tenant's use of the Premises specified herein.

         19. Tenant shall not do any cooking in the Premises, except that Tenant
may install a microwave oven and coffee makers for the use of its employees in
the Premises. Under no circumstances shall Tenant install or use any hot plates.

         20. No portion of Tenant's area or any other part of the Building shall
at any time be used or occupied as sleeping or lodging quarters.

         21. Landlord has the right to enact trash removal and trash recycling
rules and regulations as necessary to control trash removal costs or as required
by the laws of the State of Minnesota and/or the United States of America.
Tenant agrees to adhere to such trash removal regulations and to any and all
modifications thereof issued by Landlord from time to time.

         22. Tenant will refer all contractors, contractors' representatives and
installation technicians rendering any service to Tenant to Landlord for
Landlord's supervision, approval and control before performance of any
contractual service. This provision shall apply to any work performed in the
Building including installations of telephones, telegraph equipment, electrical
devices and attachments and installations of any nature affecting floors, walls,
woodwork, trim, windows, ceilings, equipment or any other physical portion of
the Building.

         23. Tenant shall not permit picketing or other union activity involving
its employees in the Building except in those locations and subject to time and
other limitations as to which Landlord may give prior written consent.

                                      C-2
<PAGE>

         24. Tenant shall not conduct, or permit to be conducted on or from the
Premises, any auction of Tenant's personal property, any liquidation sale, any
going-out-of-business sale or other similar activity.

         25. Landlord reserves the right to rescind, make reasonable amendments,
modifications and additions to the rules and regulations heretofore set forth,
and to make additional reasonable rules and regulations, as in Landlord's sole
judgment may from time-to-time be needed for the safety, care, cleanliness and
preservation of good order of the Building. Landlord shall not be responsible
for any violation of the foregoing rules and regulations by other tenants of the
Building and shall have no obligation to enforce the same against other tenants.

                                      C-3
<PAGE>

                                    EXHIBIT D

                            PLYMOUTH BUSINESS CENTER
                                Signage Criteria
                                  Phase I - III

                There is a uniform sign policy. It is as follows:

                               FRONT ENTRANCE DOOR

                        White Vinyl Applied Letters Only
                                "2 Maximum Height
                                Helvetica Letters
                             Two or Three Lines Only
                       Logos, Script, or Color Variations

                               REAR OVERHEAD DOOR

                        Black Vinyl Applied Letters Only
                                6" Maximum Height
                                Helvetica Letters
                              One or Two Lines Only
                      No Logos, Script, or Color Variations

                         REAR ENTRANCE/HOLLOW METAL DOOR

                        Black Vinyl Applied Letters Only
                                2# Maximum Height
                                Helvetica Letters
                             Two or Three Lines Only
                      No Logos, Script, or Color Variations

                               FRONT OVERHEAD SIGN

               Freeway Exposure (mounted below wallpack lighting)
                     4' x 8' Black Acrylic Background Panel
                             White or Gray Copy Only
                           Logo Reproduction Permitted

            Non-Freeway Exposure (mounted adjacent to entrance door)
                   2.5' x 3.5' Black Acrylic Background Panel
                             White or Gray copy Only
                           Logo Reproduction Permitted

                                      NOTE:

           Signage must meet Landlord approval prior to installation.
           Signage contractor must obtain permit from City if required

                                                                      July, 1998
<PAGE>

                                    EXHIBIT E

                            COMMENCEMENT CONFIRMATION

                                     [Date]

Tenant Name:               ATS Medical, Inc.

Building Address: Suite 175, 3800 Annapolis Lane North
                            Plymouth, Minnesota 55447

ATS Medical, Inc. hereby confirms to St. Paul Properties, Inc. that the
following are the respective dates required to be specified with regard to the
Data Sheet of that certain lease dated April _____, 2000, between ATS Medical,
Inc., as tenant, and St. Paul Properties, Inc., as landlord, for the Premises
described therein.

Commencement Date: _________________________

Expiration Date: _________________________

ST. PAUL PROPERTIES, INC.                     ATS MEDICAL, INC.

By:      ________________________             By:      ________________________
         Its:     _______________                      Its:     _______________

Dated:   ________________________             Dated:   ________________________
 .

                                                                      July, 1998
                                                              Revised July, 1998

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