Document:

<PAGE>

                                                                   Exhibit 10.31

                            [AUGUST TECHNOLOGY LOGO]

                                    OVERVIEW
                                AUGUST TECHNOLOGY
                           ANNUAL INCENTIVE PLAN (AIP)
                       EFFECTIVE FOR THE FISCAL YEAR 2002

PURPOSE OF THE PLAN

August Technology's Annual Incentive Plan (AIP) is established to provide a
bonus to participants who meet annual corporate performance goals.

ELIGIBILITY FOR PLAN

-     The CEO will propose the eligible participants prior to the beginning of
      each calendar year. The Plan is generally intended for Officers, Vice
      Presidents, CTO, Chief Engineer, Directors and managers, as well as any
      other key employees such as key technical personnel.

-     The Compensation Committee will review and approve the listing provided by
      the CEO at the beginning of the Plan year, subject to final approval by
      the Board of Directors.

-     Participant must be employed at the end of the plan year to receive their
      respective bonus.

-     Provisions are included in the plan to cover issues of death or
      disability.

DETERMINATION OF THE AWARD

The Bonus will be calculated based upon two measures: (1) satisfaction of the
operating margin target; and (2) satisfaction of the revenue target, as
determined by the plan matrix (shown below).

         The Bonus is calculated based on the following Plan Matrix:

<TABLE>
<CAPTION>
                                                  Revenue (millions)
         ------------------------------------------------------------------------------------
         Operating      >$32.5     $34.6     $36.5      $38.4     $40.3     $42.2       $44.1
         Margin.
         ------------------------------------------------------------------------------------
<S>                     <C>        <C>       <C>        <C>       <C>       <C>         <C>
         >4.7%          55%        65%       75%        80%       85%       90%         92.5%
         ------------------------------------------------------------------------------------
         5.2%           60%        70%       80%        85%       90%       95%         97.5%
         ------------------------------------------------------------------------------------
         5.7 %          65%        75%       85%        100%      110%      120%        130%
         ------------------------------------------------------------------------------------
         6.2%           70%        80%       90%        105%      115%      125%        135%
         ------------------------------------------------------------------------------------
         6.7%           75%        85%       95%        110%      120%      130%        140%
         ------------------------------------------------------------------------------------
         7.1%           77.5%      92.5%     97.5%      115%      125%      135%        145%
         ------------------------------------------------------------------------------------
</TABLE>

         The participant will receive a percent of the target bonus based upon
         the satisfaction of the revenue and operating margin targets as set
         forth in the Plan Matrix. There is no interpolation between the points
         on the Plan Matrix (i.e., each is defined as a distinct achievement).

                                                                          Page 1
<PAGE>
If the Company does not achieve the minimum performance levels to participate in
the above bonus structure:

      1)    AND its revenue growth rate is equal to or greater than the
            Worldwide Semiconductor Capital Equipment annual revenue growth rate
            for 2002, as reported by DATAQUEST,

      2)    AND the company generates positive EBITDA;

then the following Alternative Matrix will be used to determine the
Participant's Bonus.

<TABLE>
<CAPTION>
                           -----------------------
                           Percentage        % of
                           Points Above      Target
                           Industry          Bonus
                           -----------------------
<S>                                          <C>
                           0 to 5 pts.       22.5%
                           -----------------------
                           6 to 10 pts       25%
                           -----------------------
                           11 to 15 pts      27.5%
                           -----------------------
                           16 to 20 pts      30%
                           -----------------------
                           21 to 25 pts      32.5%
                           -----------------------
                           >25 pts.          35%
                           -----------------------
</TABLE>

PAYMENT OF AWARD

-     Participant's Bonus will be equal to XX % of their annual base salary as
      defined above by the Plan Matrix or the Alternative Matrix . Subject to
      Board of Director approval, August Technology may propose an early partial
      payment ("Partial Bonus") of Participant's bonus equal to 30% of the
      Participant's Bonus, and where such Partial Bonus is paid, the Participant
      shall only be entitled to the Remaining Bonus defined as the remaining 70%
      of Participant's Bonus. Each participant will have the option to receive
      the Bonus in the following manner (and where a Partial Bonus and thus
      Remaining Bonus are paid, each shall calculated pro-rata):

            (1)   100% stock options*

            (2)   50% cash and 50% stock options**

            (3)   Any participant with 5% or greater ownership, at December 31,
                  2002, will be awarded 100% cash

These stock options are fully vested at the time of grant. All stock option
grants are subject to Board of Director approval. Should the Board of Directors
decide not to grant the options, participants will receive 100% Cash.

*For 100% Incentive Stock Options, the number of Incentive Stock Options to be
granted is calculated by dividing the total dollar value of the bonus by the
closing stock price as of February 28, 2003 (or October 15, 2002 for the Partial
Bonus, if any), and then multiplying by three.

**The number of Incentive Stock Options to be granted, is calculated by dividing
50% of the total bonus by the closing stock price as of February 28, 2003 (or
October 15, 2002 for the Partial Bonus, if any), and then multiplying by three.

VALUATION OF STOCK OPTIONS AWARDED

-     Valuation will be based on the closing stock price on February 28, 2003
      (or October 15, 2002 for the Partial Bonus, if any).

TAX AND CASH FLOW CONSIDERATION

-     Bonus or Remaining Bonus awards will be paid not later than 2 -1/2 months
      after the close of August Technology's fiscal year, except for the Partial
      Bonus which will be paid later than October 30, 2002.

                                                                          Page 2
<PAGE>
CHANGE IN CONTROL  (FOR CEO/PRESIDENT, OFFICERS, CTO, CHIEF ENGINEER AND VP'S)

-     If >50% of the Company is sold during the year, and the participant is
      negatively impacted by the change of control as outlined below, then all
      Bonuses will be paid in full at 100% of target at the date of the change
      of control. Negative impacts include:

      -     Termination of employment

      -     Participant's status within the Company is adversely changed

      -     Or, the participant's salary is substantially reduced.

TIER STRUCTURE FOR ANNUAL INCENTIVE PLAN (AIP) PARTICIPANTS:

<TABLE>
<CAPTION>
        --------------------------------------------------------------------------------------------------
                              % OF         COMPONENTS OF
              TIER            BASE       ANNUAL INCENTIVE           SELECTIONS           CHANGE OF CONTROL
                             SALARY          PLAN (AIP)              AVAILABLE              PROVISION?
        --------------------------------------------------------------------------------------------------
<S>                          <C>         <C>                    <C>                      <C>
              CEO
          (co-founder)         90%        100% Corporate             100% Cash                 Yes
        --------------------------------------------------------------------------------------------------
            Officers           80%        100% Corporate        50%Cash/Options or             Yes
                                                                    100% Options
        --------------------------------------------------------------------------------------------------
              VP's             70%        100% Corporate        50%Cash/Options or             Yes
                                                                    100% Options
        --------------------------------------------------------------------------------------------------
        CTO, Chief Engr.       50%        100% Corporate             100% Cash                 Yes
         (co-founders)
        --------------------------------------------------------------------------------------------------
           Directors           35%        100% Corporate        50%Cash/Options or             No
                                                                    100% Options
        --------------------------------------------------------------------------------------------------
            Managers           20%        100% Corporate        50% Cash/Options or            No
                                                                    100% Options
        --------------------------------------------------------------------------------------------------
</TABLE>

                                                                          Page 3<PAGE>

                                                                   Exhibit 10.32

                       THIRD AMENDMENT TO LEASE AGREEMENT

           THIS THIRD AMENDMENT TO LEASE AGREEMENT (this "THIRD AMENDMENT") is
made as of the 18th day of June, 2001 by and between WEST 78TH STREET
BLOOMINGTON ASSOCIATES, LLC ("LANDLORD") and AUGUST TECHNOLOGY CORPORATION
("TENANT").

                                R E C I T A L S:

           A. Landlord and Tenant entered into that certain Lease Agreement
dated October 18, 1999 (the "ORIGINAL LEASE") as amended by that certain First
Amendment to Lease Agreement dated March 31, 2000 (the "FIRST AMENDMENT") and
that certain Second Amendment to Lease Agreement dated July 25, 2000 (the
"SECOND AMENDMENT"; the Original Lease as amended by the First Amendment and the
Second Amendment is referred to herein as the "LEASE") demising approximately
62,843 square feet of space comprised of the "Initial Premises," the "First
Expansion Premises" and the "Second Expansion Premises" (collectively, the
"EXISTING PREMISES") in the building located at 4900 W. 78th Street in
Bloomington, Minnesota.

           B. Landlord and Tenant desire to expand the Existing Premises, extend
the term of the Lease and make certain changes to the Lease as provided herein.

           NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration the receipt and sufficiency of
which are hereby acknowledged, Landlord and Tenant hereby amend the Lease as
follows:

           1. TERM. Section 2 of the Original Lease is hereby modified to change
the Lease expiration date from January 31, 2005 to April 30, 2006 (hereinafter,
the "EXPIRATION DATE").

           2. MONTHLY BASE RENT. Effective as of September 30, 2000, Section 3
of the Original Lease is hereby deleted in its entirety and the following
Section 3 is substituted therefor:

MONTHLY BASE RENT: Monthly Base Rent for the Existing Premises shall be as
follows:1

                                  INITIAL TERM:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
        DATE            ANNUAL BASE RENT PER      SQUARE FEET      ANNUAL BASE RENT FOR
                             SQUARE FOOT                            EXISTING PREMISES
----------------------------------------------------------------------------------------
<S>                     <C>                       <C>              <C>
  10/l/00 - 4/30/02             $7.45                62,843            $468,180.35
----------------------------------------------------------------------------------------
  5/l/02 - 4/30/03              $7.94                62,843            $498,973.42
----------------------------------------------------------------------------------------
  5/1/03 - 4/30/04              $7.94                62,843            $498,973.42
----------------------------------------------------------------------------------------
  5/l/04 - 4/30/05              $8.59                62,843            $539,821.37
----------------------------------------------------------------------------------------
  5/l/05 - 4/30/06              $8.59                62,843            $539,821.37
----------------------------------------------------------------------------------------
</TABLE>

------------------------
(1) BASE RENT FOR THE THIRD EXPANSION PREMISES AND THE FOURTH EXPANSION PREMISES
ARE SET FORTH IN SECTIONS 3 AND 4 BELOW.
<PAGE>
                                  RENEWAL TERM:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
         DATE           ANNUAL BASE RENT PER     SQUARE FEET     ANNUAL BASE RENT
                             SQUARE FOOT                           FOR EXISTING
                                                                     PREMISES
---------------------------------------------------------------------------------
<S>                     <C>                      <C>             <C>
  5/1/06 - 4/30/07             $8.19               62,843           $514,684.17
---------------------------------------------------------------------------------
  5/l/07 - 4/30/08             $8.48               62,843           $532,908.64
---------------------------------------------------------------------------------
  5/1/08 - 4/30/09             $8.48               62,843           $532,908.64
---------------------------------------------------------------------------------
</TABLE>

      3. THIRD EXPANSION PREMISES. Tenant has notified Landlord of Tenant's
desire to lease the Third Expansion Premises as defined in Section 1B of the
Original Lease, and Landlord has agreed to lease the Third Expansion Premises to
Tenant on all of the terms, conditions and obligations contained in the Lease,
with the following modifications:

       (a)    Sections 1B(i) and (ii) of the Original Lease are deleted in their
              entirety. The Lease Term for the Third Expansion Premises shall
              commence on March 1, 2002 (the "THIRD EXPANSION PREMISES
              COMMENCEMENT DATE"), and shall continue until the Expiration Date.

       (b)    Landlord shall deliver possession of the Third Expansion Premises
              to Tenant, broom clean and free of all tenants, subtenants, and
              other occupants, on or before November 1, 2001. Prior to delivery
              of possession, Landlord shall, at Landlord's sole cost and
              expense: (i) timely fulfill all of Landlord's obligations set
              forth in Section 9(c) below (relating to replacement of the HVAC
              systems serving the Premises including the Third Expansion
              Premises) and Section 9(d) below (relating to replacement of the
              roof of the Building); and (ii) remove, at Landlord's expense, all
              work or improvements associated with the current occupant of the
              Third Expansion Premises (as well as any subsequent occupant of
              the Third Expansion Premises prior to Landlord's delivery of the
              same to Tenant) and fill, patch and repair all holes in the floor
              of the area occupied or utilized by such current tenant or any
              subsequent tenant prior to the date possession of the Third
              Expansion Premises is tendered to Tenant (however, Landlord shall
              not be required to fill and patch holes in the floor if Tenant
              notifies Landlord of its intention to remove the current flooring
              from the Third Expansion Premises as part of its improvement
              work). From and after the date that Landlord delivers the Third
              Expansion Premises to Tenant, the provisions of Section 11 of the
              Original Lease setting forth Tenant's insurance requirements with
              respect to the Existing Premises shall be applicable to the Third
              Expansion Premises. Landlord shall not be deemed to have delivered
              possession of the Third Expansion Premises to Tenant until it has
              provided evidence, reasonably acceptable to Tenant, that it has
              complied with the foregoing. None of Landlord's expenses or costs
              incurred in complying with the foregoing shall be charged to
              Tenant, either directly or as part of Operating Costs.

       (c)    Section 16D of the Original Lease is hereby deleted in its
              entirety. The Third Expansion Commencement Date shall be delayed
              one day for each day after December 1, 2001 that Landlord delivers
              possession of the Third Expansion Premises to Tenant in the
              condition as set forth above. In addition, and without limitation
              of the foregoing, if, except for Excused Delays, the Third
              Expansion

                                       2
<PAGE>
              Premises have not been delivered to Tenant in the condition
              required hereunder by January 1, 2002 and such failure to deliver
              the Third Expansion Premises in fact delays Tenant's occupancy of
              the Third Expansion Premises, then, Tenant shall be entitled to
              Third Expansion Rent Abatement (as hereinafter defined), which
              Third Expansion Rent Abatement shall be applied against the first
              installment(s) of Base Rent due and owing with respect to the
              Third Expansion Premises until the same is fully utilized. For
              purposes hereof, the term "THIRD EXPANSION RENT ABATEMENT" shall
              mean, in the aggregate, (i) one day of Base Rent abatement at the
              then applicable rate for each day that the Third Expansion
              Delivery Date (as hereinafter defined) is delayed beyond January
              1, 2002 and up to February 1, 2002, (ii) one and one-half days of
              Base Rent abatement at the then applicable rate for each day that
              the Third Expansion Delivery Date is delayed beyond February 1,
              2002 and up to March 1, 2002 and (iii) two days of Base Rent
              abatement at the then applicable rate for each day that the Third
              Expansion Delivery Date is delayed beyond March 1, 2002. For
              purposes hereof, the term "THIRD EXPANSION DELIVERY DATE" shall
              mean the date that Landlord delivers the Third Expansion Premises
              to Tenant in the condition required under the Lease as amended by
              this Third Amendment.

       (d)    Tenant shall pay Base Rent for the Third Expansion Premises,
              commencing on the Third Expansion Premises Commencement Date, in
              the following amounts:

                                  INITIAL TERM:

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
       DATE            ANNUAL BASE RENT     SQUARE FEET        ANNUAL BASE RENT
                        PER SQUARE FOOT                          FOR THIRD
                                                             EXPANSION PREMISES
---------------------------------------------------------------------------------
<S>                    <C>                  <C>              <C>
  3/l/02 - 4/30/02          $7.50            15,594              $116,955.00
---------------------------------------------------------------------------------
  5/l/02 - 4/30/03          $7.50            15,594              $116,955.00
---------------------------------------------------------------------------------
  5/1/03 - 4/30/04          $7.50            15,594              $116,955.00
---------------------------------------------------------------------------------
  5/l/04 - 4/30/05          $8.00            15,594              $124,752.00
---------------------------------------------------------------------------------
  5/l/05 - 4/30/06          $8.00            15,594              $124,752.00
---------------------------------------------------------------------------------
</TABLE>

Notwithstanding the foregoing or anything contained in the Lease or this Third
Amendment to the contrary, if for any reason Tenant does not take occupancy of
the Third Expansion Premises (i.e. does not take possession for purposes of
conducting business therefrom) by the Third Expansion Premises Commencement
Date, Tenant shall be entitled to a credit against monthly Base Rent for the
Third Expansion Premises in an amount equal to $4,873.13 for the period
commencing on the Third Expansion Premises Commencement Date and ending on the
earlier of (i) the first anniversary of the Third Expansion Premises
Commencement Date and (ii) the date Tenant takes occupancy of the Third
Expansion Premises and begins conducting business therefrom (the "THIRD
EXPANSION PREMISES CREDIT TERMINATION DATE").

                                  RENEWAL TERM:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
        DATE            ANNUAL BASE RENT      SQUARE FEET        ANNUAL BASE RENT
                         PER SQUARE FOOT                            FOR THIRD
                                                                EXPANSION PREMISES
-----------------------------------------------------------------------------------
<S>                     <C>                   <C>               <C>

</TABLE>

                                       3
<PAGE>
<TABLE>
<S>                          <C>                 <C>                 <C>
-----------------------------------------------------------------------------------
  5/1/06 - 4/30/07           $8.00               15,594              $124,752.00
-----------------------------------------------------------------------------------
  5/l/07 - 4/30/08           $8.00               15,594              $124,752.00
-----------------------------------------------------------------------------------
  5/1/08 - 4/30/09           $8.00               15,594              $124,752.00
-----------------------------------------------------------------------------------
</TABLE>

       (e)    Effective on the Third Expansion Premises Commencement Date, the
              Premises shall be expanded to include the Third Expansion Premises
              and Tenant's Proportionate Share shall likewise be adjusted. All
              caps of Operating Costs set forth in Section 5B of the Original
              Lease (e.g. the Operating Cost Cap, the HVAC Cap and the Roof Cap)
              shall apply to the entire Premises (including the Third Expansion
              Premises), on an aggregate basis, after it has been expanded to
              include the Third Expansion Premises.

       (f)    Section 8 of the Original Lease is modified in the following
              respects: without limiting any of Landlord's affirmative
              obligations concerning the maintenance and repair of the Third
              Expansion Premises contained in the Lease or this Third Amendment,
              Tenant shall be responsible, at Tenant's expense, for the
              demolition of any existing leasehold improvements and construction
              of any new leasehold improvements in the Third Expansion Premises
              desired by Tenant, which shall be performed in accordance with
              Tenant's design and specification therefor, subject to Landlord's
              reasonable prior approval, which shall not unreasonably be
              withheld, delayed, or conditioned. Subject to Landlord's prior
              approval, which shall not be unreasonably withheld, delayed, or
              conditioned, Tenant may select the contractors and professionals
              of Tenant's choosing to perform this work. Tenant may commence its
              leasehold improvement work immediately upon delivery of possession
              of the Third Expansion Premises. Landlord shall contribute to
              Tenant's demolition and leasehold improvements in the amount of
              (i) $4.00 per foot for demolition and (ii) $15.00 per foot for
              construction (said $15.00 per foot allowance being referred to as
              the "THIRD EXPANSION PREMISES CONSTRUCTION ALLOWANCE") for a total
              of $19.00 per foot. Landlord shall pay such allowances directly to
              Tenant promptly upon presentation of invoices or bills relating to
              said demolition or construction (which may be presented and paid
              on a progress payment basis at Tenant's election); provided,
              however, that if Tenant does not take occupancy of the Third
              Expansion Premises on or prior to the Third Expansion Premises
              Commencement Date, Landlord may delay its payment of the Third
              Expansion Premises Construction Allowance until the Third
              Expansion Premises Credit Termination Date. Tenant may use such
              allowances for any and all expenses relating to or arising from
              the demolition, design and/or construction of leasehold
              improvements to the Third Expansion Premises as well as for the
              payment of any broker's commissions that are due and payable
              specifically with respect to Tenant's leasing of the Third
              Expansion Premises. To the extent Tenant does not use the entire
              amount of such allowances for the foregoing items, Tenant may use
              the excess toward: (a) improvements and expenses, including,
              without limitation, brokers commissions, relating to the Fourth
              Expansion Premises (as defined in Section 4 below); (b) leasehold
              improvements during any renewal term; and/or (c) repayment of the
              Third Expansion Premises Expiration Payment and/or the Fourth
              Expansion Premises Expiration Payment (as such terms are defined
              below). Any excess so utilized shall be promptly paid by Landlord
              to Tenant in accordance with the payment procedures set forth
              above. In addition to the foregoing, Tenant may use up to $5.00
              per foot of the allowances for the Third Expansion Premises to pay
              rental obligations with respect to the Third Expansion

                                       4
<PAGE>
              Premises. This amount shall be applied evenly, without interest,
              over the period between the Third Expansion Premises Commencement
              Date and the Expiration Date.

       (g)    Should Tenant fail to exercise its Renewal Option as set forth in
              Section 5 below, then Tenant shall repay to Landlord a portion of
              the Third Expansion Premises Construction Allowance (the "THIRD
              EXPANSION PREMISES EXPIRATION PAYMENT"). The Third Expansion
              Premises Expiration Payment shall equal the principal amount which
              would have been outstanding as of the Expiration Date had Landlord
              made a loan to Tenant on the Third Expansion Premises Commencement
              Date (or the Third Expansion Premises Credit Termination Date if
              Tenant is entitled to a credit against Base Rent for the Third
              Expansion Premises pursuant to subsection 3[d] above) in the
              original principal amount equal to the Third Expansion Premises
              Construction Allowance, less all amounts which would have been
              received by Landlord assuming Tenant had repaid said loan from the
              Third Expansion Premises Commencement Date (or the Third Expansion
              Premises Credit Termination Date, as applicable) until the
              Expiration Date in equal monthly installments of principal and
              interest at the rate of 10% per annum, so as to completely
              amortize such principal and interest over a period of sixty (60)
              months. Said payment shall be made on or before the last day upon
              which Tenant may give Tenant's notice of intent to exercise the
              Renewal Option as set forth in Section 5 below, and shall be
              discounted to present value to account for the period between the
              date of payment and the Expiration Date at the same 10% interest
              rate set forth above. Once all of the variables necessary to
              determine the Third Expansion Premises Expiration Payment are
              known, Landlord and Tenant agree to work together, with reasonable
              diligence, to determine the Third Expansion Premises Expiration
              Payment.

       (h)    Simultaneously with Landlord's payment to Tenant of the Third
              Expansion Premises Construction Allowance, Tenant shall increase
              the Security Deposit by an amount equal to $25,000.00 (said amount
              being referred to as the "THIRD EXPANSION SECURITY Deposit"). The
              Third Expansion Security Deposit shall be paid and held pursuant
              to the terms of Section 7 of the Original Lease as amended;
              provided, however, that (i) Landlord shall pay Tenant interest on
              the Third Expansion Security Deposit at the rate of 5% per annum
              and (ii) so long as Tenant is not then in default under the terms
              of the Lease beyond any applicable notice and cure periods, then
              on August 3, 2005, Landlord shall return the Third Expansion
              Security Deposit, together with all interest earned thereon, to
              Tenant. Notwithstanding the foregoing, at Landlord's election
              which must be given to Tenant in writing at least twenty (20) days
              prior to the date that the Third Expansion Security Deposit must
              be furnished by Tenant to Landlord, Tenant shall be required, in
              lieu of posting the same in cash, to post the Third Expansion
              Security Deposit in the form of a letter of credit, the form and
              substance of which letter of credit shall be reasonably acceptable
              to both Landlord and Tenant; it being further agreed that if
              Landlord so elects to have Tenant post the Third Expansion
              Security Deposit in the form of a letter of credit, Landlord shall
              bear any and all costs (including, without limitation, annual fees
              and other charges) relating to such letter of credit but, in such
              case, Landlord shall not be required to pay Tenant interest on the
              Third Expansion Security Deposit.

                                       5
<PAGE>
      4. FOURTH EXPANSION PREMISES. Tenant shall have the option (the "FOURTH
EXPANSION PREMISES OPTION") to lease approximately 20,176 square feet as
depicted on Exhibit A hereto (the "FOURTH EXPANSION PREMISES") for a period
commencing as set forth below and terminating on the Expiration Date.

       (a)    Tenant shall give written notice (the "FOURTH EXPANSION PREMISES
              NOTICE") to Landlord, if at all, on or before December 31, 2001 of
              Tenant's exercise of the Fourth Expansion Premises Option. The
              Fourth Expansion Premises Notice shall specify a proposed
              commencement date for the Fourth Expansion Premises that is not
              later than April 1, 2002 (the "FOURTH EXPANSION PREMISES
              COMMENCEMENT DATE"); provided, however, that, if Tenant desires to
              take early delivery of the Fourth Expansion Premises, Tenant shall
              so notify Landlord in writing and so long as Landlord does not
              have a binding agreement with a third party for the lease of the
              Fourth Expansion Premises for the period prior to the Fourth
              Expansion Premises Commencement Date, Landlord shall use
              commercially reasonable efforts to provide early delivery of the
              Fourth Expansion Premises to Tenant in accordance with Tenant's
              desired timing.

       (b)    If Tenant does not exercise its Fourth Expansion Premises Option
              by December 31, 2001, then, and only then, Landlord may market the
              Fourth Expansion Premises to third parties for leasing (the period
              from and after January 1, 2002 through the date falling nine [9]
              months prior to the Expiration Date if the Lease term is not
              extended or twelve [12] months prior to the Expiration Date if the
              Lease term is extended is hereinafter referred to as the "OFFER
              PERIOD"); provided, however, that Tenant shall have an ongoing
              option (the "ONGOING OPTION") during the Offer Period unless and
              until a Refusal Notice (as hereinafter defined) is furnished to
              Tenant, to lease the Fourth Expansion Premises on the terms set
              forth in this Section 4 by notifying Landlord of its intent to so
              lease the Fourth Expansion Premises at any time during the Offer
              Period; it being further agreed that (i) the leasing of the Fourth
              Expansion Premises pursuant to an exercise of the Ongoing Option
              shall be on the same terms and conditions set forth in this
              Section 4 except that the Fourth Expansion Premises Commencement
              Date shall be as specified by Tenant in Tenant's exercise notice
              but, in any case, shall be no more than ninety (90) days after the
              date of such exercise notice and (ii) any exercise of the Ongoing
              Option within the final six (6) months of the Offer Period shall
              be conditioned upon Tenant's simultaneous exercise of the first
              available renewal option, if any, under the Lease. Furthermore, if
              a Refusal Notice is furnished to Tenant and Landlord does not
              lease the Fourth Expansion Premises to Tenant or a third party
              within four (4) months after the date of such Refusal Notice, then
              the Ongoing Option shall again be afforded to Tenant. In addition
              to the Ongoing Option, in the event Landlord shall locate a
              prospective third party tenant or occupant for the Fourth
              Expansion Premises during the Offer Period and reach a point of
              negotiation with that prospective tenant or occupant where there
              is substantial evidence of an intent to proceed to execution of a
              lease or other occupancy agreement - such as a term sheet, letter
              of intent, or the like - then, prior to entering into a lease or
              any other binding agreement with such prospective tenant or
              occupant for the Fourth Expansion Premises (or any portion
              thereof), Landlord shall first notify Tenant (a "REFUSAL NOTICE")
              and Tenant shall have the right to exercise its right to lease the
              Fourth Expansion Premises by providing notice to Landlord of its
              intent to do so within five (5) business days of Tenant's

                                       6
<PAGE>
              receipt of the given Refusal Notice (the "DELAYED FOURTH EXPANSION
              PREMISES NOTICE"); it being agreed that the leasing of the Fourth
              Expansion Premises pursuant to this subsection (b) shall be on the
              same terms and conditions set forth in this Section 4 except that
              the Fourth Expansion Premises Commencement Date shall be as
              specified by Tenant in the Delayed Fourth Expansion Premises
              Notice but, in any case, shall be no more than ninety (90) days
              after the date of the Delayed Fourth Expansion Premises Notice.

       (c)    Landlord shall deliver possession of the Fourth Expansion Premises
              to Tenant, broom clean and free of all tenants, subtenants, and
              other occupants, at least ninety (90) days prior to the Fourth
              Expansion Premises Commencement Date. Prior to delivery of
              possession, Landlord shall, at Landlord's sole cost and expense
              timely fulfill all of Landlord's obligations set forth in Section
              9(c) below relating to replacement of the HVAC systems serving the
              Fourth Expansion Premises. Landlord shall not be deemed to have
              delivered possession of the Fourth Expansion Premises to Tenant
              until it has provided evidence, reasonably acceptable to Tenant,
              that it has complied with the foregoing. None of Landlord's
              expenses or costs incurred in complying with the foregoing shall
              be charged to Tenant, either directly or indirectly as part of
              Operating Costs. From and after the date that Landlord delivers
              the Fourth Expansion Premises to Tenant, the provisions of Section
              11 of the Original Lease setting forth Tenant's insurance
              requirements with respect to the Existing Premises shall be
              applicable to the Fourth Expansion Premises.

       (d)    The Fourth Expansion Premises Commencement Date shall be the later
              of: (i) ninety (90) days after the date upon which Landlord
              delivers possession of the Fourth Expansion Premises to Tenant in
              the condition described above; or (ii) the Fourth Expansion
              Premises Commencement Date as specified in the Fourth Expansion
              Premises Notice.

       (e)    Tenant shall not be required to pay rent or other charges for the
              Fourth Expansion Premises prior to the Fourth Expansion Premises
              Commencement Date. Tenant shall pay Base Rent for the Fourth
              Expansion Premises, commencing on the Fourth Expansion Premises
              Commencement Date, in the following amounts:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
         PERIOD(2)          ANNUAL BASE RENT     SQUARE FEET      ANNUAL BASE RENT
                            PER SQUARE FOOT                          FOR FOURTH
                                                                 EXPANSION PREMISES
------------------------------------------------------------------------------------
<S>                         <C>                  <C>             <C>
    Fourth Expansion            $10.00              20,176           $201,760.00
        Premises
   Commencement Date -
        6/30/04
------------------------------------------------------------------------------------
    7/1/04 - 4/30/06            $10.37              20,176           $209,225.12
------------------------------------------------------------------------------------
</TABLE>

-------------------
(2) IF THE FOURTH EXPANSION PREMISES COMMENCEMENT DATE IS ON OR AFTER JULY 1,
2004 THEN (a) THE FIRST ROW BELOW SHALL NOT BE APPLICABLE AND (b) THE SECOND ROW
BELOW SHALL RUN FOR THE "PERIOD" FROM THE FOURTH EXPANSION PREMISES COMMENCEMENT
DATE THROUGH APRIL 30, 2006.

                                       7
<PAGE>
Notwithstanding the foregoing or anything contained in the Lease or this Third
Amendment to the contrary, if for any reason Tenant does not take occupancy of
the Fourth Expansion Premises (i.e. does not take possession for purposes of
conducting business therefrom) by the Fourth Expansion Premises Commencement
Date, Tenant shall be entitled to a credit against monthly Base Rent for the
Fourth Expansion Premises in an amount equal to $8,407.92 for the period
commencing on the Fourth Expansion Premises Commencement Date and ending on the
earlier of (i) the first anniversary of the Fourth Expansion Premises
Commencement Date and (ii) the date Tenant takes occupancy of the Fourth
Expansion Premises and begins conducting business therefrom (the "FOURTH
EXPANSION PREMISES CREDIT TERMINATION DATE").

                                  RENEWAL TERM:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
       PERIOD            ANNUAL BASE RENT      SQUARE FEET      ANNUAL BASE RENT
                         PER SQUARE FOOT                           FOR FOURTH
                                                               EXPANSION PREMISES
----------------------------------------------------------------------------------
<S>                      <C>                   <C>             <C>
  5/1/06 - 4/30/09           $10.25              20,179            $206,834.75
----------------------------------------------------------------------------------
</TABLE>

       (f)    Effective on the Fourth Expansion Premises Commencement Date, the
              Premises shall be expanded to include the Fourth Expansion
              Premises and Tenant's Proportionate Share shall likewise be
              adjusted. All caps of Operating Costs set forth in Section 5B of
              the Original Lease (e.g. the Operating Cost Cap, the HVAC Cap and
              the Roof Cap) shall apply to the entire Premises (including the
              Fourth Expansion Premises), on an aggregate basis, after it has
              been expanded to include the Fourth Expansion Premises.
              Additionally, effective on the Fourth Expansion Premises
              Commencement Date, the cap on Landlord's management fees set forth
              in Section 5A of the Original Lease shall be lowered from 5% of
              gross rents for the Project to 3.5% of gross rents for the Project
              (specifically excluding, however, utilities and janitorial costs
              and expenses).

       (g)    Without limiting any of Landlord's affirmative obligations
              concerning the maintenance and repair of the Fourth Expansion
              Premises contained in the Lease or this Fourth Amendment, Tenant
              shall be responsible, at Tenant's expense, for the demolition of
              any existing leasehold improvements and construction of any new
              leasehold improvements in the Fourth Expansion Premises desired by
              Tenant, which shall be performed in accordance with Tenant's
              design and specification therefor, subject to Landlord's
              reasonable prior approval, which shall not unreasonably be
              withheld, delayed, or conditioned. Subject to Landlord's prior
              approval, which shall not be unreasonably withheld, delayed, or
              conditioned, Tenant may select the contractors and professionals
              of Tenant's choosing to perform this work. Tenant may commence its
              leasehold improvement work immediately upon delivery of possession
              of the Fourth Expansion Premises. Landlord shall contribute to
              Tenant's demolition and leasehold improvements in the amount of
              (i) $4.00 per foot for demolition and (ii) $25.00 per foot for
              construction (said $25.00 per foot allowance being referred to as
              the "FOURTH EXPANSION PREMISES CONSTRUCTION ALLOWANCE") for a
              total of $29.00 per foot. Landlord shall pay such allowances
              directly to Tenant promptly upon presentation of invoices or bills
              relating to said demolition or construction (which may be
              presented and paid on a progress payment basis at Tenant's
              election); provided,

                                       8
<PAGE>
              however, that if Tenant does not take occupancy of the Fourth
              Expansion Premises on or prior to the Fourth Expansion
              Commencement Date, Landlord may delay its payment of the Fourth
              Expansion Premises Construction Allowance until the Fourth
              Expansion Premises Credit Termination Date. Tenant may use such
              allowances for any and all expenses relating to or arising from
              the demolition, design and/or construction of leasehold
              improvements to the Fourth Expansion Premises as well as for the
              payment of any broker's commissions that are due and payable
              specifically with respect to Tenant's leasing of the Fourth
              Expansion Premises. To the extent Tenant does not use the entire
              amount of such allowances for the foregoing items, Tenant may use
              the excess toward: (a) leasehold improvements during any renewal
              term; and/or (b) repayment of the Third Expansion Premises
              Expiration Payment and/or the Fourth Expansion Premises Expiration
              Payment (as such term is defined below). Any excess so utilized
              shall be promptly paid by Landlord to Tenant in accordance with
              the payment procedures set forth above. In addition to the
              foregoing, Tenant may use up to $5.00 per foot of the allowances
              for the Fourth Expansion Premises to pay current rental
              obligations on any Premises leased or occupied by Tenant. This
              amount shall be applied evenly, without interest, over the period
              between the Fourth Expansion Premises Commencement Date and the
              Expiration Date.

       (h)    Should Tenant fail to exercise its Renewal Option as set forth in
              Section 5 below, then Tenant shall repay a portion of the Fourth
              Expansion Premises Construction Allowance (the "FOURTH EXPANSION
              PREMISES EXPIRATION PAYMENT"). The Fourth Expansion Premises
              Expiration Payment shall equal the principal amount which would
              have been outstanding as of the Expiration Date had Landlord made
              a loan to Tenant on the Fourth Expansion Premises Commencement
              Date (or the Fourth Expansion Premises Credit Termination Date if
              Tenant is entitled to a credit against Base Rent for the Fourth
              Expansion Premises pursuant to subsection 4[d] above) in the
              original principal amount equal to the Fourth Expansion Premises
              Construction Allowance, less all amounts which would have been
              received by Landlord assuming Tenant had repaid said loan from the
              Fourth Expansion Premises Commencement Date (or the Fourth
              Expansion Premises Credit Termination Date, as applicable), until
              the Expiration Date in equal monthly installments of principal and
              interest at the rate of 10% per annum, so as to completely
              amortize such principal and interest over a period of sixty (60)
              months. Said payment shall be made on or before the last day upon
              which Tenant may give Tenant's notice of intent to exercise its
              Renewal Option as set forth in Section 5 below, and shall be
              discounted to present value to account for the period between the
              date of payment and the Expiration Date at the same 10% interest
              rate set forth, above. Once all of the variables necessary to
              determine the Fourth Expansion Premises Expiration Payment are
              known, Landlord and Tenant agree to work together, with reasonable
              diligence, to determine the Fourth Expansion Premises Expiration
              Payment.

       (i)    Simultaneously with Landlord's payment to Tenant of the Fourth
              Expansion Premises Construction Allowance, Tenant shall increase
              the Security Deposit by an amount equal to $40,000.00 (said amount
              being referred to as the "FOURTH EXPANSION SECURITY DEPOSIT"). The
              Fourth Expansion Security Deposit shall be paid and held pursuant
              to the terms of Section 7 of the Lease as amended hereby;
              provided, however, that (i) Landlord shall pay Tenant interest on
              the Fourth

                                       9
<PAGE>
              Expansion Security Deposit at the rate of 5% per annum and (ii) so
              long as Tenant is not then in default under the terms of the Lease
              beyond any applicable notice and cure periods, then on August 3,
              2005, Landlord shall return the Fourth Expansion Security Deposit,
              together with all interest earned thereon, to Tenant.
              Notwithstanding the foregoing, at Landlord's election which must
              be given to Tenant in writing at least twenty (20) days prior to
              the date that the Fourth Expansion Security Deposit must be
              furnished by Tenant to Landlord, Tenant shall be required, in lieu
              of posting the same in cash, to post the Fourth Expansion Security
              Deposit in the form of a letter of credit, the form and substance
              of which letter of credit shall be reasonably acceptable to both
              Landlord and Tenant; it being further agreed that if Landlord so
              elects to have Tenant post the Fourth Expansion Security Deposit
              in the form of a letter of credit, Landlord shall bear any and all
              costs (including, without limitation, annual fees and other
              charges) relating to such letter of credit but, in such case,
              Landlord shall not be required to pay Tenant interest on the
              Fourth Expansion Security Deposit.

      5. RENEWAL OPTION. Tenant shall retain the renewal option set forth in
Section 2A of the Original Lease. The notice shall be given at least two hundred
seventy (270) days prior to the Expiration Date set forth above, the Renewal
Term shall commence on May 1, 2006, and the option shall apply to all Premises
occupied by Tenant as of the Expiration Date. Base Rent for the Renewal Term
shall be as set forth in Section 3 of the Original Lease (as modified by this
Third Amendment). Additionally, if Tenant exercises such renewal option and is
not in default under the Lease beyond the expiration of all applicable notice
and cure periods on the Expiration Date set forth above (i.e. April 30, 2006),
then, on the commencement date of the Renewal Term, Landlord shall return the
entire accumulated Security Deposit.

      6. ADDITIONAL RENEWAL OPTIONS. In addition to the foregoing, Tenant shall
have two additional options to renew the Lease (each singularly an "ADDITIONAL
RENEWAL OPTION" and collectively the "ADDITIONAL RENEWAL OPTIONS" as to all
Premises then being leased by Tenant, on all terms and conditions of the Lease
as modified herein, for two (2) additional terms of two (2) years each,
commencing on May 1, 2009, and May 1, 2011, respectively. Tenant shall provide
written notice of its exercise of (a) the first Additional Renewal Option on or
prior to May 1, 2008 and (b) the second Additional Renewal Option on or prior to
May 1, 2010. Base Rent for the first additional renewal term shall be (a) $8.65
per square foot of the Premises then being leased by Tenant if Tenant has not
elected to lease the Fourth Expansion Premises pursuant to Section 4 above or
(b) $9.00 per square foot of the Premises then being leased by Tenant if Tenant
has elected to lease the Fourth Expansion Premises pursuant to Section 4 above.
Base Rent for the second additional renewal term shall be (a) $8.85 per square
foot of the Premises then being leased by Tenant if Tenant has not elected to
lease the Fourth Expansion Premises pursuant to Section 4 above or (b) $9.25 per
square foot of the Premises then being leased by Tenant if Tenant has elected to
lease the Fourth Expansion Premises pursuant to Section 4 above.

      7. REVOCATION OF ADDITIONAL RENEWAL OPTION(S) UPON DEMOLITION OF BUILDING.
Notwithstanding anything contained in Section 6 of this Third Amendment to the
contrary, if Tenant exercises an Additional Renewal Option and, within sixty
(60) days after notice of such exercise, Landlord notifies Tenant in writing
that it intends to demolish the Building within one (1) year after the
expiration of the then Term of the Lease (a "DEMOLITION NOTICE"), then Tenant's
exercise of such Additional Renewal Option shall be deemed null and void and of
no further force and effect and Tenant shall have no further rights to renew the
Lease pursuant to Section 6 of this Third Amendment; provided, however, if,
Landlord provides Tenant with a Demolition Notice and

                                       10
<PAGE>
does not in fact demolish the Building within such one (1) year period following
the expiration of the then Term of the Lease, Landlord shall within thirty (30)
days following the end of such one-year period pay Tenant One Hundred Twenty
Five Thousand and No/100 Dollars ($125,000.00) (the "REVOCATION PAYMENT"). As
security for the Revocation Payment, on the first (1st) day of each of the last
ten (10) months of the then Term of the Lease, Landlord agrees to deposit
$12,500.00 in a third-party controlled escrow account. The terms and provisions
governing such escrow account, as well as the third party-escrowee, shall be
subject to Tenant's reasonable prior approval.

      8. RIGHT OF FIRST OFFER TO PURCHASE. In the event Landlord intends to sell
the Project or any portion thereof during the Term of the Lease, Landlord will
first be obligated to provide Tenant with written notice of its intent to sell
the Project or material portion thereof (the "SALE NOTICE") and the general
terms on which Landlord intends to market the Building for sale (e.g. price,
terms, closing date). Landlord agrees that for a period of 60 days following the
Sale Notice (the "NEGOTIATION PERIOD"), Tenant shall be afforded the exclusive
opportunity to enter into a binding agreement to purchase the Building on terms
mutually acceptable to both Landlord and Tenant; it being further agreed that if
Tenant desires to purchase the Project (or applicable portion thereof), then
Landlord and Tenant agree to negotiate the terms of sale in good faith during
the Negotiation Period. Furthermore, if (a) Tenant desires to purchase the
Project (or applicable portion thereof) during the Negotiation Period but does
not agree to mutually acceptable terms with the Landlord and (b) a Third Party
Proposal (as hereinafter defined) exists at any time thereafter during the Term
(as the same may be extended) for the sale of the Project or material portion
thereof at a net price (i.e. cash price less estimated transaction costs) lesser
than or equal to seventy-five percent (75%) of the list price originally offered
by Landlord in negotiations with Tenant during the Negotiation Period, then,
under such circumstances, Landlord shall offer the Project (or applicable
portion thereof) for sale to Tenant on all of the terms set forth in the Third
Party Proposal; provided, further, that in the event the purchase price set
forth in the Third Party Proposal includes a brokerage commission due from
Landlord which will not be due and owing pursuant to Landlord's listing
agreement with such broker if Tenant purchases the Project or applicable portion
thereof pursuant to this Section 8, then Tenant shall be obligated to pay the
purchase price less said broker's commission. Tenant must accept any offer by
Landlord pursuant to the previous sentence, if at all, by notice given to
Landlord given within seven (7) days after Tenant's receipt of the given Third
Party Proposal, and, if Tenant so accepts an offer, Landlord and Tenant shall
use good faith, diligent efforts to negotiate a commercially reasonable purchase
agreement reflecting the terms of the Third Party Proposal within twenty (20)
days after Tenant's acceptance of such offer; it being further agreed that if
Tenant does not accept such offer with said 7-day period, Tenant shall have no
further rights to acquire the Project pursuant to the terms and provisions of
this Section. For purposes hereof, "THIRD PARTY PROPOSAL" shall mean a bona fide
arms-length offer which Landlord desires to accept, from a third party to
purchase the Project or material portion thereof. Notwithstanding the foregoing,
this right of first offer to purchase will not apply to any partial or whole
transfers or changes in ownership amongst and between the current members of
Landlord (i.e. Lutheran Brotherhood and Ryan Properties, Inc.) or any affiliates
or subsidiaries thereof.

      9. LEASEHOLD IMPROVEMENTS.

       (a)    Floor Tile: Landlord represents and warrants that to the best of
              its knowledge the Third Expansion Premises and Fourth Expansion
              Premises shall be free of all toxic or hazardous substances on the
              date upon which possession is tendered to Tenant, with the
              exception of existing vinyl composite floor tile covering
              substantially all of the floor in the Third and Fourth Expansion
              Premises, which the Landlord believes to contain asbestos fibers
              ("ACM"). Without otherwise

                                       11
<PAGE>
              limiting any of Landlord's covenants and obligations in the Lease
              concerning ACM and other Hazardous Substances, Tenant agrees that,
              as to the Third and Fourth Expansion Premises, its demolition and
              leasehold improvement responsibilities shall include removal
              and/or remediation of the floor tile if and to the extent required
              by code. Any such removal of the floor tile and related disposal
              shall be performed in accordance with applicable federal, state
              and local laws and ordinances.

       (b)    Restroom: While Landlord acknowledges that Tenant has no
              obligation to fulfill a Restroom Event (as defined below),
              Landlord has constructed restrooms for the Second Expansion
              Premises, at no cost to Tenant pursuant to the plans drawn by BDH
              & Young dated September 12, 2000 in anticipation of one of the
              following (each, a "RESTROOM EVENT"): (i) Tenant's exercise of the
              Fourth Expansion Premises Option; (ii) Tenant's election not to
              exercise the Fourth Expansion Premises Option, but nonetheless to
              permit sharing of said restrooms with a third party tenant and to
              construct, at Tenant's expense, reasonable improvements necessary
              to effect such sharing; or (iii) Tenant's exercise of the first
              Renewal Option. If no Restroom Event occurs, then Tenant shall,
              within 30 days of the determination that no Restroom Event could
              occur, pay to Landlord the sum of $30,000.

       (c)    HVAC: Notwithstanding anything contained in the Lease (as amended
              hereby) to the contrary, Landlord shall, at Landlord's sole cost
              and expense, remove and replace all HVAC units which have not been
              replaced with new HVAC units since the Commencement Date (the
              "HVAC WORK") that service or are otherwise located on or about the
              Building or Project in accordance with the HVAC Requirements (as
              hereinafter defined). All replacement HVAC units (collectively,
              the "HVAC Requirements") (i) shall be new first-grade units, (ii)
              shall have sufficient capacity to meet the HVAC Specifications for
              (A) Tenant's use of the Premises (specifically including the First
              Expansion Premises and the Second Expansion Premises) for office
              and production purposes in the same manner that Tenant is using
              the Premises as of the date of this Third Amendment, (B) Tenant's
              use of the Third Expansion Premises as production space and (C)
              Tenant's use of the Fourth Expansion Premises as office space,
              (iii) servicing the Premises (specifically including the First
              Expansion Premises and the Second Expansion Premises) shall be
              distributed in a manner consistent with Tenant's use of the
              Premises as of the date of this Third Amendment (i.e. the HVAC
              units shall be reconnected to the existing duct work located in
              the Premises), (iv) shall be installed and connected to existing
              zoning systems with new thermostat controls that include
              programmable temperature controls (i.e. set-backs) and (v) shall
              be installed by licensed contractors, in a good and workmanlike
              manner and in compliance with all applicable laws, codes and
              ordinances. All HVAC Work shall be commenced by Landlord upon the
              date of full execution and delivery of this Third Amendment by
              Landlord and Tenant and completed as soon thereafter as is
              practicable (with the use of diligent efforts by Landlord and its
              contractors), except the HVAC Work relating specifically to the
              Fourth Expansion Premises which, subject to Excused Delays, shall
              be completed within sixty (60) days after Tenant notifies Landlord
              of its election to lease the Fourth Expansion Premises.
              Furthermore, except with respect to the HVAC Work relating to the
              Third Expansion Premises and the Fourth Expansion Premises which
              may be performed

                                       12
<PAGE>
              at any time of day, all HVAC Work shall be performed outside of
              Tenant's normal business hours (i.e. after 5:00 p.m. [Minneapolis
              time] on business days and at any time on non-business days) and,
              in any case, in a manner that minimizes interference with Tenant's
              business operations and use and quiet enjoyment of the Premises.
              Notwithstanding anything in the Lease to the contrary, Tenant's
              Proportionate Share of Operating Costs solely as they relate to
              the maintenance, repair and replacement of all HVAC units serving
              the Building shall be fixed at the HVAC Cap (i.e., $.20 annually
              per square foot of the Premises) for the period commencing on the
              first (1st) month following substantial completion of all HVAC
              Work and ending on the expiration date of the Initial Term (as the
              same may be extended to the expiration date of the first Renewal
              Term if Tenant exercises its option to extend the Term for the
              first Renewal Term) (the "HVAC CAP ADJUSTMENT PERIOD"); it being
              further agreed and understood that during the HVAC Cap Adjustment
              Period such agreement by Tenant to pay the HVAC Cap (i) shall be
              in lieu of all other payments and costs associated with repairing,
              replacing and maintaining (other than routine semi-annual filter
              changes) the HVAC units serving the Building including, without
              limitation, all costs associated with the HVAC Maintenance
              Contract and (ii) shall be factored in when calculating the
              Operating Cost Cap. Following the HVAC Cap Adjustment Period, the
              provisions concerning Operating Costs, including all caps of
              Operating Costs relating thereto (i.e. the Operating Cost Cap, the
              HVAC Cap and the Roof Cap), shall again be applicable to Tenant's
              obligation to pay its Proportionate Share of Operating Costs for
              the entire Premises.

       (d)    Roof: Notwithstanding anything contained in the Lease (as amended
              hereby) to the contrary, Landlord shall, at Landlord's sole cost
              and expense, replace the existing roof on the Building with a new
              roof (the "ROOF WORK"). The new roof shall be rated to have a
              minimum life of at least 12 years. Landlord shall cause the Roof
              Work to be performed by licensed contractors, in a good and
              workmanlike manner, in compliance with all applicable laws, codes
              and ordinances, and in a manner that is otherwise consistent with
              work on first class office-warehouse buildings located in the
              Minneapolis, Minnesota metropolitan area. All Roof Work shall be
              commenced by Landlord upon the date of full execution and delivery
              of this Third Amendment by Landlord and Tenant and completed as
              soon thereafter as is practicable (with the use of diligent
              efforts by Landlord and its contractors), except the Roof Work
              relating specifically to the Fourth Expansion Premises which,
              subject to Excused Delays, shall be completed within sixty (60)
              days after Tenant notifies Landlord of its election to lease the
              Fourth Expansion Premises. Furthermore, except with respect to the
              Roof Work relating to the Third Expansion Premises and the Fourth
              Expansion Premises which may be performed at any time of day, the
              Roof Work shall be performed outside of Tenant's normal business
              hours (i.e. after 5:00 p.m. [Minneapolis time] on business days
              and at any time on non-business days) and, in a manner that
              minimizes interference with Tenant's business operations and use
              and quiet enjoyment of the Premises. Notwithstanding anything in
              the Lease to the contrary, Tenant's Proportionate Share of
              Operating Costs solely as they relate to the maintenance, repair
              and replacement of the roof of the Building shall be fixed at the
              Roof Cap (i.e., $.20 annually per square foot of the Premises) for
              the period commencing on the first (1st) month following
              substantial completion of all Roof Work and ending on the
              expiration date of the Initial Term (as the same may be

                                       13
<PAGE>
              extended to the expiration date of the first Renewal Term if
              Tenant exercises its option to extend the Term for the first
              Renewal Term) (the "ROOF CAP ADJUSTMENT PERIOD"); it being further
              agreed and understood that during the Roof Cap Adjustment Period
              such agreement by Tenant to pay the Roof Cap (i) shall be in lieu
              of all other payments and costs associated with repairing,
              replacing and maintaining the roof of the Building and (ii) shall
              be factored in when calculating the Operating Cost Cap. Following
              the Roof Cap Adjustment Period, the provisions concerning
              Operating Costs, including all caps of Operating Costs relating
              thereto (i.e. the Operating Cost Cap, the HVAC Cap and the Roof
              Cap), shall again be applicable to Tenant's obligation to pay its
              Proportionate Share of Operating Costs for the entire Premises.

       (e)    Utility Savings: Due to the savings on the cost of utilities that
              will inure to the benefit of Tenant as a result of the HVAC Work,
              from and after the date that both the HVAC Work and the Roof Work
              are completed in accordance with the terms hereof through the
              expiration date of the Initial Term (as the same may be extended
              to the expiration date of the first Renewal Term if Tenant
              exercises its option to extend the Term for the first Renewal
              Term), Tenant shall pay Landlord on the first day of each month
              during such period an amount equal to 1/12 of the product of (i)
              $.15, multiplied by (ii) the number of square feet in the Premises
              then being leased by Tenant under the Lease.

       10.    PARKING.

       (a)    Landlord shall provide on-site parking for all Premises,
              including, without limitation, the Third and Fourth Expansion
              Premises, at a ratio of not less than 4.0 stalls per 1,000 square
              feet of space leased. Landlord shall provide said parking at
              Landlord's sole cost and expense, with all necessary permits, in
              compliance with all applicable laws, and otherwise in accordance
              with Section 13 of the Original Lease.

       (b)    Section 13 of the Original Lease requires Landlord to provide not
              less than 160 parking spaces on the north and east sides of the
              Building (such parking spaces are hereinafter referred to as the
              "NORTHEAST SPACES" and shall be located within the area designated
              as the "NORTHEAST PARKING AREA" on Exhibit B attached hereto).
              Landlord shall continue to provide the Northeast Spaces for use by
              Tenant, Tenant's employees, guests, and invitees in accordance
              with the terms and provisions of the Lease. All other parking
              spaces required under the provisions of the Lease to meet parking
              ratio (i.e. - those parking spaces in excess of the Northeast
              Spaces), shall be provided within (i) the current parking areas
              for the Project or (ii) if necessary, elsewhere in the areas
              adjacent to the Project identified on Exhibit B attached hereto or
              other parking areas adjacent to the Project that are reasonably
              acceptable to Tenant (collectively, the "ADJACENT PARKING AREAS").
              All costs relating to construction, grading, striping and lighting
              and otherwise readying the Adjacent Parking Areas for use by
              Tenant and other tenants of the Project, if any, shall be borne by
              Landlord. Parking spaces required to meet the applicable ratio as
              to the Third Expansion Premises and Fourth Expansion Premises
              shall be supplied to Tenant on the Third Expansion Premises
              Commencement Date and the Fourth Expansion Premises Commencement
              Date respectively.

                                       14
<PAGE>
       (c)    Landlord has informed Tenant that the Minnesota Department of
              Transportation ("MNDOT") intends to relocate the primary access
              road servicing the Project from the south side of the Project to
              the north side of the Project, and to condemn a strip of land
              along the north side of the Project to enable MNDOT to construct a
              street contiguous to the north side of the Project (the "TAKING").
              Notwithstanding anything contained in the Lease to the contrary,
              and without limitation of Tenant's rights under Section 15 of the
              Original Lease, Tenant shall be entitled to a pro rata abatement
              of Base Rent and all components of Additional Rent hereunder if
              and to the extent that Tenant's use and quiet enjoyment of any of
              the parking spaces to which Tenant is entitled is denied, blocked
              or materially and adversely interfered with either during or as a
              direct or indirect result of the Taking. For purposes of the
              foregoing sentence, the pro rata rent abatement shall be equal to
              the product obtained by multiplying the sum of Base Rent and
              Additional Rent otherwise owing hereunder for the applicable
              period by a fraction, equal to (i) one (1) minus (ii) a fraction,
              the numerator of which is the number of parking spaces then
              available for Tenant's use at the Project in accordance with the
              terms of the Lease and the denominator of which is the product of
              .004 multiplied by the number of square feet in the Premises. By
              way of example, if the sum of Base Rent and Additional Rent for
              the given period is equal to $100,000.00, the square feet in the
              Premises is equal to 100,000 square feet and the total number of
              parking spaces then available for Tenant's use at the Project is
              equal to 320 parking spaces, then the pro rata rent abatement to
              which Tenant would be entitled is $20,000.00 (i.e. $100,000 x [1 -
              320/400] = $20,000.00). Additionally, the words "including,
              without limitation, any reduction of the number of parking spaces
              in the parking area for the Project which results in a parking
              ratio that is less than 4 stalls per 1,000 square feet of space in
              the Premises" is hereby added immediately after the word
              "operations" in the third sentence of Section 15 of the Original
              Lease.

       (d)    Tenant acknowledges that Landlord owns or controls the property
              immediately to the east of the Project and intends to redevelop
              and/or sell such property (the "NEIGHBORING DEVELOPMENT"). In
              connection with the Neighboring Development, without limitation of
              any Tenant's rights under the Lease, Tenant acknowledges and
              agrees that certain portions of the eastern most portion of the
              parking area of the Project may be reconfigured and/or utilized as
              a temporary staging area and Tenant consents to the same so long
              as Landlord uses commercially reasonable efforts (consistent with
              owners of other first class, multi-tenant office warehouse
              buildings) to minimize any interference with Tenant's use and
              enjoyment of the Premises and the parking areas serving the
              Premises.

       (e)    Notwithstanding anything contained in the Lease to the contrary,
              if as a result of the Taking or the Neighboring Development, it
              becomes necessary for Landlord to provide Tenant with parking
              spaces in Adjacent Parking Areas in order to meet the parking
              requirements under the Lease, then Landlord shall be entitled to
              expand the Project to include such portion of the Adjacent Parking
              Areas that are necessary to meet such parking ratios (such
              expanded area being hereinafter referred to as the "EXPANDED
              PROJECT AREA") and from and after such expansion Tenant shall be
              obligated to pay its Proportionate Share of Operating Costs with
              respect to the Expanded Project Area with the following
              limitations: (a) such obligation to pay Operating Costs shall be
              subject to all applicable caps of

                                       15
<PAGE>
              Operating Costs set forth in Section 5(b) of the Original Lease,
              and (b) if the Expanded Project Area is part of a larger tax
              parcel then (i) Tenant shall only be obligated to pay its
              Proportionate Share of the portion of taxes, assessments (both
              general and special) and related costs allocated to the Expanded
              Project Area on a pro rata basis and (ii) if the overall tax
              parcel on which the Expanded Project Area is included contains any
              improvements other than a parking lot, then taxes, assessments
              (general and special) and related costs allocated to the Expanded
              Project Area shall be equitably adjusted on account thereof.

      11. SIGNAGE. Section 1F of the Original Lease is hereby deleted in its
entirety and the following is substituted therefor:

    Tenant shall be entitled to place one or more signs on the Building at its
    own cost. The aggregate size of such signs shall not exceed 100% of the
    total area permitted for exterior signage on the Building per city codes;
    provided, however, that if Tenant does not exercise the Fourth Expansion
    Option and if Landlord requires signage for a tenant (other than Tenant) of
    the Fourth Expansion Premises, Tenant agrees to relinquish its right to no
    more than 20% of the maximum signage permitted by code upon not less than
    ninety (90) days prior written notice from Landlord (the "RELINQUISHED
    SIGNAGE"). The Relinquished Signage shall be in an area mutually acceptable
    to Landlord and Tenant. Tenant's signage shall be subject to Landlord's
    approval, which shall not be unreasonably withheld, conditioned or delayed
    so long as such signage meets applicable code requirements.

      12. SECURITY DEPOSIT. Section 7 of the Original Lease is hereby modified
in the following respects:

      (a)   The fourth sentence is hereby deleted in its entirety and of no
            further force and effect; and

      (b)   The following sentence is added to the end of Section 7: In lieu of
            posting the Security Deposit required under this Section in cash,
            Tenant may post the same in the form of a letter of credit or other
            security provided that the form and substance of such other security
            is reasonably acceptable to Landlord.

      13. ADDITIONAL RENT. In the third grammatical line of Section 7 of the
First Amendment, the words "during the Initial Term" are hereby deleted and the
words "through and including January 1, 2005" are substituted therefor

      14. DEFINITIONS. Each capitalized term used as a defined term in this
Third Amendment but not otherwise defined in this Third Amendment shall have the
same meaning ascribed to such term in the Lease.

      15. NO OFFER. Submission of this instrument for examination or negotiation
shall not bind Landlord or Tenant, and no obligation on the part of Landlord or
Tenant shall arise until this instrument is signed and delivered by Landlord and
Tenant.

      16. LEASE IN FULL FORCE AND EFFECT. Except as herein provided, all of the
terms and provisions of the Lease shall remain in full force and effect. All
capitalized terms used in this Third Amendment shall have the definition given
to them in the Lease unless otherwise defined herein.

                                       16
<PAGE>
      IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to
Lease Agreement to be duly executed and delivered as of the day and year first
written above.

LANDLORD:                                              TENANT:

WEST 78TH STREET                                    AUGUST TECHNOLOGY
BLOOMINGTON ASSOCIATES, LLC                         CORPORATION

BLOOMINGTON OFFICE PROJECT, LLC,
ITS MANAGER

By  /s/ _______________                              By  /s/ _______________
Its __________________                               Its __________________

                                    EXHIBIT A

                     DEPICTION OF FOURTH EXPANSION PREMISES

                                 (see attached)

                                    EXHIBIT B

                       DEPICTION OF ADJACENT PARKING AREAS

                                 (see attached)

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