Document:

Exhibit 10.21

 

COMMUNITY FIRST BANKSHARES, INC.

 

March 12, 2001

 

David Lee

Community First Bankshares, Inc.

Fargo, ND

 

RE: Severance Package and Notice of Termination of Change in Control
Agreement

 

Dear David:

 

As a result of Community First Bankshares, Inc.’s (“CFB”) need to
restructure its workforce and eliminate certain positions, we are offering you
a severance package which recognizes your long term contributions to CFB.  By this reference, we also incorporate the
terms of the Change in Control Agreement executed by you and CFB on December 1,
1998.  This letter (hereinafter
“Agreement”) describes our agreement regarding the termination of your
employment, no later than February 28, 2002 (the “Termination Date”).  This letter also serves as written notice
terminating the Change in Control Agreement effective December 31, 2001,
pursuant to Paragraph 2 thereof. If, after reading this letter, you feel there
is any discrepancy between our conversations and the content of this letter,
please contact me.

 

We are offering to provide you with the following benefits in
connection with the termination of your employment with CFB:

 

(1)                                  We will pay you a severance payment equal
to two year’s base compensation at your most recent annual rate of pay, less
all applicable federal and state tax and FICA withholdings.  You will have the option to receive this
payment in either a lump-sum, or in bi-weekly installments beginning on CFB’s
first bi-weekly payday, following expiration of the full rescission period for
your release, or if later, the first bi-weekly payday following your
Termination Date. If you should die before you receive all of your severance
payments, any remaining severance payments will be paid to the personal
representative of your estate.

 

(2)                                  You will have the right, as of your
Termination Date, to continue your group health, dental and/or vision coverage
for up to 18 months, pursuant to applicable federal and state continuation
coverage laws, including COBRA, provided you make the appropriate written elections
to continue your group coverage.  CFB
will pay the employer’s portion of such premium(s) for the duration of such
continuation coverage, and you will be responsible for payment of the employee 

 

 

share of such
premium(s). Thereafter, you may also continue to participate in CFB’s
then–current group insurance plan for an additional 24 months at your own
expense, providing you are not eligible for coverage under another plan of
group insurance. Information and election forms concerning continuation of your
group health, dental and/or vision coverage will be mailed to you under
separate cover.  All rights that you may
have under CFB’s benefit plans are subject to the terms of the plans,
applicable law and the continuation of said plans for active employees.

 

(3)                                  We will pay you any accrued, unused PTO
in your account as of your Termination Date.

 

(4)                                  You will be entitled to receive 401(k)
Plan contributions to your Plan accounts for Plan Year 2001, based upon your
earnings.

 

(5)                                  The Company will modify, in the form
attached hereto as Exhibit B, the incentive stock options granted to you in
1998, 2000 and 2001 and the nonqualified stock options granted to you in 1998,
1999, 2000 and 2001 to permit such options to be exercisable for the original
term of the option (i.e., ten years [five years with respect to options granted
in 1998] from the option date, as defined in the option agreement) without
regard to your termination of employment, and to permit options that are not
vested as of your Termination Date to continue to vest and become exercisable
in accordance with the terms of that option agreement without regard to your
termination of employment. All other terms of each option agreement, including
the installment exercise of options as set forth in Section 3 of the option
agreement, shall remain in effect. Options granted in 1997 and incentive stock
options granted in 1999 shall not be modified pursuant to this Agreement to
further extend their vesting or exercise period, and shall be exercisable in
accordance with their present terms (i.e., exercisable within 30 days of your
termination of employment).

 

(6)                                  You will be entitled to participate in
CFB’s Annual Incentive Compensation Plan at the participation level established
for you by CFB as of December 31, 2001.

 

Where applicable, benefits will also be available to you in connection
with or following your Termination Date under the CFB Flexible Benefit Plan and
other CFB benefit programs, as applicable. 
These benefits will be handled in accordance with the terms and
conditions of those plans.  You are not
eligible to participate in any such plans following your Termination Date
unless otherwise required or permitted pursuant to applicable law.

 

The premium payments in (2) will be made on a timely basis on your
behalf contingent upon your payment on a timely basis of your share of employee
premiums.  The payment in (3) will be
made with your first bi-weekly payment or lump sum payment under (1).

 

2

 

The Plan contributions described in (4) above shall be made at the same
time as contributions for active CFB employees are made.

 

In consideration of CFB’s payment of the benefits as provided in this
Agreement which CFB is not otherwise required to provide, you agree to the
following:

 

1.                                       Waiver and Release of Claims

 

You, for yourself, your heirs, successors, assigns, and anyone who has
or obtains any legal rights or claims through you, hereby fully waive, release
and discharge CFB and its subsidiaries and their past and present directors,
officers, shareholders, agents, employees, attorneys, successors, insurers,
indemnitors, and assigns (the “Releasees”) from any and all legal and equitable
claims, actions, demands, damages, or liabilities of any nature, including,
without limitation, breach of contract, wage or benefit claims, promissory
estoppel, misrepresentation, wrongful discharge, defamation and discrimination
of any kind or any other tort claims, under any federal, state or municipal law
or ordinance, and specifically including rights or claims under the federal Age
Discrimination in Employment Act, the Older Workers Benefit Protection Act,
Title VII of the Civil Rights Act of 1964, the Employee Retirement Income
Security Act of 1974, the Americans With Disabilities Act, and applicable state
human rights laws, whether known or unknown, arising out of or in any way
connected with any matter, fact, or thing relating to your employment and
separation from employment with CFB and existing prior to the date of your
signature on this Agreement, except for claims to the benefits provided for in
this Agreement.  You understand that you
are not waiving any claims or rights which you may have which arise after you
sign this waiver and release.  You
certify that you have not filed any claims, complaints or other actions against
any Releasee and to the full extent permitted by law will not cause or permit
to be filed (to the extent you are able to control such filing) any claim,
complaint, or action of any nature or type against any Releasee. You are
advised by CFB to review your rights and responsibilities under this Agreement
with your own lawyer. You understand that you have 21 days to consider signing
this Agreement from the date it is first given to you.  If you sign this Agreement before 21 days
has elapsed, you will be voluntarily waiving your right to the full 21-day
review period.

 

You acknowledge that CFB specifically denies that it is responsible or
legally obligated to you for any claims you may have, other than claims to
enforce your rights to the benefits provided for under this Agreement.  This Agreement and the payment required
under it fully resolve any and all differences CFB and you may have regarding
your employment and separation from employment with CFB.  This Agreement supersedes all prior written
and oral agreements between CFB and you, except for any written or legal
obligations which you have to CFB under any agreement not to disclose any of
CFB’s confidential information or trade secrets, not to compete with CFB, or
not to solicit CFB customers, employees or other valuable business contacts.

 

 

3

 

2.                                       Right to Rescind

 

You understand that this Agreement is governed by United States and
applicable state laws and that you may change your mind and rescind it within
seven (7) days after signing it, by delivering a written notice to Mark
Anderson, CEO, Community First Bankshares, Inc., 520 Main Avenue, Fargo ND
58124-0001, by hand or mail within the seven (7) day period.  You also understand that this Agreement will
become effective and enforceable only after the rescission period has
expired.  If you rescind this Agreement,
CFB will owe you no benefits as provided under this Agreement following your
termination.  You understand that if you
violate any terms of this Agreement while you are receiving the benefits
provided for above, that payments and provision of all remaining benefits to
you will cease immediately and your obligations herein provided shall remain in
effect, in consideration of all the benefits which you will have received prior
to said violation by you.

 

3.                                       Return of Property

 

You certify that upon your termination date you will return all CFB
property in your possession and all copies thereof, including but not limited
to all keys, equipment, proprietary technology, all CFB documents or
computerized transcriptions thereof, including any CFB Confidential Information
as defined in paragraph 4 below, and any other property in your possession belonging
to CFB.

 

4.                                       Confidential Information

 

Effective upon your signature below, you agree that you will not
divulge, communicate or use for your benefit or the benefit of any person
outside CFB any of CFB’s Confidential Information.  Confidential Information includes but is not limited to CFB’s
trade secrets, records, data, customer and prospective customer lists and
information, short term and long range plans, all financial information,
including sales, specific customer account sales, gross margin information,
operating expense and information, competitive strategies and pricing
information, procurement resources, information concerning CFB’s business or
its manner of operation, personnel information, sales and marketing strategies
and information, and any other confidential or technical information which you
have obtained during your employment with CFB. 
Confidential Information shall mean information not generally known in
the business community that has been disclosed to you and is known to you as a
consequence of your employment by CFB. 
You will not disclose any such information to any person, firm,
corporation, association or other entity for any reason whatsoever.  Confidential Information also includes the
terms and existence of this Agreement, which may be disclosed by you only to
your immediate family, attorney or tax advisor, except as otherwise required by
court order.

 

5.                                       Non-disparagement

 

Effective upon your signature below, you agree not to (a) make, either
directly or indirectly, any derogatory or negative comments of any kind, either
oral or written, to any person or organization about CFB or any officer,
director, shareholder, employee or any other person affiliated with CFB which
would in any way interfere with any of CFB’s business relationships.

 

4

 

6.                                       Opportunity for Review

 

Your signature below acknowledges that you have read this Agreement
carefully and understand all its terms; that you have had full opportunity to
consult with an attorney before signing it; that you are signing it knowingly
and voluntarily, and that you have not relied upon any representations by any
CFB employee, agent or attorney.

 

You are hereby notified that CFB elects to
terminate your Change in Control Severance Agreement upon its expiration
effective December 31, 2001, pursuant to Paragraph 2 of that Agreement dated
December 1, 1998.  In the event the
Board of Directors extends that Agreement prior to its expiration on December
31, 2001, you will be eligible to participate in such extension until December
31, 2002.

 

This Agreement shall not in any way be construed as an admission of
liability by CFB or an admission that CFB has acted wrongfully with respect to
you.  CFB specifically denies and
disclaims any such liability or wrongful acts.

 

In the event that any provision of this Agreement is found to be
illegal or unenforceable, such provision will be severed or modified to the
extent necessary to make it enforceable, and as so severed or modified, the
remainder of this Agreement shall remain in full force and effect.

 

This Agreement shall be interpreted, construed, and enforced in
accordance with the laws of the State of North Dakota, other than its law
dealing with conflicts of law.

 

We ask you to declare that you have entered into this Agreement
voluntarily, without coercion or duress, and with the opportunity to review its
contents with legal counsel should you desire.

 

[Remainder of page intentionally left blank]

 

5

 

If this letter accurately reflects our understanding and agreement,
please sign the original and copy and return the original to me.  The copy is for your file.

 

Sincerely,

 

COMMUNITY FIRST BANKSHARES, INC.

 

	
  By:

  	
  /s/ Mark A.
  Anderson

  	
   

  
	
  Its:

  	
  President

  	
   

  
				

 

Read and agreed to, with declarations

confirmed, this 13th day of March 2001.

 

David
Lee

 

	
  /s/ David A. Lee

  	
   

  	
  March 13, 2001

  	
   

  
	
  Signature

  	
  Date

  

 

6

 

EXHIBIT A

TO

RELEASE AGREEMENT

 

                            , 2001

 

Community First
Bankshares, Inc.

Attn: Mark
Anderson

520 Main Avenue

Fargo, North
Dakota 58124-0001

 

Dear Mark:

 

This letter, dated more
than 7 days after I signed the agreement between Community First Bankshares,
Inc. and me dated             , 2001 is
to certify that I have taken no steps to exercise my 7 day right of rescission,
as described on page 3 of the agreement.

 

Very truly yours,

 

 

________________________

David Lee

 

7

 

EXHIBIT B

 

AMENDMENT TO STOCK OPTION AGREEMENTS

 

THIS AGREEMENT, made as of this         th day of March, 2001, amends the
following Stock Option Agreements between COMMUNITY FIRST BANKSHARES, INC., a
Delaware corporation (hereinafter called the “Company”), and DAVID LEE, an employee
of the Company or one or more of its subsidiaries (hereinafter called the
“Optionee”):

 

	
  Grant
  Date of 

  Options

  	
   

  	
  Option 

  Type

  	
   

  	
  Original Number of Shares
  Subject to Option

  	
   

  
	
  1998

  	
   

  	
  ISO

  	
   

  	
  6,414

  	
   

  
	
  1998

  	
   

  	
  NQSO

  	
   

  	
  3,586

  	
   

  
	
  1999

  	
   

  	
  NQSO

  	
   

  	
  9,125

  	
   

  
	
  2000

  	
   

  	
  ISO

  	
   

  	
  7,299

  	
   

  
	
  2000

  	
   

  	
  NQSO

  	
   

  	
  27,701

  	
   

  
	
  2001

  	
   

  	
  ISO

  	
   

  	
  5,177

  	
   

  
	
  2001

  	
   

  	
  NQSO

  	
   

  	
  19,823

  	
   

  

 

WHEREAS, the Company and Optionee have entered into a
Separation Agreement of even date herewith, which, among other terms, requires
that the exercise period of the above options be extended as set forth herein;

 

THEREFORE, in consideration for the mutual covenants
in that Agreement, the parties hereto agree that the above described Stock
Option Agreements be and hereby are amended as follows:

 

1.               Section 5 of the Option Agreement be amended in its
entirety to read as follows:

 

Termination of Employment.  
In the event the employment of the Optionee shall terminate other than
as a result of the Optionee’s deliberate, willful or gross misconduct, any
portion of the Option that is not vested on the date of such termination shall
continue to be exercisable in installments in accordance with paragraph 3 and
this Option shall terminate and be deemed canceled if not exercised prior to
the expiration of the term specified in paragraph 3 hereof. Nothing in this
Option Agreement shall confer upon the Optionee any right to continue in the
employ of the Company or any of its subsidiaries or interfere in any way with
the right of the Company or any such subsidiary to terminate the employment of the
Optionee at any time.

 

8

 

2.               Section 6 of the Option Agreement shall be amended in
its entirety to read as follows:

 

Death of Optionee.  
If the Optionee shall die, the Option shall be exercisable as to the may
be exercised by the person to whom the Option is transferred by will or the
applicable laws of descent and distribution at any time within six (6) months
after the Optionee’s death, but in no event later than the expiration of the
term specified in paragraph 3 hereof.

 

3.               Section 7 of the Option Agreement shall be deleted in
its entirety and replaced with the following:

 

[RESERVED]

 

4.               Except as set forth above, the terms and conditions of
each Stock Option Agreement be and hereby shall remain in full force and effect
including, but not limited to, the exercise price per Share upon exercise and
the date of expiration of the Option specified in paragraph 3 therein. Nothing
herein is intended to, nor shall it be construed so as to cause the incentive stock
option granted in 1998 to fail to so qualify under Section 421 of the Code if
and to the extent such option is exercised within 90 days of the Optionee’s
termination of employment or within six months of the date of death.

 

IN WITNESS WHEREOF, the Company and the Optionee have
executed this Amendment to the above described Option Agreements as of the day
and year first above written.

 

	
   

  	
   

  	
  COMMUNITY
  FIRST BANKSHARES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  
	
   

  	
   

  	
   

  	
  Its President & CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  David Lee, Optionee

  

 

9<PAGE>

                                                                 EXHIBIT 10.15
                                     LEASE

      This agreement is made and entered into as of July 30, 1996, by and
between David H. Arnold and Muriel M. Arnold, husband and wife, and Daniel M.
Rukavina and Patricia A. Rukavina, husband and wife, parties of the first part,
Lessors, and EMD Associates, Inc., a Minnesota corporation, party of the second
part, Lessee;

      WITNESSETH:

      That the said parties of the first part, in consideration of the tents and
covenants hereinafter mentioned, do hereby demise, lease and let unto the said
party of the second part, and the said party of the second part does hereby hire
and take from the said parties of the first part the premises situated at 4155
Theurer Boulevard, Goodview, Minnesota, legally described as Lots Four (4) and
Five (5), Block One (1), Goodview Industrial Park.

      TO HAVE AND TO HOLD the above rented premises unto the said Lessee, its
successors and assigns, just as they are, without any liability or obligation on
the part of said Lessors of making any alterations, improvements or repairs of
any kind on or about said premises, except as expressly provided herein, for and
during the full term of ten (10) years from and after September 1, 1996, and
thereafter from year to year until terminated by either party by providing the
other party with written notice of such party's election to terminate the lease
not less than 180 days prior to the expiration of the term (as the term may be
extended year to year as provided herein), for the following purposes, to-wit:
Offices and manufacturing or other similar lawful uses.

      And the said Lessee agrees to and with the said Lessors to pay as rent for
the above mentioned premises the sum of Seventeen Thousand One Hundred Fifty and
no/100 ($17,150.00) Dollars per month during the full term of this lease.

      Lessee shall be afforded reasonable access to the leased premises before
September 1, 1996, to make improvements and prepare the premises for its use,
provided Lessee shall not interfere with occupancy and use of the leased
premises by Lessors and their current tenant. If Lessors and their current
tenant vacate part of the leased premises before the commencement date of this
lease specified above, and Lessee elects to occupy and use such vacated part,
this lease shall commence with the date such use begins, and the rent specified
herein shall be equitably prorated for the period before the specified
commencement date.

      The Lessee, for itself, its successors and assigns, hereby covenants with
the Lessors, their heirs, executors, administrators, and assigns:

      (1) That it will promptly pay all gas, oil, electric, light, sewage, water
rates or charges which may become payable during the continuance of this lease
for gas, oil, electric, light and water used on said premises.

                                    -1-
<PAGE>
      (2) That it will keep all and singular the said building and premises,
including the plumbing and heating plant and all driveways, parking areas and
other appurtenances, in such repair as the same are at the commencement of the
said term or may be put in during the continuance thereof, reasonable wear and
tear and damage by fire or extended coverage perils only excepted, and will
promptly replace all glass thereof broken during the said term by other of the
same quality and size.

      (3) That it will not injure, overload or deface or suffer to be injured,
overloaded or defaced the premises or any part thereof.

      (4) That it will save harmless and indemnify the Lessors from and against
all loss, liability or expense that may be incurred by reason of any accident
with the machinery, pipes or from any damage or neglect arising from or in any
way growing out of the misuse or abuse of the city water or from the bursting of
any pipes or from any neglect in not removing snow and ice from the premises; or
from any accident or other occurrence on or about said premises.

      (5) That it will not make or suffer any unlawful, improper or offensive
use of the premises or any use or occupancy thereof contrary to any law of the
State or any ordinance of the City now or hereafter made, or which shall be
injurious to any person or property or which shall be liable to endanger or
affect any insurance on the said building or to increase the premium thereof.

      (6) That it will not make any alterations or additions in or to the
premises without the written consent of the Lessors; nor suffer any holes to be
made or drilled in the outside stone or brick work; nor to suffer any signs to
be placed upon the building except such as the Lessors shall in writing approve.

      (7) Lessee shall not assign, underlet or part with the possession of the
whole or any part of the demised premises without first obtaining the written
consent of the Lessors.

      (8) Lessors at all reasonable times may enter to view the premises and to
make repairs which Lessors may see fit to make, or to show the premises to
persons who may wish to buy or lease, and that during three (3) months next
preceding the expiration of the term Lessors will be permitted to place and keep
next to the sidewalk in the front of said premises a notice 24" x 24" that the
premises are for rent or sale.

      (9) That at the expiration of said term Lessee will peaceably yield up to
Lessors or those having their estates therein the premises and all erections or
additions made upon the same in good repair in all respects, reasonable use and
wear and damage by fire and other unavoidable casualty excepted, as the same now
are or may be put in by Lessors.

      (10) That all property of any kind that may be on the premises during the
continuance of this lease shall be at the sole risk of the Lessee, and that the
Lessors shall not be liable to the Lessee

                                    -2-
<PAGE>
or any other persons for any injury, loss or damage to property or to any person
on the premises; and neither Lessee nor Lessors will make any claim against the
other for losses arising by reason of fire or extended coverage perils for which
full recovery has been made from any other person, corporation, or association.

      (11) Lessee covenants and agrees to pay for the costs of procuring and
maintaining and keeping in full force during the term hereof the following
insurance which shall be procured and renewed from time to time by Lessee at
Lessee's cost and expense:

            (a)   Insurance upon all of the buildings and improvements located
                  on the demised premises against loss thereof, or damage
                  thereto, by fire and the risks included in what is commonly
                  known as an "all risk policy", for the replacement cost from
                  time to time of said buildings and improvements; and any loss
                  insured against shall be payable to Lessors and Lessee as
                  their respective interests may appear.

            (b)   Comprehensive general liability insurance insuring Lessors and
                  Lessee against liability for injury to and destruction of
                  property and for injury to or loss of life of persons, with a
                  combined single limit of at least One Million Dollars per
                  accident or occurrence.

            (c)   The policies or certificates evidencing the aforesaid
                  insurance shall be delivered to the Lessors and in turn may be
                  delivered by the Lessors to their mortgage.

            (d)   All policies shall provide that the same shall not be canceled
                  or altered except on ten (10) days' prior written notice to
                  Lessors and to the mortgagee.

      (12) Lessee covenants and agrees that it will not use or permit any person
to use said demised premises or any part thereof for any use or purpose in
violation of the laws of the United States of America, the State of Minnesota or
ordinances or other regulations of any municipality in which said premises are
situated, or of any other lawful authorities, or use or permit, or suffer any
person or use of said premises or any buildings thereon for the manufacture or
sale of intoxicating liquor of any kind, character or description whatsoever;
that during said term it will keep said demised premises and every part thereof
and all buildings at any time situated thereon in a clean and wholesome
condition, and generally that it will in all respects and at all times fully
comply with all lawful health, police and fire regulations, and also that it
will keep the improvements at any time situated on the demised premises and all
sidewalks and areas adjacent thereto, as well as the area thereof, safe, secure
and comfortable to the lawful and valid requirements of any municipality in
which said premises may be situated, and of all other public authorities.

                                    -3-
<PAGE>
      (13) That no assent, express or implied by the Lessors, to any breach of
any of the Lessee's covenants shall be deemed to be a waiver of any succeeding
breach of the same covenant.

      Provided always that these presents are upon this condition that if the
Lessee or its representatives, successors or assigns, shall neglect or fail to
perform and observe any covenant herein contained which on the Lessee's part is
to be performed, or if their leasehold estate shall be taken in execution, or if
the Lessee shall be declared bankrupt or insolvent according to law or shall
make an assignment for the benefit of their creditors, then and in any case the
Lessors or those having the estate of the Lessors in the premises, lawfully may
immediately or at any time thereafter and without notice or demand, enter into
and upon the demised premises or any part thereof and repossess the same as if
of their former estate and expel the Lessee and those claiming under it and
remove Lessee's effect forcibly if necessary without being taken or deemed to be
guilty of any manner of trespass. And thereupon this demise shall absolutely
determine but without prejudice to any remedies which might otherwise be used by
the Lessors for arrears of rent or any breach of the Lessee's covenants herein
contained.

      Provided also that in case the demised premises or any part thereof shall
at any time during said term be destroyed or damaged by fire or other
unavoidable casualty so as to be unfit for occupancy and use and so the premises
cannot be rebuilt or restored by the Lessors within one (1) year thereafter,
then and in that case this demise shall terminate, but if the premises can be
rebuilt or restored within one (1) year, and if proceeds of insurance payable
for such casualty are sufficient therefor, the Lessors will at their own expense
and with due diligence so rebuild or restore the premises and Lessee shall
continue to pay the rents hereunder without abatement.

      Provided also that in case the whole or any part of the premises hereby
demised shall be taken by the City or State or other public authority for any
use, then this demise shall terminate from the time when such possession of the
whole or any part so taken shall be required for such public use and the rents
properly apportioned shall be paid up to that time; and such taking shall not be
deemed a breach of the Lessors' covenant for quiet enjoyment hereinbefore
contained.

      (14) Lessee covenants and agrees to pay all taxes due and payable and all
assessments hereafter levied during the term or extension thereof of this lease.

      (15) Each party hereto hereby waives all claims for recovery from the
other party for any loss or damage to any of its property insured under valid
and collectible insurance policies to the extent of any recovery collectible
under such insurance, subject to the limitation that this waiver shall apply
only when the fire and extended coverage policies of both parties contain a
clause to the effect this waiver shall not affect said policies or the right of
both parties to recover thereunder. Both parties agree that such insurance
policies will include such clause as long as the same is includable without
extra cost.

                                    -4-
<PAGE>
      This lease shall be subject to and subordinate to the lien of any mortgage
or mortgages or deed or deeds of trust which at any time may be placed upon the
fee title to the premises above described; provided, however, that the rights of
the Lessee, its successors and assigns hereunder shall not be cut off or
affected by foreclosure of any such mortgage or mortgages or deed or deeds of
trust so long as the Lessee, its successors and assigns, shall not be in default
hereunder.

      Lessor hereby grants to Lessee an option to purchase the Leased Premises
for a stipulated and agreed upon sum of $1,389,000. The term of said purchase
option shall commence on the date hereof and shall expire on July 31, 1999. In
the event Lessee desires to exercise its option to purchase the Leased Premises,
Lessee shall notify Lessor in writing of Lessee's exercise of such purchase
option on or before January 31, 1999; otherwise, the purchase option shall be
null and void and of no further force or effect. In the event Lessee timely
exercises its option to purchase the Leased Premises, Lessor and Lessee agree to
cooperate with each other in good faith to close the purchase of the Leased
Premises within thirty (30) days following the date that Lessee notifies Lessor
in writing that Lessee has exercised its purchase option. The purchase option
shall cover the entire Leased Premises, including all improvements, structures,
buildings and fixtures, located therein or thereon, and all of Lessor's right,
title and interest in and to all easements and other appurtenances thereto, and
the same shall be conveyed by Lessor to Lessee by warranty deed and bills of
sale and assignments, with covenants of general warranty, free and clear of all
liens and encumbrances.

      Concurrently with the execution of this agreement, Lessor and Lessee agree
to execute and file of record in the appropriate public records of Winona
County, Minnesota, a Memorandum of Option specifying the leased premises and the
term of the option described in the preceding paragraph, in the form attached
hereto as "Exhibit A".

      IN WITNESS WHEREOF, the parties hereto have executed this agreement,
effective the day and year first above written.

                                    /S/ DAVID H. ARNOLD
                                        David H. Arnold

                                    /S/ MURIEL M. ARNOLD
                                        Muriel M. Arnold

                                    /S/ DANIEL M. RUKAVINA
                                        Daniel M. Rukavina

                                    /S/ PATRICIA A. RUKAVINA
                                        Patricia A. Rukavina

                                    -5-
<PAGE>
                                    EMD ASSOCIATES, INC.

                                    By: /S/ DAVID FRADIN
                                            David Fradin, President

                                    -6-
<PAGE>
                              AMENDMENT TO LEASE

      This Amendment to Lease (this "Amendment") is made and entered into on
this 30th day of July, 1996, by and between David H. Arnold and Muriel M.
Arnold, husband and wife, and Daniel M. Rukavina and Patricia A. Rukavina,
husband and wife (collectively, "Lessor"), and EMD Associates, Inc., a Minnesota
corporation ("Lessee").

      WHEREAS, Lessor and Lessee entered into a Lease Agreement dated July 30,
1996 (the "Lease"), whereby Lessor demised and let unto Lessee the premises
located at 4155 Theurer Boulevard, Goodview Minnesota, and legally described in
said Lease as Lots Four (4) and (5), Block One (1), record plat of Goodview
Industrial Park, for a term commencing September 1, 1996, and continuing until
August 31, 2006, and thereafter from year to year until terminated as provided
therein, for a net rent of $17,150 per month, subject to adjustment as provided
therein; and

      WHEREAS, the Lease remains in full force and effect; and

      WHEREAS, the parties have agreed that the legal description of the
premises was incorrectly described, and the parties desire to modify and amend
the Lease to correct the legal description of the premises covered by the Lease,
and to otherwise modify the Lease in other respects, all as more particularly
described herein;

      NOW, THEREFORE, in consideration of the premises, the mutual covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of all of which is hereby acknowledged and confessed, the parties
hereto hereby agree as follows:

      (16) The legal description of the premises described in the Lease was
incorrect and the parties hereby agree that the premises described in the Lease
shall be modified to be those certain premises located at 4155 Theurer
Boulevard, Goodview, Winona County, Minnesota, and legally described on Exhibit
A attached hereto and incorporated herein for all purposes.

      (17) In the event Lessor is unable to deliver the premises to Lessee free
and clear of all other tenancies, and with all of the prior tenant's property
removed therefrom, on or before September 1, 1996, then the term of the Lease
(and Lessee's obligations thereunder, including, without limitation, the
obligation to pay rent) shall not commence until such premises are delivered to
Lessee in the aforementioned condition. Notwithstanding the foregoing, however,
in the event Lessor is able to deliver the entire manufacturing portion of the
premises to Lessee prior to delivering the office portion of the premises to
Lessee, then Lessor and Lessee agree that the Lease shall commence (and Lessee's
obligations under the Lease, including the payment of rent) only with respect to
the manufacturing portion of the premises on the date that the entire
manufacturing portion of the premises is delivered to Lessee in the
aforementioned conditioned; provided, however, until the remainder of the
premises is delivered to Lessee, all rent and other charges payable under the

                                    -7-

<PAGE>
Lease shall be prorated such that Lessee shall only be obligated to pay a
percentage thereof based upon the ratio that the square footage of the
manufacturing portion of the premises bears to the total square footage of the
manufacturing portion and the office portion of the premises. Notwithstanding
any of the foregoing or anything in the Lease to the contrary, Lessor covenants
and agrees to deliver the entirety of the premises to Lessee in the
aforementioned condition not later than September 30, 1996.

      (18) Except as amended herein, the said Lease shall be and remain in full
force and effect.

      IN WITNESS WHEREOF, the paries hereto have executed this Amendment,
effective July 30, 1996.

                                    /S/ DAVID H. ARNOLD
                                        David H. Arnold

                                    /S/ MURIEL M. ARNOLD
                                        Muriel M. Arnold

                                    /S/ DANIEL M. RUKAVINA
                                        Daniel M. Rukavina

                                    /S/ PATRICIA A. RUKAVINA
                                        Patricia A. Rukavina

                                    EMD ASSOCIATES, INC.

                                    By: /s/ DAVID W. FRADIN
                                    Name:   DAVID W. FRADIN
                                    Title:    PRESIDENT

                                    -8-

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