Document:

Exhibit 10.2

 

Form 10-QSB for quarter ended
December 31, 2003

 

Restated October 15, 2002

 

RESTATED LEASE AND OPTION TO PURCHASE

 

THIS LEASE is made and entered into as of this 6th day of August, 2001,
by and between B&L Rentals, L.L.C., a Minnesota limited liability company
(“Landlord”), and WATERS INSTRUMENTS, INC., a Minnesota corporation.(“Tenant”).

 

WITNESSETH:

 

Landlord and NORTH CENTRAL PLASTICS, INCORPORATED (“NCP”) entered into
a certain Lease and-Option to Purchase dated August 6, 2001 (the “Original
Lease”)..  NCP has merged into Tenant
and Tenant is the surviving corporation of that merger.  Landlord and Tenant desire to amend and
restate the Original Lease in the form of this document.

 

Landlord hereby leases to Tenant, and Tenant leases from Landlord the
premises described in Exhibit A attached and hereby made a part hereof,
which premises are hereinafter referred to as the “leased premises”.

 

TO HAVE AND TO HOLD the leased premises and appurtenances for a term of
approximately ten (10) years, commencing on the date hereof and ending at 12:00
midnight, June 30, 2011, subject to the following terms and conditions.

 

ARTICLE 1.  RENT.  Landlord reserves and Tenant covenants to
pay to Landlord, without demand, at the place at which notices to Landlord are
to be given pursuant to Article 15, base rent for the leased premises as
follows:

 

	
  Period

  	
   

  	
  Monthly
  Base Rent

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Beginning on the date hereof

  and ending December 31, 2003

  	
   

  	
  $

  	
  16,666.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Beginning January 1, 2004

  and ending December 31, 2004

  	
   

  	
  $

  	
  18,750.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Beginning January 1, 2005

  and ending December 31, 2005

  	
   

  	
  $

  	
  20,833.33

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Beginning January 1, 2005

  and ending June 30, 2011

  	
   

  	
  $

  	
  30,000.00

  	
   

  

 

Base rent shall be payable in advance on the first day of each and
every calendar month during the term of this Lease.  A pro rata portion of such monthly base rent shall be due for any
partial

 

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calendar month during the term of this Lease, in proportion to the
number of days of such calendar month falling within the term.

 

ARTICLE 2.  OPTION TO
PURCHASE. 
Landlord hereby grants to Tenant, and Tenant hereby accepts, the
exclusive option to purchase the leased premises (the “Option”) at any time on
or after June 30, 2002, and on or before December 31, 2005, for a
purchase price (the “Option Price”) equal to Two Million Dollars ($2,000,000),
plus any additional amounts necessary to satisfy array Construction Loans
pursuant to Article 6, and subject to the other terms and conditions
stated in this Article.  Said Option
shall be exercisable by written notice to Landlord given by or on behalf of
Tenant at, any time on or after May 31, 2002 and on or before December 1,
2005, and the closing of such purchase (“Option Closing”) shall be held on such
date as Tenant may specify, but no later than December 31, 2005, or such
other date as the parties may mutually agree.

 

(a)                                  1031
Exchange.  Tenant hereby declares its
intent to purchase the leased premises as part of a like-kind exchange under
the provisions of Internal Revenue Code Section 1031 and regulations
promulgated thereunder.  Notwithstanding
the foregoing, Tenant shall have no obligation to purchase the leased premises
unless and until Tenant has exercised the Option.  Landlord shall cooperate reasonably with Tenant as Tenant effects
a like-kind exchange; provided, that Landlord shall not be required to bear
additional costs or liabilities in connection therewith.

 

(b)                                 Within
ten (10) days after exercise of the Option, Landlord shall deliver to Tenant a
commitment for a current-form ALTA owner’s policy of title insurance in the
amount of.  the Option Price and issued
by a title insurance company reasonably acceptable to Tenant.  Tenant shall have a period of ten (10) days
after receipt of said commitment to review the same and to make any objections
thereto, such objections to be made in writing within said ten (10) day period
or deemed waived.  Tenant shall not
object to any reservations, restrictions and easements of record as of the date
of this Lease which have been disclosed to Tenant by Landlord on or before the
date of this Lease.  If any such
objections are made, Landlord shall have a period of sixty (60) days within
which to cure such objections, during which period the Option Closing shall be
postponed and, if necessary, the term of this Lease shall be extended.  If such objections are not cured within such
sixty (60) day period, then Tenant shall have the option to either (i) waive
such objections and proceed to the Option Closing, or (ii) rescind its notice
of exercise of this Option, in which event the term of this Lease shall be
extended for a period of ninety (90) days from and after the date such notice
of exercise of this Option is rescinded. 
Landlord shall pay all charges and exam fees for issuance of the
commitment for title insurance, and Tenant shall be responsible for the premium
for any policy of title insurance ordered by Tenant.

 

(c)                                  At
the Option Closing, Landlord shall convey good and marketable title to the
leased premises to Tenant by general warranty deed, subject to no encumbrances
other than reservations, restrictions and easements of record as of the date of
this Lease which have been disclosed to Tenant by Landlord on or before the
date of this Lease.  This Lease shall
automatically terminate as of the date of the Option Closing, and all rents and
additional rents payable pursuant to this Lease shall be prorated as of the
date of the Option Closing.  Tenant
shall assume all unpaid real estate taxes and special assessments, except for
real estate taxes

 

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attributable to periods prior to the date of this Lease and prorated to
the date of this Lease and special assessments which are levied or pending as
of the date of this Lease, all of which shall be paid by Landlord.

 

(d)                                 In
the event Landlord defaults in the performance of its obligations under this
Article, Tenant shall be entitled to specific performance of Landlord’s
obligations hereunder, ‘to recover Tenant’s actual damages incurred by reason
of such default, or both, or to terminate its exercise of this Option, in which
event the term of this Lease shall be extended for a period of ninety (90) days
from and after the date of such termination. 
In the event Tenant defaults iii the performance of its obligations
under this Article, after exercise of the Option, Landlord shall be entitled to
specific performance of Tenant’s obligations hereunder, to Landlord’s actual
damages incurred by reason of such default, or both, or to terminate the this
Agreement.  In any action to enforce the
parties’ obligations with respect to the Option, the prevailing party shall be
entitled to recover its reasonable costs and attorneys fees.

 

(e)                                  In
the event the leased premises are subject to any encumbrances on the date of
the Option Closing, except as, expressly permitted hereby, all such
encumbrances shall be satisfied out of the sale proceeds to Landlord and, if
such encumbrances cannot be prepaid, Tenant shall be entitled to assume the
same.  Landlord agrees not to place any
additional encumbrances against the leased premises during the tern of this
Lease.

 

ARTICLE 3.  NET LEASE.  Without limitation of the specific
provisions of this Lease, the parties declare that this Lease shall be
construed in all respects to be a .net lease, with all expenses of operating,
maintaining and insuring the leased premises, and paying taxes and special
assessments and similar charges against the leased premises, to be borne by
Tenant, with the exception only of reasonable wear and tear and loss by reason
of fire and other casualty insurable under the current “special cause of loss”
form of building and personal property insurance policy published by the
Insurance Services Office or equivalent (hereinafter referred to as “Standard
Hazard Insurance”).

 

ARTICLE 4.  TAXES AND
SPECIAL ASSESSMENTS. 
Tenant shall pay, when due and before penalty attaches; all real estate
taxes and installments of special assessments, and any similar charges or liens
due and payable during the term hereof with respect to the leased premises and
improvements situated thereon, provided that election shall be made to pay any
special assessment over the longest period allowed by law.  For any partial calendar year within the
term or any renewal term of this Lease, Tenant shall be responsible for a pro
rata portion of such taxes and special assessments due and payable in such
calendar year in proportion to the number of days of such calendar year falling
within the term or renewal term of this Lease, and appropriate adjustments
shall be made at the beginning of the term and at the end of the term or
renewal term hereof.  Notwithstanding
the foregoing, Landlord shall be responsible for, and shall pay when due, all real
estate taxes and installments of special assessments payable prior to the date
of this Lease and prorated to the date of this Lease, and shall pay all special
assessments levied or pending as of the date of this Lease.

 

ARTICLE 5.  MAINTENANCE AND
REPAIR.  Tenant
hereby accepts the leased premises in the condition they are in.  Tenant, at its sole cost and expense, will
keep, maintain

 

3

 

and rebuild, if necessary, the leased premises, including any altered,
rebuilt, additional or substituted improvements, in good repair and appearance
during the term and any renewal term of this Lease, ordinary wear and tear and
damage by fire or other casualty insurable under Standard Hazard Insurance
excepted.  All repairs made by Tenant
shall be at least equal to the original work in class and quality.  Tenant shall put, keep and maintain all
portions of the leased premises and the sidewalks, curbs, drives, parking
areas, landscaped areas, and passageways adjoining the same in a clean and
orderly condition, free of dirt, rubbish, snow; ice and unlawful obstructions.

 

ARTICLE 6.  ALTERATIONS AND
ADDITIONS. 
Tenant may, at any time and from time to time during the term and any
renewal term of this Lease, at its sole cost and expense, make additions to,
alterations of, substitutions and replacements for, and removals from the
improvements on the leased premises (hereinafter “alterations”), provided,
however, that (i) the total market value of the leased premises shall not be
lessened by reason of any such alterations, (ii) any alterations shall be done
in a good and first class workmanlike manner, (iii) all such alterations shall
be .expeditiously completed in compliance with all laws, ordinances, orders,
rules, regulations and requirements applicable thereto, (iv) if Tenant or
Tenant’s contractor estimates that any such alterations will cost more than One
Hundred Thousand and no/100 Dollars ($100,000.00), Tenant shall give to
Landlord notice of its intention to undertake the same at least thirty (30)
days prior to commencement of the work, and (v) prior to commencement of the
work Tenant shall have obtained all required governmental consents and
approvals for such work.  Tenant shall
promptly pay for all such alterations and shall hold Landlord harmless from any
liens or charges against the leased premises by reason of any such work.  Tenant shall procure and pay for all
required permits, certificates and licenses in connection with such
alterations.  All such alterations shall
become the property of Landlord, except that trade fixtures which may be
removed without material damage to the leased premises shall remain the
property of Tenant.

 

Upon Tenant’s exercise of the Option, upon Tenant’s request, Landlord
shall enter into one or more contracts for the alteration or improvement of the
leased premises as Tenant may specify in Tenant’s discretion (the “Construction
Contracts”) subject to the following sentences.  Any such Construction Contract shall, be without recourse to Landlord.  Tenant shall advance and loan to Landlord
without recourse any amounts the Construction Contracts specify Landlord is to
pay during any period before the Option Closing (the “Construction
Loans”).  The Option Price shall be
increased upon the Option Closing to an amount equal to Two Million Dollars
($2,000,000) plus the total amount necessary to pay and satisfy the
Construction Loans:

 

ARTICLE 7.  USE OF LEASED
PREMISES; COMPLIANCE WITH LAWS; ENVIRONMENTAL COVENANTS.  The leased premises shall be used and
occupied by Tenant as an office, warehouse and manufacturing facility and for
any other lawful purpose, and such use and occupancy shall be in compliance
with all applicable laws, ordinances and governmental regulations.  Without limiting the foregoing, Tenant
shall, at Tenant’s expense, make all such improvements and alterations required
by reason of Tenant’s use of the leased premises under the Americans with
Disabilities Act and shall comply with all Environmental Laws as hereinafter
provided, and Landlord shall have no responsibility for the same; provided that
Landlord warrants that the leased premises currently comply with all
requirements of the

 

4

 

Americans with Disabilities Act and Environmental Laws and Tenant shall
have no obligation to remedy any existing violation of the same.  Tenant shall indemnify, defend and hold
harmless Landlord from any loss or liability incurred by reason of any failure
by Tenant to comply with applicable laws in its use and occupancy of the leased
premises from and after the date hereof, and Landlord shall indemnify, defend
and hold harmless Tenant from any loss or liability incurred by reason of
Landlord’s warranty set forth above in this Article.

 

As used herein, the following terms shall have the following meanings:

 

“Environmental, Law” - The Comprehensive Environmental Response,
Compensation and Liability Act, as amended by the Superfund Amendments and
Reauthorization Act of 1986, 42 U.S.C. §9601 et seq.; the Resource Conservation
and Recovery Act, 42 U.S.C. §6901 et seq.; the Hazardous Materials
Transportation Act, 49 U.S.C. § 1802 et seq.; the Toxic Substances
Control Act, 15 U.S.C. §2601 et seq.; the Federal Water Pollution
Control Act, 33 U.S.C. §1251 et seq.; the Clean Water Act, 33 U.S.C.
§1321 et seq.; the Clean Air Act, 42 U.S.C. §.7401 et seq.; the
Minnesota Environmental Response and Liability Act, Minn. Stat. Chap. 115B; the
Minnesota Petroleum Tank Release Cleanup Act, Minn. Stat. Chap. 115C; any other
federal, state, county, municipal, local or other statute, law, ordinance or
regulation that may relate to pesticides, agricultural or industrial chemicals,
wastes, Hazardous Substances (as defined in this Lease), human health or the
environment; all regulations promulgated by a regulatory body pursuant to any
of the foregoing statutes, laws, regulations, or ordinances and all as may from
time to time be amended or subsequently enacted.

 

“Hazardous Substances” - Asbestos, urea formaldehyde, polychlorinated
biphenyls, nuclear fuel or materials, chemical waste, radioactive materials,
explosives, known carcinogens, petroleum products, pesticides; fertilizers, or
any other substance that is toxic or hazardous, or that is a pollutant,
contaminant, chemical, material or substance defined as hazardous or as a
pollutant or contaminant in, or the use; transportation, storage, release or
disposal of which is regulated by, any Environmental Law.

 

Tenant covenants and agrees with Landlord that Tenant shall not use, or
permit the use of, the leased premises for the handling, storage,
transportation, manufacture, release or disposal of any Hazardous Substances,
except for Hazardous Substances of such types and in such quantities as
normally used in Tenant’s business as specified in this Article, which are kept
and used in compliance with all Environmental Laws.  In addition, the Tenant shall not install or maintain, or permit
the installation or maintenance of, any above-ground or underground storage
tanks for the storage of petroleum, petroleum by-products or other Hazardous
Substances in, about or under the leased premises unless (i) the Tenant has
obtained the prior written consent of the Landlord for such installation and
maintenance and (ii) the Tenant installs and maintains such above-ground or
underground storage tanks in compliance with all applicable Environmental
Laws.  Upon the occurrence of an event
of .default hereunder or if the Landlord receives information which leads the
Landlord, in its reasonable discretion, to believe that a Hazardous Substance
is present on or is being handled, stored, transported, manufactured, released
or disposed of in, on or about the leased premises, except as permitted above,
the Landlord may, at its option, through its employees, agents or independent
contractors, enter upon the leased premises and perform, at the Tenant’s
expense, environmental tests (including core drilling),

 

5

 

studies, investigations and reports from a reputable environmental
consultant chosen by Landlord.  If any
such environmental reports indicates any presence, handling, storage,
transportation, manufacture, release or disposal of Hazardous Substances in, on
or about the leased premises, except as permitted above, the Landlord may
require the Tenant, at the Tenant’s expense, to refrain from and take remedial
action with respect to any such presence, handling, storage, transportation,
manufacture, release or disposal to the satisfaction of the Landlord:  The, Tenant shall immediately notify the
Landlord in writing of any claim, investigation, administrative proceeding,
litigation, regulatory hearing or request or demand for remedial or response
action or for compensation which may be proposed, threatened or pending,
alleging the presence, handling, storage, transportation, manufacture, release,
disposal or improper handling of Hazardous Substances in, on or about the
leased premises not permitted hereby. 
The Landlord shall have the right, but not the obligation, to join and
participate in any such investigation, administrative proceeding, litigation,
regulatory hearing or other action, and, unless such investigation,
administrative proceeding, litigation, regulatory action or other action is the
result of any condition which occurred prior to or exists on the date of this
Lease; Tenant shall pay upon demand its attorneys’ fees and expenses in
connection therewith.  The Tenant shall
not take any remedial or response action or enter into any settlement or other
compromise with respect to any claim, investigation, administrative proceeding,
litigation, regulatory hearing or request or demand for remedial or response
action or for compensation without prior written notice to and consent by
Landlord, which consent shall not unreasonably be withheld or delayed.

 

Tenant shall defend, indemnify and hold Landlord harmless from any and
all, claims, actions, damages, costs, expenses and liability suffered or
incurred or paid by or asserted against Landlord, including but not limited to
reasonable attorneys fees incurred in the defense of such claims and actions,
whether for cleanup or other response costs of for damage to property, personal
injury or death, and whether to public agencies or authorities or to private
persons (i) arising from or with respect to acts or practices of Tenant
occurring after the date hereof in violation of any Environmental Law, or (ii)
resulting from the presence on or about the leased premises or the release from
or onto the leased premises of any Hazardous Substances occurring during the term
of this Lease.  The Tenant’s liability
hereunder shall not be limited to the extent of insurance carried by or
provided by the Tenant or subject to any exclusions from coverage in any
insurance policy.  Landlord shall
defend, indemnify and hold Tenant harmless from any and all claims, actions,
damages, costs, expenses and liability suffered or incurred or paid by or
asserted against Tenant, including but not limited to reasonable attorneys fees
incurred in the defense of such claims and actions, whether for cleanup or
other response costs or for damage to property, personal injury or death, and
whether to public agencies or authorities or to private persons (i) arising
from or with respect to acts or practices on or at the leased premises
occurring prior to the date hereof in violation of any Environmental Law, or
(ii) resulting from the presence on or about the leased premises or the release
from or onto the leased premises of any Hazardous Substances occurring prior to
the commencement of the term of this Lease. 
The Landlord’s liability hereunder shall not be limited to the extent of
insurance carried by or provided by the Landlord or subject to any exclusions
from coverage in any insurance policy.

 

The covenants and obligations of Tenant and Landlord contained in this
Article shall survive expiration or earlier termination of the term of
this Lease.

 

6

 

ARTICLE 8.  UTILITIES.  Tenant will pay or cause to be paid when due
all charges for gas, water, sewer, electricity, telephone and other utilities
and services used, rendered or supplied to, upon or in connection with the
leased premises, and Landlord shall have no responsibility to supply the
same.  Without limiting Tenant’s general
duty to .maintain and repair, Tenant shall maintain in good order and condition
during the term and any renewal term of this Lease all pipes, wires, conduits,
boilers and other equipment for the provision of utility services to the leased
premises.

 

ARTICLE 9.  INSURANCE.

 

(a)                                  Public
Liability.  At all times during the term
and any renewal term of this Lease, Tenant shall keep in full force and effect
at its expense a policy or policies of commercial general liability insurance
with respect to the leased.  premises
and the business of Tenant and any subtenant, licensee or concessionaire, with
companies licensed to do business in the State of Minnesota, in which both
Tenant and Landlord shall be named as insureds and adequately covered under
reasonable limits of liability not less than $2,000,000 general liability
aggregate and $1,000,000 per occurrence. 
Tenant shall furnish Landlord with certificates or other acceptable
evidence that such insurance is in effect, which evidence shall state that
Landlord shall be notified in writing thirty (30) days prior to cancellation,
material change or renewal of insurance.

 

(b)                                 Hazard
Insurance.  At all times during the term
and any renewal term of this Lease, Tenant shall keep in full force and effect
a policy of Standard Hazard Insurance, with companies licensed to do business
in the State of Minnesota, covering all improvements on the property in the
amount of their full insurable replacement value, naming both Landlord and
Tenant as insureds; and shall furnish Landlord with certificates or other
acceptable evidence that such insurance is in effect, which evidence shall
state that Landlord shall be notified in writing thirty (30) days prior to
cancellation, material change or renewal of such insurance.  Tenant may separately or under the same policy
insure any trade fixtures, equipment, supplies and other personal property
owned by Tenant and located upon the leased premises.

 

(c)                                  Waiver
of Subrogation.  To the extent such
waiver does not void or diminish the coverage under any policy, Landlord and
Tenant hereby waive any rights each may have against the other on account of
any loss or damage occasioned to Landlord or Tenant, as the case may be, or
their respective property, to the extent such loss or damage is covered by
insurance carried by either Landlord or Tenant or may be insured (regardless of
whether coverage is actually in effect) under Standard Hazard Insurance.

 

ARTICLE 10.  NON-LIABILITY;
COVENANTS TO HOLD HARMLESS.  Landlord shall be held harmless by Tenant from any liability for
damages to any person or property in or upon the leased premises and the
sidewalks adjoining same, including the property of Tenant and its employees
and all persons in he building at its or their invitation.  All property kept, stored or maintained in
the leased premises shall be so kept, stored or maintained at the sole risk of
Tenant.  Tenant agrees to make payment
when due for any labor, services, materials, supplies or equipment furnished or
alleged to have been furnished to Tenant in or about the leased premises during
the term of this Lease which may be secured by any mechanic’s, materialmen’s or
other

 

7

 

lien against the leased premises or the Landlord’s interest therein and
will cause each such lien to be discharged at the time performance of any
obligation secured thereby matures; provided that Tenant may contest such lien
by appropriate proceedings which stay the enforcement thereof, upon providing
reasonable assurances or security to Landlord that Tenant will pay the amount
secured by such lien if found to be valid, but if such lien is reduced to final
judgment and if such judgment or process thereon is not stayed, or if stayed
and said stay expires, then and in such event Tenant shall forthwith pay and discharge
said judgment.  Landlord shall have the
right to post and maintain on the leased premises notice of nonresponsibility
under the laws of Minnesota.

 

ARTICLE 11.  EMINENT DOMAIN.

 

(a)                                  Entire
Premises.  If substantially all of the
leased premises shall be taken under the power of eminent domain-then the term
of this Lease shall cease as of the day possession shall be taken and the rent
shall be paid up to that day with a proportionate refund by Landlord of such
rent as may have been paid in advance.

 

(b)                                 Partial
Taking.  If more than ten percent (10%)
of the floor space in the building or buildings located on the leased premises
shall be taken under the power of eminent domain, Tenant shall have the right
to terminate this Lease as of the day possession shall be taken by notice to
Landlord given within ten (10) days after possession is so taken.  If more than twenty percent (20%) of the
parking area in the leased premises is taken under the power of eminent domain,
Tenant shall have the right to terminate this Lease as of the day possession
shall be taken by like notice to Landlord, unless Landlord shall provide and
make subject to this Lease and part of the leased premises, on or before the
day possession shall be taken, a reasonably equivalent substitute parking
area.  Tenant shall be allowed a
reasonable time not to exceed ninety (90) days after any such termination to
vacate the remainder of the leased premises, and rent shall be paid up to the
day possession shall be taken or the day Tenant vacates the remainder, of the
leased premises, whichever is later.

 

(c)                                  Continuation
of Lease.  In the event this Lease is
not terminated pursuant to paragraphs (a) or (b) of this Article, all the terms
of this Lease shall continue in effect, except that the base rent shall be
reduced in proportion to the reduction in floor space in the building or
buildings located on the leased premises as a result of the taking, and
Landlord shall, at its own cost and expense, make all necessary repairs or
alterations to the basic building or buildings, exterior and interior work to
be in conformance with the then existing architectural design of the
improvements so, as to constitute the remaining premises a complete
architectural unit.

 

(d)                                 Damages.  In any event all damages awarded for such
taking under the power of eminent domain, whether for the whole or a part of
the leased premises, shall belong to and be the property of Landlord whether
such damages shall be awarded as compensation for diminution in value to the
leasehold or to the fee of the premises; provided, however, that Landlord shall
not be entitled to any award made to Tenant for its leasehold improvements made
after the date of this Lease, for relocation benefits provided by M.S.A.
Section 117.52 or similar successor statute, for “going concern” value of
its business, loss of business, fair value of, and cost of removal of stock and
fixtures or for temporary requisition of the use or occupancy of the

 

8

 

leased premises or a part thereof, which shall belong to Tenant; and
provided, however, that the Option Price for the Option granted in
Article 2 above shall be reduced by the amount of any such awards paid to
Landlord.

 

(e)                                  Definition.  The term “eminent domain” shall include the
exercise of any similar power and any purchase or other acquisition in lieu of
condemnation.

 

ARTICLE 12.  DAMAGE.

 

(a)                                  Partial
or Total Destruction.  In case the
leased premises shall be partially or totally destroyed by fire or other
casualty insurable under Standard Hazard Insurance so as to become partially or
totally untenantable, the same, unless Landlord or Tenant shall terminate this
Lease as hereinafter provided, shall be repaired or rebuilt as quickly as
practicable at the cost of Landlord (provided that Landlord shall not be
responsible for any costs in excess of available insurance proceeds paid or
payable by reason of such damage or destruction), and the base rent shall abate
during the period of repair in proportion to the portion of the floor space in
the building or buildings located on the leased premises that is untenantable
or unfit for use by Tenant in its business.

 

(b)                                 Extensive
Damage; Election.  If the building or
buildings located on the leased premises shall be destroyed or damaged by fire
or other casualty insurable under Standard Hazard Insurance, so as to become
wholly untenantable, and the leased premises cannot be repaired or restored
within the remaining term of this Lease, then either Landlord or Tenant may
terminate this Lease as of the date of such destruction or damage by giving
written notice to the other party of such election within thirty (30) days
after such damage or destruction.

 

(c)                                  Effect
on Option.  Notwithstanding any
provision of this Lease, in the event this Lease is terminated by Landlord by
reason of damage to or destruction of the leased premises, Tenant shall have
the right to exercise the Option granted in Article 2 hereof by written
notice to Landlord given at any time within sixty (60) days after the date of
such damage or destruction, whether or not the Option is otherwise exercisable
at such time, and upon the Option Closing pursuant to Tenant’s exercise of the
Option all insurance proceeds paid or payable by reason of such damage or
destruction shall be paid or assigned to Tenant, and the Option Price shall
otherwise not be adjusted under this Article.

 

ARTICLE 13.  SURRENDER;
HOLDING OVER. 
On the last day of the term hereof or on the sooner termination thereof,
Tenant shall peaceably surrender the leased premises in good order, condition
and repair, broom-clean, fire and other casualty insurable under Standard
Hazard Insurance and reasonable wear and tear only excepted.  Tenant shall repair any damage to the leased
premises caused by removal of Tenant’s trade fixtures or equipment.  Any of Tenant’s property, not removed on the
last day of the term hereof or on the sooner termination thereof, shall be
deemed abandoned.  In the event Tenant
remains in possession of the leased premises after the expiration of the term
and any renewal term of this Lease without the execution of a new lease but
with the acquiescence of Landlord, it shall be deemed to be occupying said
leased premises as a tenant from month-to-month, subject to all the conditions,

 

9

 

provisions and obligations of this Lease insofar as the same can be
applicable to a month-to-month tenancy.

 

ARTICLE 14.  DEFAULT;
REMEDIES.

 

(a)                                  Default.  The occurrence of any of the following shall
constitute an event of default under this Lease:

 

1.                                       Tenant shall
have failed to pay any installment of base rent to Landlord when the same shall
be due and payable and such failure shall continue for a period of ten (10)
days after written notice thereof; or

 

2.                                       Tenant shall
have failed to keep in full force and effect the insurance policies required by
Article 9 above or shall have failed to pay taxes  and special assessments when due as required
by Article 4 above and such failure shall continue for a period of ten
(10) days after written notice thereof; or

 

3.                                       Tenant shall
have failed to comply with any other provision of this Lease, and shall not
have cured such failure within sixty (60) days after Landlord, by written
notice, has informed Tenant of such noncompliance; provided, however, in the
case of a default which cannot be cured, with due diligence, within a period of
sixty (60) days, Tenant shall have such additional time to cure such default as
may be reasonably necessary, provided that Tenant proceeds promptly and with
due diligence to cure such default after receipt of said notice; or

 

4.                                       Tenant shall
have filed a petition in bankruptcy or insolvency or for reorganization or for
the appointment of a receiver or trustee for it or its property, or any similar
petition, or shall have made an assignment for the benefit of creditors, or an
order for relief shall have been entered in any proceeding under the federal
Bankruptcy Code in which Tenant is named as the debtor; or

 

5.                                       Any involuntary
petition of the type or similar to those referred to in Paragraph 4 of this
Subsection (a) shall have been filed against Tenant, and shall not be
vacated or withdrawn within one hundred twenty (120) days after the date of the
filing thereof.

 

(b)                                 Remedies.  Whenever any event of default shall have
occurred and be subsisting, Landlord may elect either:

 

1.                                       To cancel and
terminate this Lease; or

 

2.                                       To reenter and
take possession of the leased premises, and terminate Tenant’s right to
possession of the leased premises, without terminating this Lease or any of
Tenant’s obligations for the balance of the term of this Lease.

 

10

 

Landlord may at any time elect to terminate this Lease despite a prior
election to exercise its remedies under Paragraph 2 above.  In the event Landlord exercises its remedies
under Paragraph 2 above, it may remove all persons and property from the leased
premises and store such property at the cost of and for the account of Tenant,
may make alterations and repairs and redecorate the premises to the extent
deemed by Landlord necessary or desirable, and may relet the premises, or any
part thereof, for the account of Tenant, to any person, firm or corporation,
other than Tenant, for such tent, for such time and upon such terms as
Landlord, in Landlord’s sole discretion, shall determine; but Landlord shall
not be required to accept any tenant offered by Tenant or to observe any
instruction given by Tenant concerning such reletting.  Any rent and other amounts received by
Landlord upon such reletting shall be applied first to the costs and expenses
of Landlord in regaining possession of the leased premises, storing property
removed from the premises, making alterations or repairs or redecorating the
leased premises, and reletting the premises, including, without limitation,
brokerage and reasonable attorneys fees, then to the rentals and other
obligations of Tenant under this Lease, and any surplus shall be paid to
Tenant.

 

ARTICLE 15.  NOTICES.  Any notice required or permitted under this
Lease shall be deemed sufficiently given or served when personally delivered
(in person, by commercial courier service, by facsimile with confirmed
transmission, or otherwise) or forty-eight (48) hours after mailed by registered
or certified mail to Tenant at:

 

Waters Instruments, Inc.’

2950 Xenium Lane North

Suite 108 .

Plymouth, MN 55441.

Facsimile No.:  763/509-7450

Attention:  Gerald W. Grabowski

 

and to Landlord at:

 

Jon Berg and Ronald Langlie

B&L Rentals, L.L.C.

906 Fifth Avenue East

Ellendale, MN 56026

Facsimile No.: 

 

and either party may by like written notice at any time designate a
different address to which notices shall subsequently be sent.

 

ARTICLE 16.  GENERAL.  This Lease does not.  create the relationship of principal and
agent or of partnership or of joint venture or of any association between
Landlord and Tenant, the sole relationship between Landlord and Tenant being
that of landlord and tenant and optionor and optionee.  One or more waivers of any default of Tenant
by Landlord shall not be construed as a waiver of a subsequent, breach of the
same covenant, term or condition.  The
consent to or approval by Landlord of any act by Tenant requiring Landlord’s
consent or approval shall not waive or render unnecessary Landlord’s consent to
or approval of any subsequent similar act by

 

11

 

Tenant.  Whenever under this
Lease provision is made for Tenant securing the consent or approval of
Landlord, such consent or approval shall not be unreasonably withheld.  Each term and each provision of this Lease
performable by Tenant shall be construed to be both a covenant and a
condition.  The marginal or topical
headings of the several articles, paragraphs and clauses are for convenience
only and do not define, limit or construe the contents of such articles,
paragraphs or clauses.  All preliminary
negotiations and all prior written agreements regarding the subject matter of
this Lease are superseded and merged into and incorporated in this Lease.  The laws of the State of Minnesota shall
govern the validity, performance and enforcement of this Lease.  The terms, covenants and conditions hereof
shall be binding upon and inure to the benefit of the successors in interest
and assigns of the parties hereto.

 

ARTICLE 17.  QUIET
ENJOYMENT. 
Landlord covenants and agrees with Tenant that upon Tenant paying the
rent and performing all of the terms and conditions on Tenant’s part to be
observed and performed, Tenant may peaceably and quietly enjoy the premises
hereby leased, subject, nevertheless, to the terms and conditions of this
Lease.

 

ARTICLE 18.  ASSIGNMENT AND
SUBLETTING. 
Neither Landlord nor Tenant shall assign this Lease or sublease all or
part of the leased premises without the prior written consent of the other
party.  Notwithstanding the foregoing,
Tenant shall have the right to assign or transfer its rights and interest under
this Lease, including without limitation its rights under Article 2
hereof, without the consent of Landlord, in connection and together with the
sale or transfer of all or substantially all the assets of Tenant, in
connection with a merger of Tenant with another entity, regardless of whether
Tenant or another entity is the surviving entity, or to an entity that,
controls, is controlled by, or is under common control with Tenant; provided
that the obligations of Tenant hereunder shall not be released or otherwise
affected by such assignment and Tenant, shall remain personally liable for the
payment and performance of its obligations hereunder upon and after such
assignment or transfer.

 

ARTICLE 19.  SETTLEMENT
ISSUES. 
Notwithstanding any other provision of this Agreement, if the Option is
exercised and the Option Closing occurs prior to December 2, 2003, the Option
Price will be reduced as set forth in the following table:

 

	
  Date of Option Closing

  	
   

  	
  Reduction
  of Option Price

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  After January 1 and on or before February 1, 2003

  	
   

  	
  $

  	
  70,950

  	
   

  
	
  After February 1 and on or before March 1, 2003

  	
   

  	
  $

  	
  64,500

  	
   

  
	
  After March 1 and on or before April 1, 2003

  	
   

  	
  $

  	
  58,050

  	
   

  
	
  After April 1 and on or before May 1, 2003

  	
   

  	
  $

  	
  51,600

  	
   

  
	
  After May 1 and on or before June 1, 2003

  	
   

  	
  $

  	
  45,150

  	
   

  
	
  After June 1 and on or before July, 1, 2003

  	
   

  	
  $

  	
  38,700

  	
   

  
	
  After July 1 and on or before August 1, 2003

  	
   

  	
  $

  	
  32,250

  	
   

  
	
  After August 1 and on or before September 1, 2003

  	
   

  	
  $

  	
  25,800

  	
   

  
	
  After September 1 and on or before October 1, 2003

  	
   

  	
  $

  	
  19,350

  	
   

  
	
  After October 1 and on or before November 1, 2003

  	
   

  	
  $

  	
  12,900

  	
   

  
	
  After November 1 and on or before December 1, 2003

  	
   

  	
  $

  	
  6,450

  	
   

  

 

ARTICLE 20.  MEMORANDUM OF
LEASE.  The
parties agree not to record or register this Lease, but the parties shall
execute on the date hereof two (2) copies of the Memorandum of

 

12

 

Lease and Option attached hereto as Exhibit B, and either party
may record or register said Memorandum of Lease and Option.

 

(Signatures follow).

 

IN WITNESS WHEREOF, the Landlord and the Tenant have caused this Lease
to be executed as of the day and year first above written.

 

 

	
   

  	
  B&L RENTALS, L.L.C.

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Jon A. Berg

  
	
   

  	
  Its

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Ronald H. Langlie

  
	
   

  	
  Its

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WATERS INSTRUMENTS, INC.

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Its President

  

 

13

 

EXHIBIT A

TO

LEASE AND OPTION TO PURCHASE

 

LEGAL DESCRIPTION OF LEASED PREMISES

 

PARCEL I:

 

A tract of land in the Northwest Quarter of Section 30, Township
105 North, Range 20 West, Steele County, Minnesota, described as follows:

 

Commencing at a point on the North line of State Highway #30 and 600
feet West of the Intersection of the West right-of-way of Interstate
Highway #35 and North right-of-way of State Highway #30; thence North 400 feet;
thence West 600 feet; thence South to a point on the North line of said State
Highway #30; thence East along the North right-of-Way Highway #30 to a point of
commencement.

 

PARCEL II:

 

A tract of land being a part of the Northwest Quarter of
Section 30, Township 105 North, Range 20 West, Steele County, Minnesota,
described as follows:

 

Commencing at the Southeast Corner of said Northwest Quarter; thence
West along the South line of said Northwest Quarter 650.66.feet; thence North
20 degrees West 44.70 feet; thence North 20 degrees East 79.81 feet to the
point of beginning (said point being the intersection of the North Right
of Way line of State Trunk Highway No. 30 and the Westerly Right of Way line of
Interstate Highway No. 35); thence West parallel with the South line of said
Northwest Quarter along said North Right of Way line 600.0 feet; thence North
400.0 feet; thence East 745.23 feet to the Westerly Right of Way line of said
Highway No: 35; thence South 20 degrees West 425.68 feet to the point of
beginning.

 

 

EXHIBIT B

TO

BUILDING LEASE

 

MEMORANDUM OF LEASE AND OPTION

 

THIS AGREEMENT, Made and entered into as of the 6th day of August,
2001, by and between B&L Rentals, L.L.C., a Minnesota limited liability
company (“Landlord”), and NORTH CENTRAL PLASTICS, INCORPORATED, a Minnesota
corporation (“Tenant”).

 

WITNESSETH:

 

WHEREAS, the parties have this day entered into that certain Lease and
Option to Purchase (the “Lease and Option”),. 
wherein Landlord has leased to Tenant and has granted Tenant an option
to purchase certain property located in Steele County, Minnesota, described in Exhibit
A attached hereto, which, premises are hereinafter referred to as the
“leased premises”.

 

NOW, THEREFORE, in consideration of the mutual covenants contained in
said Lease and Option, and for other good and valuable consideration, Landlord
hereby leases the leased premises to Tenant, upon the terms and conditions and
for the rent set forth in the Lease and Option, which is hereby incorporated
herein and made a part hereof, for a term of approximately ten (10) years,
commencing on the date hereof and expiring on June 30, 2011, and grants to
Tenant the option to purchase the leased premises during a period commencing
June 30, 2002 and expiring December 1, 2005 upon the terms and
conditions and for the purchase price set forth in the Lease and Option.

 

IN WITNESS WHEREOF, the parties have hereunto set their hands the day
and year first above written.

 

	
   

  	
  B&L RENTALS, L.L.C.

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Jon A. Berg

  
	
   

  	
  Its

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Ronald H. Langlie

  
	
   

  	
  Its

  	
   

  

 

(signatures continue)

 

1

 

	
   

  	
  WATERS INSTRUMENTS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Its President

  

 

 

	
  STATE OF MINNESOTA

  	
  )

  
	
   

  	
  ) SS.

  
	
  COUNTY OF ___________

  	
  )

  

 

The foregoing instrument was acknowledged before me this
         day of October, 2002, by JON
A. BERG and RONALD H. LANGLIE on be of B&L Rentals, L.L.C.

 

	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Notary Public

  

 

 

	
  STATE OF MINNESOTA

  	
  )

  
	
   

  	
  ) SS.

  
	
  COUNTY OF ___________

  	
  )

  

 

The foregoing instrument was acknowledged before me this
        of October, 2002, by Jerry
Grabowski, the President of WATERS INSTRUMENTS, INC., a Minnesota corporation on
behalf of the corporation.

 

	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Notary Public

  

 

THIS INSTRUMENT DRAFTED BY:

 

FREDRIKSON & BYRON, P.A.

1100 International Centre

900 Second Avenue South

Minneapolis, MN 55402

 

2

 

EXHIBIT A

TO

MEMORANDUM OF LEASE AND OPTION

 

LEGAL DESCRIPTION OF LEASED PREMISES

 

PARCEL I:

 

A tract of land in the Northwest Quarter of Section 30, Township
105 North, Range 20 West, Steele County, Minnesota, described as follows:

 

Commencing at a point on the North line of State Highway #30 and 600
feet West of the Intersection of the West right-of-way of Interstate
Highway #35 and North right-of-way of State Highway #30; thence North 400 feet;
thence West 600 feet; thence South to a point on the North line of said State Highway
#30; thence East along the North right-of-way Highway #30 to a point of
commencement.

 

PARCEL II:

 

A tract of land being a part of the Northwest Quarter of
Section 30, Township 105 North, Range 20 West, Steele County, Minnesota,
described as follows:

 

Commencing at the Southeast Comer of said Northwest Quarter; thence
West along the South line of said Northwest Quarter 650.66 feet; thence North
20 degrees West 44.70 feet; thence North 20 degrees East 79.81 feet to the
point of beginning.(said point being the intersection of the North Right
of Way line of State Trunk Highway No. 30 and the Westerly Right of Way line of
Interstate Highway No. 35); thence West parallel with the South line of said
Northwest Quarter along said North Right of Way line 600.0 feet; thence North
400.0 feet; thence East 745.23 feet to the Westerly Right of Way 1ine of said
Highway No. 35; thence South 20 degrees West 425.68 feet to the point of
beginning.

 

 

TERMINATION OF LEASE AGREEMENT

 

THIS AGREEMENT is made this 3rd day of November, 2003, by
and between B & L Rentals, LLC, a Minnesota limited liability company,
hereinafter referred to as “B & L Rentals”: and North Central Plastics,
Incorporated, now known as Waters Instruments, Inc. through a merger into
Waters Instruments, Inc., hereinafter referred to as “Waters”.

 

WHEREAS, the parties hereto did enter into a Lease Agreement and Option
dated August 6, 2001, pursuant to that Memorandum of Lease and Option
dated August 6, 200, filed August 15, 2001, as Document No. A291865,
referred to that certain unrecorded Lease by and between B & L Rentals,
LLC, a Minnesota limited liability company, as Lessor and North Central
Plastics, Incorporated, a Minnesota corporation, as Lessee; and

 

WHEREAS, said option has been exercised and said real estate has been
acquired by Waters Instruments, Inc.; and

 

WHEREAS, the lease agreement is to be terminated.

 

NOW, THEREFORE, the parties hereto agree as follows:

 

1.                                       That
lease agreement referred to by that Memorandum of Lease and Option dated
August 6, 2001, filed August 15, 2001, as Document No. A291865 is
hereby terminated effective November 3, 2003.

 

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

 

 

	
   

  	
  B & L Rentals, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ronald H. Langlie

  	
   

  
	
   

  	
   

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Waters Instruments, Inc.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gregory J. AnshusEXHIBIT 10.3

 

FORM 10-QSB FOR
QUARTER ENDED DECEMBER 31, 2003

 

TRIPLE NET LEASE

 

THIS LEASE, made
and entered into on this 13th day of January, 2004, by and between 1620
Industrial Drive LLC, a Minnesota limited liability company, herein referred to
as “Lessor,” and Waters Instruments Inc., a Minnesota corporation, herein
referred to as “Tenant.”

 

ARTICLE 
I.                                           DEMISE, DESCRIPTION AND
USE OF PREMISES

 

Lessor leases to Tenant
and Tenant hires from Lessor, for the purpose of conducting a research,
distribution, service and manufacturing business thereon, those certain
premises, with the appurtenances (“premises”), shown on the floorplan attached
hereto as Exhibit “A”, constituting part of the building located at
1620 Industrial Drive in the City of Rochester, County of Olmsted, State of
Minnesota, and more particularly described below.  As used herein, the term “building” refers to the real property
described on Exhibit “B” attached hereto and any improvements located
thereon, from time to time, during the term hereof.  Tenant shall also have the right to non-exclusive use of the
parking areas and drives on the land, to exclusive use of 15 of the parking
stalls directly adjacent to the portion of the building constituting the
premises or adjacent to the sidewalks abutting the same, to install signage on
the building or on the land identifying Tenant’s occupancy in compliance with
all applicable laws, and to use of any common areas in the building designed
for use by all occupants thereof.

 

ARTICLE 
II.                                       TERM

 

The initial term of this
Lease shall be for a period of five (5) years, commencing on March 1,
2004, and ending on February 28, 2009. 
As used herein, the expression “term hereof” refers to such initial term
and to any renewal thereof as hereinafter provided.

 

ARTICLE 
III.                                   RENT

 

Tenant shall pay for the
use and occupancy of the premises a fixed annual rental for each year of the
rental term of Sixty-One Thousand Seven Hundred Sixty ($61,760.00) Dollars,
payable in equal monthly installments of Five Thousand One Hundred Forty-Six
($5,146.00) Dollars, on the 1st day of each month, in advance, without demand.

 

Assuming Tenant exercises the option to extend the
term of this Lease for five (5) years in accordance with Article XVIII
below, the rent shall be increased (but not decreased) effective as of
March 1, 2009, based on the change in the Consumer
Price Index, calculated as follows:

 

 

Lessor
shall compute the increase, if any, in the cost of living based upon the
“revised Consumers’ Price Index for All Urban Consumers-Cities,” hereinafter
called the Index, published by the Bureau of Labor Statistics of the United
States Department of Labor.

 

The Index number
indicated in the column for the City of Minneapolis, entitled “all items,” for
the month of March, 2004, shall be the “Base Index Number,” and the
corresponding Index for the month of February, 2009 shall be the “Current Index
Number.”

 

The Current Index Number
shall be divided by the Base Index Number. 
The resulting quotient (if greater than 1) shall be multiplied by
the initial rent to determine the new rent. 
If the resulting quotient is 1 or less, the rent shall remain the same.

 

	
   

  	
  Example:

  	
  CPI – March 2004

  	
  =  100

  	
   

  
	
   

  	
  CPI –
  February 2009

  	
  =  109

  	
   

  
	
   

  	
  Rent Commencing
  3-1-2009

  	
  =  109/100 x $5,146.00

  	
  = $5,609.14/mo

  

 

Notwithstanding anything
in this Lease to the contrary, all amounts payable by Tenant to or on behalf of
Lessor, whether or not expressly denominated as rent, shall be deemed to be
additional rent for all purposes, including for the purposes of Section 502(b)(7)
of the Bankruptcy Code, Title 11 of the United States Code.

 

Notwithstanding the
foregoing, the increase in fixed annual rental as of March 1, 2009 shall
not exceed ten percent (10%) of the initial fixed annual rental.

 

In addition to the fixed annual
rental provided above, Tenant shall pay to Lessor on the first day of each
month commencing March 1, 2004 and ending February 1, 2009, without
demand, an additional payment of One Hundred Thirty-three and 33/100 Dollars
($133.33), which amount represents Tenant’s contribution to Landlord’s cost of
constructing the demising wall and separately-metered utilities to the premises
as required by this Lease.  Tenant shall
not otherwise be responsible for, and Landlord shall pay without any right of
reimbursement, all costs and expenses related to construction of the demising
wall and the installation of separate meters and construction of other pipes,
lines, conduits and facilities necessary to provide separately-metered utility
service to the premises.  The payment
required by this paragraph shall not continue during any renewal term of this
Lease.

 

ARTICLE 
IV.                                  WARRANTY OF QUIET
POSSESSION

 

Lessor covenants that
Tenant shall have quiet and peaceable possession of the demised premises during
the term hereof.

 

2

 

ARTICLE 
V.                                      USES PROHIBITED

 

Tenant shall not use or
permit the demised premises, or any part thereof, to be used for any purpose or
purposes other than the purpose or purposes for which the demised premises are
hereby leased; and no use shall be made or permitted to be made of the demised
premises, or acts done, which will cause a cancellation of any standard
insurance policy covering any building located on the premises, or any part
thereof, nor shall Tenant sell, or permit to be kept, used or sold, in or about
the demised premises any article which may be prohibited by the standard
form of insurance policies.  Tenant
shall, at Tenant’s sole cost, comply with all requirements pertaining to the
demised premises, of any insurance organization or company necessary for the
maintenance of standard insurance, as herein provided, covering any building
and appurtenances at any time located on the demised premises.

 

ARTICLE 
VI.                                  ABANDONMENT OF PREMISES

 

Tenant shall not vacate
for a period in excess of thirty (30) days, subject to force majeure such as
casualty damage or acts of god, or abandon the premises at any time during the
term hereof; if Tenant shall abandon, so vacate or surrender the demised premises,
or be dispossessed by process of law, or otherwise, by reason of Tenant’s
default under this Lease, any personal property belonging to Tenant and left on
the premises shall be deemed to be abandoned, at the option of the Lessor,
except such property as may be encumbered to Lessor.

 

ARTICLE 
VII.                              WASTE AND NUISANCE
PROHIBITED

 

During the term of this
Lease, Tenant shall comply with all applicable laws affecting the demised
premises, the breach of which might result in any penalty on Lessor or
forfeiture of Lessor’s title to the demised premises.  Tenant shall not commit, or suffer to be committed, any waste on
the demised premises, or any nuisance.

 

ARTICLE 
VIII.                          LESSOR’S RIGHT OF ENTRY

 

Tenant shall permit
Lessor and the agents and employees of Lessor to enter into and upon the
demised premises at all reasonable times and upon reasonable notice for the
purpose of inspecting the same, or for the purpose of posting notices of
non-responsibility for alterations, additions or repairs, without any liability
to Tenant for any loss of occupation or quiet enjoyment of the premises thereby
occasioned, and shall permit the Lessor and Lessor’s agents and employees, at
anytime within the last six (6) months prior to the expiration of this Lease,
or any renewals thereof, to place on the demised premises any usual or ordinary
“To Let” or “To Lease” signs and exhibit the premises to prospective tenants at
reasonable hours.  Notwithstanding the
foregoing, Lessor recognizes that Tenant manufactures and handles an
FDA-approved product which requires a special manufacturing environment, and
Lessor agrees to use all commercially-reasonable efforts in exercising its
rights of entry provided herein not to interfere with or otherwise adversely
affect Tenant’s business operations in the premises.

 

3

 

ARTICLE 
IX.                                  SUBLETTING AND ASSIGNMENT

 

Tenant shall not sublet
the premises in whole or in part without Lessor’s written consent, which
consent shall not unreasonably be withheld, delayed or conditioned, and shall
not be conditioned upon an increase in rentals, and the making of any such
sublease shall not release Tenant from, or otherwise affect in any manner, any
of Tenant’s obligations hereunder. 
Tenant shall not assign, transfer, mortgage or encumber this Lease, or
any interest therein, without the prior written consent of Lessor, which
consent shall not unreasonably be withheld, delayed or conditioned, and shall
not be conditioned upon an increase in rentals, and a consent to an assignment
shall not be deemed to be a consent to any subsequent assignment.  If this Lease is assigned to any person or
entity pursuant to the provisions of the Bankruptcy Code, Title 11 of the
United States Code, any and all moneys or other considerations payable or
otherwise to be delivered in connection with such assignment shall be paid or
delivered to Lessor, shall be and remain the exclusive property of Lessor, and
shall not constitute property of Tenant or of the estate of Tenant within the
meaning of the Bankruptcy Code.  Any and
all moneys or other considerations constituting Lessor’s property under the
preceding sentence not paid or delivered to Lessor shall be held in trust for
the benefit of Lessor and to be promptly paid or delivered to Lessor.

 

Any person or entity to
which this Lease is assigned pursuant to the provisions of the Bankruptcy Code,
Title 11 of the United States Code, shall be deemed without further act or
deed to have assumed all of the obligations arising under this Lease on and
after the date of such assignment.  Any
such assignee shall upon demand execute and deliver to Lessor an instrument
confirming such assumption.

 

ARTICLE 
X.                                      NOTICES

 

All notices, demands or
other writings in this Lease provided to be given or made or sent, or which may
be given or made or sent, by either party hereto to the other, shall be deemed
to have been fully given or made or sent when made in writing and two (2)
business days after deposited in the United States mail, registered and postage
prepaid, and addressed as follows:

 

	
  To Lessor:

  	
   

  	
  1620 Industrial Drive
  LLC

  
	
   

  	
   

  	
  1321 Southview Drive

  
	
   

  	
   

  	
  Hastings, Minnesota
  55033

  
	
   

  	
   

  	
   

  
	
  To Tenant:

  	
   

  	
  Waters Instruments Inc.

  
	
   

  	
   

  	
  13705 26th
  Avenue North #102

  
	
   

  	
   

  	
  Minneapolis, Minnesota
  55441

  

 

4

 

The address to which any
notice, demand or other writing may be given or made or sent to any party as
above provided, may be changed by written notice given by such party as above
provided.

 

ARTICLE 
XI.                                  TAXES AND ASSESSMENTS

 

A.                                   Taxes.  Lessor shall pay and discharge as they
become due, promptly and before delinquency, all taxes, assessments, rates,
charges, license fees, municipal liens, levies, excises, or imposts, whether
general or special, or ordinary or extraordinary, of every name, nature and
kind whatsoever, including all governmental charges of whatsoever name, nature,
or kind, which may be levied, assessed, charged, or imposed, or which may
become a lien or charge on or against the building, or any part thereof, the
leasehold of Tenant herein, the premises described herein, any building or
buildings, or any other improvements now or hereafter thereon, or on or against
Tenant’s estate hereby created which may be subject to taxation, or on or
against Lessor by reason of their ownership of the fee underlying this Lease,
during the entire term hereof, excepting only those other taxes hereafter
specifically excepted.

 

B.                                     Assessments
Affecting Improvements. 
Specifically and without in any way limiting the generality of the
foregoing, Lessor shall pay all special assessments and levies or charges made
by any municipal or political subdivision for local improvements, and shall pay
the same in cash as they shall fall due and before they shall become delinquent
as required by the act and proceedings under which any such assessments or
levies or charges are made by any municipal or political subdivision.  If the right is given to pay in either one
sum or in installments, Lessor may elect either mode of payment and their
election shall be binding on Lessor. 
If, by making any such election to pay in installments, any of such
improvements shall be payable after the termination of this Lease or any
extended term thereof, such unpaid installments shall be prorated as of the
date of termination, and amounts payable after such date shall be paid by
Lessor.

 

C.                                     Tenant
Obligation.  Tenant shall
pay to Lessor each year an amount equal to fifty-six (56%) percent of the real
estate taxes against the building payable during each year of this Lease,
prorated based on the term of Tenant’s occupancy.  Said amounts shall be payable on May 1 and October 1 of
each year.  Lessor shall promptly
deliver to Tenant all notices of tax valuation and assessment received by
Lessor with respect to the building.

 

ARTICLE 
XII.                              CONSTRUCTION OF
IMPROVEMENTS

 

A.                                   Alterations,
Improvements and Changes Permitted.  Tenant shall have the right to make such alterations,
improvements and changes to the premises as Tenant may deem necessary, provided
that prior to making any structural alterations, improvements or

 

5

 

changes, Tenant shall
obtain Lessor’s written approval of plans and specifications thereof, which
approval Lessor shall not unreasonably withhold, provided that the value of the
building shall not be diminished and the structural integrity of the building
shall not be adversely affected by any such alterations, improvements or
changes.  In the event of disapproval,
Lessor shall give to Tenant an itemized statement of reasons therefor.  If Lessor does not disapprove the plans and
specifications provided for in this section within fifteen (15) days after
the same has been submitted to Lessor, such plans and specifications shall be
deemed to have been approved by Lessor. 
Tenant will in no event make any alterations, improvements or other
changes of any kind to the premises that will decrease the value of such
building, or that will adversely affect the structural integrity of the
building.  Prior to commencing any work
that will cost in excess of Fifteen Thousand Dollars ($15,000), Tenant shall
furnish Lessor, on demand with a good and sufficient surety bond or other
security reasonably satisfactory to Lessor insuring the completion of such work
and the payment of all bills therefor.

 

B.                                     Restoration
and Replacement of Currently Existing Structure.  Tenant shall have no obligation to restore
or replace the building at the expiration or other termination of this Lease,
except that Tenant shall keep and maintain the premises in a condition
comparable to its condition when delivered to Tenant, reasonable wear and tear
and casualty damage excepted.

 

C.                                     Disposition
of New Improvements.  All
alterations, improvements, changes or additions made in or to the premises
shall be the property of Lessor, and Tenant shall have only a leasehold
interest therein, subject to the terms hereof.

 

ARTICLE 
XIII.                          CAM

 

Tenant shall pay to
Lessor, as and for additional rent, an amount equal to Tenant’s pro rata
share of all insurance, and all other costs incurred by Lessor with respect to
the building.  Tenant’s pro rata
share of such amount shall be equal to fifty-six (56%) percent.  These costs shall include, but not be limited
to, insurance premiums, maintenance, exterior lighting, snow plowing,
landscaping, yard maintenance, and all other maintenance and operation costs
incurred by Lessor with respect to the building in which the premises are
located.  These costs shall not include
income, property (except as provided in Article XI), estate, income,
alternative minimum or francise taxes payable by Lessor, nor principal or
interest obligations of Lessor on indebtedness related to the building in which
the premises are located, nor any expenditure which must be capitalized for
federal income tax purposes (other than amortization without interest over the
reasonably-estimated useful life of capital expenditures made to comply with
changes of codes and laws enacted after the date hereof or to reduce operating
expenses, to the extent of such reduction), nor management fees in excess of
four percent (4%) of gross rents, nor leasing or legal fees, nor costs of
improving space for occupancy by other tenants, nor any expenses for services
which are paid for separately by Tenant with respect to the demised

 

6

 

premises.  Tenant’s initial payments to Lessor for
expenses referred to in this Article shall be based upon annual expenses
with respect to the building of
$                        ,
and increases of all expenses other than insurance premiums and utilities for
subsequent years shall not exceed three percent (3%) of the payments during the
previous year.

 

ARTICLE 
XIV.                         REPAIRS AND DESTRUCTION OF IMPROVEMENTS

 

A.                                   Maintenance
of Premises.  Tenant
shall, throughout the term of this Lease, at its own cost, and without any
expense to Lessor, keep and maintain the premises, including all improvements
of every kind which may be a part thereof, and all appurtenances thereto,
including sidewalks adjacent thereto, in good, sanitary and neat order,
condition and repair, reasonable wear and tear and casualty damage
excepted.  Lessor shall not be obligated
to make any repairs, replacements, or renewals of any kind, nature or
description, whatsoever, to the demised premises, except as expressly provided
in this Lease.  Tenant shall also comply
with and abide by all federal, state, country, municipal and other governmental
statutes, ordinances, laws and regulations affecting the demised premises, the
improvements thereon, or any activity or condition on or in such premises.  Notwithstanding the foregoing, Lessor shall
be responsible to pay for, without any right to reimbursement under
Article XIII or otherwise, any major repair or replacement of the heating,
ventilating and air conditioning systems serving the premises, the electrical
service to the premises or the plumbing or other mechanical systems serving the
premises; provided that such major repair or replacement is not made necessary
by reason of Tenant’s negligence or abuse of such systems or failure to provide
customary maintenance to such systems. 
For purposes of this Lease, a “major repair or replacement” shall mean
any single repair or replacement which either (a) costs in excess of Tne Thousand
Five Hundred Dollars ($2,500), or (b) constitutes the replacement of a
compressor or evaporator or furnace.

 

B.                                     Obligations
of Lessor.  Lessor shall,
prior to the commencement of the term, at Lessor’s expense and without any
right of reimbursement from Tenant under Article XIII or otherwise,
construct a demising wall separating the premises from the rest of the building
in accordance with the specifications set forth on Exhibit “C” attached
hereto.  Lessor shall also, prior to
occupancy of the building by any other tenant, at Lessor’s expense and without
any right of reimbursement from Tenant under Article XIII or otherwise,
install separate meters and construct other pipes, lines, conduits and
facilities necessary to provide separately-metered utility service to the
premises.  Lessor shall also be
responsible, at its sole expense but subject to the provisions of
Article VIII above, for maintenance and repair of (i) the exterior walls,
roof, footings, foundation and structural elements of the building, (ii) the
exterior parking areas, drives and walks serving the building, and (iii) any
common areas of the building designed for use by more than one tenant, and for
keeping the exterior parking areas, drives and walks serving the building
reasonably free of snow, ice and debris. 
All such items shall be kept in good condition

 

7

 

and repair by Lessor, and
in substantially as good condition as they are now in.  In the event Lessor does not reasonably
correct any deficiency in such maintenance of the building or exterior areas
within a reasonable time (taking into account the effect such deficiency is
having on the operations of Tenant, and in any event not exceeding thirty (30)
days) after notice of such deficiency is given by Tenant to Lessor, then Tenant
shall have the right to correct such deficiency and thereafter deduct the
reasonably costs incurred in so correcting the deficiency from the rentals
payable under this Lease.  In the event
of any disagreement between Lessor and Tenant as to whether there is a
deficiency in such maintenance of the building or exterior areas by Lessor,
such dispute shall be resolved by arbitration in accordance with the rules of
the American Arbitration Association.

 

C.                                     Damage or
Destruction of Improvements. 
In case the premises or building shall be partially or totally destroyed
by fire or other casualty so as to render the premises partially or totally
untenantable, the same, unless Lessor or Tenant shall terminate this Lease as
hereinafter provided, shall be repaired or rebuilt as quickly as practicable at
the cost of Lessor, and the rentals and other payments by Tenant under this
Lease shall abate during the period of repair in proportion to the portion of
the floor space in the premises that is untenantable or unfit for use by Tenant
in its business.

 

If the premises or
building shall be destroyed or damaged by fire or other casualty, so as to
become wholly untenantable (“Major Damage”), and:

 

1.                                       the
premises cannot be repaired or restored within one hundred twenty (120) days
after such damage or destruction; or

 

2.                                       the
unexpired portion of the term or any renewal term of this Lease is one (1) year
or less at the date of the damage;

 

then Tenant may terminate
this Lease as of the date of such destruction or damage by giving written
notice to Lessor of such election within sixty (60) days after the date of such
damage or destruction.  Further, in the
event of such Major Damage, Lessor shall have the right to terminate this Lease
and shall have no obligation to restore if either (i) the cost of restoration
is reasonably estimated to exceed One Million Dollars ($1,000,000), or (ii)
Lessor’s mortgage lender does not make the insurance proceeds payable by reason
of such Major Damage available to pay the costs of the restoration.

 

ARTICLE 
XV.                             UTILITIES

 

Landlord shall provide
all facilities necessary for delivery of water, sewer, electricity, gas, and
telephone utilities to the premises. 
Tenant shall fully and promptly pay for all water, sewer, electrical,
gas, telephone service or other public utilities of every kind furnished to the
premises

 

8

 

throughout the term
hereof to the extent separately metered to the premises, and all other costs
and expenses of every kind whatsoever of or in connection with the use,
operation and maintenance of the utility systems serving the premises only, and
except as expressly provided in this Lease Lessor shall have no responsibility
of any kind for any thereof.  Prior to
such time as any utility service is separately metered to the premises, and so
long as the remainder of the building is not occupied by any other tenants,
Tenant shall, within twenty (20) days after receiving an invoice from Lessor
therefor, reimburse Landlord for eighty percent (80%) of the cost of such
utility service provided to the leasable spaces in the building but not
separately metered to the premises. 
Nothing herein shall prohibit Lessor from collecting expenses incurred
by Lessor for utility service to the common areas of the building in accordance
with the provisions of Article XIII hereof.

 

ARTICLE 
XVI.                         LIENS

 

A.                                   Tenant’s
Duty to Keep Premises Free of Liens.  Tenant shall keep all of the premises and every part thereof and
the building free and clear of any and all mechanics’ materialmen’s, and other
liens for or arising out of or in connection with work or labor done, services
performed, or materials or appliances furnished for or in connection with any
operations of Tenant, any alteration, improvement or repairs or additions which
Tenant may make or cause to be made, or any work or construction by or for
Tenant on or about the premises, or any obligations of any kind incurred by
Tenant, and at all times promptly and fully pay and discharge any and all
claims on which any such lien may or could be based, and to indemnify Lessor
and all of the premises and the building against all such liens and claims of
liens and suits or other proceedings pertaining thereto.

 

B.                                     Contesting
Liens.  If Tenant desires
to contest any such lien, it shall notify Lessor of its intention to do so
within one hundred eighty (180) days after filing of such lien.  In such case, and provided that Tenant shall
on demand protect Lessor by a good and sufficient surety bond against any such
lien and any cost, liability or damage arising out of such contest, Tenant
shall not be in default hereunder until ninety (90) days after the final
determination of the validity thereof, within which time Tenant shall satisfy
and discharge such lien to the extent held valid; but the satisfaction and
discharge of any such lien shall not, in any case, be delayed until execution
is had on any judgment rendered thereon, and such delay shall be a default of
Tenant hereunder.  In the event of any
such contest, Tenant shall protect and indemnify Lessor against all loss,
expense and damage resulting therefrom.

 

ARTICLE 
XVII.                     INDEMNIFICATION OF LESSOR

 

Lessor shall not be
liable for any loss, injury, death, or damage to persons or property which at
any time may be suffered or sustained by Tenant or by any person whosoever may
at any time be using or occupying or visiting the demised premises or be in,
on, or about the same, whether

 

9

 

such loss, injury, death,
or damage shall be caused by or in any way result from or arise out of any act,
omission, or negligence of Tenant or of any occupant, subtenant, visitor, or
user of any portion of the premises, or shall result from or be caused by any
other matter or thing whether of the same kind as or of a different kind than
the matter or things above set forth, and Tenant shall indemnify Lessor against
all claims, liability, loss, or damage whatsoever on account of any such loss,
injury, death, or damage.  Tenant hereby
waives all claims against Lessor for damages to the premises and to the
property of the Tenant in, on or about the premises, and for injuries to
persons or property in or about the premises, from any cause arising at any
time.  The two preceding sentences shall
not apply to loss, injury, death, or damage arising by reason of the negligence
or misconduct of the Lessor, its agents or employees.

 

ARTICLE 
XVIII.                 ATTORNEY’S FEES

 

If any action at law or
in equity shall be brought to recover any rent under this Lease, or for or on
account of any breach of, or to enforce or interpret any of the covenants,
terms or conditions of this Lease, or for the recovery of the possession of the
demised premises, the prevailing party shall be entitled to recover from the
other party as part of the prevailing party’s costs reasonable attorney’s fees,
the amount of which shall be fixed by the Court and shall be made a part of any
judgment or decree rendered.

 

ARTICLE 
XIX.                         OPTION TO RENEW

 

Lessor grants to Tenant,
subject to the conditions set forth below, the right and option to renew this
Lease for a period of five (5) years, beginning on March 1, 2009, and
expiring on February 28, 2014, at a rental determined as provided above,
and otherwise subject to and on all the terms and conditions herein
contained.  Notice in writing to Lessor
of Tenant’s intention to exercise said option shall be given at least sixty
(60) days prior to expiration of the original term of the Lease herein.

 

ARTICLE 
XX.                             REDELIVERY OF PREMISES

 

Tenant shall pay all sums
required to be paid by Tenant hereunder in the amounts, at the times, and in
the manner herein provided, and shall keep and perform all the terms and
conditions hereof on their part to be kept and performed, and, at the
expiration or sooner termination of this Lease, peaceably and quietly quit and
surrender to Lessor the premises in good order and condition subject to the
other provisions of this Lease and subject to reasonable wear and tear and
casualty damage.

 

ARTICLE 
XXI.                         REMEDIES CUMULATIVE

 

All remedies hereinbefore
and hereinafter conferred on Lessor shall be deemed cumulative and no one
exclusive of the other, or of any other remedy conferred by law.

 

10

 

ARTICLE 
XXII.                     INSURANCE

 

A.                                   Insurance
Coverage of Premises and Waiver of Rights in Insured Losses.  Lessor shall, at all times during the term
of this Lease and at Lessor’s sole expense, subject to the provisions of
Article XIII, keep the building and all improvements which are now or
hereafter a part of the building insured against loss or damage by fire and the
extended coverage and special cause of loss hazards for the properties’ full
insurable replacement value.

 

Lessor and Tenant agree
that neither shall be liable to the other for damage to the building or the
premises or to any of the contents thereof, whether owned by Tenant or Lessor,
by perils insured against by the party owning such damaged or destroyed
property.  The Lessor hereby waives any
and all rights of recovery from the Tenant for loss caused by the perils of
fire and other perils included in the definition of extended coverage or
special causes of loss, and the Tenant hereby waives any and all right of
recovery from the Lessor for loss caused by the perils of fire and other perils
included in the definition of extended coverage or special causes of loss.  Each party hereto shall provide the other
party with documentary evidence of the concurrence of their respective
insurance carriers with the provisions of this clause.

 

B.                                     Personal
Injury Liability Insurance. 
Tenant shall maintain in effect throughout the term of this Lease
personal injury liability insurance covering the premises and its appurtenances
and the sidewalks fronting thereon in the amount of One Million ($1,000,000.00)
Dollars for injury to or death of any one person, and Two Million
($2,000,000.00) Dollars for injury to or death of any number of persons in one
occurrence, and property damage liability insurance in the amount of Two
Hundred Fifty Thousand ($250,000.00) Dollars. 
Such insurance shall specifically insure Tenant against all liability
assumed by it hereunder, as well as liability imposed by law, and shall insure
both Lessor and Tenant but shall be so endorsed as to create the same liability
on the part of the insurer as though separate policies had been written for
Lessor and Tenant.

 

C.                                     Cost of
Insurance Deemed Additional Rental.  The cost of insurance required to be carried by Tenant in this
section shall be deemed to be additional rental hereunder.

 

ARTICLE 
XXIII.                 DEFAULT AND TERMINATION

 

If any one or more of the
following events shall occur:

 

A.                                   Tenant
shall fail to make any payment hereunder when due, whether for rent or
otherwise, and such failure shall continue for a period of five (5) days after
written notice of such failure is given to Tenant; or

 

11

 

B.                                     Any
financial report or statement, certificate, statement, representation or
warranty at any time furnished or made by or on behalf of Tenant or any
guarantor of any of Tenant’s obligations hereunder, including, without
limitation, any representation or warranty made by Tenant herein, proves to
have been false or misleading in any material respect at the time as of which
the facts therein set forth were stated or certified, or any such financial
report or statement has omitted any material contingent or unliquidated
liability or claim against Tenant or any such guarantor; or

 

C.                                     Tenant
shall fail to perform or observe any covenant, condition or agreement to be
performed or observed by him hereunder, and such failure shall continue for a
period of thirty (30) days after written notice of such failure is given to
Tenant, or, in the event the covenant, condition or agreement may not
reasonably be performed or observed within such period of thirty (30) days, for
such longer period of time as may be reasonably necessary to perform or observe
such covenant, condition or agreement; provided that Tenant commences to cure
such failure with such thirty (30) day period and thereafter diligently
continues to proceed to cure such failure; or

 

D.                                    Tenant
or any guarantor of any of Tenant’s obligations hereunder shall cease doing
business as a going concern, make an assignment for the benefit of creditors,
generally not pay his debts as they become due or admit in writing his
inability to pay his debts as they become due, file a petition commencing a
voluntary case under any chapter of the Bankruptcy Code, Title 11 of the
United States Code, be adjudicated an insolvent, file a petition seeking for
himself any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar arrangement under any present or future
statute, law, rule or regulation, or file an answer admitting the material
allegations of a petition filed against it in any such proceeding, consent to
the filing of such a petition or acquiesce in the appointment of a trustee,
receiver, custodian or other similar official for him or of all or any
substantial part of his assets or properties, or take any action looking to his
dissolution or liquidation; or

 

E.                                      An
order for relief against Tenant or any guarantor of any of Tenant’s obligations
hereunder shall have been entered under any chapter of the Bankruptcy Code, or
a decree or order by a court having jurisdiction in the premises shall have
been entered approving as properly filed a petition seeking reorganization,
arrangement, readjustment, liquidation, dissolution or similar relief against
Tenant or any guarantor of any of Tenant’s obligations hereunder under any
present or future statute, law, rule or regulation, or within thirty (30) days
after the appointment without Tenant’s or such guarantor’s consent or
acquiescence of any trustee, receiver, custodian or other similar official for
him or such guarantor or of all or any substantial part of his or such
guarantor’s assets and properties, such appointment shall not be vacated; or

 

12

 

F.                                      An
order, judgment or decree for payment of money shall be entered against Tenant
or such guarantor by a court of competent jurisdiction and shall continue in
effect for any period of thirty (30) consecutive days without a stay of
execution, or any execution or writ or process shall be issued under any action
or proceeding against Tenant whereby the leased premises or its use may be
levied upon or restrained;

 

Then and in any such
event Lessor may, at the sole discretion of Lessor, without notice or demand,
take any one or more of the following steps:

 

1.                                       Immediately
terminate Tenant’s rights hereunder with or without process of law, directly or
acting through agents, without liability to Tenant, enter upon the premises of
Tenant and take immediate possession of all or any portion of the premises and
thenceforth hold, possess and enjoy the same free from any right of the Tenant
to the possession and use of the premises for any purpose whatsoever, in which
event Tenant hereby expressly waives all further rights to possession of the
premises and all claims for injuries suffered through or caused by any such
repossession; or

 

2.                                       Sue
for and seek to recover from Tenant all rent and other sums then past due
pursuant to the terms and provisions of this Lease; or

 

ARTICLE 
XXIV.                LESSOR’S RIGHT TO PERFORM

 

In the event that Tenant
by failing or neglecting to do or perform any act or thing herein provided by
it to be done or performed, shall be in default hereunder and such failure
shall continue for a period of ninety (90) days after written notice from
Lessor specifying the nature of the act or thing to be done or performed, then
Lessor may, but shall not be required to, do or perform or cause to be done or
performed such act or thing (entering on the demised premises for such
purposes, if Lessor shall so elect), and Lessor shall not be or be held liable
or in any way responsible for any loss, inconvenience, annoyance, or damage
resulting to Tenant on account thereof, and Tenant shall repay to Lessor on
demand the entire expense thereof, including compensation to the agents and
employees of Lessor.  Any act or thing
done by Lessor pursuant to the provisions of this section shall not be
construed as a waiver of any such default by Lessor, or as a waiver of any
covenant, term, or condition herein contained or the performance thereof, or of
any other right or remedy of Lessor hereunder or otherwise.

 

ARTICLE 
XXV.                    EFFECT OF EMINENT DOMAIN

 

A.                                   Effect of
Total Condemnation.  In
the event the entire demised premises shall be appropriated or taken under the
power of eminent domain by any public or quasi-public authority, this Lease
shall terminate and expire as of the date of such taking, and Tenant shall
thereupon be released from any liability thereafter accruing hereunder.

 

13

 

B.                                     Effect of
Partial Condemnation.  In
the event a portion of the demised premises shall be so appropriated or taken
and the remainder of the premises shall not be suitable for the use then being
made of the property by Tenant, or if the remainder of the property is not one
undivided parcel of premises, Tenant shall have the right to terminate this
Lease as of the date of such taking on giving to Lessor written notice of such
termination within thirty (30) days after Lessor has notified Tenant in writing
that the premises has been so appropriated or taken.

 

In the event a portion of
the demised premises shall be so appropriated or taken and the remainder of the
property shall still be suitable for the use then being made of the property by
Tenant, this Lease agreement shall remain in full force and effect but there
shall be a pro rata adjustment of the rental payments due hereunder based on
the square footage appropriated or taken in such proceedings.

 

C.                                     Condemnation
Award.  Lessor shall be
entitled to the entire award in any condemnation proceeding or other proceeding
for taking for public or quasi public use, including, without limitation, any
award made for the value of the leasehold estate created by this Lease.  No award for any partial or entire taking
shall be apportioned, and Tenant hereby assigns to Lessor any award that may be
made in a condemnation or other taking, together with any and all rights of
Tenant now or hereafter arising to all or part of the award; provided, however,
that nothing contained herein shall be deemed to give Lessor any interest in,
or require Tenant to assign to Lessor, any award made to Tenant specifically
for its relocation expenses, the taking of personal property, or loss of “going
concern” value of Tenant’s business.

 

ARTICLE 
XXVI.                SURRENDER OF LEASE

 

The voluntary or other
surrender of this Lease by Tenant, or a mutual cancellation thereof, shall not
work a merger, and shall, at the option of Lessor, terminate all or any
existing subleases or subtenancies, or may, at the option of the Lessor,
operate as an assignment to them of any or all such subleases or subtenancies.

 

ARTICLE  XXVII.  DISPOSITION
OF IMPROVEMENTS ON TERMINATION OF LEASE

 

On termination of this
Lease for any cause, Lessor shall become the owner of any improvements on the
demised premises.

 

ARTICLE 
XXVIII.  TRANSFER OF SECURITY

 

If any security is given
by Tenant to secure the faithful performance of all or any of the covenants of
this Lease on the part of Tenant, Lessor may transfer or deliver the security,
as such, to the purchaser of the reversion, in the event that the reversion be
sold, and thereupon Lessor shall be discharged from any further liability in
reference thereto.

 

14

 

ARTICLE 
XXIX.                WAIVER

 

The waiver by Lessor of,
or the failure of Lessor to take action with respect to any breach of any term,
covenant or condition herein contained, shall not be deemed to be a waiver of
such term, covenant or condition, or subsequent breach of the same, or any
other term, covenant or condition herein contained.  The subsequent acceptance of rent hereunder by Lessor shall not
be deemed to be a waiver of any preceding breach by Tenant of any term,
covenant or condition of this Lease, other than the failure of Tenant to pay
the particular rental so accepted, regardless of Lessor’s knowledge of such
preceding breach at the time of acceptance of such rent.

 

ARTICLE 
XXX.                    EFFECT OF TENANT’S HOLDING OVER

 

Any holding over after
the expiration of the term of this Lease, with consent of Lessor, shall be
construed to be a tenancy from month to month, on the same terms and conditions
herein specified, so far as applicable.

 

ARTICLE 
XXXI.                LEASE TO BE SUBORDINATE

 

This Lease is subject and
subordinate to Lessor’s first mortgage and restrictions which may now or
hereafter affect the building, and to all renewals, amendments, modifications
and extensions thereof; provided that any mortgagee or other purchaser at
mortgage foreclosure sale shall recognize this Lease and shall not disturb
Tenant’s occupancy hereunder so long as Tenant is not in default hereunder
beyond applicable periods of grace. 
This clause shall be self-operative, and no further instruments shall be
required; provided, however, that for confirmation of such subordination or
superiority, Tenant shall execute promptly any agreement requested by
Lessor.  Tenant hereby attorns to any
such first mortgagee, purchaser at foreclosure sale, or recipient of a deed in
lieu of foreclosure, and agrees to execute any reasonable agreement affirming
such attornment.

 

ARTICLE  XXXII.  ESTOPPEL
CERTIFICATE

 

Tenant shall, within ten
(10) business days following a request from Lessor, execute and deliver to
Lessor an Estoppel Certificate in such form and content as requested by Lessor
and reasonably acceptable to Tenant, attesting to the terms and condition of
this Lease and the compliance to date of Lessor with the terms and conditions
of this Lease and such other matters as requested by Lessor concerning the
tenancy of Tenant under this Lease.  In
the event that Tenant asserts any default by Lessor, Tenant shall set forth
such alleged default or defaults upon the said certificate in detail and attest
to the fact that those listed defaults are the only defaults by Lessor
hereunder.

 

Lessor shall, within ten
(10) business days following a request from Tenant, execute and deliver to
Tenant an Estoppel Certificate in such form and content as requested by Tenant
and reasonably acceptable to Lessor, attesting to the terms and condition of
this Lease and the compliance to date of Tenant with the terms and conditions
of this Lease and such other matters

 

15

 

as requested by Tenant
concerning the tenancy of Tenant under this Lease.  In the event that Lessor asserts any default by Tenant, Lessor
shall set forth such alleged default or defaults upon the said certificate in
detail and attest to the fact that those listed defaults are the only defaults
by Tenant hereunder.

 

ARTICLE 
XXXIII.  PARTIES BOUND

 

The covenants and
conditions herein contained shall, subject to the provisions as to assignment,
transfer and subletting, apply to and bind the heirs, successors, executors,
administrators and assigns of all the parties hereto; and all of the parties
hereto shall be jointly and severally liable hereunder.

 

ARTICLE 
XXXIV.  TIME OF THE ESSENCE

 

Time is of the essence of
this Lease, and of each and every covenant, term, condition, and provision
hereof.

 

ARTICLE  XXXV.  SECTION CAPTIONS

 

The captions appearing
after the section number designations of this Lease are for convenience
only and are not a part of the Lease and do not in any way limit or amplify the
terms and provisions of this Lease.

 

ARTICLE 
XXXVI.  GOVERNING LAW

 

This Lease shall be governed
by, construed and enforced in accordance with the laws of the State of
Minnesota.

 

ARTICLE  XXXVII.  MISCELLANEOUS

 

Where applicable, words
used in this instrument in the masculine gender include the feminine and
neuter; the singular number includes the plural and the plural the singular.

 

IN WITNESS WHEREOF,
the parties hereto have executed this Lease at Rochester, Minnesota, effective
on the day and year first above written.

 

 

16

 

	
   

  	
  LESSOR:

  
	
   

  	
   

  
	
   

  	
  1620 INDUSTRIAL DRIVE
  LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Patrick O. Regan

  	
   

  
	
   

  	
   

  	
  Patrick O. Regan,

  	
   

  
	
   

  	
   

  	
  Chief Manager/President

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  TENANT:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  WATERS INSTRUMENTS INC.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Jerry W. Grabowski

  	
   

  
	
   

  	
   

  	
  Jerry W. Grabowski,

  	
   

  
	
   

  	
   

  	
  President and Chief
  Executive Officer

  	
   

  
							

 

17

 

EXHIBIT “A”

 

Floor Plan Showing Demised Premises

 

 

EXHIBIT “B”

 

Legal Description of Land on which
Building is Located

 

 

EXHIBIT “C”

 

Specifications for Demising Wall

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00061-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00061-of-00352.parquet"}]]