Document:

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                                                                 Exhibit 10.2

                               A G R E E M E N T

     This Agreement entered into this 26th day of June, 2000 by and between
SPECTRUM CONTROL, INC. ("SCI") and JACK FREEMAN ("Freeman").

                             W I T N E S S E T H:

     WHEREAS, Jack Freeman has been a valued employee of SCI; and for his
excellent leadership and extraordinary effort SCI is desirous of executing an
Agreement to provide Freeman compensation in the event of change in control of
SCI and Freeman is terminated within twelve (12) months of the change in control
event.

     NOW, THEREFORE, the parties hereto intending to be legally bound hereby
agree as follows:

     1. If there is a change in "control" as hereinafter defined of SCI and
Freeman is terminated within twelve (12) months of such change in control,
Freeman will receive a minimum compensation package which will provide for the
payment of an amount of money equal to Freeman's salary and At Risk Compensation
which had been paid to Freeman for the fiscal year prior to the change in
control.

     For purposes of this Agreement, the term "change in control" is defined to
include, (a) a tender offer or exchange offer made and consummated for ownership
of SCI stock representing fifty (50%) percent or more of the combined voting
power of SCI's outstanding securities; (b) the sale or transfer of substantially
all of SCI's assets to another corporation which is not a wholly-owned
subsidiary of SCI; (c) any merger or consolidation of SCI with another
corporation whereby less than thirty (30%) percent of the outstanding voting
shares of the surviving or resolving corporation are owned in the aggregate by
SCI's former stockholders; or (d) any tender offer, exchange offer, merger, sale
of assets and/or contested election which results in a total change in the
composition of SCI's Board of Directors.

     The amount paid to Freeman pursuant to this paragraph will be deemed
severance pay and in consideration of Freeman's past services to SCI and his
continued services from the date of this Agreement. Freeman will have no duty to
mitigate his damages by seeking other employment, nor will Freeman severance pay
hereunder be reduced or offset by any future earnings.
<PAGE>

     2. This Agreement shall be binding on the Company and its successors.

     3. This Agreement was authorized at a duly convened meeting of the Board
of Directors of SCI held on the 26th day of June, 2000.

     4. By the execution of this Agreement, Freeman acknowledges that there are
no other compensation agreements orally or written, other than his current
annual compensation package in effect.

     WITNESS our hands and seals the day and year above first written.

     Attest:                              SPECTRUM CONTROL, INC.

     /s/ James F. Toohey                   By /s/ Gerald A. Ryan
        -----------------------------           ----------------------------
        James F. Toohey                         Gerald A. Ryan, Chairperson,
        Secretary                               Board of Directors

                                             /s/ Jack Freeman
                                                ----------------------------
                                                Jack Freeman<PAGE>

                                                                    Exhibit 10.5

                                     LEASE

This Lease is made as of September 21, 1998, by and between Potter Production
Corporation, a Minnesota corporation ("Landlord") and Spectrum Control, Inc. a
Pennsylvania corporation ("Tenant") (the "Lease").

                                   ARTICLE I

                       Lease of Property, Term of Lease

1.01 Property. Landlord hereby leases to Tenant, subject to the covenants,
     --------
     agreements, terms, provisions, conditions and limitations set forth herein,
     all of which Tenant covenants and agrees to perform, and Tenant hereby
     leases, (i) that certain real property located in the Town of Wesson,
     County of Copiah, State of Mississippi, and commonly described as 3004
     Highway 51 North, and the building located therein, including any leasehold
     improvements within, containing approximately _________ square feet (the
     "Building") and the land on which the Building is located (the "Land"), all
     as more particularly described in Exhibit A and made a part hereof (the
     "Property").

1.02 Initial Term. The Lease term shall commence as of the date above written
     ------------
     (the "Commencement Date") and continue for a period of six months until
     March 21, 1999 (the "Expiration Date"), unless sooner terminated as
     hereinafter provided (the "Initial Term").

1.03 Landlord's Reserved Right to Market Property. Landlord shall retain the
     --------------------------------------------
     right to market the Property for sale or lease during the Initial Term at
     any time after January 31, 1999. In the event Landlord enters an agreement
     with a third party for the sale or lease of the Property on terms providing
     for occupancy prior to September 21, 1999, Landlord shall have the right to
     provide Tenant with sixty days written notice to vacate the Property. In
     such case, the Lease shall terminate effective as of the date specified in
     the notice to vacate and Tenant shall be obligated only to pay all Base
     Rent and any other sums due with respect to the period of Tenant's
     occupancy.

1.04 Renewal Term. Provided that Landlord has not entered an agreement for the
     ------------
     sale or lease of the Property as of the Expiration Date and further
     provided that Tenant shall not be in default under any of the terms or
     conditions of the Lease, Tenant may renew and extend the term of this Lease
     on a month to month basis on the terms and conditions contained herein.
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                                      -2-

                                  ARTICLE II

                                     Rent

2.01 Base Rent. Tenant covenants and agrees to pay a monthly Base Rent, payable
     ---------
     in advance, commencing on the Commencement Date and continuing on the first
     day of each and every month thereafter for the next succeeding months
     during the balance of the Initial Term in the amount of Twenty-two thousand
     five hundred dollars ($22,500). Base Rent shall be payable in advance,
     without notice or demand. In the event the first or last month of the
     Initial Term is not a full calendar month, the Base Rent installment for
     that month shall be prorated and adjusted accordingly.

2.02 Operating Expenses. During the Initial Term and any Renewal Term of this
     ------------------
     Lease, Tenant shall be solely and directly responsible for payment of all
     operating expenses incurred with respect to Tenants use, maintenance,
     repair, and care of the Property, including , without limitation, cleaning,
     trash removal, striping and restriping, and sealing or resurfacing the
     parking areas, policing/protection, lawn and landscaping costs, insurance
     premiums, wages and fringe benefits of the personnel employed for such
     work, costs of equipment purchased and used for such purposes, water and
     sewage charges, cost to operate and maintain heating and air conditions
     systems, cost of electricity and other utilities.

2.03 Insurance. Tenant shall be named as an additional insured on the insurance
     ---------
     required to be obtained by Landlord hereunder and shall reimburse Landlord
     on a monthly prorata basis for any premium applicable to the Term of this
     Lease.

2.04 Taxes. Tenant shall be solely responsible for payment of any and all taxes,
     -----
     including without limitation, real property taxes payable in any year
     during the term of this Lease, levied or imposed with respect to the
     Property (excluding any income taxes payable by Landlord with respect to
     the Property) during the Initial Term or any Renewal Term. Such payment by
     Tenant shall be in equal monthly installments representing 1/12 of the
     taxes and installments of special assessments due and payable in any such
     year; provided that, upon Landlord's receipt of the tax statement for any
     tax year, Landlord shall send to Tenant a statement for, and Tenant shall
     pay, within thirty (30) days of receipt thereof, any amount due for any
     monthly periods occurring within such tax year prior to the date the
     Landlord receives such tax statement, if such amount exceeds the payments
     made by Tenant for such monthly periods.

2.05 Payments Constitute Rent. All Base Rent and other payments provided for in
     ------------------------
     this Lease shall constitute rent payable hereunder with the same effect as
     if the same were the Base Rent reserved and provided for herein and, in the
     event of non-payment by Tenant
<PAGE>

                                      -3-

     of any such amounts when due according to the terms of this Lease, Landlord
     shall have the same rights and remedies in respect thereof as Landlord
     shall or may have in respect of the Base Rent herein reserved.

2.06 Payment of Rent. All payments of Base Rent and other payments, required to
     ---------------
     be made to Landlord shall be in lawful money of the United States of
     America and shall be paid to Landlord at the address indicated in
     Section______________or to such other person or persons and/or at such
     other place or places as Landlord may designate from time to time in
     writing. Landlord may assign to others revocably or irrevocably, the right
     to receive all or part of said Base Rent and other payments, but such
     assignee shall not by virtue of such an assignment be or become Landlord
     hereunder

2.07 No Offset. Base Rent and other payments required to be made to Landlord
     ---------
     hereunder shall be paid without setoff or deduction whatsoever. Any claims
     not released hereunder which Tenant may have against Landlord may be
     pursued only in an independent action against the Landlord.

                                  ARTICLE III

                                      Use

3.01 Use. Absent the Landlord's prior written consent to an alternative use, the
     ---
     Property shall be used and occupied by Tenant solely for the purpose of
     conducting and operating a general manufacturing business, and uses
     reasonably incident thereto. Regardless of the nature of Tenant's specific
     use of the Property, the Property shall at all times be used and occupied
     in compliance with all laws, ordinances and governmental regulations
     applicable to Tenant's use and occupancy. The Property shall not be used in
     such manner that, in accordance with any requirement of law or of any
     public authority, Landlord shall be obliged on account of the purpose or
     manner of said use to make any addition or alteration to or in the
     Building. Tenant shall occupy the Property, conduct its business and
     control its agents, employees, invitees and visitors in such a way as is
     lawful.

                                  ARTICLE IV

                             Environmental Matters

4.01 Definitions.  As used in this Lease the following terms shall have the
     -----------
following meanings:

     (a)  "Claims" shall mean:
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                                      -4-

          (1)  any and all suits, demands, actions, fines, penalties, claims,
               enforcement, clean-up, removal, closure plans, contribution or
               other actions or proceedings, liens, or other claims by any
               Governmental Entity now or at any time from and after the
               Commencement Date threatened, instituted or claimed;

          (2)  any and all claims, liabilities, costs, expenses, damages,
               attorneys' fees, experts' fees, costs or expenses arising in
               connection with any death or injury to any person or damage to
               any property;

          (3)  any and all personal injury, property damage, nuisance, tort, or
               other claims, actions, or demands arising on or after the
               Commencement Date brought at any time by any third parties; and

          (4)  any and all other judgments, claims, losses, damages,
               liabilities, deficiencies, injunctions, attorneys fees, experts'
               fees, costs or expenses imposed, threatened, paid or incurred at
               any time from and after the Commencement Date arising out of
               Tenant's use of the Property, whether foreseeable or
               unforeseeable, suspected or unsuspected, conditional or
               unconditional.

     (b)  "Environmental Laws" shall mean the Comprehensive Environmental
          Response, Compensation and Liability Act, as amended by the Superfund
          Amendments and Reauthorization Act of 1986, 42 U. S. C. Section
          9601,et. seq.; the Resource Conservation and Recovery Act, 42 U. S. C.
          Section 6901, et. seq.; the Hazardous Materials Transportation Act, 49
          U.S. C. 1802, et. seq.; the Toxic Substances Control Act, 15 U. S. C.
          Section 2601, et. seq.; the Federal Water Pollution Control Act, 33 U.
          S.C. 1251, et. seq.; the Clean Water Act, 33 U. S. C. Section 1321,
          et. seq.;the Clean Air Act, 42 U. S. C. Section 7401, et. seq.; the
          Minnesota Environmental Response and Liability Act, Minn. Stat.
          115B.01, et. seq.; the Minnesota Petroleum Tank Release Cleanup Act,
          Minn. Stat.115C. 01, et. seq.; and any other federal, state, county,
          municipal, local or other statute, law, ordinance, rule, or regulation
          which may relate to or deal with human health or the environment, all
          as may be from time to time amended or subsequently enacted.

     (c)  "Governmental Entity" shall mean any local, state, federal, foreign,
          or international governmental authority, agency, or entity, including,
          but not limited to, any court, tribunal, or panel.

     (d)  "Hazardous Substance Activity" shall mean the generation, possession,
          transportation, transfer, recycling, storage, use, treatment,
          manufacture,
<PAGE>

                                      -5-

          investigation, removal, remediation, release, exposure of others to,
          sale, distribution, or disposal (including, but not limited to,
          landfilling, incineration, abandonment, evaporation, or dilution) of
          any Hazardous Substance or any product containing a Hazardous
          Substance.

     (e)  "Hazardous Substances" shall mean any material or substance which is
          defined or included in the definition of a hazardous or toxic
          material, substance or waste, or a pollutant or contaminant, pursuant
          to any Environmental Law.

     (f)  "Remedial Action" shall mean and include the soil and groundwater
          contamination clean-up activities currently in progress on the
          Property as approved and ordered by the Mississippi Department of
          Environmental Quality ("MDEQ"), any modifications or amendments
          thereto subsequently approved or ordered by the MDEQ, the United
          States Environmental Protection Agency ("EPA"), or any other
          governmental authority.

4.02 Compliance With Environmental Laws. Tenant agrees that from and after the
     ----------------------------------
     Commencement Date, Tenant shall conduct all Hazardous Substance Activity in
     material compliance with Environmental Laws and shall provide sufficient
     personnel and resources to assure that the conduct of its business complies
     with all Environmental Laws.

4.03 Reports. At Tenants expense, Tenant will comply with any periodic reporting
     -------
     requirements arising after the Commencement Date concerning Hazardous
     Substance Activity of the Tenant. If required, Tenant shall file reports on
     any such Activities with the appropriate Governmental Entity. If, at any
     time during the Term of this Lease, any Governmental Entity should request
     a report on any Hazardous Substances Tenant has used, stored or disposed of
     on or from the Property, Tenant will either cause said report to be made as
     soon as possible at its own cost and expense, or, if not made within thirty
     (30) days of Landlord's request for the same, will reimburse Landlord, as
     Additional Rent, for Landlord's cost of obtaining said report.

4.04 Permits. Tenant shall obtain, at Tenant's expense, all approvals, whether
     -------
     in the form of a license, permit, certification, or other authorization,
     required by any Governmental Entity with respect to Hazardous Substance
     Activity, maintain all such required approvals for the duration of the
     Lease Term, and provide such evidence of such continuing compliance as
     required of Tenant and as Landlord may from time to time request. Landlord
     shall cooperate with any reasonable request for assistance by Tenant with
     respect to any documentation necessary in connection with such permits.

4.05 Removal of Storage Tanks. Upon the request of Landlord, at the expiration
     ------------------------
     of this Lease, Tenant shall remove, at Tenant's expense, any tanks for
     storage of Hazardous Substances installed by Tenant in compliance with all
     Environmental Laws.
<PAGE>

                                      -6-

4.06 Entry By Landlord. In the event that, at any time during the Initial Term
     -----------------
     or any Renewal Tenn of this Lease, landlord has reason to believe that a
     release of a Hazardous Substance has occurred or is threatened, Landlord
     may enter the Property immediately and take whatever action it reasonably
     believes is necessary to prevent the threatened release or otherwise comply
     with applicable Environmental Laws; provided that, such action/intervention
     by Landlord shall not constitute a waiver of Tenant's obligation to use the
     Property in compliance with Environmental Laws, indemnify Landlord with
     respect to any breach of said obligations, and bear any and all costs and
     expenses incurred in connection with such compliance.

4.07 Landlord Right of Access. Tenant agrees to permit Landlord, its employees
     ------------------------
     and authorized representatives of the Landlord to enter the Property at
     such times and upon reasonable notice as may be reasonably necessary in
     connection with the conduct of the Remedial Action.

4.08 Indemnification by Tenant
     -------------------------

     (a)  Tenant will assume all responsibility for any and all of the following
          which occur during the period of Tenant's use, occupancy, or Lease of
          the Property (regardless of when discovered): (i) all Hazardous
          Substances introduced on the Property by Tenant; and (ii) all
          Hazardous Substance Activities conducted by Tenant or occurring on the
          Property in connection with Tenant's operation of its business.

     (b)  Tenant agrees to absolutely indemnify, defend and hold Landlord and
          its officers, directors, employees and agents from and against any
          actual or threatened Claims which arise from, in connection with, or
          as a result of (i) any Hazardous Substance Activity conducted by
          Tenant in connection with its operation of its business after the
          Commencement Date or (ii) any Hazardous Substance used, stored, or
          otherwise introduced on, in or under the Property in connection with
          the conduct of its business after the Commencement Date.

4.09 Indemnification by Landlord.
     ---------------------------

     (a)  Landlord will assume all responsibility for (i) all Hazardous
          Substances existing on the Property prior to the Commencement Date and
          (ii) all Hazardous Substance Activities conducted or occurring on the
          Property or in connection with conduct of business by Landlord prior
          to the Commencement Date, whether discovered before or after the
          Commencement Date.

     (b)  Landlord will indemnify and hold harmless Tenant from and against any
          actual or threatened Claims which arise from, in connection with or as
          a result of (i) any Hazardous Substance Activity conducted on the
          Property or in connection with its
<PAGE>

                                      -7-

          conduct of business prior to the Commencement Date or (ii) any
          Hazardous Substance used, stored, or otherwise introduced on, in or
          under the Property or in connection with the conduct of its business
          prior to the Commencement Date. This indemnification obligation shall
          not be effective to the extent any Claims are caused by or arise from
          any action or failure to act by Tenant after the Commencement Date.

     (c)  Landlord's liability for indemnity to Tenant under this Lease is
          subject to the limitation that any and all Claims for which Tenant
          seeks indemnity from Landlord must have been made against Tenant or
          Landlord before11:59 p.m. Central Daylight Time on the fifth
          anniversary of the Commencement Date or recovery against Landlord for
          such Claims shall be forever barred; provided that, this termination
          of Landlord's indemnification obligation shall not apply to the extent
          Tenant is able to prove that both (i) the Claim arises from
          contamination which occurred prior to the Commencement Date by a
          Hazardous Substance, and (ii) Tenant has not used the same Hazardous
          Substance in its conduct of business after the Commencement Date.

4.10 Operating Costs of Remedial Action. Landlord shall be solely responsible
     ----------------------------------
     for any operating costs, including without limitation, utility costs,
     incurred in connection with the conduct of the Remedial Action.

                                   ARTICLE V

                        Maintenance/Repair/Alterations

5.01 Care of Property.
     ----------------

     (a)  General Maintenance. Tenant shall, at all times throughout the Lease
          -------------------
          Term, and at its sole expense, keep and maintain the Property in a
          clean, safe and sanitary condition and in compliance with all
          Environmental Laws and other laws, codes, ordinances, rules, and
          regulations applicable to Tenant's use and occupancy. Tenant shall
          make all non-structural repairs to the Building, interior and
          exterior, including, but not limited to, repair of all lighting and
          plumbing fixtures and equipment, fixtures, motors and machinery,
          heating, and air conditioning fixtures, equipment and systems,
          parking, sidewalks, and landscaped areas, all interior walls,
          partitions thereof, all exterior entrances, windows, doors and docks
          and the replacement of all broken glass, signs, all outside
          maintenance of the Property, including grounds and parking areas, and
          repair and maintenance of the exterior of the Building. All such
          repairs by Tenant shall be equal in quality and class to the original
          work. Tenant shall keep and maintain all portions of the Property in a
          clean and orderly condition.
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                                      -8-

     (b)  Repairs by Landlord. Upon reasonable notice from the Tenant, Landlord
          -------------------
          shall repair, at its expense, the structural portions of the Building;
          provided, however, where structural repairs are required to be made by
          reason of the acts of Tenant, the costs thereof shall be borne by
          Tenant and payable by Tenant to Landlord within thirty days of request
          by Landlord.

5.02 Capital Improvements. Landlord shall make all capital improvements and
     --------------------
     replacements to the Building as required by applicable laws, rules,
     regulations and statutes on this Lease to maintain the Building suitable
     for general occupancy.

5.03 Alterations.
     -----------

     (a)  Tenant shall not make any alteration, additions, or improvements in or
          to the Property or add, disturb or in any way change any plumbing or
          wiring therein without the prior written consent of the Landlord,
          which consent shall not be unreasonably withheld.

     (b)  As required pursuant to Article V, Tenant shall make any alterations
          required in order to obtain or maintain compliance with any
          Environmental Laws and in addition shall make any alterations required
          by other laws, rules, regulations or statutes arising out of Tenant's
          use and occupancy of the Property. Prior to commencement of any such
          alterations, Tenant shall obtain Landlord's approval of plans and
          specifications therefore and furnish such indemnification as Landlord
          may reasonably require against liens, costs, damages and expenses
          arising out of such alterations.

     (c)  Alterations or additions by Tenant must be built in material
          compliance with all Environmental Laws and other laws, ordinances and
          governmental regulations affecting the Property and Tenant shall
          warrant to Landlord that all such afterations, additions, or
          improvements shall be in strict compliance with all relevant
          Environmental Laws, other laws, ordinances, governmental regulations,
          and insurance requirements.

     (d)  Construction of alterations or additions shall commence only upon
          Tenant obtaining and exhibiting to Landlord the requisite approvals,
          licenses and permits and indemnification against liens.

     (e)  All alterations, installations, physical additions or improvements to
          the Property made by Tenant shall at once become the property of
          Landlord and shall be surrendered to Landlord upon the termination of
          this Lease. All movable equipment or furniture owned by Tenant shall
          remain the property of Tenant and shall be removed by Tenant at the
          end of the term provided that Tenant repairs all
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                                      -9-

          damage, including without limitation, any structural damage caused by
          the removal. Notwithstanding the foregoing, Tenant shall be entitled
          to all tax benefits and attributes of any alteration, installation,
          physical condition or improvement installed on or about the Property
          at Tenants expense, including all depreciation and investment tax
          credits applicable thereto. Upon demand, Landlord shall execute any
          document reasonably required by Tenant to evidence its ownership of
          the same and/or its rights to tax benefits with respect thereto. In
          the event that any item of equipment which was located in the Building
          as of the commencement date of this Lease is difficult to remove
          without causing some damage to the Building, Landlord and Tenant shall
          mutually agree on the method of removal and allocation of any cost
          incurred in connection with the removal and/or repair of any damage so
          caused.

     (f)  All alterations by Tenant hereunder shall be at Tenants expense.

5.04 Signs. Any sign, lettering, picture or notice of advertisement installed on
     -----
     or in any part of the Property and visible from the exterior of the
     Property, shall be approved by Landlord and installed by Tenant at Tenant's
     expense. In the event of a violation of the foregoing by Tenant, Landlord
     may remove the same without any liability and may charge the expense
     incurred by such removal to Tenant.

                                  ARTICLE VI

                          Possession/Quiet Enjoyment

6.01 Possession/Condition of Property. Except as hereinafter provided, Landlord
     --------------------------------
     shall deliver possession of the Property in the condition required by this
     Lease on or before the Commencement Date. As of the Commencement Date the
     Building, including any improvements thereto, and all heating and air
     conditioning equipment and all plumbing, electrical and other mechanical
     facilities which are part of or service the Property are, to the knowledge
     of Landlord, in good operating condition and repair and do not require any
     material repairs other than routine maintenance. Landlord shall have no
     responsibility or liability for loss or damage to fixtures, facilities or
     equipment owned by Tenant and abandoned thereon at the expiration of the
     Lease.

6.02 Access to Property.
     ------------------

     (a)  The Tenant agrees to permit the Landlord, its employees and authorized
          representatives of the Landlord, to enter the Property at all times
          during usual business hours for the purpose of inspecting and making
          any necessary repairs to the Property and performing any work therein
          that may be necessary to comply
<PAGE>

                                      -10-

          with any laws, ordinances, rules, regulations or requirements of any
          public authority or of the Board of Fire Underwriters or any similar
          body or that the Landlord may deem necessary to prevent waste or
          deterioration in connection with the Property.

     (b)  Nothing herein shall imply any duty upon the part of the Landlord to
          do any such work which, under any provision of this Lease, the Tenant
          may be required to perform and the performance thereof by the Landlord
          shall not constitute a waiver of the Tenant's default in failing to
          perform the same. All such repairs shall be conducted with a minimum
          of interference to Tenant and its business.

     (c)  Provided Landlord diligently prosecutes the work, the Landlord may,
          during the progress of any work in the Property, keep and store upon
          the Property all necessary materials, tools and equipment. Except for
          damage caused by the negligence of Landlord or its employees or
          agents, Landlord shall not be liable for inconvenience, annoyance,
          disturbance, loss of business, or other damage of the Tenant by reason
          of making repairs or the performance of any work in the Property, or
          on account of bringing materials, supplies and equipment into or
          through the Property during the course thereof and the obligations of
          the Tenant under this Lease shall not thereby be affected in any
          manner whatsoever. Landlord shall at all times comply with all
          reasonable security regulations of Tenant and shall not unreasonably
          interfere with Tenant's use of the Property. In no event shall
          Landlord undertake any work in such a manner as would interrupt the
          production of product by Tenant without the prior approval of Tenant.

     (d)  Landlord's right of access hereunder shall be in addition to
          Landlord's right of entry under Section ______.

6.02 Quiet Enjoyment. Landlord warrants that it has full right to execute and to
     ---------------
     perform this Lease and to grant the demised estate, and that Tenant, upon
     payment of the rents and other amounts due and the performance of all the
     terms, conditions, covenants and agreements on Tenant's part to be observed
     and performed under this Lease, may peaceably and quietly enjoy the
     Property for the business uses permitted hereunder, subject, nevertheless,
     to the terms and conditions of this Lease.

                                  ARTICLE VII

                                 Condemnation

7.01 Condemnation. In the event of any eminent domain or condemnation proceeding
     ------------
     or private sale in lieu thereof in respect to the Property during the
     Initial Term or any Renewal Term, the following provisions shall apply:
<PAGE>

                                      -11-

     (a) Condemnation of Entire Property. If the whole of the Property shall be
         acquired or condemned by eminent domain for any public or quasi-public
         use or purpose ("Condemnation"), then the Lease Term shall cease and
         terminate as of the date possession shall be taken and all rent
         reserved under the Lease shall be apportioned to the date of such
         taking and shall be paid up to that date.

     (b) Condemnation of Portion of Building.

         (1)   If any part constituting less than the whole of the Building
               shall be Condemned, Tenant shall reasonably determine, within
               sixty (60) days after the date of such Condemnation, whether the
               Condemnation materially affects the Property so as to render the
               Property unsuitable for the business of the Tenant;

         (2)   If Tenant shall determine that the Property has been rendered
               unsuitable for the operation of its business and Landlord does
               not agree with such determination, written notice of dispute
               shall be given within fifteen (15) days and the dispute shall be
               determined by arbitration under Article XIV;

         (3)   If it is determined either by Tenant (and uncontested by
               Landlord) or by arbitration that the Property can no longer
               feasibly be used by Tenant, Tenant may terminate this Lease on at
               least ten (10) days notice but not more than sixty (60) days
               notice from the date of such determination. Tenant shall remove
               all of Tenant's property from the Property prior to the effective
               date of any such termination of the Lease and rent shall be
               apportioned and paid to the effective date of such termination.

         (4)   In the event of a partial Condemnation of the Building, which
               shall not materially affect the Property so as to render the
               Property unsuitable for the business of the Tenant. the Lease
               shall continue in full force and effect.

7.02 Condemnation Award
     ------------------

     (a)  Condemnation Award. In the event of any Condemnation, whether whole or
          ------------------
          partial, the Tenant shall not be entitled to any part of the award
          paid for such Condemnation and Landlord is to receive the full amount
          of such award, the Tenant hereby expressly waiving any right or claim
          to any part thereof.

     (b)  Tenant's Damages. Although all damages in the event of any
          ----------------
          Condemnation shall belong to the Landlord whether such damages are
          awarded as compensation for diminution in value of the leasehold or to
          the fee of the Property, Tenant shall
<PAGE>

                                      -12-

          have the right to claim and recover from the condemnation authority,
          but not from Landlord, such compensation as may be separately awarded
          or recoverable by Tenant in Tenant's own right on account of any and
          all damage to Tenant's business by reason of the Condemnation and for
          or on account of any cost or loss to which Tenant might be put in
          removing Tenant's merchandise, furniture, fixtures, leasehold
          improvements and equipment.

7.03 Temporary Condemnation. In the event of a Condemnation, in whole or part,
     ----------------------
     of the Property for a temporary use or occupancy for a period of less than
     six months, the Term of the Lease shall not be reduced or affected in any
     way, provided that, Tenant shall not be obligated to pay gross rent for
     that portion of the Property which Tenant is unable to use, and, except
     only to the extent that the Tenant is prevented from doing so by the order
     of the condemning authority, Tenant shall continue to perform and observe
     all of the other covenants, agreements, terms and provisions of this Lease
     as though such temporary taking had not occurred. Any temporary taking of
     at least fifty percent of the Property lasting in excess of six months
     shall give Tenant the right to terminate the Lease upon thirty days written
     notice. In such event, Tenant shall pay rent through the effective date of
     such termination of the Lease unless Tenant is required to vacate prior to
     such effective date in which case rent shall be apportioned and paid
     through the date of vacation.

                                 ARTICLE VIII

                             Damage or Destruction

8.01 Damage or Destruction. In the event of any damage or destruction to the
     ---------------------
     Property by fire or other cause during the term hereof, the following
     provisions shall apply:

     (a)  If the Building is damaged by fire or any other cause which is not to
          be insured against by Landlord pursuant to Section 10.01, to such
          extent that the cost of restoration, as reasonably estimated by
          Landlord, will equal or exceed thirty percent (30%) of the replacement
          value of the Building (exclusive of foundations) just prior to the
          occurrence of the damage, then Landlord may, no later than the
          sixtieth (60th) day following the damage, give Tenant written notice
          of Landlord's election to terminate this Lease.

     (b)  If the cost of restoration as reasonably estimated by Landlord will
          equal or exceed fifty percent (50%) of said replacement value of the
          Building and if the Property are not suitable as a result of said
          damage for the purposes for which they are used hereunder, in the
          reasonable opinion of Tenant, then Tenant may, no later than the
          sixtieth (60th) day following the damage, give Landlord a written
          notice of election to terminate this Lease.
<PAGE>

                                      -13-

     (c)  If the cost of restoration as estimated by Landlord shall amount to
          less than thirty percent (30%) of said replacement value of the
          Building, or if, despite the cost, Landlord does not elect to
          terminate this Lease, Landlord shall restore the Building and the
          Property with reasonable promptness, subject to delays beyond
          Landlord's control and reasonable delays in the making of insurance
          adjustments by Landlord; and Tenant shall have no right to terminate
          this Lease except as otherwise provided in this Section 9.01. Landlord
          shall not be responsible for restoring or repairing leasehold
          improvements of the Tenant.

     (d)  Notwithstanding any other provision of this Section 9.01, in the event
          that, as a result of any damage or destruction to the Property, Tenant
          is unable to conduct its business from the Property for a period of
          more than ninety days, Tenant may elect to terminate this Lease.
          Tenant shall be required to provide Landlord with thirty days written
          notice of exercise of such election hereunder.

     (e)  In the event of any election to terminate, this Lease shall be deemed
          to terminate on the date of the damage and all rentals shall be paid
          up to that date, provided that, in the event of an election by Tenant
          under Section 9.01(d), if the destruction was wholly or partially
          caused by the negligence or breach of the terms of this Lease by
          Tenant, its employees, contractors or licensees, then rent shall be
          paid through the effective date of the notice of election by Tenant.
          Tenant shall have no claim against Landlord for the value of any
          unexpired term of this Lease.

     (f)  any case where damage to the Building shall materially affect the
          Property so as to render them unsuitable in whole or in part for the
          purposes for which they are demised hereunder, then, unless such
          destruction was wholly or partially caused by the negligence or breach
          of the terms of this Lease by Tenant, its employees, contractors or
          licensees, a portion of the rent in an amount based upon the extent to
          which the Property are rendered unsuitable shall be abated until
          repaired or restored. If the destruction or damage was wholly or
          partially caused by the negligence or breach of the terms of this
          Lease by Tenant as aforesaid and if Landlord shall elect to rebuild,
          the rent shall not abate and the Tenant shall remain liable for the
          same. However, should Landlord receive rent through insurance, then,
          notwithstanding the foregoing, Tenant's rent shall abate or be
          refunded, to the extent of insurance proceeds received by Landlord.

                                  ARTICLE IX

                                   Insurance

9.01 Landlord's Insurance. Landlord shall at all times during the term of this
     --------------------
     Lease, at its
<PAGE>

                                      -14-

     expense, maintain a policy or policies of insurance with premiums paid in
     advance, issued by an insuring company licensed to do business in the State
     of Mississippi, insuring the Building against loss or damage by fire,
     explosion or other insurable hazards and contingencies for the full
     replacement value and insuring Landlord against loss of rents on account of
     such perils for a period of six (6) months, provided that Landlord shall
     not be obligated to insure any furniture, equipment, machinery, goods or
     supplies not covered by this Lease which Tenant may bring upon the Property
     or any additional improvements which Tenant may construct or install on the
     Property. Such policy or policies shall provide that thirty (30) days
     written notice must be given to Tenant prior to the cancellation thereof.
     Landlord shall furnish evidence satisfactory to Tenant upon the
     Commencement Date that such coverage is in full force and effect.

9.02 Tenant's Insurance. Tenant agrees to purchase, in advance, and to carry in
     ------------------
     full force and effect for the duration of the Lease Term, the following
     insurance:

     (1)  "All risk" property insurance covering the full replacement value of
          all of Tenant's leasehold improvements, trade fixtures, inventory and
          personal property within the Property.

     (2)  Comprehensive general public liability insurance covering all acts of
          Tenant, its employees, agents, representatives and guests on or about
          the Property, containing a contractual liability endorsement, in a
          combined single limit amount of not less than One Million Dollars
          ($1,000,000) and written on an "occurrence" basis.

     (3)  a policy or policies of public liability insurance with respect to the
          Property and the business of Tenant, on terms and with companies
          approved in writing by Landlord in which both Tenant and Landlord
          shall be covered by being named as insured parties under reasonable
          limits of liability not less than: One Million Dollars ($1,000,000)
          for injury or death to any one person; Three Million Dollars
          ($3,000,000) for injury or death to more than one person; and Five
          Hundred Thousand Dollars ($500,000) with respect to damage to
          property. Such policy or policies shall provide that thirty (30) days
          written notice must be given to Landlord prior to cancellation
          thereof. Tenant shall furnish evidence satisfactory to Landlord at the
          time this Lease is executed that such coverage is in full force and
          effect.

     (4)  a policy of "business interruption" insurance in an amount reasonably
          sufficient determined on the basis of Tenant's business activities.

9.03 Tenant Changes Affecting Insurance. In the event that the use of the
     ----------------------------------
     Property by Tenant increases the premium rate for insurance carried by
     Landlord or on the improvements of which the Property are a part, Tenant
     shall pay Landlord, upon demand,
<PAGE>

                                      -15-

      the amount of such premium increase. If Tenant installs any electrical
      equipment that overloads the power lines to the Building or its wiring,
      Tenant shall, at its own expense, make whatever changes are necessary to
      comply with the requirements of the insurance underwriter, insurance
      rating bureau and governmental authorities having jurisdiction.

9.04  Waiver of Claims and Subrogation. Notwithstanding any other provision in
      --------------------------------
      this Lease to the contrary, Landlord and Tenant hereby release one another
      from any and all liability or responsibility (to the other or anyone
      claiming through or under them by way of subrogation or otherwise) for any
      loss or damage covered by casualty insurance or coverable by the insurance
      required by this Article X, even if such loss or damage shall have been
      caused by the fault or negligence of the other party, or anyone for whom
      such party may be responsible.

                                   ARTICLE X

                           Exculpation and Indemnity

10.01 Non-Liability. Landlord shall not be liable for any damage to property of
      -------------
      Tenant or of others located on the Property, nor for the loss of or damage
      to any property of Tenant or of others by theft or otherwise, unless
      caused by negligence of Landlord, its employees or agents. Landlord shall
      not be liable for any injury or damage to persons or property resulting
      from fire, explosion, failing plaster, steam, gas, electricity, water,
      rain or snow or leaks from any part of the Property or from the pipes,
      appliances, or plumbing works or from the roof, street or subsurface or
      from any other place or by dampness or by any other cause of whatsoever
      nature, other than the negligence of Landlord, or its agents or employees,
      or the breach by Landlord of its obligations hereunder, or the intentional
      acts or misconduct of Landlord. Landlord shall not be liable for any
      damage caused by the public, other tenants or persons in the Building, or
      occupants of adjacent property or the Building or caused by operations in
      construction of any private, public or quasi-public work. Landlord shall
      not be liable for any latent defect in the Property. All property of
      Tenant kept or stored on the Property shall be so kept or stored at the
      risk of Tenant only and Tenant shall hold Landlord harmless from any
      claims arising out of damage to the same, including subrogation claims by
      Tenant's insurance carrier.

10.02 Indemnity by Tenant. Except as otherwise provided in Section 4.09, unless
      -------------------
      the liability is caused by the negligence of Landlord, its agents or
      employees, or a breach by Landlord of its obligations hereunder, Tenant
      shall indemnify, defiend and hold harmless Landlord, its officers,
      directors, contractors, agents and employees from any and all liability,
      claims, suits, demands, damages, judgments, costs, fines, penalties,
      interest and expenses (including, but not limited to, attorneys fees and
      disbursements incurred in any proceeding) which may be imposed upon or
      incurred or paid by or asserted against the Landlord, the Property, or any
      interest therein by reason of or in connection with any of
<PAGE>

                                      -16-

      the following occurring during the Term of this Lease:

      (a) any accident, injury, death or damage to any person or property in or
          upon the Property and the Property, including the person and property
          of Tenant and its employees and all persons in the Building at its or
          their invitation or sufferance; or

      (b) any negligent or tortious act on the part of Tenant or any of its
          agents, contractors, servants, employees, licensees or invitees; or

      (c) the use, non-use, possession, occupation, condition, operation,
          maintenance or management of the Property; or

      (d) any failure on the part of Tenant to perform or comply with any of the
          covenants, agreement, terms, provisions, conditions or limitation
          contained in this Lease on its part to be performed or complied with.

Tenant's obligation of indemnity hereunder shall be in addition to Tenant's
indemnification obligation with respect to environmental matters as set forth in
Article IV of this Lease.

                                  ARTICLE XI

                               Default of Tenant

11.01 Events of Default. Each of the following events shall constitute a
      -----------------
      default:

      (a) failure of Tenant to pay any rental due hereunder within ten (10) days
          after the same shall be due; or

      (b) any failure to perform any other of the terms, conditions or covenants
          of this Lease to be observed or performed by Tenant for more than
          thirty (30) days after written notice of such failure has been given
          to Tenant or such longer time after written notice as is reasonably
          required to cure the default with due diligence; or

      (c) Tenant or any agent of Tenant shall become bankrupt or insolvent, or
          file any debtor proceedings or any person shall take or have against
          Tenant in any court pursuant to any statute either of the United
          States or of any state a petition in bankruptcy or insolvency or for
          reorganization or for the appointment of a receiver or trustee of all
          or a portion of Tenants property and the proceedings are not released
          within sixty (60) days; or

      (d) if Tenant makes an assignment for the benefit of creditors.
<PAGE>

                                      -17-

11.02  Remedies. Upon the occurrence of a default as defined in Section 11.01,
       --------
       Landlord, may, in addition to other rights or remedies it may have, elect
       either:

       (a)  to cancel and terminate this Lease, and this Lease shall not be
            treated as an asset of Tenant's bankruptcy estate, and such
            termination will not release Tenant from liability for all amounts
            as provided in Section 12.04; or

       (b)  to terminate Tenant's right to possession only without canceling,
            terminating or releasing Tenants continued liability as set forth in
            Section 11.03.

Notwithstanding the fact that initially Landlord elects under Section 11.02(b)
to terminate Tenant's right to possession only, Landlord shall have the
continuing right to cancel and terminate this Lease by giving three (3) days
written notice to Tenant of such further election, and shall have the right to
pursue any remedy at law or in equity that may be available to Landlord.

11.03  Landlord Rights on Termination of Possession. Upon the occurrence of an
       --------------------------------------------
       Event of Default and in the event of an election to terminate Tenant's
       right to possession only:

       (a)  Landlord shall have the immediate right of re-entry and may, at its
            option, remove all persons and property from the Property and such
            property may be removed and stored in a public warehouse or
            elsewhere at the cost of, and for the account of the Tenant, all
            without service of notice to resort to legal process and without
            being guilty of trespass, or becoming liable for any loss or damage
            which may be occasioned thereby.

       (b)  Should Landlord elect to re-enter the Property, as herein provided,
            or should it take possession of the Property pursuant to legal
            proceedings or pursuant to any notice provided for by law, it may
            from time to time, without terminating this Lease:

            (1)  make such alterations and repairs as may be necessary in order
                 to relet the Property: and

            (2)  relet the Property or any part thereof for such term or terms
                 (which may be for a term extending beyond the Lease term) and
                 at such rental or rentals and upon such other terms and
                 conditions as Landlord in its sole discretion may deem
                 advisable; provided that, in no event and under no
                 circumstances shall Landlord be obligated or required to relet
                 the Property.

       (c)  Upon each subletting all rentals received by the Landlord from such
            reletting shall be applied first to the payment of any indebtedness
            other than rent due hereunder
<PAGE>

                                      -18-

            from Tenant to Landlord; second, to the payment of any costs and
            expenses of such reletting, including brokerage fees and attomey's
            fees and of costs of such alterations and repairs; third, to the
            payment of residue and unpaid rent hereunder and the rent due, if
            any, shall be held by Landlord and applied in payment of future rent
            as the same may become due and payable hereunder until termination
            of the Lease term, at which time any residue shall be paid to
            Tenant. If such rentals received from such reletting during any
            month are less than that to be paid during any month by Tenant
            hereunder, Tenant, upon demand, shall pay any such deficiency to
            Landlord.

       (d)  No such re-entry or taking possession of the Property by Landlord
            shall be construed as an election on its part to terminate this
            Lease unless a written notice of such intention be given to Tenant
            or unless the termination thereof be decreed by a court of competent
            jurisdiction.

       (e)  Whether or not Landlord re-enters the Property, upon the election by
            Landlord to terminate Tenant's right to possession, Tenant shall be
            liable to Landlord as follows:

            (1)  for all attorneys fees incurred by Landlord by reason of
                 Tenant's default or in connection with exercising any remedy
                 hereunder;

            (2)  for the unpaid installments of Base Rent or other unpaid sums
                 which were due prior to such termination of right to
                 possession, including interest, which sums shall be payable
                 immediately;

            (3)  for the installments of Base Rent or other sums failing due
                 pursuant to the provisions of this Lease for the periods after
                 termination of Tenant's right to possession during which the
                 Property remain vacant, including interest, which sums shall be
                 payable as they become due hereunder.

11.04  Termination of Lease. Upon the occurrence of an Event of Default and
       --------------------
       notwithstanding Landlord's initial election to terminate Tenant's right
       to possession only, and notwithstanding any reletting without
       termination, Landlord, at any time thereafter, may elect to terminate
       this Lease, and to recover from Tenant, and Tenant agrees to pay, in lieu
       of the amounts which would thereafter be payable pursuant to Section
       11.03, but not in lieu of any amounts accruing prior thereto, as damages
       for loss of the bargain and not as a penalty, the following amounts:

       (a)  the worth at the time of such termination, of the excess, if any, of
            the amount of rent and charges equivalent to rent reserved in this
            Lease for the remainder of the stated term over the then reasonable
            rental value of the Property for the remainder
<PAGE>

                                      -19-

            of the stated term, all of which amounts shall be immediately due
            and payable from Tenant to Landlord;

       (b)  all expenses incurred by Landlord as a result of Tenant's default,
            including, without limitation, leasing commissions, attorneys fees,
            all expenses of alteration, repairs and redecorating;

       (c)  all other incidental and consequential damages incurred or suffered
            by Landlord directly or indirectly as a result of Tenant's default.

11.05  Landlord's Option to Cure. Landlord may, at its option, instead of
       -------------------------
       exercising any of the rights or remedies available to it in this Lease or
       otherwise by law, statute or equity, upon ten (10) days prior written
       notice to Tenant, unless such delay may result in injury to person or
       property, and in such case, upon such notice as is practicable, spend
       such money as is reasonably necessary to cure any default of Tenant
       herein and the amount so spent, and costs incurred, including attorney's
       fees in curing such default, shall be paid by Tenant, as additional rent,
       upon demand.

11.06  Waiver of Demand for Possession. Tenant also waives any demand for
       -------------------------------
       possession of the Property and any demand for payment of rent and notice
       of intent to re-enter the Property, or of intent to terminate this Lease,
       other than the notices above provided in this Article, and waives any and
       every other notice or demand prescribed by any applicable statutes or
       laws.

11.07  Remedies Cumulative. No remedy herein or elsewhere in this Lease or
       -------------------
       otherwise by law, statute, or equity conferred upon or reserved to
       Landlord or Tenant shall be exclusive of any other remedy, but shall be
       cumulative, and may be exercised from time to time and as often as the
       occasion may arise.

                                 ARTICLE XII

                             Assignment/Subletting

12.01  Assignment or Subletting. Tenant agrees not to transfer or assign this
       ------------------------
       Lease or sublet said Property, or any part thereof, whether by voluntary
       act, operation of law, or otherwise, without obtaining the prior consent
       of Landlord in each instance. Notwithstanding the foregoing, Tenant may,
       without the consent of Landlord, assign its rights and obligations
       hereunder to any corporation or entity with which or into which Tenant
       may merge or consolidate. Tenant shall seek any required consent of
       Landlord by a written request therefore, setting forth such information
       as Landlord may reasonably
<PAGE>

                                      -20-

       deem necessary. Consent by Landlord to any assignment of this Lease or to
       any subletting of the Property shall not be a waiver of Landlord's right
       under this paragraph as to any subsequent assignment or subletting.
       Landlord's rights to assign this Lease are and shall remain unqualified.
       No such assignment or subleasing shall relieve the Tenant from any of
       Tenant's obligations contained in this Lease, nor shall any assignment of
       this Lease be effective unless the assignee, subtenant or transferee
       shall at the time of such assignment, sublease or transfer, assume in
       writing for the benefit of Landlord, its successors or assigns, all of
       the terms, covenants and conditions of this Lease thereafter to be
       performed by Tenant and shall agree in writing to be bound thereby.

12.02  Attornment. In the event of a sale or assignment of Landlord's interest
       ----------
       in the Property, the Building or this Lease, or if the Property come into
       custody or possession of a mortgagee or any other party whether because
       of a mortgage foreclosure, or otherwise, Tenant shall attorn to such
       assignee or other party and recognize such party as Landlord hereunder;
       provided, however, Tenant's peaceable possession will not be disturbed so
       long as Tenant faithfully performs its obligations under this Lease.
       Tenant shall execute, on demand, any attornment agreement required by any
       such party to be executed, containing such provisions and such other
       provisions as such party may reasonably require.

12.03  Subordination. At the request of any mortgagee or ground Landlord, this
       -------------
       Lease will be subject to any mortgage or ground lease which may now or
       hereafter encumber the Property, and Tenant will execute, acknowledge and
       deliver to the Landlord any document requested by Landlord to evidence
       the subordination. Tenants obligation of subordination hereunder shall be
       conditioned on acknowledgment by any applicable party of Tenant's right
       of possession and quiet enjoyment of the Property so long as Tenant is
       not in default under any of the provisions of this Lease.

                                ARTICLE XIII

                Surrender of Property, Ownership of Improvement

13.01  Surrender. Upon the expiration or within thirty (30) days following any
       ---------
       other termination of this Lease, Tenant shall peaceably quit and
       surrender the Property broom-clean in good order, condition and repair,
       reasonable wear and tear and casualty damage excepted. On or before the
       expiration or within thirty (30) days following any other termination of
       this Lease, Tenant shall, at its expense, remove all trade fixtures, all
       alterations, additions and improvements belonging to Tenant, all personal
       property, all equipment and all signs from the Property and any property
       not so removed shall be deemed to have been abandoned. Any damage caused
       in the removal of such items shall be repaired by Tenant at its expense.
       Tenant's obligation to observe or perform this covenant shall survive the
       expiration or other termination of the Lease Term.
<PAGE>

                                      -21-

       Notwithstanding the foregoing, in the event that any item of equipment
       which was located in the Building as of the commencement date of this
       Lease is difficult to remove without causing some damage to the Building,
       Landlord and Tenant shall mutually agree on the method of removal and
       allocation of any cost incurred in connection with the removal and/or
       repair of any damage so caused.

13.02  Title to Property.
       -----------------

       (a)  Landlord. Title to the Building and all alterations, additions,
            --------
            improvements and fixtures installed by Landlord at its expense or
            which cannot be removed without structural injury to the Property
            and all floor covering shall remain upon and be surrendered with the
            Property as a part thereof, without disturbance, molestation or
            injury (other than reasonable wear and tear and casualty damage),
            and without charge, at the expiration or termination of this Lease.

       (b)  Tenant. Tenant shall retain title to any and all equipment,
            ------
            machinery, fixtures and other personal property installed or used in
            the Building.

13.03  Delay in Surrender. If the Property are not surrendered on the Expiration
       ------------------
       Date or within thirty (30) days following termination thereof upon a day
       other than the Expiration Date, Tenant shall indemnify Landlord against
       loss or liability, claims, without limitation, made by any succeeding
       Tenant founded on such delay. Tenant shall promptly surrender all keys
       for the Property to Landlord at the place then fixed for payment of rent
       and shall inform Landlord of combinations of any locks and safes on the
       Property.

13.04  Holding Over. In the event Tenant remains in possession of the Property
       ------------
       after the expiration of this Lease and without the execution of a new
       Lease and Landlord accepts payment of rent, it shall be deemed to be
       occupying said Property as a Tenant from month-to-month, subject to all
       the conditions, provisions and obligations of this Lease insofar as the
       same can be applicable to a month-to-month tenancy, provided, however,
       that the Base Rent required to be paid by Tenant during any holdover
       period shall be in an amount equal to 200% of the then current Base Rent.

                                  ARTICLE XIV

                                  Arbitration

14.01  Dispute Resolution. Whenever in this Lease it is provided that a dispute
       ------------------
       shall be determined in arbitration, the arbitration shall be conducted as
       provided in this Article.
<PAGE>

                                      -22-

14.02  Procedure.
       ---------

       (a)  The party desiring arbitration shall give written notice to that
            effect to the other, specifying the dispute to be arbitrated and the
            name and address of the person designated to act as the arbitrator
            on its behalf. Each party may appoint as its arbitrator its own
            attorney, accountant, employee or officer or any individual
            permitted or authorized to act as such an arbitrator under the rules
            of the American Arbitration Association.

       (b)  Within ten (10) days after said notice is given, the other party
            shall give written notice to the first party, specifying the name
            and address of the person designated to act as arbitrator on its
            behalf.

       (c)  If the second party fails to notify the first party of the
            appointment of its arbitrator by the time above specified, then a
            joint arbitrator shall be appointed in accordance with the
            provisions of clause (e) of this Section 14.02.

       (d)  The respective arbitrators so chosen shall meet within ten (10) days
            after the second arbitrator is appointed and within thirty (30) days
            thereafter shall decide the dispute. If within said period then
            cannot agree upon their decision, they shall appoint a third
            arbitrator, and if they cannot agree upon said appointment, the
            third arbitrator shall be appointed in accordance with the
            provisions of clause (e) of this Section 15.02.

       (e)  If required, a joint arbitrator or a third arbitrator shall be
            appointed upon the application of either party, by the American
            Arbitration Association in the City of Minneapolis, Minnesota; In
            the event a joint arbitrator is required, the party failing to
            select and notify the other party of its designated arbitrator in a
            timely manner shall bear the cost of the joint arbitration. In any
            other case, the parties shall share the cost of the arbitrating
            equally.

       (f)  The joint arbitrator or the three arbitrators as the case may be,
            shall meet and decide the dispute by written decision. In the latter
            case, if two of the arbitrators shall be unable to concur, the
            parties shall appoint new arbitrators and a new arbitration shall be
            conducted;

       (g)  A decision of the joint arbitrator or in which two of the three
            arbitrators concur shall be binding and conclusive upon the parties;

       (h)  In appointing arbitrators and in deciding the dispute, the
            arbitrators shall act in accordance with the rules then in force of
            the American Arbitration Association, subject, however, to such
            limitations as may be placed upon them by the
<PAGE>

                                      -23-

            provisions of this Lease.

14.03  Determination Binding. Any determination rendered in accordance with the
       ---------------------
       provisions of this Article shall be controlling and decisive of any
       dispute thereafter arising under this Lease if, and to the extent that,
       the same issues of fact and law are involved, and judgment upon the
       determination may be entered in any court having jurisdiction thereof.

14.04  Rent Pending Arbitration. Pending the determination of the arbitrators,
       ------------------------
       Tenant shall pay the Base Rent and other payments provided for in this
       Lease whether or not Tenants obligation to make such payments or the
       amount thereof are the subject of the pending arbitration.

14.05  Arbitration Obligation. The obligation of Landlord and Tenant to submit a
       ----------------------
       dispute to arbitration is limited to disputes arising under those
       Articles of this Lease which specifically provide for arbitration.

                                  ARTICLE XV

                                 Miscellaneous

15.01  Consents by Landlord. Whenever provision is made under this Lease for
       --------------------
       Tenant securing the consent or approval by Landlord, such consent or
       approval shall only be in writing, and shall not be unreasonably withheld
       or delayed.

15.02  Recording. Tenant shall not record this Lease without the written consent
       ---------
       of Landlord. Tenant and Landlord shall join in the execution of a
       Memorandum Lease for the purposes of recordation in the form attached
       hereto as Exhibit Said Memorandum lease shall not be construed to limit
       Landlord's right to file this Lease.

15.03  Overdue Payments. All monies due under this Lease from Tenant to Landlord
       ----------------
       shall be due on demand, unless otherwise specified, and if not paid
       within five (5) days following written notice shall bear interest from
       the original due date computed at an annual rate equal to the reference
       rate or prime rate quoted by the Wall Street Journal, adjusted weekly as
       of the first business day of each week with respect to which interest is
       being computed, plus one and one-half percent (1 1/2%), until paid.

15.04  Intent of Parties. Except as otherwise provided herein, the parties
       -----------------
       covenant and agree that if a party, within any grace period allowed
       herein, shall at any time fail to pay any cost or expense, or fail to
       take out, pay for, maintain or deliver any of the insurance policies
       above required, or fail to make any other payment or perform any other
       act on its part to be made or performed as in this Lease provided, then
       the other party may, after ten (10) days prior written notice, unless
       such delay may result in injury to person or
<PAGE>

                                      -24-

       property, and then upon such notice as is practicable, but shall not be
       obligated to, and without waiving or releasing the other party from any
       obligations on its part to be performed under this Lease, pay any such
       cost or expense, effect any such insurance coverage and pay premiums
       therefore and may make such payment or perform such act to be made and
       performed as in this Lease provided, in such manner and to such extent as
       the curing party may deem desirable, and in exercising any such right, to
       also pay all necessary and incidental costs and expenses, employ counsel
       and incur and pay reasonable attorney's fees. All sums so paid by the
       curing party and all necessary and incidental costs and expenses in
       connection with the performance of any such act by the curing party,
       together with interest thereon computed at an annual rate equal to the
       reference rate or prime rate quoted by the Wall Street Journal, adjusted
       weekly as of the first business day of each week with respect to which
       interest is being computed until paid plus one and one-half percent (1
       1/2%) from the date of making of such expenditure, shall be deemed
       Additional Rent hereunder, and shall be payable to the curing party on
       demand. The defaulting party covenants to pay any such sum or sums with
       interest as aforesaid and, in the event of a cure by Landlord, the
       Landlord shall have the same rights and remedies in the event of the non-
       payment thereof by Tenant as in the case of default by Tenant in the
       payment of the Base Rent payable under this Lease.

15.05  No Implied Waiver. No waiver of any default of a party hereunder shall be
       -----------------
       implied from any omission by the other party to take any action on
       account of such default if such default persists or is repeated, and no
       express waiver shall affect any default other than the default specified
       in the express waiver and that only for the time and to the extent
       therein stated. One or more waivers shall not be construed as a waiver of
       a subsequent breach of the same covenant, term or condition. The consent
       to or approval of any act requiring consent or approval shall not waive
       or render unnecessary the consent to or approval of any subsequent
       similar act.

15.06  No Deemed Eviction. No action required or permitted to be taken by or on
       ------------------
       behalf of Landlord under the terms or provisions of this Lease shall be
       deemed to constitute an eviction or disturbance of Tenant's possession of
       the Property.

15.07  Landlord Right of Entry. Landlord, shall, provided it shall have given
       -----------------------
       Tenant notice hereof and is accompanied by a representative of Tenant,
       have the right to enter upon the Property, or any part thereof, for the
       purpose of ascertaining their condition, exhibiting them for the purpose
       of sale or lease or determining whether Tenant is observing and
       performing the obligations assumed by it under this Lease, all without
       hindrance or molestation from Tenant. Landlord's right of entry shall be
       exercisable at reasonable times, at reasonable hours, on reasonable
       notice, and in a reasonable manner which does not unreasonably interfere
       with Tenant's operations or disclose Tenants trade secrets, and always in
       compliance with and in accordance with Tenant's security requirements and
       clearances and Governmental security requirements and clearances. Nothing
       contained
<PAGE>

                                      -25-

       herein, however, shall impose or imply any duty on the part of Landlord
       to make any such repairs or perform any such work. Any confidential
       information obtained by Landlord with respect to Tenant's business
       operation shall be kept confidential by Landlord.

                                  ARTICLE XVI

                              General Provisions

16.01  Severability. If any term, covenant or condition of this Lease or the
       ------------
       application thereof to any person or circumstance shall, to any extent,
       by invalid or unenforceable, the remainder of this Lease, or the
       application of such term, covenant or condition to persons or
       circumstances other than those as to which it is held invalid or
       unenforceable, shall not be affected thereby and each term, covenant or
       condition of this Lease shall be valid and be enforced to the fullest
       extent permitted by law.

16.02  Entire Agreement. This Lease (including the Exhibits hereto) constitutes
       ----------------
       the entire agreement of the parties with respect to the subject matter
       hereof and supersedes all prior written or oral and all contemporaneous
       oral agreements, understandings and negotiations between the parties with
       respect to the subject matter hereof.

16.03  Governing Law. This Lease is governed by and is to be construed and
       -------------
       interpreted in accordance with the laws of the State of Mississippi,
       without giving effect to the conflict of law principles thereof.

16.04  Modifications or Amendments. No subsequent alteration, amendment, change
       ---------------------------
       or addition to this Lease shall be binding upon Landlord or Tenant unless
       reduced to writing and executed in the same form and manner in which this
       Lease is executed.

16.05  Captions. The captions are inserted only as a matter of convenience and
       --------
       for reference, and in no way define, limit or describe the scope of this
       Lease nor the intent or any provision thereof.

16.06  Notices. All notices given pursuant to this Lease shall be in writing and
       -------
       be personally delivered or mailed with postage prepaid, by registered or
       certified mail, return receipt requested, to the address set forth below
       or such other address as party may from time to time specify in writing
       to the other party. If so mailed and also sent by telegram or facsimile
       machine, the notice will conclusively be deemed to have been received on
       the business day next occurring 24 hours after the latest to occur of
       such mailing and telegraphic or facsimile communication; otherwise, no
       notice shall be deemed given until it actually arrives at the address in
       question. The addresses to which notice are initially to be sent are as
       follows:
<PAGE>

                                      -26-

       (a)  If to Landlord:

            Potter Production Corporation
            Suite 2394570 W. 77th Street
            Edina, MN 55435
            Facsimile No: (612) 831-9226(b)

       (b)  If to Tenant:

            John P. Freeman
            Vice President and Chief Financial Officer
            Spectrum Controls Inc.
            6000 West Ridge Road
            Erie, PA 16506

16.07  Successors and Assigns. The terms, covenants and conditions hereof shall
       ----------------------
       be binding upon and inure to the permitted successors and assigns of the
       parties hereto.

IN WITNESS WHEREOF, Landlord and Tenant have caused these presents to be
executed in form and manner sufficient to bind them at law, as of the day and
year first above written.

LANDLORD:                                    TENANT:

POTTER PRODUCTION CORPORATION                SPECTRUM CONTROL, INC.

   /s/ Chief Executive Officer                   /s/ John P. Freeman
By _________________________________         By ________________________________

Its ________________________________         Its _______________________________

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