Document:

Exhibit 10.32

 

PURCHASE AGREEMENT

 

THIS PURCHASE AGREEMENT (“Agreement”)is made and entered into as of
this 4th day of April, 2003 between MedicalCV, Inc., a Minnesota
corporation (“Seller”), and PKM Properties, LLC, a Minnesota limited
liability company (“Purchaser”).  For
purposes of this Agreement, the term “Effective Date” shall mean the date that
Purchaser receives a fully executed copy of this Agreement.

 

In consideration of the
covenants and agreements contained herein, the parties agree as follows:

 

1.                                       Premises.

 

A.                                   Premises.  Subject to compliance with
the terms and conditions of this Agreement, Seller shall sell to Purchaser and
Purchaser shall purchase from Seller the following (collectively, the
“Premises”):

 

1.                                       The real property located at 9725 South
Robert Trail, in the City of Inver Grove Heights, County of Dakota, State
of Minnesota, legally described in EXHIBIT A and depicted on EXHIBIT B
attached hereto, consisting of approximately 19.35 acres of real property
together with all easements, tenements, hereditaments, and appurtenances
belonging thereto (the “Land”); and

 

2.                                       The office-warehouse-manufacturing facility
building (“Building”) and other structures and improvements erected or placed
on the land, supplies, tools, and equipment used in connection with the
maintenance or operation of the Premises or Building (collectively, the
“Personal Property”).

 

B.                                     Excluded Assets; Liabilities of Seller.

 

1.                                       Seller shall retain ownership of any personal
property located on the Premises not described in Section 1.A. above (including
but not limited to all supplies, tools, equipment (used in connection with the
maintenance or operation of Tenant’s business), inventory, machinery,
furniture, fixtures,  and other items of
personal property located on or about the Building.

 

2.                                       Except as specifically set forth herein,
Purchaser shall not assume or pay any liabilities, expenses, or other
obligations of Seller except as provided in this Agreement.

 

2.                                       Purchase Price; Payment.

 

A.                                   Purchase Price.  The
purchase price for the Premises shall be Three Million Five Hundred Thousand
and 00/100 Dollars ($3,500,000.00) (“Purchase Price”).

 

B.                                     Payment.  Purchaser shall pay the
purchase price for the Premises as follows:

 

1.                                       Earnest Money.  The
sum of Ten Thousand and 00/100 Dollars ($10,000.00) earnest money (“Earnest
Money”) shall be deposited by Purchaser with Old Republic National Title
Insurance Company (“Title”) upon execution of this Agreement.  The Earnest Money shall be placed and held
by Title in its

 

 

commercial interest bearing account in accordance with the terms of
this Agreement and shall be credited against the Purchase Price in favor of
Purchaser at closing.  Any and all
interest accruing on the Earnest Money pursuant to this Agreement shall be paid
to Purchaser and shall accrue solely for Purchaser’s benefit.  If Purchaser does not provide Seller with
written notice that a condition to closing set forth in Section 7 of this
Agreement has not been satisfied, then the Earnest Money shall be deemed
nonrefundable to Purchaser, except as otherwise provided in Sections 3D., 5.B.,
5.C., 14.A. or elsewhere in this Agreement.

 

2.                                       Mortgage Note. 
$2,500,000 by assumption of the principal balance of a promissory note
and mortgage, assignment of rents, security agreement and fixture financing
statement executed by CV Dynamics, Inc., now known as MedicalCV, Inc., in favor
of Riverside Bank, now known as Associated Bank-Minnesota, dated November 23,
1999 (“Mortgage Note”).

 

3.                                       Cash.  $990,000, the balance of the
Purchase Price shall be paid (subject to prorations, reductions and credits as
provided below) by Purchaser paying such amount in immediately available funds
by wire transfer to an account designated by Seller.

 

3.                                       Title To Be Delivered; Commitment; Survey; Title Objections.

 

A.                                   Title To Be Delivered.  At
closing, Seller agrees to convey Marketable Fee Simple Title in the Land and
Building.  For purposes of this
Agreement, the term “Marketable Fee Simple Title” means title to the Land and
Building that, when acquired by Purchaser, will be insurable by Title under its
standard ALTA (Form 10/17/92) Owner’s Title Insurance Policy, at standard rates
and free and clear of all liens, encumbrances, easements, covenants, conditions
and restrictions other than the Permitted Exceptions (defined herein).  Seller shall deliver to Purchaser Marketable
Fee Simple Title, free and clear of all claims, encumbrances and liens except:

 

1.                                       Mortgage, Assignment of Rents, Security
Agreement and Fixture Financing Statement executed by CV Dynamics, Inc. in
favor of Riverside Bank, dated November 23, 1999, filed December 13, 1999, as
Document No. 1659505 in the original amount of $2,500,000.

 

2.                                       Trunk, watermain, sanitary sewer extension
and utility easement(s) over the southeasterly 20 feet lying south of the north
417.42 feet of the Northwest 1⁄4 of the Southwest 1⁄4 in favor of the City of Inver
Grove Heights, recorded as Document No. 1740919.

 

3.                                       Conditional Use Permit issued by the City of
Inver Grove Heights dated July 14, 1997 recorded July 24, 1997 as document
number 1434761.

 

4.                                       Road Easement in favor of the State of
Minnesota set forth in final certificate recorded February 2, 1955 in Book 64
p.240.

 

5.                                       Easement between Soo Line Railroad Company, a
Minnesota corporation dated November 15, 1991 recorded January 10, 1992, as
Document No. 1022688.

 

6.                                       The lien of real estate taxes due and payable
in 2003 and subsequent years.

 

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7.                                       The lien of the following special
assessments:

 

(1)                                  1998-12 CV - $168,000 payable in installments
in 2004 and thereafter;

 

(2)           2003 installment -
$39,360

 

8.                                       Laws, regulations, or ordinances of any
governmental unit or agency which do not prohibit the current use of the
Premises.

 

9.                                       An unrecorded tower lease between CV
Dynamics, Inc. and U.S. West Communications Wireless Group, a division of U.S.
West Communications dated April 16, 1997 (“Tower Lease”).

 

B.                                     Commitment.  Seller at its sole cost and
expense shall cause to be issued and delivered to Purchaser a commitment
(“Commitment”) covering the Premises issued by Title wherein Title agrees to
issue to Purchaser upon the recording of the Deed (defined herein) and the
conveyance documents described herein an ALTA (Form 10/17/92) Owner’s Title
Insurance Policy, with standard coverage, in the full amount of the Purchase
Price.  Such Commitment shall include a
(i) non-imputation endorsement, (ii) an endorsement insuring that the
conveyance to the Purchaser complies with Sections 302A.661 and 302A.673 of the
Minnesota Business Corporation Act (collectively, “MBCA Endorsement”), and
(iii) Uniform Commercial Code financing statement search, tax lien search,
state and federal court judgment and lien search.  Seller shall deliver a copy of the Survey (defined herein) to Title
so that the initial Commitment may be amended or supplemented to contain any
survey exceptions to title.

 

C.                                     Survey.  Seller at its sole cost and
expense shall cause to be delivered to Purchaser a current ALTA/ACSM Urban Land
Title Survey (“Survey”) of the Premises prepared by a duly licensed land
surveyor in the State of Minnesota reasonably approved by Purchaser, which
Survey shall meet the then current accuracy standards jointly adopted by ALTA
and ACSM and shall contain a certification as set forth in the attached EXHIBIT C
dated after the date of this Agreement and shall contain items 1 through 4, 6,
7(a), 8 through 11(a), and 13 and 14 of Table A of the 1999 Minimum
Standard Detail Requirements for ALTA/ACSM Land Title Surveys. The Survey shall
be issued in the names of Seller, Purchaser, Title and Associated Bank and TCF
National Bank.  Seller shall deliver to
said surveyor a copy of the Commitment to be delivered to Purchaser as provided
above, so that the Survey delivered to Purchaser will include and identify the
location of any encroachments, easements, encumbrances or other restrictions
that are identified or disclosed in the Commitment.

 

D.                                    Title Objections. 
Purchaser shall have until ten (10) days from the date it receives the
latter of the Commitment or Survey (or any update or supplement thereto) to
make its objections to matters disclosed in the Commitment or Survey (or any
update or supplement thereto) in writing to Seller.  Any exception disclosed in the Commitment or Survey (or any update
or supplement thereto) and not timely objected to by Purchaser within the
applicable ten (10) day period shall be deemed a “Permitted Exception”
hereunder.  Seller shall have until
twenty (20) days after it receives such objections to have the same removed or
satisfied, using its best efforts.  If
Seller shall fail to have such objections removed within that time, then
without limiting any other remedies Purchaser may have at law or in equity,
Purchaser may, at its sole discretion, either (a) terminate

 

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this Agreement without any liability on its part and receive the
Earnest Money (together with interest) back, (b) waive such objections in
writing and proceed to closing with the understanding that such uncured
objections shall be deemed Permitted Exceptions at closing, or (c) attempt to
cure such uncured objections, in which event Purchaser shall have an additional
twenty (20) days to attempt to cure such objections, and if Purchaser is not
successful in curing such objections, Purchaser shall then have the right to
either terminate this Agreement pursuant to clause (a) above or waive such
objections pursuant to clause (b) above.

 

4.                                       Property Information; Purchaser’s Inspections.

 

A.                                   Seller’s Documents.  Concurrently
with Seller’s acceptance and delivery of this Agreement to Purchaser, Seller
shall deliver to Purchaser, complete and accurate copies of any contracts,
leases, licenses or other agreements pertaining to the Premises, including any
amendments thereof, and copies of all permits, plats, authorizations, notices,
consents, approvals, plans, specifications, surveys, engineering studies,
analysis, soil test borings, environmental studies and other documentation
pertaining to the physical condition, development and operation of the Premises
and any other information reasonably requested by Purchaser (whether prepared
by Seller, Seller’s agents or independent contractors, any governmental
authority or agency, federal, state or local, or any other third party), to the
extent that Seller has the same in its possession or has a right of possession
thereto (“Seller’s Documents”).

 

B.                                     Environmental Assessment. 
Seller shall, at its sole cost, obtain and deliver to Purchaser an
update of the Phase I Environmental Assessment (“Phase I”)of the Premises
prepared by Pinnacle Engineering, Inc. and dated September 27, 1999, which
update is issued in the name of Seller, Purchaser, Associated Bank and TCF
National Bank (“Updated Phase I”).

 

C.                                     Appraisals.  Seller shall, at its sole
cost, provide Purchaser with an update of the existing appraisal of the
Premises conducted by Jabs, Gehrig & Company and dated August 29, 2002
(“Seller’s Appraisal”).  Seller’s
Appraisal shall be for the benefit of Seller, Purchaser and Associated Bank
such that they can each rely on the Seller’s Appraisal.  Purchaser shall, at its sole cost, obtain an
appraisal of the Premises taking into consideration the financial terms of the
lease from Purchaser to Seller (“Purchaser’s Appraisal”).

 

D.                                    Purchaser’s Inspections. 
Purchaser, its counsel, accountants, agents and other representatives,
shall upon at least twenty-four (24) hours prior notice to Seller have full and
continuing access to the Premises, as well as to all other papers and documents
of Seller as they relate to the title, physical condition, development and
operation of the Premises, which inspections will be conducted in a manner not
disruptive to the operation or security of the Premises.  Purchaser and its agents and representatives
shall also have the right to enter upon the Premises at any time after the
execution and delivery hereof for any purpose whatsoever, including inspecting,
surveying, engineering, test boring, performance of environmental tests and
such other work as Purchaser shall consider appropriate and shall have the
further right to make such inquiries of governmental agencies and utility
companies, etc., and to make such feasibility studies and analyses as it
considers appropriate (collectively the “Inspections”). Purchaser shall
indemnify and hold harmless Seller from and against any liabilities, losses,
liens, expenses, suits and fees or damages to persons or property arising out
of the activities of Purchaser, its agents or contractors on the Premises.

 

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5.                                       Control of Premises; Condemnation.

 

A.                                   Control of Premises. 
Until the closing, except for Purchaser’s indemnification obligations
set forth in Section 4.D. above, Seller shall have the full responsibility and
the entire liability for any and all damages or injury of any kind whatsoever
to the Premises, the Improvements thereon, and all persons, whether employees
or otherwise, and all property from and connected to the Premises.  Seller agrees to keep the Premises continually
insured during the term of this Agreement under a policies of (i) commercial
general liability insurance with policy limits of not less than $1,000,000 per
incident, and (ii) fire, hazard and all risk property insurance in amount equal
to one hundred percent (100%) of the replacement value of the
Improvements.  Until the closing, Seller
shall have the full responsibility for the continued operation, maintenance and
repair of the Premises, provided, however, Seller shall not (i) enter into any
new leases or any amendments, modifications, extensions or renewals of existing
leases except a sublease with Huntter Medical, or (ii) approve of any
assignment or sublease of an existing lease, without the prior written consent
of the Purchaser, which may be withheld in Purchaser’s reasonable discretion.

 

B.                                     Condemnation.  If,
prior to the closing, the Premises shall be the subject of an action in eminent
domain or a proposed taking by a governmental authority, whether temporary or
permanent, Purchaser, at its sole discretion, shall have the right to terminate
this Agreement upon notice to Seller without liability on its part by so
notifying Seller and the Earnest Money (with interest) shall be refunded to
Purchaser.  If Purchaser does not
exercise its right of termination, (i) any and all proceeds arising out of any
such eminent domain or taking shall be held in trust by Seller for the benefit
of Purchaser and paid to Purchaser at closing or if the eminent domain action
has not concluded as of the Closing Date, Seller shall assign any quick take
payments to Purchaser, assign any rights of Seller in the eminent domain action
and any award therein to Purchaser and Purchaser shall take title subject to
the eminent domain action; and (ii) if the condemning authority has acquired
title as of the Closing Date, the “Premises” shall thereafter be defined to
mean the Premises less the portion taken by eminent domain or
condemnation.  In no event shall the
Purchase Price be changed.

 

C.                                     Casualty.  If, prior to the closing, the
Premises or the Improvements are damaged or destroyed, Purchaser, at its sole
discretion, shall have the right to terminate this Agreement upon notice to
Seller without liability on its part by so notifying Seller and the Earnest
Money (with interest) shall be refunded to Purchaser.  If the Premises or Improvements are not materially damaged or
destroyed or Purchaser does not exercise its right of termination, Seller shall
proceed forthwith to repair the damage to the Premises and Improvements and any
and all proceeds arising out of such damage or destruction, if the same be
insured, shall be held in trust by Seller for the benefit of such repair.

 

6.                                       Representations, Warranties and Covenants of Seller.  In
order to induce Purchaser to enter into this Agreement and purchase the
Premises, Seller hereby represents, warrants and covenants to Purchaser:

 

A.                                   Each of the persons executing this Agreement
on behalf of Seller does hereby represent and warrant that (i) Seller is a duly
organized and validly existing corporation, as the case may be, under the laws
of the State of Minnesota, (ii) Seller is qualified to do business in the
state in which the Premises are located, (iii) the Seller has full right
and authority to enter into this Agreement, (iv) each person signing on
behalf of the Seller is authorized to

 

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do so, (v) the execution and delivery of this Agreement by Seller
will not constitute a default under any indenture, agreement, contract,
mortgage or other instrument to which Seller is a party, (vi) Seller is
not a “foreign person” as that term is defined under Internal Revenue Code
Section 1445(F)(3), and (vii) the sale of the Premises is not subject to
any withholding requirements imposed by the Internal Revenue Code, including,
without limitation, Section 1445(F)(3).

 

B.                                     No action in condemnation, eminent domain or
public taking proceedings have been commenced or to the best of Seller’s
knowledge without investigation pending against the Premises.

 

C.                                     To the best of Seller’s knowledge without
investigation, no ordinance or hearing is now before any local governmental
body which either contemplates or authorizes any levy of special assessments
against the Premises.

 

D.                                    There is no actual or to the best of Seller’s
knowledge without investigation threatened, action, litigation, or
administrative proceeding by any organization, person, individual or
governmental agency (including governmental actions under condemnation
authority or similar proceedings) affecting the Premises.

 

E.                                      Seller owns fee simple title interest to the
Premises.

 

F.                                      To the best of Seller’s knowledge, there are
no delinquent taxes against the Premises. 
There are no “Green Acres” taxes against the Premises.  Seller has not appealed any taxes or
assessments payable against the Premises and has made no commitments or
agreements with any taxing authorities pertaining to the payment of taxes and
assessments against the Premises or the assessed value of the Premises.

 

G.                                     All labor or material which have been
furnished to the Premises have been fully paid for or will be fully paid for
prior to the closing date so that no valid lien for labor or materials rendered
can be asserted against the Premises.

 

H.                                    Seller has not received notice of any order,
suit, judgment or other proceedings relating to fire, building, zoning, air
pollution or health violations that have not been corrected.  Seller has received no written request from
any fire insurance underwriter or governmental authority for any alterations or
any additions to the Premises.

 

I.                                         There are no management, maintenance or
service contracts, leases, licenses, purchase agreements, purchase options,
rights of first refusal, or other unrecorded agreements affecting the Premises,
except the lease between Seller and Huntter Medical which will be converted by
Seller into a sublease on or before closing. 
Seller agrees not to enter into any new, or modify any existing, written
or oral service contracts, leases, licenses or other recorded or unrecorded
agreements affecting the Premises hereafter without Purchaser’s prior written
consent which may be withheld in Purchaser’s reasonable discretion, except for
the Huntter Medical sublease.

 

J.                                        To the best knowledge of Seller without
investigation and subject to whatever may be disclosed in the Phase I, Updated
Phase I, or any other document delivered by Seller to Purchaser (“Environmental
Documents”), there are no toxic or hazardous substances or wastes, pollutants
or contaminants (including, without limitation, asbestos, urea formaldehyde,
the group of organic compounds known as polychlorinated biphenyls,

 

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petroleum products including gasoline, fuel oil, crude oil and various
constituents of such products, and any hazardous substance as defined in the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
(“CERCLA”), 42 U.S.C. § 9601-9657, as amended) released on or illegally
disposed of, from the Premises, nor has Seller undertaken any activity on the
Premises that would cause or contribute to (i) the Premises becoming a
treatment facility within the meaning of the Resource Conservation and Recovery
Act of 1976 (“RCRA”), 42 U.S.C. § 6901 et. al., (ii) a release or threatened
release of toxic or hazardous wastes or substances, pollutants or contaminants,
from the Premises within the meaning of, CERCLA, or (iii) the discharge of
pollutants or effluent into any water source or system, the dredging or filling
of any waters or the discharge into the air of any emissions, that would
require a permit under the Federal Water Pollution Control Act, 33 U.S.C. §
1251 et. al., or the Clean Air Act, 42 U.S.C. § 7401 et. al., or any similar
state law or local ordinance.  To the
best knowledge of Seller without investigation and subject to whatever may be
disclosed in the Environmental Documents there are no substances or conditions
released in or on the Premises that may support a claim or cause of action
under RCRA, CERCLA or any other federal, state or local environmental statutes,
regulations ordinances or other environmental regulatory requirements.  Seller has disclosed to Purchaser all
environmental reports and studies with respect to the Premises which are in
Seller’s possession or the possession of Seller’s agents.

 

No
above ground or underground tanks are located in or about the Premises, or to
the best knowledge of Seller without investigation, have been located under, in
or about the Premises and have subsequently been removed or filled, other than
as disclosed in the Environmental Documents previously delivered to
Purchaser.  To the extent storage tanks
exist on or under the Premises, such storage tanks have been duly registered
with all appropriate regulatory and governmental bodies and to the best of
Seller’s knowledge without investigation otherwise are in compliance with
applicable Federal, state and local statutes, regulations, ordinances and other
regulatory requirements.

 

Subject
to whatever may be disclosed in the Environmental Documents, (i) Seller has not
received any written notice that the Premises or Seller’s operations at the
Premises do not comply with any applicable federal, state, county or local
statutes, laws, regulations, rules, ordinances, codes, standards, orders, licenses
and permits of any governmental authorities relating to environmental matters
(being hereinafter collectively referred to as the “Environmental Laws”),
including by way of illustration and not by way of limitation, (A) the Clean
Air Act, the federal Water Pollution Control Act of 1972, the Resource
Conservation and Recovery Act of 1976, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Toxic Substances Control
Act, or the Minnesota Environmental Response and Liability Act (including any
amendments or extensions thereof and any rules, regulations, standards or
guidelines issued pursuant to any of said Environmental Laws), and (B) all
other applicable environmental standards or requirements. (ii) there are no
existing or pending remedial actions or other work, repairs, construction or
capital expenditures with respect to the Premises in connection with the
Environmental Laws; (iii) Seller has not released Hazardous Materials into the
environment, or deposited, spilled, discharged, disposed of Hazardous Materials
at, on, or adjacent to the Premises; (iv) no notices of any violation of any of
the matters referred to in the foregoing sections relating to the Premises or
its use have been received by Seller and there are no writs, injunctions,
decrees, orders or judgments outstanding, no lawsuits, claims, proceedings or
investigations pending or threatened, relating to the ownership, use,
maintenance or operation of the Premises.

 

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K.                                    Seller is not aware of and has not received
any written notification from governmental authorities with respect to
violations of any law or ordinance concerning the Premises.

 

For
purposes of the above representations limited to “Seller’s knowledge”,
“Seller’s knowledge” means the knowledge of all current officers of Seller and
any current employee with management responsibility for production operations.

 

Purchaser expressly
acknowledges that the Premises is being sold and accepted AS-IS, WHERE IS, and
Seller makes no representations or warranties (other than those Seller
representations and warranties contained in this Section 6), express or
implied with respect to the physical condition or any other aspect of the
Premises, including without limitation, (1) the conformity of the Premises
to past, current or future applicable zoning or building requirements,
(2) the existence of soil instability, past soil repairs, soil additions
or conditions of soil fill, or susceptibility to landslides, (3) the sufficiency
of any drainage, (4) whether the Premises is located wholly or partially
in a flood plain or a flood hazard boundary or similar area, (5) the
existence or non-existence of underground storage tanks, (6) any other
matter affecting the stability or integrity of the land, or any buildings or
improvements situated on or as part of the Premises, (7) the availability
of public utilities and services for the Premises, (8) the fitness or
suitability of the Premises for Purchaser’s intended use, (9) the potential
for further development of the Premises, (10) the existence of vested land
use, zoning or building entitlements affecting the Premises, or (11) the
presence of Hazardous Substances, as hereinafter defined, in, on or about the
Premises (collectively, the “Premises Conditions”).

 

EXCEPT AS PROVIDED IN THIS
SECTION 6, PURCHASER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY AND
ALL ACTUAL OR POTENTIAL RIGHTS PURCHASER MIGHT HAVE REGARDING ANY FORM OF
WARRANTY, EXPRESS OR IMPLIED OR ARISING BY OPERATION OF LAW, INCLUDING, BUT IN
NO WAY LIMITED TO, ANY WARRANTY OF CONDITION, HABITABILITY, MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE RELATING TO THE PREMISES, ITS IMPROVEMENTS OR
THE PREMISES CONDITIONS.  Purchaser’s
waiver is absolute, complete, total and unlimited in every way and except for
misrepresentations made in this agreement Purchaser hereby completely,
irrevocably and unconditionally releases and forever discharges Seller of and
from any and all claims and demands whatsoever in law or equity, whether such
claims are presently known or unknown, direct or indirect, fixed or contingent,
which the Purchaser has had, now has, may in the future have, or may claim to
have against Seller, caused by or arising out of the Premises, its improvements,
the Premises Conditions or any other aspect of the Premises, whether such
claims or demands may be based on any statute, code, regulation, rule or common
law, whether federal, state or local.

 

Similarly, Purchaser
acknowledges and agrees that any reports, studies, plans, drawings or other
written materials which are made available by Seller or its agents to Purchaser
(“Information”) shall be delivered on an AS-IS WHERE-IS basis, without any
representation or warranty by Seller as to the thoroughness, truth,
completeness, sufficiency or accuracy of the data or information contained
therein.

 

The representations and
warranties set forth in this Section 6 shall be continuing and shall be true
and correct on and as of the Closing Date with the same force and effect as if
made at that time and all such representations, warranties and covenants shall
survive closing and shall not merge into Seller’s deed being delivered at
closing for a period of five years following closing.  As if the fifth anniversary of the Closing Purchaser shall be
deemed to have waived any claims against

 

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Seller on the basis of
misrepresentations except for written claims delivered to Seller prior to the
first anniversary of the closing, time being of the essence.

 

7.                                       Contingencies.  The closing of the
transaction contemplated by this Agreement and all the obligations of Purchaser
under this Agreement are subject to fulfillment, on or  before the Closing Date, of
the following conditions precedent:

 

A.                                   Purchaser shall have determined that the
physical status or condition of the Premises, including without limitation,
environmental, geotechnical (soil), wetland, floodplain, drainage and
availability of adequate access and utilities, shall be satisfactory to
Purchaser in its sole discretion.

 

B.                                     Purchaser, in its sole and absolute
discretion, shall have determined that the Premises are acceptable to Purchaser
in all respects, including without limitation, economic feasibility, market
feasibility, and availability of utilities and access.

 

C.                                     Purchaser shall have determined that its
appraisals are satisfactory to Purchaser, in its sole discretion.

 

D.                                    Purchaser shall have determined that the
Updated Phase I is satisfactory to Purchaser, in its sole discretion.

 

E.                                      Purchaser shall have reached agreement with
Associated Bank for the assumption by Purchaser of Seller’s existing Note and
Mortgage in the amount of $2,500,000, upon terms and conditions satisfactory to
Purchaser, in its discretion.

 

F.                                      Purchaser shall have reached agreement with
Associated Bank or some other lender to loan Paul Miller and/or Purchaser
$1,000,000 upon terms and conditions satisfactory to Purchaser.

 

G.                                     Seller shall have amended the Energy Note
with terms satisfactory to Purchaser, Purchaser shall be permitted to assume
the Energy Note on terms satisfactory to Purchaser and Seller shall have
provided Estoppel Certificates from Dakota Electric Association upon terms and
conditions satisfactory to Purchaser.

 

H.                                    Seller shall not be in default under this
Agreement or the Discretionary Line of Credit Agreement between Purchaser and
Seller as of the Closing Date.

 

I.                                         Seller shall have converted the lease to
Hunter Medical to a sublease between Seller and Huntter Medical, which shall be
subordinate to a lease between Seller and Purchaser for the Premises.

 

J.                                        Seller shall have delivered Briggs and
Morgan, P.A.’s opinion (“Briggs Opinion”) to Purchaser, Paul Miller and Title
upon terms and conditions satisfactory to Purchaser, Paul Miller and Title.

 

K.                                    Title shall have issued the MBCA Endorsement.

 

L.                                      Seller shall have executed and delivered the
Lease to Purchaser.

 

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Purchaser shall provide
Seller written notice on or prior to the Closing Date of any condition which
has not been satisfied.  In such event
at the option of Purchaser set forth in such notice either (i) this Agreement
shall be terminated and neither party shall have further obligation to the
other except that the Purchaser shall tender a quit claim deed to Seller and
Seller shall authorize release of the Earnest Money to Purchaser, or Purchaser
shall provide Seller additional time in which Seller may satisfy such
conditions.

 

Notwithstanding anything
contained herein to the contrary, it shall be a condition of Purchaser’s
obligation to close this transaction that (i) the representations and
warranties made by Seller in Section 6 shall be correct as of the Closing Date
with the same force and effect as if such representations were made at such
time, and (ii) the status and marketability of title shall have been
established to Purchaser’s satisfaction in accordance with this Agreement.

 

8.                                       Closing Date.  Subject to the fulfillment or
waiver of the conditions hereof, and provided that all of the covenants,
representations and warranties of Seller are true and correct on the Closing
Date as though made on such date, the closing of the purchase and sale shall
take place no later than April 15, 2003 (the “Closing Date”).  The closing shall take place at the offices
of Purchaser’s attorney or at such other place as Seller and Purchaser may
mutually determine.  Possession of the
Premises shall be delivered to Purchaser on the Closing Date subject to
Permitted Encumbrances.

 

9.                                       Seller’s Obligations At Closing.  At
or prior to the Closing Date, Seller shall:

 

A.                                   Deliver to Purchaser Seller’s duly recordable
Warranty Deed (the “Deed”) to the Premises (in a form reasonably satisfactory
to Purchaser) conveying to Purchaser Marketable Fee Simple Title to the
Premises and all rights appurtenant thereto.

 

B.                                     Deliver to Purchaser the Bill of Sale
conveying marketable title to the Personal Property.

 

C.                                     Cause to be furnished and delivered to
Purchaser the ALTA (Form 10/17/92) Owner’s Title Insurance Policy in conformity
with the requirements of this Agreement, or a “marked-up” Commitment in form
acceptable to Purchaser including the MBCA Endorsement and the non-imputation
endorsement.

 

D.                                    Deliver to Purchaser the Briggs Opinion.

 

E.                                      Deliver to Purchaser Title’s standard
affidavit of Seller confirming that Seller is not a “foreign corporation”
within the meaning of Section 1445 of the Internal Revenue Code.

 

F.                                      Deliver to Purchaser Title’s standard
affidavit of Seller in form and content sufficient to allow Title to delete the
standard exceptions contained in Purchaser’s Owners Title Insurance Policy
relative to (i) parties in possession, (ii) liens for labor, materials, or
services, and (iii) unrecorded easements or other instruments.

 

G.                                     Deliver to Purchaser a certificate at closing
confirming that the representations and warranties set forth in Section 6 of
this Agreement are true and correct as of the Closing Date as though made as of
such date.

 

H.                                    Deliver the amendment, assumption, and
estoppel certificate documents relating to the Energy Note.

 

10

 

I.                                         Deliver the assumption documents for the
Mortgage Note.

 

J.                                        Deliver a Lease of the Premises executed by
Seller as tenant in the form of Exhibit D attached hereto.

 

K.                                    Deliver an opinion of counsel in the form of
Exhibit E.

 

L.                                      Deliver to Purchaser an Assignment of the
Tower Lease in form acceptable to Purchaser and executed by Seller.

 

M.                                 Deliver to Purchaser such other documents as
may be reasonably required by this Agreement (including, without limitation,
authorizing resolutions of Seller), all in a form reasonably satisfactory to
Purchaser, Seller and Title.

 

10.                                 Delivery of
Purchase Price; Obligations At Closing.  At closing, subject to the
terms, conditions, and provisions hereof and the performance by Seller of its
obligations as set forth herein, Purchaser shall:

 

A.                                   Deliver the Earnest Money to Seller (except
any interest accrued thereon) and credited against the Purchase Price, and
Purchaser deliver the balance of the Purchase Price to Seller pursuant to
Section 2 above.

 

B.                                     Execute and deliver the Lease.

 

C.                                     Execute the assumption documents for the
Mortgage Note, including without limitation, a release of the liability of
Seller.

 

D.                                    Execute the assumption documents for the
Energy Note.

 

11.                                 Closing
Costs.  The following costs and expenses shall be
paid as follows in connection with the closing:

 

A.                                   Seller shall:

 

1.                                       Pay the cost to prepare and deliver to
Purchaser the Commitment, the cost of the Survey; the cost of Seller’s
Appraisal; the cost of the Updated Phase I; all fees to record all of the
documents necessary to permit Seller to convey Marketable Fee Simple Title to
the Premises to Purchaser (other than the fee to record the Deed); the cost of
any endorsements necessary to convey Marketable Fee Simple Title to Purchaser
including without limitation the MBCA Endorsement and the non-imputation
endorsement; and one-half (1/2) of the closing fee and/or escrow fee charged by
Title in connection with the issuance of the Owners Title Insurance Policy to
Purchaser, the escrow of Earnest Money, or the closing of this transaction.

 

2.                                       Pay any state deed tax imposed on the
conveyance.

 

3.                                       Pay any deferred or delinquent real estate
taxes or utilities and Seller’s pro-rata share of those costs and expenses set
forth in Section 12 below.

 

11

 

4.                                       Attorneys’ fees and costs of Seller’s
attorneys.

 

B.                                     Purchaser shall pay the following costs in
connection with the closing:

 

1.                                       The filing fee necessary to record the Deed.

 

2.                                       The premium for the Owners Title Insurance
Policy to be delivered to Purchaser in conformance with the requirements of
Section 3 of this Agreement; the premium for any extended coverage title insurance
endorsement requested by Purchaser.

 

3.                                       The cost of Purchaser’s Appraisal.

 

4.                                       One-half (1/2) of the closing fee and/or
escrow fee charged by Title in connection with the issuance of the Owners Title
Insurance Policy to Purchaser, the escrow of Earnest Money, or the closing of
this transaction.

 

5.                                       All costs associated with assumption of the
Mortgage Note and any loan used by Purchaser to finance the purchase of the
Premises.

 

6.                                       Attorneys’ fees and costs of Purchaser’s
attorneys.

 

C.                                     The terms of this Section 11 shall survive
the closing of the transaction contemplated herein.

 

12.                                 Prorations.  The
following prorations shall be made as of the Closing Date:

 

A.                                   Real estate taxes (including any outstanding
special assessments and/or installments of special assessments certified to the
real estate taxes for payment) allocable to the Premises that are due and
payable in the year of closing shall be prorated between Seller and Purchaser
to the Closing Date.  Seller shall pay
all such real estate taxes due and payable in years prior to the year of
closing.  Purchaser shall assume
responsibility for the payment of all such taxes due and payable in years
subsequent to the year of closing.

 

B.                                     The terms of this Section 12 shall survive
the closing of the transaction contemplated herein.

 

13.                                 Brokerage. 
Seller and Purchaser represent and warrant to each other that they have
not engaged the services of any broker in connection with the sale and purchase
contemplated by this Agreement.  Each
party hereby agrees to indemnify, defend and hold harmless the other party for
any claim (including reasonable expenses incurred in defending such claim) made
by a broker, sales agent or similar party claiming to be entitled to a
commission in connection with this transaction by reason of the acts of the
indemnifying party.  The terms of this
Section 13 shall survive the closing of the transaction contemplated herein.

 

14.                                 Remedies.

 

A.                                   Seller Default.  If
Seller defaults in the performance of this Agreement, then Title shall promptly
refund the Earnest Money (and all interest) to Purchaser and Purchaser’s sole
remedies shall be to elect to either (i) cancel this Agreement by written
notice to Seller, in

 

12

 

which event Seller shall promptly authorize Title Company to reimburse
Purchaser its Earnest Money in consideration of a quit claim deed to the
Premises executed by Purchaser, or (ii) if Purchaser does not cancel this
Agreement, Seller acknowledges the Premises are unique and that money damages
to Purchaser in the event of default by Seller are inadequate and Purchaser
shall have the right to apply for and to receive from a court of competent
jurisdiction equitable relief by way of specific performance to enforce
performance of the terms of this Agreement, plus reimbursement for costs,
including reasonable attorneys’ fees, incurred in the securing of such relief
provided under section 16J herein.

 

B.                                     Purchaser Default.  If
Purchaser defaults in the performance of this Agreement, Seller’s sole remedies
shall be to either (i) cancel this Agreement by delivering written notice of
such default to Purchaser (“Seller’s Default Notice”), in which event Purchaser
shall have the opportunity to cure such default within thirty (30) days after
receipt of Seller’s Default Notice, and if Purchaser fails to timely cure such
default after receipt of Seller’s Default Notice, then this Agreement shall be
deemed canceled without further action between the parties and Purchaser shall
authorize Title to deliver the Earnest Money to Seller as liquidated damages,
it being the understanding and agreement of the parties that it would be
impractical or extremely difficult to determine the actual damages to Seller in
the event of Purchaser’s default, and that the Earnest Money is a reasonable
estimate of the damages which Seller would incur as a result of Purchaser’s
default hereunder, or (ii) commence a legal action for specific performance and
upon obtaining such a final order, Title shall be authorized to deliver the
Earnest Money to Seller as partial payment of the purchase price, and Seller
shall be entitled to reimbursement of costs, including reasonable attorney fees
incurred in the securing of such relief as provided under section 16J herein.

 

15.                                 Escrow. 
Title is authorized and agrees by acceptance thereof to promptly deposit
the Earnest Money as provided herein and to hold same in escrow and to disburse
the same in accordance with the terms and conditions of this Agreement.  The sole duties of Title regarding the
Earnest Money shall be those described herein, and Title shall be under no
obligation to determine whether the other parties hereto are complying with any
requirements of law or the terms and conditions of any other agreements among
said parties.  Title may conclusively
rely upon and shall be protected in acting upon any written notice, consent,
order or other document believed by it to be genuine and to have been signed or
presented by the proper party or parties to this Agreement.  Title shall have no duty or liability to
verify any such written notice, consent, order or other document, and its sole
responsibility shall be to act as expressly set forth in this Agreement.  Title shall be under no obligation to
institute or defend any action, suit or proceeding in connection with this
Agreement.  If Purchaser and Seller
execute any separate escrow instructions or an escrow agreement with Title,
then in the event of a conflict between the terms of such escrow instructions
or escrow agreement and the terms of this Agreement, the terms of this
Agreement shall control, Title shall also execute this Agreement solely for the
purpose of acknowledging its agreement with and understanding of the terms of
this Section 15 and the other provisions of this Agreement relative to receipt,
escrow, investment and disbursement of the Earnest Money. Failure of Title to
execute this Agreement shall not affect the validity of this Agreement as
between Seller and Purchaser.

 

16.                                 Miscellaneous.  The
following general provisions govern this Agreement.

 

A.                                   No Waivers.  The waiver by either party
hereto of any condition or the breach of any term, covenant or condition herein
contained shall not be deemed to be a waiver of any

 

13

 

other condition or of any subsequent breach of the same or of any other
term, covenant or condition herein contained. 
Purchaser, in its sole discretion may waive any right conferred upon
Purchaser by this Agreement; provided that such waiver shall only be made by
Purchaser giving Seller written notice specifically describing the right
waived.

 

B.                                     Time of Essence. 
Time is of the essence of this Agreement.

 

C.                                     Governing Law. 
This Agreement is made and executed under and in all respects to be
governed and construed by the laws of the State of Minnesota and the parties
hereto hereby agree and consent and submit themselves to any court of competent
jurisdiction situated in the State of Minnesota.

 

D.                                    Notices.  All notices and demands given
or required to be given by any party hereto to any other party shall be deemed
to have been properly given if and when delivered in person, the next business
day after being sent by reputable overnight commercial courier (e.g. UPS. or
Federal Express), sent by facsimile (with verification of receipt) or three (3)
business days after having been deposited in any U.S. Postal Service and sent
by registered or certified mail, postage prepaid, addressed as follows (or sent
to such other address as any party shall specify to the other party pursuant to
the provisions of this Section):

 

	
  TO SELLER:

  	
  TO PURCHASER:

  
	
   

  	
   

  
	
  MedicalCV, Inc.

  	
  PKM Properties, LLC

  
	
  ATTN:  Jules Fisher

  	
  ATTN:  Paul Miller

  
	
  9725 South Robert Trail

  	
  c/o Gracon Contracting,
  Inc.

  
	
  Inver Grove Heights,
  MN  55077

  	
  606 24th Avenue
  South

  
	
  PHONE:  651-234-6699

  	
  Suite B12

  
	
  FAX:  651-234-6669

  	
  Minneapolis, MN 55454

  
	
   

  	
  PHONE:  612-305-4850

  
	
  With a copy to:

  	
  FAX:  612-305-4813

  
	
   

  	
   

  
	
  James R. Steilen

  	
  With a copy to:

  
	
  Briggs and Morgan, P.A.

  	
   

  
	
  2400 IDS Center

  	
  Charles Diessner

  
	
  80 South Eighth Street

  	
  Fredrikson & Byron,
  P.A.

  
	
  Minneapolis, MN 55402

  	
  4000 Pillsbury Center

  
	
  PHONE:  612-334-8678

  	
  200 South Sixth Street

  
	
  FAX:  612-334-8650

  	
  Minneapolis, MN  55402

  
	
   

  	
  PHONE:  612-492-7060

  
	
   

  	
  FAX:  612-492-7077

  

 

In the event either party
delivers a notice by facsimile, as set forth above, such party agrees to
deposit the originals of the notice in a post office, branch post office, or
mail depository maintained by the U.S. Postal Service, postage prepaid and
addressed as set forth above.  Such deposit
in the U.S. Mail shall not affect the deemed delivery of the notice by
facsimile, provided that the procedures set forth above are fully complied
with.

 

Any party, by notice given
as aforesaid, may change the address to which subsequent notices are to be sent
to such party.

 

14

 

E.                                      Successors and Assigns. 
This Agreement shall be binding upon and inure to the benefit of the
successors and assigns of each of the parties hereto.  This Agreement may be assigned or transferred by Purchaser at any
time without consent of Seller, including, without limitation, to a lender of
Purchaser, provided the assignee agrees to be bound by the terms of this
Agreement.  Upon such assignment,
Purchaser shall have no further or other obligations under this Agreement.

 

F.                                      Invalidity.  If for any reason any term or
provision of this Agreement shall be declared void and unenforceable by any
court of law or equity it shall only affect such particular term or provision
of this Agreement and the balance of this Agreement shall remain in full force
and effect and shall be binding upon the parties hereto.

 

G.                                     Complete Agreement.  All
understandings and agreements heretofore had between the parties are merged
into this Agreement which alone fully and completely expresses their
agreement.  This Agreement may be
changed only in writing signed by both of the parties hereto and shall apply to
and bind the successors and assigns of each of the parties hereto and shall not
merge with the Deed delivered to Purchaser at closing.

 

H.                                    Counterparts. 
This Agreement may be executed in one or more counterparts each of which
when so executed and delivered shall be an original, but together shall
constitute one and the same instrument.

 

I.                                         Calculation of Time Periods. 
Unless otherwise specifically provided herein, in computing any period
of time described in this Agreement, the day of the act or event after which
the designated period of time begins to run is not to be included and the last
day of the period so computed is to be included, unless such last day is a
Saturday, Sunday or legal holiday under the laws of the State of Minnesota, in
which event the period shall run until the end of the next day which is neither
a Saturday, Sunday or legal holiday. 
The final day of such period shall be deemed to end at 5:00 p.m.,
Minnesota time.

 

J.                                        Attorneys’ Fees.  If
any dispute arises between the parties regarding this Agreement or the subject
matter thereof, the prevailing party in any court action, administrative
proceeding or alternative dispute resolution commenced or maintained to resolve
such dispute, shall be entitled to an award of reasonable attorneys’ fees,
disbursements and court costs in addition to any other remedy to which the
parties are entitled.

 

K.                                    Survival.  All of the warranties,
covenants, and representations made herein by either Seller or Purchaser shall
survive closing and the delivery of the Deed to Purchaser, or the earlier
termination of this Agreement.

 

15

 

IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.

 

 

	
  SELLER:  MedicalCV,
  Inc.

  	
  PURCHASER:  PKM
  Properties, LLC

  
	
   

  	
   

  
	
  BY:

  	
  /s/ Blair P. Mowery

  	
   

  	
  BY:

  	
  /s/ Paul K. Miller

  	
   

  
	
   

  	
   

  
	
  ITS:

  	
  President/CEO

  	
   

  	
  ITS:

  	
  Chief Manager

  	
   

  

 

16

 

ACCEPTANCE BY TITLE

 

The undersigned, being
referred to as Title in the above Agreement, hereby acknowledges and accepts
the terms of this Agreement as its escrow instructions and agrees to act in
accordance herewith.

 

Acknowledged and agreed to
this           day of
                               ,
2003.

 

	
   

  	
  Old
  Republic National Title Insurance Company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  	
   

  
					

 

17

 

EXHIBIT A

 

LEGAL DESCRIPTION OF
PREMISES

 

That part of the West Half (W1/2) of the
Southwest Quarter (SW 1⁄4) of Section Nineteen (19), Township Twenty-seven (27),
Range Twenty-two (22), Dakota County, Minnesota lying Northerly of the Northerly
right-of-way line of Minnesota State Trunk Highway No. 3 and Westerly of the
Westerly right-of-way line of the Chicago, Milwaukee, St. Paul and Pacific
Railroad Company:

 

EXCEPT that part thereof included within the
North 417.42 feet of the East 417.42 feet of the Northwest Quarter (NW 1⁄4) of
the Southwest Quarter (SW 1⁄4) of Section Nineteen (19), Township Twenty-seven
(27), Range Twenty-two (22), Dakota County, Minnesota, as measured along the
North and East lines thereof, and

 

EXCEPT that part described as follows:
Commencing at the Northwest corner of said West Half (W 1⁄2) of the Southwest
Quarter (SW 1⁄4); thence South 0 degrees 01 minutes 18 seconds East (assumed
bearing) a distance of 700 feet along the West line of said West Half (W1⁄2) of
the Southwest Quarter (SW 1⁄4) to the point of beginning of the parcel to be
described; thence North 89 degrees 58 minutes 42 seconds East a distance of 500
feet; thence South 0 degrees 01 minutes 18 seconds East a distance of 343.44
feet, more or less, to the Northerly right-of-way line of State Trunk Highway
No. 3; thence Southwesterly along said right-of-way line 604.14 feet, more or
less, to its intersection with the West line of said West Half (W 1⁄2) of the
Southwest Quarter (SW 1⁄4); thence Northerly along said West line 666.87 feet,
more or less, to the point of beginning, according to the Government Survey
thereof, located in Dakota County, Minnesota.

 

A-1

 

EXHIBIT C

 

SURVEY CERTIFICATION

 

To PKM Properties LLC, Associated
Bank, Dakota County Abstract & Title and Old Republic National Title
Insurance Company:

 

This is to certify that this
map or plat and the survey on which it is based were made in accordance with
“Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys,”
jointly established and adopted by ALTA, ACSM and NSPS in 1999, and includes
Items 1, 2, 3,  4, 6, 7(a), 8, 9, 10,
11(a), 13 and 14 of Table A thereof. 
Purchase to the Accuracy Standards as adopted by ALTA, NSPS, and ACSM
and in effect on the date of this certification, undersigned further certifies
that [surveyor to complete with the appropriate phrase].  The Premises and easement descriptions were
taken from Old Republic National Title Insurance Company Commitment to Insure
Application No.
             dated
                       .

 

 

	
   

  	
   

  
	
   

  	
  , Land Surveyor

  
	
   

  	
  Minnesota
  License No.

  
	
   

  	
   

  
	
   

  	
  Dated:

  	
   

  

 

C-1Exhibit 10.33

 

LEASE

 

 

Landlord

 

PKM Properties, LLC

 

 

Tenant

 

MedicalCV, Inc.

 

 

BUILDING LEASE

 

This Building Lease (the
“Lease”) is made as of April 4, 2003 by and between PKM Properties, LLC, a
Minnesota limited liability company (“Landlord”), whose address is c/o Gracon
Contracting, Inc., 606 24th Ave. South, Suite B12, Minneapolis, MN
55454 and MedicalCV, Inc., a Minnesota corporation (“Tenant”), whose address is
9725 South Robert Trail, Inver Grove Heights, MN 55077.

 

In consideration of the
mutual covenants and agreements herein contained, Landlord and Tenant hereby
covenant and agree as follows:

 

1.                                      Demise of Premises.  In consideration of the
rentals and other sums to be paid by Tenant and of the other terms, covenants,
and conditions on Tenant’s part to be kept and performed, Landlord hereby
leases to Tenant, and Tenant hereby takes and hires from Landlord the building,
consisting of approximately 54,468 square feet, the two existing parking lots,
and the private septic system and drain field (the “Premises”), located on the
real property at 9725 South Robert Trail, Inver Grove Heights, Minnesota,
consisting of approximately 19.35 acres and legally described on Exhibit A
attached hereto (the “Property”), together with a non-exclusive right of access
to the Premises on and over the Property, as described in Section 8
hereto.  A Certificate of Survey
depicting the Property and the Premises is attached hereto as Exhibit B
for purposes of reference.

 

2.                                      Lease Term.  The Lease Term shall be for ten (10) Lease
Years (as defined below).  commencing on
April 4, 2003 (the “Commencement Date”) and expiring on April 30, 2013, unless
renewed or terminated earlier as provided in this Lease.  “Lease Year” means the 12-month period
commencing on May 1, 2003, or any other 12-month period as may be approved in
writing by Landlord, and each successive 12-month period thereafter.  The period during which this Lease shall
actually be in effect, including any Renewal Period (as defined below), is
referred to herein as the “Lease Term.” 
The period of time between the Commencement Date and the first day of
the first Lease Year (May 1, 2003), shall be considered part of the first Lease
Year and shall be on the same terms and conditions as the first Lease Year, but
the first Lease Year shall still end on April 30, 2004.

 

3.                                      Renewal Periods.  If
Tenant is not currently in default of the terms and conditions of this Lease,
Tenant will have two (2) options to extend the Lease Term for five (5) years
each (collectively, the “Renewal Periods” and individually, a “Renewal
Period.”).  In order to exercise the
renewal option, Tenant must notify Landlord in writing of its intent to extend
the Lease Term for the applicable Renewal Period (“Renewal Notice”).  If Tenant elects to renew the Lease for the
first Renewal Period, Tenant shall provide to Landlord the Renewal Notice for
the first Renewal Period not less than one (1) year prior to the expiration of
the original ten (10) year term of the Lease. 
If Tenant elects to renew the Lease for the second Renewal Period,
Tenant shall provide Landlord the Renewal Notice for the second Renewal Period
not less than one (1) year prior to the expiration of the first Renewal
Period.  Renewal Periods shall be on the same terms and conditions as set forth in
this Lease, except as modified by the terms, covenants, and conditions herein.  Failure of Tenant to provide Landlord either
Renewal Notice required by this Section shall void all of Tenant’s current and
future renewal rights provided herein.

 

4.                                      Rental Payments.

 

A.                                   On or before the first day of each calendar
month during the Lease Term, Tenant shall pay to Landlord in advance the base
monthly rental set forth below (the

 

 

“Base Monthly Rental”), which shall be one-twelfth (1/12) of the base
annual rental set forth below (the “Base Annual Rental”).

 

B.                                     The Base Annual Rental for each of Lease
Years 1 and 2 shall be $360,000, and accordingly, the Base Monthly Rental for
each of Lease Years 1 and 2 shall be $30,000.

 

C.                                     The Base Annual Rental for each of the Lease
Years 3, 4 and 5 shall be $370,800, and accordingly, the Base Monthly Rental
for each of the Lease Years 3, 4 and 5 shall be $30,900.

 

D.                                    The Base Annual Rental for each of the Lease
Years 6 through 10 shall be $389,340, plus the additional interest paid by the
Landlord on its long term permanent financing of the Property in the amount of
$3,500,000 during each year of the last five (5) years of the Lease Term as
compared to the interest that would have been due and payable if the interest
rate had remained the same for each such year as the interest rate charged on
such financing during the fifth year of the Lease Term (the “Annual Additional
Interest”) and, accordingly, the Base Monthly Rental for each of the Lease
Years 6 through 10 shall be $32,445, plus one-twelfth (1/12) of the Annual
Additional Interest.

 

E.                                      The Base Annual Rental, and accordingly the
Base Monthly Rental, for the Renewal Period(s) shall be determined in strict
accordance with Section 5 hereof, entitled “Renewal Period Rent Payments.”

 

F.                                      If the Commencement Date is a date other than
the first day of the month, Tenant shall pay Landlord on the Commencement Date
the Base Monthly Rental for Lease Year 1, prorated on the basis of the ratio
that the number of days from the Commencement Date through the last day in the
month containing the Commencement Date bears to the number of days in such
month.

 

5.                                      Renewal Period Rental Payments.

 

A.                                   The Base Annual Rental, and accordingly the
Base Monthly Rental, for the Renewal Period(s) shall be at “Market Rate.”  Market Rate shall mean the monthly amount
that a willing, comparable, non-owner, non-renewal tenant would pay, and a
willing, comparable landlord of a comparable building in the same region would
accept at arm’s length, giving appropriate consideration to all relevant
factors, including but not limited to, annual rental rates per rentable square
foot, any tenant improvement allowance, length of lease term, tenant
creditworthiness, size and location of the Premises, commissions payable, any
forms of tenant inducements, Tenant’s use of the Premises, and Tenant’s unique
and specialized leasehold improvements.

 

B.                                     Within forty-five (45) days of Landlord’s
receiving either of Tenant’s Renewal Notices, Landlord shall notify Tenant of
Landlord’s determination of the Market Rate to be applicable during the Renewal
Period (“Landlord’s Rate Notice”).  If
the Market Rate as set forth in Landlord’s Rate Notice is acceptable to Tenant
or if Tenant fails to timely object in the manner provided by this Section,
then the Renewal Period Rent Payments shall be pursuant to Landlord’s Rate
Notice.  If the Market Rate as set forth
in Landlord’s Rate Notice is not acceptable to Tenant, Tenant must provide
Landlord with written notice on or before fifteen (15) days subsequent to the
receipt of Landlord’s Rate

 

 

Notice.  If Tenant has so timely
objected in writing to Landlord’s Rate Notice, then Landlord and Tenant shall
negotiate, in good faith, for up to an additional thirty (30) days to arrive at
a mutually acceptable Market Rate.  If,
however, at the end of said additional thirty (30) day period Landlord and
Tenant have failed to arrive at a mutually acceptable Market Rate, the Market
Rate shall be determined by arbitration pursuant to Section 5.C hereof.  The determination of Market Rate by
arbitration shall be binding on Landlord and Tenant.  All notices under this Section shall be given in the manner
provided in the Lease for the giving of notices.

 

C.                                     If Landlord and Tenant are unable to arrive a
mutually acceptable Market Rate within the thirty (30) day period set forth in
Section 5.B hereof, then within ten (10) days after the expiration of said
thirty (30) day period, each party shall appoint an arbitrator and notify the
other party of such appointment in writing by identifying the appointee.  Each party hereto agrees to select as its
respective appointee an independent appraiser, with MAI designation, who is an
individual with at least ten (10) years experience in evaluating and/or
appraising building rental information for office/warehouse/manufacturing
buildings in the Minneapolis/St. Paul metropolitan area.  Neither party may consult directly or
indirectly with any arbitrator regarding the Market Rate before appointment, or
after appointment, outside the presence of the other party.  The arbitration shall be conducted under the
provisions of the Arbitration Rules for the Real Estate Industry (as amended
and effective as of September 1, 2000) as published by the American
Arbitration Association and Minnesota law governing arbitration or as otherwise
agreed by the parties.  Not later than
ten (10) days after both arbitrators are appointed, each party shall
separately, but simultaneously, submit in a sealed envelope to each arbitrator
whatever information such party wants the appraisers to consider in determining
Market Rate, including, but not limited to, their separate suggested Market
Rate, and any materials supporting such suggested Market Rate, and shall
provide a copy of all materials submitted to the other party.  The two (2) selected arbitrators, after
reviewing such submissions, shall attempt to determine the actual Market Rate
for the applicable space.  If both
arbitrators agree on the actual Market Rate, they shall declare the Market Rate,
and their decision shall be final and binding upon the parties.  If the two selected arbitrators are unable
to agree on the Market Rate within forty-five (45) days after receipt of
Landlord’s and Tenant’s submitted estimates and supporting materials, then the
arbitrators shall inform the parties. Unless the parties shall both otherwise
then direct, said arbitrators shall select a third arbitrator, not later than
ten (10) days after the expiration of said forty-five (45) day period.  If no arbitrator is selected by either party
within such ten (10) day period, or the third arbitrator is not selected within
such ten (10) day period, either party may immediately petition the Chief Judge
of the Dakota County District Court (or his designee for such purposes) to
appoint the arbitrator to be appointed by a party or such third
arbitrator.  The third arbitrator shall
have the qualifications and restrictions set forth above, and the three
arbitrators shall conduct an arbitration pursuant to the Arbitration Rules for
the Real Estate Industry (as amended and effective as of September 1, 2000) as
published by the American Arbitration Association and Minnesota law governing
arbitration or as otherwise agreed by the parties.  The decision

 

 

of any two of the three arbitrators shall be final and binding as to
the actual Market Rate.  The arbitrators
shall make a decision not later than thirty (30) days after appointment of the
third arbitrator.  If no two arbitrators
agree, then the average of the Market Rate of the two arbitrators whose
determinations are closest to each other (determined on the basis of net
economic effect) shall be deemed to be the actual Market Rate. Each party shall
be responsible for the costs, charges, and/or fees of its respective appointee,
and the parties shall share equally in the costs, charges, and/or fees of the
third arbitrator. The decision of the arbitrator(s) may be entered in any court
having jurisdiction thereof. If either Landlord or Tenant fails to properly
appoint an arbitrator within the time period established by this Section 5.C,
then such defaulting party shall pay all costs incurred by the non-defaulting
party in obtaining the appointment of such arbitrator, including court costs
and reasonable attorneys fees and costs.

 

6.                                      ADDITIONAL RENT.  In addition to and together with Base Monthly
Rental, Tenant shall pay to Landlord, in advance, as “Additional Rent”
Landlord’s estimate of all “Operating Costs” and “Taxes” incurred or to be
incurred annually by Landlord hereunder in equal monthly installments.

 

A.                                   “Operating Costs” shall be defined as: all
reasonable and direct costs of operation, maintenance, repair and management of
the Premises, as determined in accordance with generally accepted accounting
principles, that Landlord pays during the Lease Term, including the following
costs by way of illustration, but not limitation: insurance charges relating to
all insurance policies and endorsements customary for manufacturing warehouse
properties and deemed by Landlord to be reasonably necessary or desirable for
the protection, preservation, or operation of all or any part of the Premises;
utility costs for all parts of the Premises, such as heat, light, power, steam,
gas;  waste disposal, water and sewer,
the cost of security and alarm services (including any central station
signaling system) that Landlord might pay from time to time; the cost of
maintaining, repairing and replacing any heating, ventilating and air
conditioning systems on or within the Premises; the cost of landscaping and
seasonal decorations on or within the Premises; the cost of maintaining and
repairing any exterior stairway, truck way, loading dock, package pick-up
station, pedestrian sidewalk and ramp on, within, or connected to the Premises;
the cost of maintaining, repairing, replacing, operating, and policing the
Premises and their appurtenances and equipment and the costs of making capital
improvements on or within the Premises, including, without limitation, the
roof, signage, and parking lot, except as otherwise provided in this paragraph
A, and driveway areas, including the construction and maintenance of lighting
facilities therefore; provided all such costs shall be amortized over the
reasonable life of such improvements in accordance with such reasonable life
and amortization schedules as shall be determined by Landlord in accordance
with generally accepted accounting principles, with interest on the unamortized
amount at one percent (1%) in excess of the prime lending rate announced from
time to time as such by U.S. Bank Corporation of Minneapolis, Minnesota; labor
costs; all management costs including: management fees not to exceed four
percent (4%) of Base Rent, administrative fees, employee benefits and payroll
taxes; accounting and legal fees; material costs; equipment costs, including
the cost of service agreements on equipment; tool costs; the costs of licenses,
permits and inspection fees, and any sales, use or service taxes incurred in
connection therewith.

 

Notwithstanding
the above, “Operating Costs” shall not include:

 

(i)                                     Legal or accounting fees associated with the
operation of the business or the entity which constitutes the Landlord, the
management agent of the Landlord or preservation of the Landlord’s interest in
the Premises relative to third parties. 
This includes, but is not limited to, formation of ownership entities,
internal accounting or legal matters, preparation of tax returns and financial
statements, gathering of data therefor, costs of defending any lawsuit with a
lender, costs of selling or mortgaging Landlord’s interest.

 

 

(ii)                                  Financing or refinancing costs, interest on
debt.

 

(iii)                               Capital costs relating to the parking lot located to the west of the
building located on the Premises and which are incurred prior to the date the Tenant
begins using such parking lot and not required to be incurred in order for
Tenant to comply with paragraph 13.A. hereof.

 

(iv)                              Landlord’s executive salaries and overhead costs, including, without
limitation, attorney and accountant costs not related to operation of the
Premises, except as otherwise specifically provided in the Lease.

 

(v)                                 Costs resulting from the negligence of
Landlord or its agents.

 

Tenant
shall manage and operate the Premises for the benefit of the Landlord and
pursuant to an annual budget established by the Tenant and approved by the
Landlord and with such changes as the Landlord may reasonably require from time
to time.  Landlord, may at any time,
elect to manage and operate the Premises. 
During the time the Tenant manages and operates the Premises the
Landlord shall not charge Tenant management fees.

 

B.                                     “Taxes” shall be :

 

(i)                                     Tenant’s “Pro-rata Share” of real estate
taxes, charges, and other taxes, excluding special assessments for the
Property.  “Pro-rata Share” shall mean
an amount equal to the product obtained by multiplying a fraction, the
numerator of which shall be the number of square feet in the Premises and the
denominator of which shall be the number of square feet in the Property times
the real estate taxes attributable to the value of the land only for the
Property on each annual tax statement during the Lease Term, plus one hundred
percent (100%) of the real estate taxes attributable to the value of the
improvements on the Property as set forth on each annual tax statement during
the Lease Term; plus

 

(ii)                                  Tenant’s “Equitable Share” of special
assessments levied on the Property. 
“Equitable Share” shall mean one hundred percent (100%) of the special
assessments with respect to the Property until such time as the Property is
subdivided by Landlord (the newly subdivided or platted portion of the Property
shall be the “Subdivided Property”) and a Certificate of Occupancy is issued
for new improvements located on the Subdivided Property (the “Reallocation
Date”).  From and after the Reallocation
Date, Landlord shall pay any installments of special assessments attributable
to the Subdivided Property as set forth on the annual tax statement issued for
the Subdivided Property.  Tenant shall
pay any installments of special assessments allocated to the Premises as set
forth on the annual tax statement issued for the Premises.  If the annual tax statement(s) fails to
allocate all of the special assessments between the Premises and the Subdivided
Property, the unallocated portion of the special assessments shall be allocated
between Tenant and Landlord such that each shall pay a portion of such
unallocated special assessments equal to the product obtained by multiplying a
fraction, the numerator of which shall be the value of all improvements on the
Premises (in the case of Tenant) or Subdivided Property (in the case of
Landlord) as set forth on the annual tax statement(s), and the denominator of
which shall be the value of all improvements located on the Premises and
Subdivided Property

 

 

combined as set forth on the annual tax statement(s), times the balance
of special assessments attributable to the Property, excluding the Premises and
the Subdivided Property (the “Reallocated Amount”); plus

 

(iii)                               One hundred percent of any taxes, charges or assessments with respect
to any improvements, fixtures and equipment, real or personal, located in the
Premises and used in connection with Tenant’s business; plus

 

(iv)                              A Pro-rata Share of all fees, reasonable expenses and reasonable costs
incurred by Landlord in investigating, protesting, contesting, or in any way
seeking to reduce or avoid any assessments, levies, or real estate taxes or
other taxes rate pertaining to any Taxes to be paid by Landlord in any Lease
Year.

 

(v)                                 Taxes shall not include any corporate
franchise, or estate, inheritance, or net income tax, or tax imposed upon any
transfer by Landlord of its interest in this Lease or the Premises, death
taxes, excess profit taxes, capital stock, or penalties or interest on late payment
of Taxes unless caused by Tenant.

 

(vi)                              Landlord shall not construct any improvements on the Property, except
any improvements to the Premises as may be required by this Lease, unless and
until Landlord has subdivided the Property from the Premises.

 

(vii)                           Notwithstanding anything to the contrary in items (i)-(vi) above,
within ninety (90) days of the Reallocation Date, Landlord shall pay to Tenant
an amount equal to one hundred percent (100%) of the special assessments paid
by Tenant from the Commencement Date to the Reallocation Date, less the amount
of special assessments Tenant would have paid if special assessments had been
allocated during such time utilizing the formula for determining the
Reallocated Amount (the “Recalculated Assessment”), plus Simple Interest.  “Simple Interest” shall be calculated by (a)
dividing the Recalculated Assessment by the number of years, and portions
thereof, between the Commencement Date and the Reallocation Date (the “Deemed Annual
Installment”).  One Deemed Annual Installment
shall be deemed to have been paid on May 1 during each Lease Year between the
Commencement Date and the Reallocation Date; and (b) applying a simple interest
rate of five percent (5%) per annum to each Deemed Annual Installment from the
date it is deemed to have been paid hereunder through the Reallocation
Date.  For example, if the Recalculated
Assessment is twenty thousand dollars ($20,000.00), and has been paid over five
years between the Commencement Date and the Reallocation Date, the Deemed
Annual Installment would be four thousand dollars ($4,000.00).  Simple interest would be calculated by
applying the simple interest rate of five percent (5%) per annum to four
thousand dollars ($4,000.00) from the date each Deemed Annual Installment is deemed
to have been paid hereunder through the Reallocation Date.

 

C.                                     The annual determination of Operating Costs
and Taxes shall be itemized and certified to Tenant.  Tenant may review the books and records supporting such
determination in the office of Landlord, or Landlord’s agent, during normal
business hours, upon giving Landlord five (5) days advance written notice, but
in no event more often than once in any one year period.  The results of any such audit will be
conclusive, and any adjustment required to any previous payment made by Tenant
or Landlord by reason of any such audit shall be made within fourteen (14) days
of delivery of such audit

 

 

by such auditor to Landlord and Tenant. If an adjustment of more than
five percent (5%) in favor of Tenant is required, then Landlord shall bear the
costs of such audit.  Otherwise, Tenant
shall bear all costs of the audit.

 

D.                                    Prior to the actual determination thereof for
a Lease Year, Landlord may from time to time estimate Tenant’s liability for
Operating Costs and/or Taxes under for the Lease Year or portion thereof.  Landlord will give Tenant written
notification of the amount of such estimate and Tenant agrees that it will pay,
as Additional Rent equal monthly installments in the amount of such estimate.  Any such estimate of Operating Costs made
pursuant to this section shall remain in effect until further written
notification to Tenant pursuant hereto.

 

E.                                      When the above mentioned actual determination
of Tenant’s liability for Operating Costs and/or Taxes is made in any Lease
Year and when Tenant is so notified in writing, then:

 

(i)                                     If the total Additional Rent Tenant actually
paid on account of Operating Costs and/or Taxes for the Lease Year is less than
Tenant’s actual liability for Operating Costs and/or Taxes, then Tenant shall
pay to Landlord such deficiency as Additional Rent in one lump sum within
thirty (30) days of receipt of Landlord’s bill therefore; and

 

(ii)                                  If the total Additional Rent Tenant actually
paid on account of Operating Costs and/or Taxes for the Lease Year is more than
Tenant’s liability for Operating Costs and/or Taxes, then Landlord shall credit
the difference against the then next due payments to be made by Tenant under
this Section or pay such amount in cash if at the end of the Term.

 

F.                                      If the Commencement Date is a date other than
the first day of the month, Tenant shall pay Landlord on the Commencement Date
the Additional Rent prorated on the basis of the ratio that the number of days
from the Commencement Date through the last day in the month containing the
Commencement Date bears to the number of days in such month.

 

G.                                     Landlord shall have the same remedies for
nonpayment of Additional Rental as those provided herein for the nonpayment of
Base Monthly Rental.

 

H.                                    Notwithstanding any of the provisions of this
Section 6, nothing contained herein shall constitute an agreement by Landlord
to assume the obligation for making payments for any item of Operating Costs
for which Tenant is obligated to make payment by the terms and conditions of
the Lease.

 

I.                                         Landlord, in its sole discretion, may require
Tenant to make payment for any and/or all items of Operating Expenses directly
to the provider of the services for which such Operating Expenses are
incurred.  If Tenant is required by
Landlord to make payments directly to any service provider, Tenant shall
provide evidence to Landlord that Tenant timely made such payment(s) within
five (5) days of making such payment. 
If Tenant fails to timely make any payment that Landlord, pursuant to
Section 6.I, has instructed Tenant to make, Tenant shall be in default
hereunder and solely responsible for any fees, charges, penalties, and/or costs
that may be assessed by the service provider as a result of such untimely
payment.

 

 

7.                                      Rentals To Be Net to Landlord.  The
Base Monthly Rental payable hereunder shall be net to Landlord, so that this
Lease shall yield to Landlord the rentals specified herein during the Lease
Term and that all costs, expenses and obligations of every kind and nature reasonably
necessary for the operation, maintenance, repair and management of the Premises
shall be performed and paid by Tenant, except as provided in paragraph 6A
hereof.  Notwithstanding any provision
of this Lease, all amounts payable by Tenant as Base Monthly Rental, Additional
Rent and all other amounts due hereunder shall be deemed to be rent under the
Lease (the “Rent”).

 

8.                                      Access to Premises.  Landlord hereby agrees to furnish Tenant, and
its employees, agents, independent contractors, licensees, and business
invitees, for the duration of the Lease Term, a non-exclusive right to use the
roadway that shall run over and across the Property to access the
Premises.  Tenant, and its employees,
agents, independent contractors, licensees, and business invitees, shall have
the non-exclusive right to use the existing roadway running on and across the
Property, commonly known as B.T. Drive, for purposes of gaining access to the
Premises, until the Landlord shall notify Tenant that another means of access
to the Premises is to be used.  Landlord
shall have the right, at its sole discretion, at any time during the Lease Term
to relocate all or part of B.T. Drive or to construct an entirely new roadway
running on and across the Property.  Any
construction costs incurred in relocating all or part of B.T. Drive or
constructing a new roadway shall be the sole responsibility of Landlord.  If Landlord relocates all or part of B.T.
Drive or constructs an entirely new roadway on and across the Property, Tenant,
and its employees, agents, independent contractors, licensees, and business
invitees, shall have the non-exclusive right to use the newly constructed
roadway for purposes of gaining access to the Premises.  Any such relocated or newly constructed
roadway shall be of equal quality and utility as the existing roadway.

 

9.                                      Utilities.  Tenant shall contract, in its own name, for
and pay when due all charges for the connection and use of water, gas,
electricity, telephone, garbage collection, sewer use, and other utility
services supplied to the Premises during the Lease Term.  Under no circumstances shall Landlord be
responsible for any interruption of any utility service.  Tenant shall also pay all sums due and owing
by Landlord during the Lease Term under that certain “Energy Conservation
Promissory Note,” dated April 14, 1999, a copy of which is attached hereto as Exhibit
C.  Tenant shall provide Landlord,
on a monthly basis, evidence that Tenant has made timely payment of the sums
due and owing for all utility charges for the Premises and for all sums due and
owing under the Energy Conservation Promissory Note.  Landlord shall have the right, at its sole discretion, at any
time during the Lease Term to relocate the private septic system and drain
field or to remove such private septic system and drain field and connect the
premises to public storm and sanitary sewer. 
Any construction costs incurred in relocating or removing the private
septic system and/or drain field which is not necessary or required in
Landlord’s reasonable opinion shall be the sole responsibility of the
Landlord.  Any construction costs
incurred in relocating or removing the private septic system and/or drain field
which is necessary or required in Landlord’s reasonable opinion shall be the
sole responsibility of the Tenant. 
Relocation or removal of the private septic and/or drain field shall not
be deemed necessary unless the City, State Environmental Authorities, other
regulatory authorities or Landlord’s lender financing the Property requires the
relocation or removal of the private septic system and/or drain field.  Also, in connection with the relocating or
removing of the private septic system and/or drain field, Tenant shall be
solely responsible for abating, relieving and responding to all Hazardous
Materials at or to the Property as provided in Section 13 hereof.

 

 

10.                               Insurance.

 

A.                                   Throughout the Lease Term, Tenant shall
maintain, or cause to be maintained, at its own expense, the following types
and amounts of insurance (which may be included under a blanket insurance
policy if all the other terms hereof are satisfied), in addition to such other
insurance as Landlord may reasonably require:

 

(i)                                     Commercial general liability and property
damage insurance covering Landlord and Tenant against bodily injury liability,
property damage liability and automobile bodily injury and property damage
liability, including without limitation any liability arising out of the
ownership, maintenance, repair, condition, or operation of the Premises or adjoining
ways, streets or sidewalks.  Such
insurance policy or policies shall contain a broad form contractual liability
endorsement under which the insurer agrees to insure Tenant’s obligations of
indemnity under this Lease to the extent insurable, and a “severability of
interest” clause or endorsement which precludes the insurer from denying the
claim of either Tenant or Landlord because of the negligence or other acts of
the other, shall be in amounts of not less than $3,000,000.00 per injury and
occurrence with respect to any insured liability, whether for personal injury
or property damage, or such higher limits as Landlord may reasonably require
from time to time, and shall be in form and substance satisfactory to Landlord;

 

(ii)                                  All Risks insurance including, but not
limited to, coverage for fire, extended coverage, plate glass, sprinkler and
water damage, covering the Premises, contents of the Premises, and Tenant’s
property, including, but not limited to, betterments and improvements made by
Tenant, Tenant’s inventory, trade, or other fixtures, furnishings and other
personal property whether or not removable by Tenant.  Coverage shall be provided on a full replacement cost basis and
the Tenant shall bear any deductible expense associated with any loss.

 

(iii)                               State worker’s compensation insurance in the statutorily mandated
limits, employer’s liability insurance with limits not less than $1,000,000.00
or such greater amount as Landlord may from time to time require and such other
insurance as may be necessary to comply with applicable laws; and

 

(iv)                              Business interruption insurance equal to 100% of the Base Monthly
Rental for a period of not less than 12 months.

 

B.                                     All insurance policies shall:

 

(i)                                     Provide for a waiver of subrogation by the
insurer as to claims against Landlord, its employees, and agents;

 

(ii)                                  Provide that any “no other insurance” clause
in the insurance policy shall exclude any policies of insurance maintained by
Landlord and that the insurance policy shall not be brought into contribution
with insurance maintained by Landlord;

 

(iii)                               Contain a standard without contribution mortgage clause endorsement in
favor of any lender designated by Landlord;

 

 

(iv)                              Provide that the policy of insurance shall not be terminated,
cancelled, or substantially modified without at least 30 days’ prior written
notice to Landlord and to any lender covered by any standard mortgage clause
endorsement;

 

(v)                                 Provide that the insurer shall not have the
option to restore the Premises if Landlord elects to terminate this Lease in
accordance with the terms hereof; and

 

(vi)                              Be issued by insurance companies licensed to do business in the state
in which the Premises is located and which are approved by Landlord, such
approval not to be unreasonably withheld.

 

C.                                     All insurance policies (with the exception of
worker’s compensation insurance to the extent not available under statutory
law) shall designate Landlord and any mortgagee of Landlord as additional
insureds as their interests may appear and shall be payable as set forth in
this Lease.  All such policies shall be
written as primary policies, with deductibles not to exceed $50,000.00.  Any other policies, including any policy now
or hereafter carried by Landlord, shall serve as excess coverage.  Tenant shall procure policies for all
insurance for periods of not less than one year and shall provide to Landlord
and any lender designated by Landlord certificates of insurance or, upon
Landlord’s request, duplicate originals or insurance policies evidencing that
insurance satisfying the requirements of this Lease is in effect at all
times.  Tenant shall provide to Landlord
evidence of renewals of all policies of insurance at least thirty (30) days
prior to the expiration of such policies.

 

11.                               Payment of Rental and Other Sums.  All
Rental, Additional Rent, and other sums which Tenant is required to pay
hereunder shall be the unconditional obligation of Tenant and shall be payable
in full when due without any setoff, abatement, deferment, deduction, or
counterclaim whatsoever except as provided herein.  Any delinquent payment (that is, any payment not made when due)
shall, in addition to any other remedy of Landlord, incur a late charge of five
percent (5%) (which late charge is intended to compensate Landlord for the cost
of handling and processing such delinquent payment and should not be considered
interest) and bear interest at the rate of the prime rate of U.S. Bank plus 600
basis points per annum, which interest rate shall accrue from the date such
payment was due, but in no event shall Tenant be obligated to pay a sum of late
charge and interest higher than the maximum legal rate then in effect (“Default
Rate”).

 

12.                               Use.

 

A.                                   Tenant shall use the Premises solely for the
purposes of conducting Tenant’s existing business and for any other legal
purpose provided that the Landlord approves such other use of the Premises with
regard to its environmental impact on the Premises and the Property or adverse
impact on the Landlord’s potential future development of the Property, excluding
the Premises.  The Landlord’s approval
with regard to such other use shall not be unreasonably withheld.  Tenant’s use is specifically conditioned
upon such use being allowed under all Laws (as hereinafter defined) and Tenant
complying with all Laws in its use of the Premises as required by this Section.

 

 

B.                                     Tenant shall not, by itself or through any
assignment, sublease, or other type of transfer, convert the Premises to an
alternative use during the Lease Term without Landlord’s consent as provided in
subparagraph A above.

 

13.                               Compliance with Laws, Restrictions, Covenants and Encumbrances.

 

A.                                   Tenant’s use and occupation of the Premises,
and the condition thereof, shall, at Tenant’s sole cost and expense, comply
fully with (i) all applicable statutes, regulations, rules, ordinances, codes,
licenses, permits, orders, and approvals of any governmental agencies,
departments, commissions, bureaus, boards, or instrumentalities of the United
States, the state in which the Premises are located, and all political
subdivisions thereof, including, without limitation, all health, building,
fire, safety and other codes, ordinances, and requirements and all applicable
standards of the National Board of Fire Underwriters, (ii) the requirements and
conditions of all conditional or special use permits covering the Premises and
the use thereof, now or hereafter in effect, (iii) all restrictions, covenants,
and encumbrances of record with respect to the Premises, (iv) Environmental
Laws (as defined below), and (v) all requirements and matters described in
Section 13.F hereof (collectively, the “Laws”).

 

B.                                     Tenant will not permit any act or condition
to exist on or about the Premises which will increase any insurance rate
thereon, except when such acts are required in the normal course of its
business and Tenant shall pay for such increase.

 

C.                                     Without limiting the generality of the other
provisions of this Section, Tenant agrees that it shall be responsible for
complying in all respects with the Americans with Disabilities Act of 1990, as
such act may be amended from time to time, and all regulations promulgated
thereunder (collectively, the “ADA”), as it affects the Premises, including,
but not limited to, making required “readily achievable” changes to remove any architectural
or communications barriers, and providing auxiliary aides and services within
the Premises.  Tenant further agrees
that any and all additions and alterations made to the Premises during the
Lease Term will comply with the requirements of the ADA.  Tenant agrees that it will defend,
indemnify, and hold harmless Landlord and Landlord’s shareholders, directors,
officers, agents, attorneys, and employees from and against any and all claims,
demands, causes of action, suits, proceedings, liabilities, damages (including
consequential and punitive damages), losses, costs, and expenses, including
attorneys’ fees, caused by, incurred, or resulting from Tenant’s failure to
comply with its obligations under this Section.

 

D.                                    Without limiting the generality of the other
provisions of this Section, Tenant shall (i) comply with all Environmental Laws
(as defined below) applicable to the operation or use of the Premises including
without limitation the storage, use, and disposal of all Hazardous Materials,
(ii) require and use its best efforts to cause all other persons occupying or
using the Premises to comply with all such Environmental Laws, (iii) obtain and
renew all governmental permits, licenses and authorizations required under any
Environmental Law with respect to the Property and Tenant’s Use at the
Premises, and (iv) provide Landlord with prompt written notice and, when
applicable, notice to the appropriate governmental agencies, of any actual,
threatened or claimed release of a Hazardous Material (as such term is defined
below) on the Premises or the Property and of any claim, notice, investigation
or action relating to the Premises and any Environmental Law.  Tenant covenants and agrees not to use,
generate, release, manage, treat, manufacture, store, or dispose of, on, under
or about, or transport to or from (any of

 

 

the foregoing hereinafter a “Use”) the Premises or the Property any
Hazardous Materials, except in compliance with all Environmental Laws and in
such case only in De Minimis Amounts (as such term is defined below).  In the event Tenant breaches any of the
foregoing covenants, in addition to any and all other rights and remedies of
Landlord, Landlord at its option may either (i) require Tenant to immediately
upon demand analyze, remove, abate, and/or otherwise remedy all such Hazardous
Materials using licensed contractors approved by Landlord or (ii) perform,
without further notice to Tenant, or cause to be performed such analysis,
removal, abatement, and/or remedial work for and at the sole expense of
Tenant.  For purposes of this Lease, (1)
the term “Hazardous Materials” shall include but not be limited to asbestos,
urea formaldehyde, polychlorinated biphenyls, oil, petroleum products,
pesticides, radioactive materials, hazardous wastes, biomedical wastes, toxic
substances and any other related or dangerous, toxic or hazardous chemical,
material or substance regulated by or defined as hazardous or as a pollutant or
contaminant in, or the Use of or exposure to which is prohibited, limited, governed
or regulated by, any Environmental Law; (2) the term “De Minimis Amounts” shall
mean, with respect to any given Hazardous Material, that amount or quantity of
that Hazardous Material in any form or combination of forms which (i) does not
constitute a violation of any Environmental Law and (ii) is reasonably
necessary for Tenant’s business, or customarily employed in, or customarily
associated with, similar businesses located in the metropolitan area in which
the Premises is located; and (3) the term “Environmental Laws” shall mean any
federal, state, or local statute, law, rule, regulation, ordinance, code,
policy or rule of common law now or hereafter in effect and in each case as
amended, and any judicial or administrative interpretation thereof, including
any judicial or administrative order, consent decree or judgment, relating to
the environment, health, safety or Hazardous Materials.

 

E.                                      Tenant shall be responsible for abating,
remediating, and responding to all releases of Hazard Materials at or to the
Property throughout the Term hereof, except to the extent such releases result
from Landlord’s negligence.  All such
abatements, remediation, and responses shall be pursuant to Environmental Laws
and be performed to the reasonable satisfaction of the Minnesota Pollution
Control Agency and to the reasonable satisfaction of the Landlord in order that
such abatements, remediation and responses will be consistent with what would
be required in the event of the Landlord’s sale or financing of the Premises
and/or any portion of the Property.  All
such remediation, abatement, or responses performed by Tenant shall be
performed at Tenant’s sole cost and expense.

 

F.                                      In addition to the other requirements of this
Section, Tenant shall, at all times throughout the Lease Term, comply with all
federal, state or local statutes, laws, rules, regulations, ordinances, codes,
policies, or rules of common law now or hereafter in effect and in each case,
as amended, and any judicial or administrative interpretation thereof,
including any judicial order, consent, decree, or judgment, applicable to
Tenant.

 

14.                               Condition of Premises; Maintenance.

 

A.                                   Tenant has owned and operated the Property
for the previous twenty-seven (27) years has inspected, or had the opportunity
to inspect, and knows and understands the condition of the Premises and the
Property and hereby accepts the Premises “AS IS” and “WHERE IS” with no
representation or warranty of Landlord as to the condition thereof.  Tenant acknowledges the environmental condition
of the Premises and the Property as set forth in the following environmental
reports:  Phase I

 

 

Environmental Site Assessment report dated March 4, 2003, prepared by
Pinnacle Engineering, Inc., Phase I Environmental Site Assessment report dated
February 10, 2003, prepared by Pinnacle Engineering, Inc., for MedicalCV, Inc.;
the Phase I Environmental Site Assessment report dated September 27, 1999,
prepared by Pinnacle Engineering, Inc. for Medical, Inc.; and the Preliminary
Environmental Subsurface Investigation dated March 10, 1992, prepared by Braun
Intertec Environmental, Inc., for Parsinen, Bowman & Levy.  Tenant shall keep all improvements now or
hereafter located on or within the Premises in good, clean, sanitary, and
working condition; and Tenant shall at all times at its own expense maintain,
repair, and replace, as necessary, the Premises, including all portions of the
Premises, whether or not the Premises were in such condition on the
Commencement Date.

 

B.                                     Floor Drains;  Environmental Testing.  Tenant, at Landlord’s
discretion and at Tenant’s sole cost, shall seal floor drains at the Premises
at any time during the term hereof if either of the following conditions are
met:  (i) Tenant has assigned or
subleased any portion of the Premises which includes a floor drain to a third
party in which event Tenant shall seal the floor drains in the Subleased
Premises; or (ii) Landlord reasonably concludes, based on the findings of an
environmental professional retained by or approved by Landlord at Tenant’s sole
cost, that substances are being or may be released to the floor drains at the
Premises in such a manner or in such quantities (whether in aggregate or
otherwise) that would either: (a) result in a release or threatened release of
hazardous substances to the environment or (b) cause the Premises to be out of
compliance with applicable legal requirements in which event Tenant shall seal
all the floor drains in the Premises. 
In addition, Tenant shall conduct from time to time such environmental testing
at the Property as may be determined as reasonably necessary by the Landlord or
the Landlord’s lender financing the Property.

 

15.                               Improvements; Waste; and Alterations.

 

A.                                   Tenant shall not commit actual or
constructive waste upon the Premises. 
Tenant shall not make any alternations, improvements, or additions to
the Premises in any manner without the consent of Landlord not to be
unreasonably delayed or withheld.  If
Landlord consents to the making of any such alterations, improvements or
additions, the same shall be made by Tenant at Tenant’s sole expense by a
licensed contractor and according to plans and specifications approved by
Landlord and subject to such other conditions as Landlord shall reasonably
require.

 

B.                                     Any work at any time commenced by Tenant on
the Premises shall be prosecuted diligently to completion, shall be of good
workmanship and materials, and shall comply fully with all the terms of this
Lease.  Upon completion of the work, or
at any time on or before the completion of the work as Landlord shall
reasonably require, Tenant shall promptly provide Landlord with (i) evidence of
full payment to all laborers and materialmen contributing to the work, (ii) an
architect’s certificate certifying the work to have been completed in conformity
with the plans and specifications, (iii) a certificate of occupancy (if
required), and (iv) any other documents or information reasonably requested by
Landlord.  Tenant shall execute and file
or record, as appropriate, a “notice of non-responsibility,” or any equivalent
notice permitted under applicable law in the state where the Premises is
located.

 

C.                                     Any addition to or alteration of the Premises
shall be the property of Tenant; provided that such addition to or alteration
of the Premises shall remain on the

 

 

Premises and become the property of Landlord upon the expiration or
earlier termination of the Lease Term or at Landlord’s option, removed by
Tenant, at its sole cost and expense, prior to expiration or termination of the
Lease Term.  Upon expiration or earlier
termination of the Lease Term, Tenant shall execute and deliver to Landlord
such instruments as Landlord may reasonably require to evidence the ownership
by Landlord of such additions or alterations.

 

16.                               Indemnification.  Tenant shall indemnify,
protect, defend, and hold harmless Landlord and Landlord’s members, directors,
officers, agents, lenders, attorneys, and employees (collectively, “Indemnified
Parties”) from and against any and all claims, demands, causes of action,
suits, proceedings, liabilities, damages (including consequential and punitive
damages), losses, costs, and expenses, including Landlord’s attorneys fees
(collectively, “Claims”), caused by, incurred, or resulting from its operations
of or relating in any manner to the Premises or the Property, whether relating
to its design or construction; latent defects; the presence of Hazardous
Materials at, in, or beneath the Premises or Property as of the date hereof or
as may be released at the Property during the Lease Term; alteration;
maintenance; use by Tenant or any person thereon, supervision or otherwise, or
from any breach of, default under or failure to perform any term or provision
of this agreement by Tenant, its officers, employees, agents or other persons,
except to the extent the Claims arise out of the negligent act of the
Indemnified Parties.  It is expressly
understood and agreed that Tenant’s obligations under this Section shall
survive the expiration or earlier termination of this Lease for any
reason.  Landlord agrees to defend,
indemnify, and hold Tenant harmless to the extent any Claims are caused by,
incurred or resulting from any negligent acts of Landlord on the Premises.

 

17.                               Quiet Enjoyment.  So long as Tenant shall pay
the Rental and other sums herein provided and shall keep and perform all of the
terms, covenants, and conditions on its part herein contained, Tenant shall
have, subject and subordinate to Landlord’s rights herein, the right to the
peaceful and quiet occupancy of the Premises as against all persons claiming
by, through, or under Landlord.

 

18.                               Condemnation or Damage.

 

A.                                   In case of taking of all or any part of the
Premises or the commencement of any proceedings or negotiations which might
result in a taking for any public or quasi-public purpose by any lawful power
or authority by exercise of the right of condemnation or eminent domain or by
agreement between Landlord, Tenant, and those authorized to exercise such right
(“Taking”), Tenant will promptly give written notice thereof to Landlord,
generally describing the nature and extent of such taking and including copies
of any documents or notices received in connection therewith.

 

B.                                     In case of a Taking of the whole of the
Premises, other than for Temporary Taking (as hereinafter defined) (“Total
Taking”), this Lease shall terminate as of the date of such Total Taking, and
all rentals, sums of money, and other charges provided to be paid by Tenant
shall be apportioned and paid to the date of such Total Taking.  A Total Taking shall include a taking of a
portion of the Premises if, in the reasonable determination of Landlord, the
reminder of the Premises is not useable and cannot be made useable for the
purposes provided herein.  Landlord
shall be entitled to receive the entire award or payment in connection with any
taking of the Premises without deduction for any estate vested in Tenant by
this Lease.  Tenant hereby expressly
assigns to Landlord all of its right, title, and interest in and to every such
award or payment and agrees that Tenant shall not be entitled to any award or
payment for the

 

 

value of Tenant’s leasehold interest in the Lease.  Tenant shall be entitled to claim and
receive any separate award or payment from the condemning authority expressly
granted for the taking of Tenant’s trade fixtures and personal property, the
interruption of its business, and moving expenses (collectively, “Tenant’s
Damages”).  Tenant shall promptly send
Landlord copies of all correspondence and pleadings relating to any such claim.

 

C.                                     In case of a temporary use of all or any part
of the Premises by a Taking (“Temporary Taking”), this Lease shall remain in
full force and effect without any reduction of Base Monthly Rental, Additional
Rental, or any other sum payable hereunder. 
Landlord shall be entitled to the entire award for a Temporary Taking,
whether paid by damages, rent, or otherwise. 
At the termination of any such Temporary Taking, Landlord will, at its
own cost and expense, promptly commence and complete the restoration of the
Premises.  A Temporary Taking shall be a
taking for a period of ninety (90) days or less.

 

D.                                    In the event of a Taking of less than all of
the Premises for other than a Temporary Taking, and such Taking is not
reasonably determined by Landlord to be a Total Taking (“Partial Taking”) or of
damage or destruction to all or any part of the Premises, all awards, insurance
proceeds, compensation or damages shall be paid to Landlord, and Landlord shall
have the option to (i) terminate this Lease by notifying Tenant within sixty
(60) calendar days after Tenant gives Landlord notice of such damage or
destruction or that title has vested in the taking authority, provided that the
Premises cannot reasonably be restored to a condition reasonably necessary for
the continuation of Tenant’s business in the Premises within two hundred ten
(210) days after the date possession shall be taken pursuant to such Partial
Taking or the date of such damage or destruction of the Premises or (ii)
subject to subparagraph E hereof, continue this Lease in effect, which election
may be evidenced by either a notice from Landlord to Tenant or Landlord’s
failure to notify Tenant that Landlord has elected to terminate this Lease
within such 60-day period.  If Landlord
elects to terminate the Lease pursuant to the provisions herein, this Lease
shall terminate as of the last day of the month during which such 60-day period
expired.  Tenant shall then immediately
vacate and surrender the Premises, all obligations of either party hereunder
shall cease as of the date of termination (provided however, Tenant’s
obligations of indemnity under this Lease and Tenant’s obligations to pay Base
Monthly Rental, Additional Rental, and all other sums (whether payable to
Landlord or a third-party) accruing under this Lease prior to the date of
termination shall survive such termination) and Landlord may retain all such
awards, compensation, or damages.  If
Landlord elects not to terminate this Lease, then this Lease shall continue in
full force and effect on the following terms: (i) all Base Monthly Rental,
Additional Rental, and other sums and obligations due under this Lease shall
continue unabated, provided that the proceeds of any business interruption or
rent loss insurance payable by reason of such occurrence shall be applied
thereto; and (ii) Landlord shall promptly commence and diligently prosecute
restoration of the Premises (but not including any additions or alterations
made by Tenant) to substantially the same condition, as nearly as practicable,
as prior to such partial condemnation, damage, or destruction, provided that
Landlord shall not be obligated to incur any cost or expense in connection with
such restoration in excess of the net amount (after deducting all costs and
expenses incurred by Landlord, including reasonable attorneys fees and legal
costs) of awards, insurance proceeds, compensation or damages paid to
Landlord.  Tenant, at its cost and
expense, shall, after completion of Landlord’s restoration or concurrently
therewith so long as Tenant’s work does not interfere with Landlord’s
restoration work,

 

 

promptly commence and diligently prosecute restoration of Tenant’s
additions or alterations to the Premises. 
Landlord shall be entitled to keep any portion of such award, insurance
proceeds, compensation, or damages which may be in excess of the cost of
Landlord’s restoration work, and Tenant shall bear all additional costs, fees,
and expenses of such restoration, in excess of the amount of any such award,
insurance proceeds, compensation or damages.

 

E.                                      Notwithstanding the foregoing, in the event
of a Partial Taking or damage or destruction to all or any part of the
Premises, Landlord shall not have the right to elect to continue this Lease in
effect, and the term of this Lease shall automatically expire as of the date
possession shall be taken pursuant to such Partial Taking or the date of such
damage to or destruction of the Premises, if the Premises cannot reasonably be
restored to a condition reasonably necessary for the continuation of Tenant’s business
in the Premises within two hundred ten (210) days after the date possession
shall be taken pursuant to such Partial Taking or the date of such damage or
destruction of the Premises.

 

F.                                      Notwithstanding the foregoing, if at the time
of any Taking or damage or destruction of the Premises or at any time
thereafter Tenant shall be in default under this Lease and such default shall
be continuing, Landlord is hereby authorized and empowered but shall not be
obligated, in the name and on behalf of Tenant and otherwise, to file and
prosecute Tenant’s claim, if any, for an award, insurance proceeds,
compensation, or damages on account of any Taking or damage or destruction of
the Premises, and to collect such award, insurance proceeds, compensation, or
damages and apply the same, after deducting all costs, fees, and expenses
incident to the collection thereof, to the curing of such default and any other
then-existing default under this Lease.

 

19.                               Inspection.  Landlord and its authorized representatives
shall have the right, upon giving reasonable notice, to enter the Premises or
any part thereof during normal business hours and inspect the same and make
photographic or other evidence concerning Tenant’s compliance with the terms of
this Lease.  Tenant hereby waives any
claim for damages for any injury or inconvenience to or interference with
Tenant’s business, any loss of occupancy or quiet enjoyment of the Premises,
and any other loss occasioned by such entry, subject to the Landlord’s
indemnity set forth in paragraph 16 hereof.

 

20.                               Default, Remedies, and Measure of Damages.

 

A.                                   Each of the following shall be deemed a
material breach of this Lease and a default by Tenant:

 

(i)                                     If any representation or warranty of Tenant
herein was materially false when made or, in the event that any such
representation or warranty is continuing, becomes materially false at any time,
or if Tenant renders any materially false statement or account; or

 

(ii)                                  If any rent or other monetary sum due
hereunder is not paid within five days after the date when due; or

 

(iii)                               If Tenant becomes insolvent as defined in the United States Bankruptcy
Code, 11 U.S.C. Sec. 101 et seq., as amended (the “Code”), files a
voluntary petition for relief under the Code, initiates or has initiated
against it, a proceeding under any similar law or statute relating to
bankruptcy, insolvency, 

 

 

reorganization, winding up, or adjustment of debts (collectively,
hereinafter, an “Action”), or becomes the subject of an involuntary petition
under the Code which is not dismissed within sixty (60) days, or is not
generally paying its debts as the same become due; or

 

(iv)                              If Tenant vacates or abandons the Premises; or

 

(v)                                 If Tenant fails to observe or perform any of
the covenants, conditions, or obligations of this Lease; or

 

(vi)                              If an Event of Default occurs under the Discretionary Credit Agreement,
between Landlord and Tenant, dated January 17, 2003, as amended from time to
time, or any of the loan documents relating thereto; or

 

(vii)                           If Tenant fails to observe or perform any of the covenants, conditions,
or obligations of any loan or credit agreement between Landlord and Tenant,
whether such agreement currently exists or is executed by Landlord and Tenant
after their execution of the Lease.

 

B.                                     If Tenant commits an act as described in
Section 20.A.(i), (v) or (vii), and if such breach or default does not involve
the payment of any rent or other monetary sum does not place any rights or
property of Landlord in immediate jeopardy, and is within the reasonable power
of Tenant to cure, then such event shall not constitute a default hereunder
(except as may be expressly provided elsewhere in this Lease) unless and until
Landlord shall have given Tenant notice thereof and a period of thirty (30)
days shall have elapsed, during which period Tenant may correct or cure such
event, upon failure of which a default shall be deemed to have occurred
hereunder without further notice or demand of any kind.  If such nonmonetary breach or default cannot
reasonably be cured within such 30-day period and Tenant is diligently pursuing
a cure of such breach or default, then Tenant shall have a reasonable period to
cure such breach or default, which shall in no event exceed ninety (90) days
after receiving notice of the default from Landlord.  If Tenant is in default under Section 20.A.(ii), (iii), (iv) or
(vi) of this Lease, Tenant shall have no right to cure or correct such material
breach and event of default.

 

C.                                     As a material inducement to Landlord
executing this Lease, in the event of any breach or default, and with or
without any notice or demand, except the notice prior to default required under
certain circumstances by the provisions of this Section or such other notice as
may be required by statute, Landlord shall be entitled to exercise, at its
option, concurrently, successively, or in any combination, all remedies
available at law or in equity, including, without limitation, any one or more
of the following:

 

(i)                                     To terminate this Lease, whereupon Tenant’s
right to possession of the Premises shall cease and this Lease, except as to
Tenant’s liability, shall be terminated;

 

(ii)                                  To reenter and take possession of the
Premises, any or all personal property or fixtures of Tenant upon the Premises,
and, to the extent permissible, all franchises, licenses, area development
agreements, permits, and other rights or privileges of Tenant pertaining to the
use and operation of the Premises, and to expel Tenant and those claiming under
or through Tenant,

 

 

without being deemed guilty in any manner of trespass or becoming
liable for any loss or damage resulting therefrom, without resort to legal or
judicial process, procedure or action, except as may be required by law.  No notice from Landlord hereunder or under a
forcible entry and detainer statute or similar law shall constitute an election
by Landlord to terminate this Lease unless such notice specifically so
states.  If Tenant shall, after default,
voluntarily give up possession of the Premises to Landlord, deliver to Landlord
or its agents the keys to the Premises, or both, such actions shall be deemed
to be in compliance with Landlord’s rights and the acceptance thereof by
Landlord or its agents shall not be deemed to constitute a termination of this
Lease.  Landlord reserves the right following
any reentry and/or reletting to exercise its right to terminate this Lease by
giving Tenant written notice thereof, in which event this Lease will terminate
as specified in said notice;

 

(iii)                               To seize all personal property or fixtures upon the Premises which
Tenant owns or in which it has an interest, and cause the same to be stored in
a public warehouse or elsewhere at Tenant’s sole expense, without becoming
liable for any loss or damage resulting therefrom, and without resorting to
legal or judicial process, procedure, or action;

 

(iv)                              To bring an action against Tenant for any damages sustained by Landlord
or any equitable relief available to Landlord;

 

(v)                                 To relet the Premises or any part thereof for
such term or terms (including a term which extends beyond the original term of
this Lease), at such rentals and upon such other terms as Landlord, in its sole
discretion, may reasonably determine, with all proceeds received from such
reletting being applied to the Base Rent, Additional Rent, and all other
amounts due from Tenant under this Lease in such order as Landlord, may, in its
sole discretion, determine, which other amounts include, without limitation,
all repossession costs, brokerage commissions, attorneys’ fees and expenses,
employee expenses, alteration, remodeling and repair costs and expenses of
preparing for such reletting.  Landlord
shall exercise reasonable efforts to relet the Premises or part thereof,
Landlord shall be deemed to have used reasonable efforts if Landlord lists the
Premises for lease with an experienced commercial broker.  Landlord shall in no event be liable for
refusal or failure to relet the Premises or any part thereof, or, in the event
of any such reletting, for refusal or failure to collect any rent due upon such
reletting, and no such refusal or failure shall operate to relieve Tenant of
any liability under this Lease or otherwise to affect any such liability.  Landlord reserves the right following any
reentry and/or reletting to exercise its right to terminate this Lease by
giving Tenant written notice thereof, in which event this Lease will terminate
as specified in said notice;

 

(vi)                              To recover from Tenant all Rent, including any amounts treated as
Additional Rent under the Lease, and all other sums payable by Tenant under the
terms of the Lease as the same become due and payable;

 

(vii)                           To accelerate and recover from Tenant as damages, all Rent, including
any amounts treated as Additional Rent under this Lease, and other sums due and
payable by Tenant on the date of breach, plus as liquidated damages and not as
a penalty, an amount equal to the sum of (a) the present value

 

 

(using an 6% factor) of the difference between (i) an amount equal to
the Rent reserved in this Lease for the balance of the Lease Term including any
amounts treated as Additional Rent under this Lease and all other sums provided
in this Lease to be paid by Tenant, and (ii) the fair rental value of the
Premises for such remaining Lease Term after such fair rental value has been
reduced by all costs to be incurred by Landlord in order to obtain the fair
rental value, and (b) the cost of performing any other covenants which would
have otherwise been performed by Tenant;

 

(viii)                        To recover from Tenant all reasonable costs and expenses, including
attorneys’ fees, court costs, expert witness fees, costs of tests and analyses,
travel and accommodation expenses, deposition and trial transcripts, copies and
other similar costs and fees, paid or incurred by Landlord as a result of such
breach, regardless of whether or not legal proceedings are actually commenced;

 

(ix)                                To immediately or at any time thereafter, and with or without notice,
at Landlord’s sole option but without any obligation to do so, correct such
breach or default and charge Tenant all reasonable costs and expenses incurred
by Landlord therein.  Any sum or sums so
paid by Landlord, together with interest at the then existing maximum legal
rate, but not higher than U.S. Bank’s Prime Rate plus 600 basis points per
annum, shall be deemed to be Additional Rent hereunder and shall be immediately
due from Tenant to Landlord.  Any such
acts by Landlord in correcting Tenant’s breaches or defaults hereunder shall
not be deemed to cure said breaches or defaults or constitute any waiver of
Landlord’s right to exercise any or all remedies set forth herein;

 

(x)                                   To immediately or at any time thereafter, and
with or without notice, except as required herein, set off any money of Tenant
held by Landlord under this Lease against any sum owing by Tenant hereunder;
and/or

 

(xi)                                To enforce, and Tenant does hereby consent to such enforcement,
notwithstanding any laws to the contrary, all of Landlord’s self-help remedies
available at law or in equity without Landlord resorting to any legal or
judicial process, procedure or action.

 

D.                                    If Tenant is in default under this Lease for
other than the nonpayment of the Base Rent, Tenant shall immediately give
written notice to Landlord of the nature of the Tenant’s default.

 

21.                               Subordination, Nondisturbance, and Attornment.

 

A.                                   Landlord’s interest in this Lease and/or the
Premises shall not be subordinate to any encumbrances placed upon the Premises
by or resulting from any act of Tenant, and nothing herein contained shall be
construed to require such subordination by Landlord.  Tenant shall keep the Premises free from any liens for work
performed, materials furnished, or obligations incurred by Tenant.  NOTICE IS HEREBY GIVEN THAT TENANT IS NOT
AUTHORIZED TO PLACE OR ALLOW TO BE PLACED ANY LIEN, MORTGAGE, DEED OF TRUST, OR
ENCUMBRANCE OF ANY KIND UPON ALL OR ANY PART OF THE PREMISES OR TENANT’S
LEASEHOLD

 

 

INTEREST THEREIN, EXCEPT AS EXPRESSLY PROVIDED BELOW, AND ANY SUCH
PURPORTED TRANSACTION SHALL BE VOID.

 

B.                                     This Lease at all times shall automatically
be subordinate to the lien of any and all ground leases, mortgages, and trust
deeds now or hereafter placed upon the Premises by Landlord, and Tenant
covenants and agrees to execute and deliver, upon demand, such further
instruments subordinating this Lease to the lien of any or all such ground
leases, mortgages, or trust deeds as shall be desired by Landlord, or any
present or proposed mortgagees or trustees under trust deeds, upon the
condition that Tenant shall have the right to remain in possession of the
Premises under the terms of this Lease, and shall have all other rights granted
to Tenant under this Lease, notwithstanding any default in any or all such
mortgages or trust deeds, or after foreclosure thereof, so long as Tenant is
not in default under any of the covenants, conditions and agreements contained
in this Lease (“Nondisturbance Agreement”). 
Landlord shall provide Tenant a Nondisturbance Agreement from any
mortgagee which has a mortgage against the Premises at the time this Lease
commences.

 

C.                                     If any mortgagee or trustee elects to have
this Lease and the interest of Tenant hereunder be superior to any such
interest or right and evidences such election by notice given to Tenant, then
this Lease and the interest of Tenant hereunder shall be deemed superior to any
such mortgage or trust deed, whether this Lease was executed before or after
such mortgage or trust deed and in that event such mortgagee or trustee shall
have the same rights with respect to this Lease as if it had been executed and
delivered prior to the execution and delivery of the mortgage or trust deed and
has been assigned to such mortgagee or trustee.

 

D.                                    Although the foregoing provisions shall be
self-operative and no future instrument of subordination shall be required,
upon request by Landlord, Tenant shall execute and deliver whatever instruments
may be required for such purposes, and in the event Tenant fails so to do
within ten (10) days after demand, Tenant does hereby make, constitute, and
irrevocably appoint Landlord as its agent and attorney-in-fact and in its name,
place and stead so to do, which appointment shall be deemed coupled with an
interest.

 

E.                                      In the event any collateral assignee or
purchaser at a foreclosure sale acquires title to the Premises pursuant to the
exercise of any remedy provided for in the collateral assignment, mortgage, or
trust deed or otherwise, Tenant shall attorn to such purchaser and recognize
such purchaser as Landlord under this Lease, which shall continue in full force
and effect as a direct lease between such purchaser and Tenant.  The foregoing provision shall be
self-operative and effective without the execution of any further instruments.

 

F.                                      Tenant shall give written notice to any
lender of Landlord having a recorded lien upon the Premises or any part thereof
of which Tenant has been notified of any breach or default by Landlord of any
of its obligations under this Lease and give such lender at least thirty (30)
days beyond any notice period to which Landlord might be entitled to cure such
default before Tenant may exercise any remedy with respect thereto.  Upon request by Landlord, Tenant shall also
provide Tenant’s most recent financial statements, together with any audit or
other opinion received with respect thereto, to any such lender and certify the
continuing accuracy of such financial statements in such manner as Landlord or
such lender may request.

 

 

22.                               Estoppel Certificate.

 

A.                                   At any time, and from time to time, Tenant
agrees, promptly and in no event later than ten (10) days after a request from
Landlord, to execute, acknowledge, and deliver to Landlord or any present or
proposed mortgagee or purchaser designated by Landlord a certificate in the
form supplied by Landlord, certifying: 
(i) that Tenant has accepted the Premises (or, if Tenant has not done
so, that Tenant has not accepted the Premises, and specifying the reasons
therefor); (ii) that this Lease is in full force and effect and has not been
modified (or if modified, setting forth all modifications), or, if this Lease
is not in full force and effect, the certificate shall specify the reasons
therefor; (iii) the commencement and expiration dates of the Lease Term and the
terms of any renewal options of Tenant; (iv) the date to which the rentals have
been paid under this Lease and the amount thereof then payable; (v) whether
there are then any known existing defaults by Landlord in the performance of
its obligations under this Lease, and, if there are any such defaults,
specifying the nature and extent thereof; (vi) that no notice has been received
by Tenant of any default under this Lease which has not been cured, except as
to defaults specified in the certificate; (vii) the capacity of the person
executing such certificate, and that such person is duly authorized to execute
the same on behalf of Tenant; and (viii) any other information reasonably
requested by Landlord, or its present or proposed purchaser or mortgagee.  Tenant shall not be required to execute any
estoppel agreement which acts to amend this Lease

 

B.                                     If Tenant shall fail or refuse to sign a
certificate in accordance with the provisions of this Section within ten (10)
days following a request by Landlord, Tenant irrevocably constitutes and
appoints Landlord as its attorney-in-fact to execute and deliver the certificate
to any such third party, it being stipulated that such power of attorney is
coupled with an interest and is irrevocable and binding.  Landlord shall indemnify, defend and hold
harmless Tenant from any claims, legal actions, damages and costs from third parties
relying on such estoppel statement executed by Landlord to the extent such
estoppel statement contains a misstatement of facts.

 

23.                               Assignment.

 

A.                                   Landlord shall have the right to sell or
convey the Premises subject to this Lease or to assign its right, title, and
interest as Landlord under this Lease in whole or in part.  In the event of any such sale or assignment
other than a security assignment, Tenant shall attorn to such purchaser or
assignee and Landlord shall be relieved, from and after the date of such
transfer or conveyance, of liability for the performance of any obligation of
Landlord contained herein, except for obligations or liabilities accrued prior
to such assignment or sale.

 

B.                                     Tenant shall not, without the consent of
Landlord, which consent shall not be unreasonably withheld, assign, transfer,
convey, pledge, mortgage, or grant a deed of trust on this Lease or any
interest therein, whether by operation of law or otherwise, except as expressly
provided by other provisions of this Lease.

 

C.                                     Tenant shall have the right to sublet all or
a portion of the Premises to third-parties with the written consent of
Landlord, which consent shall not be unreasonably withheld.  Tenant shall provide Landlord all documentation
regarding any such sublease.  Any
amounts received by Tenant under such sublease that are in excess of the
amounts Tenant is obligated to pay Landlord under this Lease shall first be
used to

 

 

pay Tenant’s reasonable costs incurred as a result of such
subletting.  Any remaining excess shall
be shared equally by Landlord and Tenant on a monthly basis.  Tenant shall pay Landlord its share, if any,
of any amount received by Tenant under any sublease that is to be shared
equally by Landlord and Tenant, in accordance with this Section 23.C, within
two (2) days of Tenant’s receipt of payment under such sublease.  Tenant agrees that upon written demand by
Landlord, Tenant will furnish to Landlord, within not more than fifteen (15)
days after receiving such demand, an accounting for the amounts Tenant received
under and expended in connection with any sublease.  Landlord hereby consents to the sublease to Huntter Medical and
waives any entitlement to sublease rent from such sublease so long as Tenant is
not in default under the Lease.  If
Tenant is in default under this Lease, then upon Landlord’s written request the
Tenant shall immediately require the subleasee to pay all amounts due to Tenant
under the sublease to Landlord.

 

D.                                    In regards to the assignments and subleases
contemplated by this Section for which Landlord must provide its consent, it is
expressly agreed that Landlord may withhold or condition such consent based
upon such matters as Landlord may in its reasonable discretion determine,
including, without limitation, the experience and creditworthiness of the
assignee and/or sublessee, the assumption by the assignee and/or sublessee of
all of Tenant’s obligations hereunder by undertakings enforceable by Landlord,
the transfer to such assignee and/or sublessee of all necessary licenses and
franchises to continue operating the Premises for the purposes herein provided,
receipt of such representations and warranties from such assignee and/or
sublessee as Landlord may request, including such matters as its organization,
existence, good standing, and finances and other matters, whether or not
similar in kind.  At the time of any
such assignment or sublease that is approved by Landlord, the assignee and/or
sublessee shall assume all of the obligations of Tenant under this Lease pursuant
to an assumption agreement in form acceptable to Landlord.  No such assignment or subletting shall
relieve Tenant of its obligations respecting this Lease.  Any purported transfer, conveyance, pledge,
mortgage, or deed of trust in violation of this paragraph shall be voidable at
the sole option of Landlord.

 

24.                               Option to Purchase.

 

A.                                   On the condition that Tenant is not in
default hereunder, Landlord hereby grants to Tenant an option to purchase the
Premises and all or a portion of the Property, to be designated by Landlord in
its sole discretion (collectively the “Option Property”) at the end of the
original ten (10) year term of this Lease. 
If Tenant desires to exercise such option to purchase, Tenant shall provide
Landlord with written notice of its intent to exercise such option (the “Option
Notice”) not less one (1) year prior to the expiration of the original ten (10)
year term of this Lease.  Within fifteen
(15) days of Landlord’s receipt of the Option Notice, Landlord shall provide to
Tenant written notice of what, if any, portion of the balance of the Property
Landlord has elected to include with the Premises as Option Property (“Option
Property Notice”).  Upon Tenant’s
receipt of the Option Property Notice, Tenant shall notify landlord in writing
within fifteen (15) days thereafter of whether Tenant elects to purchase the
Option Property as designated by Landlord. 
If Tenant does not provide Landlord with written notice agreeing to
purchase the Option Property as designated by Landlord within fifteen (15) days
of receipt of the Option Property Notice, all of Tenant’s rights under this
Section 24 shall terminate.  If Tenant
agrees to purchase the Option Property as designated by Landlord by providing
Landlord the written notice required by this Section 24, Landlord and Tenant
shall thereafter enter into a real estate purchase agreement for the purchase
of the Option

 

 

Property with a purchase price equal to the “Fair Market Value” of the
Option Property, which shall be determined in strict accordance with the
provisions of this Section 24, but in no event shall the purchase price of (i)
the Premises be less than $3,540,000 and (ii) the Property, excluding the
Premises, be less than $1,240,000, reduced by the net purchase price received
by Landlord from the sale of any portion of the Property, excluding the
Premises (the “Purchase Agreement”).  If
Tenant fails to deliver the Option Notice to Landlord at least one (1) year
prior to the expiration of the original ten (10) year term of this Lease, then
Tenant’s option to purchase shall terminate, time being of the essence under
this Section 24.  The closing date for
Tenant’s purchase of the Option Property shall be March 31, 2013, the
expiration date of the original ten (10) year term of the Lease (the “Closing
Date”).

 

B.                                     “Fair Market Value” shall mean the amount
that a willing, comparable, non-owner, purchaser would pay, and a willing,
comparable seller of a comparable building and property in the same region
would accept at arm’s length.

 

C.                                     If Tenant has provided Landlord written
notice agreeing to purchase the Option Property as designated by Landlord, then
Tenant shall notify Landlord in writing of Tenant’s determination of the Fair
Market Value of the Option Property (“Tenant’s FMV Notice”) within thirty (30)
days of Tenant’s receipt of Landlord’s Option Property Notice.  If the Fair Market Value as set forth in
Tenant’s FMV Notice is acceptable to Landlord, then the purchase price is as
set forth in the Tenant’s FMV Notice. 
If the Fair Market Value as set forth in Tenant’s FMV Notice is not
acceptable to Landlord, Landlord must provide Tenant with written notice on or
before thirty (30) days subsequent to the receipt of Tenant’s FMV Notice.  If Landlord has so timely objected in
writing to Tenant’s FMV Notice, then Landlord and Tenant shall negotiate, in
good faith, for up to an additional thirty (30) days to arrive at a mutually
acceptable Fair Market Value.  If,
however, at the end of said additional thirty (30) day period Landlord and
Tenant have failed to arrive at a mutually acceptable Fair Market Value, the
Fair Market Value shall be determined by arbitration pursuant to Section 24.D
hereof.  If the determination of Fair
Market Value is submitted to arbitration, the results of such arbitration shall
be binding on Landlord and Tenant.  All
notices under this Section shall be given in the manner provided in the Lease
for the giving of notices.

 

D.                                    If Landlord and Tenant have failed to arrive
at a mutually acceptable Fair Market Value after negotiating for the thirty
(30) day period provided for in Section 24.C of this Lease, then within ten
(10) days after expiration of said thirty (30) day period each party shall
appoint an arbitrator and notify the other party of such appointment in writing
by identifying the appointee.  Each
party hereto agrees to select as its respective appointee an independent
appraiser, with MAI designation, who is an individual with at least ten (10)
years experience in appraising office/manufacturing/warehouse buildings in the
Minneapolis/St. Paul metropolitan area. 
Neither party may consult directly or indirectly with any arbitrator
regarding the Fair Market Value before appointment, or after appointment,
outside the presence of the other party. 
The arbitration shall be conducted under the provisions of the
Arbitration Rules for the Real Estate Industry (as amended and effective as of
September 1, 2000) as published by the American Arbitration Association
and Minnesota law governing arbitration or as otherwise agreed by the
parties.  Not later than ten (10) days
after both arbitrators are appointed, each party shall separately, but
simultaneously, submit in a sealed envelope to each arbitrator whatever
information such party wants the arbitrators to consider in determining the
Fair Market Value, including, but not limited to, their separate suggested Fair
Market Value,

 

 

and any materials supporting such suggested Fair Market Value, and
shall provide a copy of all materials submitted to the other party.  The two (2) selected arbitrators, after
reviewing such submissions, shall attempt to determine the actual Fair Market
Value for the Option Property.  If both
arbitrators agree on the actual Fair Market Value, they shall declare the Fair
Market Value, and their decision shall be final and binding upon the
parties.  If the two selected
arbitrators are unable to agree on the Fair Market Value within sixty (60) days
after the date the Landlord and/or Tenant submitted estimates, then the
arbitrators shall inform the parties.  Unless the parties shall both otherwise then direct, said
arbitrators shall select a third arbitrator, not later than ten (10) days after
the expiration of said sixty (60) day period. 
If no arbitrator is selected by either party within the ten (10) day period
hereinbefore provided, or if the two arbitrators do not appoint a third
arbitrator within the ten (10) day period, then either party may immediately
petition the Chief Judge of the Dakota County District Court (or his designee
for such purposes) to appoint such third arbitrator.  The third arbitrator shall have the qualifications and
restrictions set forth above, and the three arbitrators shall conduct an
arbitration pursuant to the Arbitration Rules for the Real Estate Industry (as
amended and effective as of September 1, 2000) as published by the American
Arbitration Association and Minnesota law governing arbitration or as otherwise
agreed by the parties.  The decision of
any two of the three arbitrators shall be final and binding as to the actual Fair
Market Value.  The arbitrators shall
make a decision not later than forty-five (45) days after appointment of the
third arbitrator.  If no two arbitrators
agree, then the average of the Fair Market Values of the two arbitrators whose
determinations are closest to each other shall be deemed to be the actual Fair
Market Value.  Each party shall be
responsible for the costs, charges, and/or fees of its respective appointee,
and the parties shall share equally in the costs, charges, and/or fees of the
third arbitrator. The decision of the arbitrator(s) may be entered in any court
having jurisdiction thereof.  The
decision of the arbitrator(s) may be entered in any court having jurisdiction
thereof. If either Landlord or Tenant fails to properly appoint an arbitrator
within the time period established by this Section 24.D, then such defaulting
party shall pay all costs incurred by the non-defaulting party in obtaining the
appointment of such arbitrator, including court costs and reasonable attorneys
fees and costs.

 

E.                                      Within thirty (30) days after a final
determination on the Fair Market Value of the Premises has been reached in
accordance with the provisions herein, Landlord shall deliver to Tenant a title
insurance commitment from a title company selected by Tenant (the “Title
Company”) evidencing marketable title to the Premises.  Tenant shall thereafter have ten (10) days
from the date of receipt of such documentation to examine title and make
objections thereto, if any, in writing. 
Landlord shall use its reasonable efforts to cure any title defects
within sixty (60) days thereafter.  If
title is not marketable and cannot be made marketable by Landlord within such
sixty (60) day period, Tenant may either purchase the Option Property, subject
to the title defects or terminate the purchase agreement and not be obligated
to purchase the Option Property.

 

F.                                      The closing of this transaction contemplated
hereby shall be held at the Title Company, and shall occur on the Closing Date.

 

G.                                     On the Closing Date, Tenant shall pay the
purchase price and Landlord shall convey good and marketable and insurable
title to Tenant or its designee by limited warranty deed, subject only to the
(i) current real estate taxes and special assessments not yet due and payable
as of the closing date, except that current real estate taxes shall be prorated
between Landlord and Tenant on a calendar year basis as of the closing date,
(ii)

 

 

building and zoning laws, ordinances, and state and federal
regulations, (iii) easements not interfering with existing improvements, (iv)
any covenant, condition, restriction or lien or other encumbrance created by or
through Tenant, (v) such liens, covenants, conditions, easements and exceptions
to title as Tenant may agree to in writing, (vi) the Conditional Use Permit
issued by the City of Inver Grove Heights, dated July 14, 1997, recorded July
24, 1997, as Document No. 1434761, indicating approval by the Inver Grove
Heights City Council of a Conditional Use Permit to allow a PCS tower on the
property at 9605 Jefferson Trail, (vii) road easement in favor of State of
Minnesota, as set forth in the final certificate recorded February 2, 1955 in
Book 64, page 240, (viii) easement between Soo Line Railroad Company, in favor
of Cooperative Power Association, dated November 15, 1991, recorded January 10,
1992 as Document No. 1022688, for construction of maintenance of electric
transmission lines, (ix) trunk watermain, sanitary sewer extension, and utility
easement(s) in favor of the City of Inver Grove Heights, as created in document
No. 1740919, (x) unrecorded Option and Site Lease Agreement dated April 16,
1997 between CV Dynamics, Inc. and US West Communications Wireless Group, a
division of US West Communications, Inc., and (xi) easements, or claims of easement,
not shown by the public records.  Items
customarily adjusted in commercial property transactions shall be adjusted as
of the Closing Date.  Landlord shall pay
any transfer taxes imposed by the applicable state or county and any transfer
taxes imposed by local ordinance shall be paid by the party designed in such
ordinance.

 

25.                               Right of First Notice.  In
the event Landlord elects to sell the Premises or the Premises and all or a
portion of the balance of the Property (the “Sale Property”), or Landlord
receives an offer from a third-party to purchase the Sale Property during the
Lease Term, and provided Tenant is not then in default hereunder, Landlord
agrees to provide Tenant written notice of such event as provided by this
Section.  In the event Landlord has
elected to sell the Sale Property, the notice to Tenant shall state the terms
and conditions upon which Landlord intends the list the Sale Property for
sale.  In the event Landlord has
received an offer from a third-party to purchase the Sale Property, the notice
to Tenant shall state the terms and conditions of the offer from the
third-party.  Upon receiving from
Landlord the notice required by this Section, Tenant shall have the
opportunity, along with any other third-party, to negotiate with the Landlord
for the purchase of the Sale Property. 
Nothing contained herein shall be construed to provide the Tenant with
the exclusive right to deal with the Landlord for the purchase of the Sale
Property or a right of first refusal. 
Moreover, Landlord makes no representations as to the amount of time
Landlord will wait or delay after giving Tenant the notice required by this
Section to negotiate with Tenant or to enable Tenant to submit an offer to
purchase the Sale Property.  If Tenant
fails to purchase the Sale Property after Landlord provides written notice
pursuant to this paragraph and the Landlord sells the Sale Property within one
year of the date of such notice to Tenant, then Tenant’s rights under this
paragraph shall be null and void as to the Sale Property from and after the
date the Landlord conveys the Sale Property to Tenant within such one year
period.

 

26.                               Notices.  All notices, consents, approvals or other
instruments required or permitted to be given by either party pursuant to this
Lease shall be in writing and given by (A) hand delivery, (B) facsimile, (C)
express overnight delivery service, or (D) certified or registered mail, return
receipt requested, and shall be deemed to have been delivered upon (A) receipt,
if hand delivered, (B) transmission, if delivered by facsimile, (C) the next
business day, if delivered by express overnight delivery service, or (D) the
second business day following the day of deposit of such notice with the United
States Postal Service, if sent by certified or registered mail, return receipt
requested.  Notices shall be provided to
the parties at the addresses (or facsimile numbers, as applicable) specified
below:

 

 

	
   

  	
  A.       If
  to Tenant:

  	
  MedicalCV,
  Inc.

  
	
   

  	
  9725 South Robert Trail

  
	
   

  	
  Inver Grove Heights, MN 55077

  
	
   

  	
  Attn: Chief Executive
  Officer

  
	
   

  	
  Telephone:     (651)
  452-3000

  
	
   

  	
  Facsimile:      (651)
  234-6669

  
	
   

  	
   

  
	
   

  	
  B.       If
  to Landlord

  	
  PKM
  Properties, LLC

  
	
   

  	
  c/o
  Gracon Contracting, Inc.

  
	
   

  	
  606 24th Ave.
  South

  
	
   

  	
  Suite B12

  
	
   

  	
  Minneapolis, MN 55454

  
	
   

  	
  Attn:  Paul Miller

  
	
   

  	
  Telephone:     (612)
  305-4850

  
	
   

  	
  Facsimile:      (612)
  305-4813

  

 

or
to such other address or such other person as either party may from time to
time hereafter specify to the other party in a written notice delivered in the
manner provided above.

 

27.                               Holding Over.  If Tenant remains in possession of the
Premises after the expiration of the Lease Term, Tenant, at Landlord’s option
and within Landlord’s sole discretion, may be deemed a tenant on a
month-to-month basis and shall continue to pay rentals and other sums in the
amounts herein provided, except that the Base Monthly Rental shall be
automatically doubled, and to comply with all the terms of this Lease; provided
that nothing herein nor the acceptance of rent by Landlord shall be deemed a
consent to such holding over.  Tenant
shall defend, indemnify, protect and hold harmless from and against any and all
claims, losses, and liabilities for damages resulting from Tenant’s failure to
surrender possession upon the expiration of the Lease Term, including, without
limitation, any claims made by any succeeding lessee.

 

28.                               Removal of Tenant’s Property.  At
the expiration of the Lease Term, Tenant shall remove from the Premises all
personal property belonging to Tenant (but not including any improvements, which
shall, at Landlord’s option, become the property of the Landlord at the
expiration of the Lease Term and shall be surrendered by Tenant to
Landlord).  Landlord may require Tenant
to remove improvements from the Premises which are constructed from and after
the date of this Lease and which the Landlord requires to be removed at the
time it provides Tenant with its consent to the construction of such
improvements.  Tenant shall repair any
damage caused by such removal and shall leave the Premises broom clean and in
good and working condition and repair inside and out.  Any property of Tenant left on the Premises on the tenth (10th)
day following the expiration of the Lease Term shall automatically and
immediately become the property of Landlord, without relieving Tenant of its
obligation hereunder to remove the same at the option of Landlord.

 

29.                               Force Majeure.  Any prevention, delay, or stoppage due to
strikes, lockouts, act of God, enemy or hostile governmental action, civil
commotion, fire, or other casualty beyond the control of the party obligated to
perform shall excuse the performance by such party for a period equal to any
such prevention, delay or stoppage, except the obligations imposed with regard
to Base Monthly Rental, Additional Rental, and other monies to be paid by
Tenant pursuant to this Lease.

 

30.                               Document Review.  In the event Tenant makes any
request upon Landlord requiring Landlord or its attorneys to review and/or
prepare (or cause to be reviewed and/or prepared) any

 

 

document or documents in connection with or arising out of or a result
of this Lease, then, except as expressly stated elsewhere herein, Tenant shall
pay Landlord or its designee promptly upon Landlord’s demand therefor a
processing and review fee.

 

31.                               Time Is of the Essence.  Time is of the essence with
respect to each and every provision of this Lease in which time is a factor.

 

32.                               Landlord’s Liability.  Notwithstanding anything to
the contrary provided in this Lease, it is specifically understood and agreed,
such agreement being a primary consideration for the execution of this Lease by
Landlord, that (i) there shall be absolutely no personal liability on the part
of Landlord, its successors or assigns, and its members, officers, directors,
employees, and agents to Tenant with respect to any of the terms, covenants,
and conditions of this Lease, (ii) Tenant waives all claims, demands, and
causes of action against Landlord’s members, officers, directors, employees,
and agents in the event of any breach by Landlord of any of the terms,
covenants, and conditions of this Lease to be performed by Landlord, and (iii)
Tenant shall look solely to the Premises, rental proceeds and proceeds from the
sale of the Premises for the satisfaction of each and every remedy of Tenant in
the event of any breach by Landlord of any of the terms, covenants, and
conditions of this Lease to be performed by Landlord, or any other matter in
connection with this Lease or the Premises, such exculpation of liability to be
absolute and without any exception whatsoever.

 

33.                               Consent of Landlord.  Unless specified otherwise
herein, Landlord’s consent to any request of Tenant may be conditioned or
withheld in Landlord’s sole discretion. 
Landlord shall have no liability for damages resulting from Landlord’s
failure to give any consent, approval, or instruction reserved to Landlord,
Tenant’s sole remedy in any such event being an action for injunctive relief.

 

34.                               Waiver and Amendment.  No provision of this Lease
shall be deemed waived or amended except by a written instrument unambiguously
setting forth the matter waived or amended and signed by the party against
which enforcement of such waiver or amendment is sought.  Waiver of any matter shall not be deemed a waiver
of the same or any other matter on any future occasion.  No acceptance by Landlord of an amount less
than the monthly rent and other payments stipulated to be due under this Lease
shall be deemed to be other than a payment on account of the earliest such rent
or other payments then due or in arrears nor shall any endorsement or statement
on any check or letter accompanying any such payment be deemed a waiver of
Landlord’s right to collect any unpaid amounts or an accord and satisfaction.

 

35.                               Successors Bound.  Except as otherwise specifically
provided herein, the terms, covenants, and conditions contained in this Lease
shall bind and inure to the benefit of the respective heirs, successors,
executors, administrators, and assigns of each of the parties hereto.

 

36.                               No Merger.  The voluntary or other surrender of this
Lease by Tenant, or a mutual cancellation thereof, shall not result in a merger
of Landlord’s and Tenant’s estates, and shall, at the option of Landlord,
either terminate any or all existing subleases or subtenancies, or operate as
an assignment to Landlord of any or all of such subleases or subtenancies.

 

37.                               Captions.  Captions are used throughout this Lease for
convenience or reference only and shall not be considered in any manner in the
construction or interpretation hereof.

 

38.                               Severability.  The provisions of this Lease shall be deemed
severable.  If any part of this Lease
shall be held unenforceable by any court of competent jurisdiction, the
remainder shall

 

 

remain in full force and effect, and such unenforceable provision shall
be reformed by such court so as to give maximum legal effect to the intention
of the parties as expressed therein.

 

39.                               Easements.  During the Lease Term Landlord shall have
the right to grant utility and public road easements on, over, under, and above
the Premises without the prior consent of Tenant, provided that such easements
will not materially interfere with Tenant’s use of the Premises.

 

40.                               Bankruptcy.

 

A.                                   As a material inducement to Landlord
executing this Lease, Tenant acknowledges and agrees that Landlord is relying
upon Tenant’s timely performance of all of its obligations under this Lease
notwithstanding the entry of an order for relief under the Code for Tenant and
all defaults under the Lease being cured promptly and the Lease being assumed
within sixty (60) days of any order for relief entered under the Code for
Tenant, or the Lease being rejected within such sixty (60) day period and the
Premises surrendered to Landlord. 
Accordingly, in consideration of the mutual covenants contained in this
Lease and for other good and valuable consideration, Tenant hereby agrees that:

 

(i)                                     All obligations that accrue under this Lease
(including the obligation to pay rent), from and after the date that an Action
is commenced shall be timely performed exactly as provided in this Lease and
any failure to so perform shall be harmful and prejudicial to Landlord;

 

(ii)                                  Any and all rents that accrue from and after
the date that an Action is commenced and that are not paid as required by this
Lease shall, in the amount of such rents, constitute administrative expense
claims allowable under the Code with priority of payment at least equal to that
of any other actual and necessary expenses incurred after the commencement of
the Action;

 

(iii)                               Any extension of the time period within which the Tenant may assume or
reject the Lease without an obligation to cause all obligations under the Lease
to be performed as and when required under the Lease shall be harmful and
prejudicial to Landlord;

 

(iv)                              Any time period designated as the period within which the Tenant must
cure all defaults and compensate Landlord for all pecuniary losses which
extends beyond the date of assumption of the Lease shall be harmful and
prejudicial to Landlord;

 

(v)                                 Any assignment of the Lease must result in
all terms and conditions of the Lease being assumed by the assignee without
alteration or amendment, and any assignment which results in an amendment or
alteration of the terms and conditions of the Lease without the express written
consent of Landlord shall be harmful and prejudicial to Landlord;

 

(vi)                              Any proposed assignment of the Lease to an assignee that does not
possess operating performance and experience characteristics equal to or better
than the operating performance and experience of Tenant as of the Commencement
Date, shall be harmful and prejudicial to Landlord;

 

 

(vii)                           The rejection (or deemed rejection) of the Lease for any reason
whatsoever or the occurrence of an Event of Default after the commencement of
an Action shall constitute cause for immediate relief from the automatic stay
provisions of the Code, and Tenant stipulates that such automatic stay shall be
lifted immediately and possession of the Premises will be delivered to Landlord
immediately without the necessity of any further action by Landlord.

 

B.                                     No provision of this Lease shall be deemed a
waiver of Landlord’s rights or remedies under the Code or applicable law to
oppose any assumption and/or assignment of this Lease, to require timely
performance of Tenant’s obligations under this Lease, or to regain possession
of the Premises as a result of the failure of Tenant to comply with the terms
and conditions of this Lease or the Code.

 

C.                                     Notwithstanding anything in this Lease to the
contrary, all amounts payable by Tenant to or on behalf of Landlord under this
Lease, whether or not expressly denominated as such, shall constitute “rent”
for the purposes of the Code.

 

D.                                    For purposes of this Section addressing the
rights and obligations of Landlord and Tenant in the event that an Action is
commenced, the term “Tenant” shall include Tenant’s successor in bankruptcy,
whether a trustee, Tenant as debtor in possession, or other responsible person.

 

41.                               No Offer.  No contractual or other rights shall exist
between Landlord and Tenant with respect to the Premises until both have
executed and delivered this Lease, notwithstanding that deposits may have been
received by Landlord and notwithstanding that Landlord may have delivered to
Tenant an unexecuted copy of this Lease.  The submission of this Lease to Tenant shall be for examination
purposes only, and does not and shall not constitute a reservation of or an
option for Tenant to lease or otherwise create any interest on the part of
Tenant in the Premises.

 

42.                               Other Documents.  Each of the parties agrees to
sign such other and further documents as may be necessary or appropriate to
carry out the intentions expressed in this Lease.

 

43.                               Attorneys’ Fees.  In
the event of any judicial or other adversarial proceeding between the parties
concerning this Lease, the prevailing party shall be entitled to recover all of
its reasonable attorneys’ fees and other costs in addition to any other relief
to which it may be entitled.  In
addition, Landlord shall, upon demand, be entitled to all attorneys’ fees and
all other costs incurred in the preparation and service of any notice or demand
hereunder, whether or not a legal action is subsequently commenced.

 

44.                               Development. 
Prior to the Landlord commencing or permitting the commencement of any
sand or gravel operations or land development on the Property, excluding the
Premises, Landlord shall review such operations or development with Tenant to
determine whether or not such operations or development will materially
interfere with or materially adversely affect Tenant’s operation on the
Premises.  Landlord shall not conduct
such operations or development in a manner and shall not permit such operations
or development to be conducted in a manner which would materially interfere
with or materially adversely affect Tenant’s operations on the Premises.

 

 

45.                               Entire Agreement.  This Lease, and any other
instruments or agreements referred to herein, constitute the entire agreement
between the parties with respect to the subject matter hereof, and there are no
other representations, warranties, or agreements except as herein
provided.  Without limiting the
foregoing, Tenant specifically acknowledges that neither Landlord nor any
agent, officer, employee, or representative of Landlord has made any
representation or warranty regarding the projected profitability of the
business to be conducted on the Premises.

 

46.                               Forum Selection; Jurisdiction; Venue; Choice of Law. 
Tenant acknowledges that this Lease was substantially negotiated in the
State of Minnesota, the executed Lease was delivered in the State of Minnesota,
all payments under the Lease will be delivered in the State of Minnesota, and
there are substantial contracts between the parties and the transactions
contemplated herein and the State of Minnesota.  For purposes of any action or proceeding arising out of this
Lease, the parties hereto expressly submit to the jurisdiction of all federal
and state courts located in the State of Minnesota.  Tenant consents that it may be served with any process or paper
by registered mail or by personal service within or without the State of
Minnesota in accordance with applicable law, provided a reasonable time for
appearance is allowed.  Furthermore,
Tenant waives and agrees not to assert in any such action, suit, or proceeding
that is not personally subject to the jurisdiction of such courts, that the
action, suit, or proceeding is brought in an inconvenient forum or that venue
of the action, suit, or proceeding is improper.  The creation of this Lease and the rights and remedies of
Landlord with respect to the Premises, as provided herein and by the laws of
the state in which the Premises is located, shall be governed by and construed
in accordance with the internal laws of the state in which the Premises is
located without regard to principles of conflict of law.  With respect to other provisions of this
Lease, this Lease shall be governed by the internal laws of the State of
Minnesota.  Nothing contained in this
Section shall limit or restrict the right of Landlord to commence any
proceeding in the federal or state courts located in the state in which the
Premises is located to the extent Landlord deems such proceeding necessary or
advisable to exercise remedies available under this Lease.

 

47.                               Counterparts.  This Lease may be executed in one or more
counterparts, each of which shall be deemed an original.

 

48.                               Joint and Several Liability.  If Tenant consists of more
than one individual or entity, each such individual and/or entity shall be
jointly and severally liable for all obligations of Tenant under this Lease.

 

49.                               Memorandum of Lease.  Concurrently with the
execution of this Lease, Landlord and Tenant are executing a memorandum of
lease in recordable form, indicating the names and addresses of Landlord and
Tenant, a description of the Premises, the Lease Term, and the terms of any
options to extend the Lease Term, or purchase the Premises, but omitting rent
and such other terms of this Lease as Landlord may not desire to disclose to
the public.

 

50.                               No Brokerage.  Landlord and Tenant represent and warrant to
each other that they have had no conversation or negotiations with any broker
concerning the leasing of the Premises. 
Each of Landlord and Tenant agrees to protect, indemnify, save, and keep
harmless the other, against and from all liabilities, claims, losses, costs,
damages, and expenses, including attorneys’ fees, arising out of, resulting
from, or in connection with their breach of the foregoing warranty and
representation.

 

51.                               Waiver of Jury Trial and Punitive, Consequential, Special,
and Indirect Damages.  Landlord and Tenant hereby knowingly,
voluntarily, and intentionally WAIVE THE RIGHT

 

 

EITHER MAY HAVE TO A TRIAL BY JURY with respect to any and all issues
presented in any action, proceeding, claim, or counterclaim brought by either
of the parties hereto against the other or its successors with respect to any
matter arising out of or in connection with this Lease, the relationship of
Landlord and Tenant, Tenant’s use or occupancy of the Premises, and/or any
claim for injury or damage, or any emergency or statutory remedy.  This WAIVER BY THE PARTIES HERETO OF ANY
RIGHT EITHER MAY HAVE TO A TRIAL BY JURY has been negotiated and is an
essential aspect of their bargain. 
Furthermore, Landlord and Tenant hereby knowingly, voluntarily, and
intentionally WAIVE THE RIGHT IT MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL,
SPECIAL, AND INDIRECT DAMAGES FROM EACH OTHER with respect to any and all
issues presented in any action, proceeding, claim, or counterclaim brought by
either party against the other or its successors with respect to any matter
arising out of or in connection with this Lease or any document contemplated
herein or related hereto.  The WAIVER BY
LANDLORD AND TENANT OF ANY RIGHT IT MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL,
SPECIAL, AND INDIRECT DAMAGES has been negotiated by the parties hereto and is
an essential aspect of their bargain.

 

Landlord and Tenant have
caused this Lease to be executed and delivered effective as of the date first above
written.

 

[Signatures
Pages to Follow]

 

 

Landlord’s Signature Page to Lease
between PKM Properties, LLC as Landlord and MedicalCV, Inc., as Tenant

 

 

	
   

  	
  LANDLORD:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PKM
  PROPERTIES, LLC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Paul K. Miller

  	
   

  
	
   

  	
   

  
	
   

  	
     Its:

  	
  Chief
  Manager

  	
   

  
						

 

 

Tenant’s Signature Page to Lease between PKM Properties, LLC
as Landlord and MedicalCV, Inc., as Tenant

 

 

	
   

  	
  TENANT:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MEDICALCV,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Blair P. Mowery

  	
   

  
	
   

  	
   

  
	
   

  	
     Its:

  	
  President
  and CEO

  	
   

  
						

 

 

EXHIBIT A

 

LEGAL DESCRIPTION OF THE PROPERTY

 

That part of the West Half
(W1/2) of the Southwest Quarter (SW 1⁄4) of Section Nineteen (19), Township
Twenty-seven (27), Range Twenty-two (22), Dakota County, Minnesota lying
Northerly of the Northerly right-of-way line of Minnesota State Trunk Highway
No. 3 and Westerly of the Westerly right-of-way line of the Chicago, Milwaukee,
St. Paul and Pacific Railroad Company:

 

EXCEPT that part thereof
included within the North 417.42 feet of the East 417.42 feet of the Northwest
Quarter (NW 1⁄4) of the Southwest Quarter (SW 1⁄4) of Section Nineteen (19),
Township Twenty-seven (27), Range Twenty-two (22), Dakota County, Minnesota, as
measured along the North and East lines thereof, and

 

EXCEPT that part described
as follows:  Commencing at the Northwest
corner of said West Half (W 1⁄2) of the Southwest Quarter (SW 1⁄4); thence South 0
degrees 01 minutes 18 seconds East (assumed bearing) a distance of 700 feet
along the West line of said West Half (W 1⁄2) of the Southwest Quarter (SW 1⁄4) to
the point of beginning of the parcel to be described; thence North 89 degrees
58 minutes 42 seconds East a distance of 500 feet; thence South 0 degrees 01
minutes 18 seconds East a distance of 343.44 feet, more or less, to the
Northerly right-of-way line of State Trunk Highway No. 3; thence Southwesterly
along said right-of-way line 604.14 feet, more or less, to its intersection
with the West line of said West Half (W 1⁄2) of the Southwest Quarter (SW 1⁄4);
thence Northerly along said West line 666.87 feet, more or less, to the point
of beginning, according to the Government Survey thereof, located in Dakota
County, Minnesota.

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