AMENDED AND RESTATED LEASE AGREEMENT

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LANDLORD:            Jain-Olsen Properties, a Minnesota general partnership.  Landlord is a
                     limited liability general partnership under Minn. Stat. 323A.10-03.

TENANT:              APA Optics, Inc., a Minnesota corporation

LEASE DATE:          June 23, 2004

LEASE TERM:          December 1, 2004 ("Commencement Date") to and including
                     November 30, 2009.  Tenant may extend the Lease Term for two (2)
                     five- (5) year extension terms ("Extension Terms") as provided in
                     Section 5 below of this Lease.

USE:                 Industrial, Warehouse, and Office

BASE RENT:           Determined as provided in Section 4 below

ADDITIONAL RENT:     All sums payable by Tenant pursuant to this Lease, except Base Rent

RENT:                Base Rent plus Additional Rent

RENT PAYMENT
ADDRESS:             2950 NE 84th Lane, Blaine, Minnesota, or such other place as Landlord
                     from time to time designates in writing

SECURITY DEPOSIT:    None

PREMISES:            The property located in Ramsey County, Minnesota, legally described
                     as follows and commonly known as:  Lot 4, Block 3, North Star
                     Industrial Park (the "Land"), the building located on the Land (the
                     "Building") and the surface parking lot on the Land surrounding the
                     Building.

PRIOR LEASE:         This Amended and Restated Lease replaces the Sublease dated
                     December 1, 1984, the Sublease Amendment and Option Agreement
                     dated March 11, 1985, and the Amendment and Extension of Sublease
                     dated August 31, 1999 (collectively, the "Prior Lease").  The Prior
                     Lease is terminated effective as of the Commencement Date and
                     Landlord and Tenant hereby release each other from any and all claims
                     under the Prior Lease.

OPTION TO PURCHASE:  Tenant has the right to purchase the Premises during the Lease Term
                     as described in Schedule A, attached.
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IN CONSIDERATION OF the lease for the Premises, the Rent agreed to be paid, and
all other covenants and agreements herein contained,

LANDLORD AND TENANT agree as follows:


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1.   PREMISES. Landlord hereby leases to Tenant the Premises identified above
     and Tenant hereby takes such Premises from Landlord subject to the terms
     and conditions of this Lease (including as set forth above) and for the
     Lease Term set forth above.

2.   USE. The Premises shall be used by Tenant only for the Use identified
     above, in compliance with all applicable federal, state and local laws,
     ordinances, codes, rules, regulations and orders. Tenant shall, at its
     expense, make any alterations and improvements required at any time in
     order for the Premises and the use thereof to comply with such laws,
     ordinances, codes, rules, regulations and orders. No part of the Premises
     shall be used for any purpose which constitutes a nuisance or which is
     dangerous, illegal or offensive. Tenant shall indemnify and hold harmless
     Landlord, and Landlord's partners, agents, and employees, against all
     claims, costs, and liabilities arising out of the storage, use, generation
     or disposal of any such materials on the Premises by or at the sufferance
     of Tenant, including all costs of removal, cleanup and restoration.

3.   OCCUPANCY OF PREMISES. Tenant hereby accepts the Premises in their "as-is"
     condition at the Commencement Date. Tenant acknowledges that Landlord has
     made no other representations as to the repair of the Premises, nor
     promises to alter, remodel or improve the Premises.

4.   BASE RENT. Tenant agrees to pay to Landlord the Base Rent in equal monthly
     installments in advance on or before the first day of each month during the
     Lease Term, without demand, deduction or set-off. Payment shall be made at
     the Rent Payment Address set forth above. If the Lease Term begins on other
     than the first day of the month or ends on other than the last day of the
     month, the Base Rent for that month shall be pro-rated. Base Rent shall be
     determined as follows:

     a.   Base Rent during the period from the Commencement Date through
          December 31, 2004 shall be $117,487.80, annually, payable in equal
          monthly installments of $9,790.65.

     b.   On January 1 of each year through the Lease Term, including any
          Extension Term, the Base Rent shall be increased by 100% of the
          increase, if any, in the Consumer Price Index during the preceding
          calendar year.

5.   EXTENSION. Tenant may extend the Lease Term by five (5) years ("First
     Extension Term") by giving written notice to Landlord no later than one
     hundred twenty (120) days before the last day of the initial Lease Term,
     Tenant may extend the Lease Term for an additional five (5) years ("Second
     Extension Term") by giving written notice to Landlord no later than 120
     days before the last day of the First Extension Term. The term "Lease Term"
     as used in this Lease shall include any such Extension Term provided that
     Tenant has exercised the extension rights granted herein. The terms and
     conditions of this Lease during any Extension Term shall be the terms and
     conditions provided herein except that Base Rent shall be adjusted as
     provided in Section 4 of this Lease. Tenant shall not be entitled to extend
     the Lease Term at any time when Tenant is in default under this Lease.

6.   CERTAIN ADDITIONAL RENT. Tenant agrees to pay to Landlord as Additional
     Rent, upon demand, all attorneys' fees and other fees and out-of-pocket
     costs and expenses, if any, incurred by Landlord in connection with any
     delinquencies or defaults by Tenant


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     hereunder or enforcing the provisions hereof, and the amount of any gross
     receipts tax, sales tax or similar tax (but excluding therefrom any income
     tax) paid or which will be payable by Landlord by reason of the receipt
     hereunder of Base Rent or any other amounts, the renting of the Premises to
     Tenant or Tenant's occupancy of the Premises.

7.   MAINTENANCE OF PREMISES. Tenant, at its expense, shall keep the Premises,
     including the building, all fixtures and facilities related thereto, and
     leasehold improvements, and all trade fixtures, personal property,
     equipment and signs thereon, including those owned by Tenant, in good order
     and condition, ordinary wear and tear excepted, and make all repairs and
     replacements, whether structural or otherwise, which may become necessary
     to keep the Premises in the condition required by this Lease, or which may
     be ordered by any governmental authority during the Lease Term. Tenant
     shall pay for all utilities used within the Premises during the Lease Term,
     including all taxes, penalties, surcharges, and maintenance costs
     pertaining thereto.

8.   RELEASE AND INDEMNITY.

     a.   Neither Landlord nor Tenant, nor their respective partners, officers,
          directors, agents and employees, shall be liable to the other, or
          those claiming through or under the other, for injury, death, property
          damage, burglary, theft or disappearance occurring in, on or about the
          Premises and appurtenances thereto, unless due to gross negligence or
          willful misconduct.

     b.   Landlord and Tenant each hereby expressly release each other and their
          respective partners, officers, directors, agents, and employees, from
          any claim or cause of action for any loss or damage whatsoever arising
          from or in the Premises or the business conducted therefrom, except as
          noted in 8a above. It is the intention of the parties that they shall
          look only to their insurance carrier, if any, for payment of such
          loss.

     c.   Notwithstanding the foregoing, Tenant hereby agrees to indemnify
          Landlord and its partners, agents and employees, and to hold them
          harmless against any claim, damage, cost, and expense (including
          attorney's fees) and liability (collectively, "loss") arising out of
          any claim by any third party for personal injury or property damage
          arising from the Premises or the business conducted at the Premises,
          to the extent that such loss is not covered by insurance, but only if
          the claim does not involve gross negligence or willful misconduct of
          Landlord.

9.   INSURANCE.

     a.   Tenant, at its sole cost and expense, shall maintain in effect at all
          times during the Lease Term the following insurance:

          (i)  A Commercial General Liability Insurance policy providing
               coverage on an "occurrence" rather than on a "claims made" basis,
               which policy shall include coverage for bodily injury, property
               damage, personal injury, and contractual liability (applicable to
               this Lease). Such policy shall provide coverage of at least
               $6,000,000 for each occurrence and annual aggregate coverage of
               at least $6,000,000.


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          (ii) Insurance on the Building against loss by fire and other hazards
               covered by the Special Form policy or equivalent, and including
               contingent liability from operation of building laws coverage, in
               an amount not less than the full insurable replacement value.
               Such policy shall have an "agreed amount" endorsement or
               otherwise exclude co-insurance participation by the insured, and
               may include a deductible in an amount not greater than $10,000.
               While any building or other improvement is in the course of being
               constructed or rebuilt on the Land, such insurance shall be in
               builder's risk, completed value form.

         (iii) Equipment Breakdown insurance on Landlord's equipment in the
               Building for risks not covered by the Special Form insurance
               described in clause 9a(ii) above in an amount not less than the
               full insurable replacement value of such equipment.

          (iv) If the Land or any part thereof is located in a designated
               flood-hazardous area, flood insurance insuring the Building in an
               amount equal to the maximum limit of coverage made available with
               respect to the Premises under the Federal Flood Disaster
               Protection Act of 1973, as amended, and the regulations issued
               thereunder.

          (v)  Rent loss and rental value insurance insuring Landlord against
               loss of rental under this Lease in amount equal to at least the
               total Base Rent and Additional Rent payable hereunder for a
               period of 12 months.

          (vi) Worker's compensation and disability insurance with limits at
               least as great as required by law.

     b.   All property insurance policies shall name Landlord as the insured
          party. All liability insurance policies shall name both Landlord and
          Tenant as insured parties. If Landlord so elects, such policies shall
          also include the holders of any mortgages now or hereafter encumbering
          the Premises. In the event that the holder of such a mortgage is named
          as an insured under any of the foregoing property insurance policies,
          the proceeds under such policies shall be made payable to such
          mortgagee or mortgagees pursuant to standard mortgagee clauses. Each
          of the foregoing policies shall contain the agreement of the insurer
          that:

          (i)  Such policies shall not be cancelled except upon 30 days' prior
               notice to each named insured;

          (ii) The coverage afforded thereby shall not be affected by the
               performance of any work or alterations in or about the Premises;

         (iii) The insurer waives all rights of subrogation against all named
               insureds;

          (iv) The insurance provided to Landlord thereunder shall not be
               affected by any defense the insurer may have against Tenant or
               any other person; and


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          (v)  Such policies waive contribution from any other insurance carried
               by Tenant or any other person.

     c.   All policies required by this Section shall be carried in such
          companies and upon such forms as Landlord and Landlord's mortgagee
          from time to time approve. Evidence of the insurance required to be
          furnished hereunder shall be deposited with the Landlord prior to the
          commencement of the Lease Term, and renewals thereof, and evidence of
          the payment of premium to continue coverage in force shall all be
          deposited with Landlord not less than 30 days prior to the date on
          which such insurance would otherwise expire. Tenant shall provide
          copies of all policies and certificates of insurance to Landlord upon
          request. At Landlord's option, exercised in writing, in the event
          Tenant shall fail to provide such policies, Landlord may obtain such
          insurance and the entire cost thereof shall be due and payable as
          Additional Rent upon billing by Landlord.

     d.   Whenever appropriate, the property insurance required to be maintained
          during the Lease Term shall be endorsed or supplemented, at Tenant's
          sole cost and expense, during any period when alterations are in
          progress, to provide for builder's risk insurance written on a
          so-called completed value form. Workman's compensation insurance
          covering all persons employed in connection with the work and with
          respect to whom death or bodily injury claims could be asserted
          against Landlord, Tenant or the Premises, and comprehensive general
          public liability insurance, providing full coverage with respect to
          any accident, injury or occurrence involving, relating to, or arising
          during or as a result of such alteration, naming Landlord and Tenant
          as insureds, with limits of not less than those required for
          commercial general liability insurance hereunder, shall be maintained
          by Tenant (or Tenant's independent contractor) at Tenant's (or at such
          contractor's) sole cost and expense at all times when any work is in
          progress in connection with any such alteration.

     e.   Tenant shall likewise at Tenant's sole expense observe and comply with
          the requirements of all policies of public liability and property
          insurance, and all other policies of insurance at any time in force
          with respect to the Premises, and Tenant shall, in the event of any
          violation or any attempted violation of the provisions of this Article
          by any subtenant or occupant, take all required steps, immediately
          upon knowledge of such violation or attempted violation, to remedy or
          prevent the same, as the case may be.

     f.   Tenant, at its sole expense, shall obtain and maintain in effect
          insurance covering its personal property, including equipment,
          fixtures, furnishings and leasehold improvements (except for leasehold
          improvements which are deemed Landlord's property under this Lease and
          are insured as a part of the Building).

     g.   Tenant shall be responsible for payment of all retentions,
          deductibles, self-insured amounts, and other similar payments which
          are conditions precedent to payment by the insurer.

10.  PROTECTION OF COVERAGE. Tenant shall not do or permit to be done, or keep
     or permit to be kept on the Premises, anything that will contravene any
     insurance against loss by fire or other causes. Under no circumstances
     shall Tenant keep or permit to be kept; or do or permit to be done, in or
     about the Premises anything of a character so


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     hazardous as to render it difficult, impracticable or impossible to secure
     such insurance in companies acceptable to the Landlord. Further,
     immediately upon notice, Tenant shall remove from the Premises and/or
     desist from any practice deemed to affect the insurance risk by the
     insurance companies or by any authority which administers applicable
     national or local fire codes or standards.

11.  WAIVER OF SUBROGATION. Landlord and Tenant each hereby waives any and all
     rights of recovery against the other, its officers, partners, directors,
     officers, agents and employees, occurring on or arising out of the use and
     occupation of the Premises or the Building to the extent such loss or
     damage is covered by proceeds received from insurance required under this
     Lease to be carried by the other party. Landlord and Tenant shall each
     indemnify the other against any loss or expense, including reasonable
     attorneys' fees, resulting from the failure to obtain such waiver. This
     mutual waiver shall be in addition to, and not in limitation or derogation
     of, any other waiver or release contained in this Lease with respect to any
     loss of, or damage to, property of the parties hereto. Inasmuch as the
     above mutual waivers will preclude the assignment of any aforesaid claim by
     way of subrogation to an insurance company, Landlord and Tenant agree
     immediately to give to each insurance company providing a policy described
     in Section 9 of this Lease, written notice of the terms of said mutual
     waivers, and to have said insurance policies properly endorsed, if
     necessary, to prevent the invalidation of said insurance coverages by
     reason of said waivers. This Section shall not apply to workers'
     compensation insurance.

12.  FIRE AND CASUALTY. If all or any part of the Premises is damaged by fire,
     the elements or any other casualty, Tenant shall give immediate written
     notice thereof to Landlord.

     a.   Except as provided in this Section 12, if fire or other casualty
          renders the whole or any material part of the Premises untenantable
          and Landlord determines (in Landlord's reasonable discretion) that it
          can make the Premises tenantable within 180 days after the date of the
          casualty, then Landlord will notify Tenant that Landlord will repair
          and restore the Premises to as near their condition prior to the
          casualty as is reasonably possible within the 180-day period (subject
          to delays caused by Tenant or matters not within the reasonable
          control of Landlord). Landlord will provide the notice within 45 days
          after the date of the casualty. In such case, this Lease shall remain
          in full force and effect, but Base Rent for the period during which
          the Premises are untenantable shall abate proportionately.

     b.   If fire or other casualty renders the whole or any material part of
          the Premises untenantable and Landlord determines (in Landlord's
          reasonable discretion) that it cannot make the Premises tenantable
          within 180 days after the date of the casualty, then Landlord will so
          notify Tenant within 45 days after the date of the casualty and may,
          in such notice, terminate this Lease effective on the date of
          Landlord's notice.

     c.   If Landlord does not terminate this Lease as provided in this
          subsection, or if Landlord fails to notify Tenant of its election to
          rebuild or repair under Section 12a within 45 days after the casualty,
          Tenant may terminate this Lease by notifying Landlord within 60 days
          after the date of the casualty.


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     d.   Notwithstanding any contrary language in this Section 12, if this
          Section 12 obligates Landlord to repair damage to the Premises caused
          by fire or other casualty and Landlord does not receive sufficient
          insurance proceeds to repair all of the damage, or if Landlord's
          lender does not allow Landlord to use sufficient proceeds to repair
          all of the damage, then Landlord, at Landlord's option, by notifying
          Tenant within 90 days after the casualty, may terminate this Lease
          effective on the day of Landlord's notice.

     e.   If this Lease is not terminated under Sections 12.b. through 12.d.
          following a fire or other casualty, then Landlord will repair and
          restore the Premises to as near their condition prior to the fire or
          other casualty as is reasonably possible with all commercially
          reasonable diligence and speed (subject to delays caused by Tenant or
          matters not within the reasonable control of Landlord).

     f.   In the event such destruction or damage shall make the Premises
          uninhabitable, all Base Rent paid in advance shall be apportioned and
          rebated as of the date of the destruction or damage and the Base Rent
          thereafter accruing shall be equitably and proportionately suspended
          and adjusted according to the nature, extent and duration of the
          destruction or damage, pending completion of repairs, except that in
          the event the destruction or damage is so extensive as to make it
          unfeasible for Tenant to conduct its business on the Premises, Base
          Rent shall be completely abated until Tenant resumes the conduct of
          its business on the Premises or 30 days after the repairs are
          complete, whichever event first occurs. Such adjustment, suspension or
          abatement of Base Rent shall not extend beyond the period of coverage
          nor reduce the amount otherwise payable hereunder by more than the
          amount of the rent-loss and rental value insurance then in effect
          pursuant to Section 9 hereof, it being the intention that Landlord
          shall continue to receive full rental payments from Tenant or such
          insurer throughout the period of any such work. In no event shall
          Additional Rent be abated.

     g.   Landlord shall not be responsible for repairing or restoring Tenant's
          leasehold improvements, personal property, machinery or equipment.

13.  CONDEMNATION. If all or a substantial part of the Premises are taken for
     any public purpose or purchased under threat of such taking and the taking
     or purchase prevents or materially interferes with the Use of the Premises,
     this Lease shall terminate and the rent abate as of the date of taking for
     the remainder of the Lease Term. If part of the Building is so taken or
     purchased and this Lease is not terminated thereby, the rent payable from
     the date of taking for the remainder of the Lease Term shall be reduced
     proportionately. The entire award for the taking of the fee and leasehold
     shall belong to Landlord, but Landlord shall not be entitled to any award
     made to Tenant for Tenant's trade fixtures or for relocation and moving
     expenses.

14.  TAXES. Tenant shall pay before delinquency all taxes, assessments, license
     fees, and other charges levied, assessed or charged by any authority upon
     or on account of the Premises for any period all of which is within the
     Lease Term, and its pro-rata share of such taxes, assessments, license fees
     and charges for any period part of which is within the Lease Term. In any
     calendar year, the real estate taxes and special assessments for that year
     are deemed to be those due and payable in such year. Receipts for any
     taxes, assessments, license fees and charges paid shall be delivered to
     Landlord not


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     less than 30 days prior to their due date. However, Tenant shall have no
     responsibility to pay any tax upon the income, profit, or business of
     Landlord, or any franchise, inheritance or estate tax which may be levied
     against the estate or interest of Landlord, except to the extent the tax is
     levied in lieu of taxes, assessments, fees or charges upon or on account of
     the Premises.

15.  ASSIGNMENT.

     a.   Tenant shall not assign, sublease, mortgage, pledge or in any manner
          transfer the Premises or any part thereof or this Lease without the
          prior written consent of Landlord. If Tenant is a partnership,
          corporation or other legal entity, any change in the partnership
          interest, stock or legal or beneficial ownership of such partnership,
          corporation or other entity which changes the effective control of
          Tenant shall be deemed an assignment of this Lease for purposes of
          this Section.

     b.   Landlord is not restricted in its ability to sell or encumber the
          Land, the Building, or the Premises as a whole or to assign its
          interest in this Lease; provided, however, that any transferee shall
          take subject to, and must agree to be bound by, the terms of this
          Lease.

16.  ALTERATIONS BY TENANT. Tenant shall not make any alterations or
     improvements to the Premises costing more than $20,000 without the prior
     written approval of the Landlord, which consent shall not be unreasonably
     withheld or delayed. Landlord's approval may be conditioned on the Tenant's
     compliance with such requirements with respect to such alterations as
     Landlord may impose, including without limitation the furnishing of a bond
     or other security satisfactory to Landlord against mechanics' liens and
     claims therefore. Any such work approved by Landlord shall be done in a
     good, skillful manner in conformance with applicable building codes, free
     and clear of mechanics' liens and claims therefore. Any alterations and
     improvements shall unless otherwise agreed become the property of Landlord
     upon being affixed to the Premises and all right, title and interest of the
     Tenant therein shall immediately cease; but if directed by Landlord,
     Tenant, at its expense, shall remove any such alterations and improvements
     from the Premises at the expiration or earlier termination of this Lease,
     and repair any damage to the Premises caused by the installation or removal
     of such alterations and improvements.

17.  MECHANICS' LIENS. Tenant will not permit any mechanics', laborers' material
     supplier's or other liens to stand against the Premises or any part thereof
     for any labor, skill, material or equipment furnished or claimed to be
     furnished to or an account of Tenant in connection with any work in or
     about the Premises. Tenant shall give Landlord immediate notice of the
     filing of any such lien and shall cause the lien to be discharged within 10
     days of its filing.

18.  SURRENDER. Upon expiration or earlier termination of this Lease, Tenant
     shall peaceably surrender the Premises broom-clean, in good condition and
     repair, reasonable wear and tear excepted. Tenant shall, at its expense,
     remove all leasehold improvements, trade fixtures, personal property,
     equipment and signs owned by Tenant from the Premises. Any property not
     removed on or before the expiration or termination of this Lease shall be
     deemed to have been abandoned. Any damage to the Premises


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     caused in the removal of such items shall be repaired by and/or at the
     expense of Tenant.

19.  DEFAULT OF TENANT AND REMEDIES.

     a.   EVENTS OF DEFAULT AND REMEDIES. If Tenant fails to pay any Rent,
          Additional Rent, or other monies when due hereunder or within 10 days
          after notice from Landlord to perform any other of the terms,
          covenants, conditions or obligations of this Lease to be performed by
          Tenant, or if Tenant abandons or vacates the Premises, or if any
          proceeding is commenced by Tenant for the purpose of subjecting the
          assets of Tenant to any law relating to bankruptcy or insolvency or
          for an appointment of a receiver of Tenant or any of Tenant's assets,
          or if any such proceeding commenced against Tenant is not discharged
          within 60 days thereafter, or if Tenant makes a general assignment of
          Tenant's assets for the benefit of creditors, then in any such event,
          Tenant shall be in default hereunder and Landlord may at its option,
          in addition to any other rights and remedies it may have hereunder or
          at law or in equity or by statute or otherwise, terminate this Lease
          as to all future rights of Tenant, and/or regain, repossess and enjoy
          the Premises. If Landlord at any times terminates this Lease or
          regains and repossesses the Premises for any such default, in addition
          to any other remedies Landlord may have, Landlord may recover from
          Tenant, and Tenant shall indemnify Landlord against, all loss of rents
          and other damages Landlord may incur by reason of such default,
          including the cost of recovering and reletting the Premises, and
          reasonable attorneys' fees.

     b.   RIGHT OF LANDLORD TO CURE DEFAULT OF TENANT. Landlord may, at its
          option, instead of exercising any other rights or remedies available
          to it under this Lease or otherwise, enter into the Premises and
          perform such acts or spend such sums of money as is reasonably
          necessary to cure any default of Tenant herein, and the amount spent
          and cost incurred, including reasonable attorneys' fees, in curing
          such default shall be paid by Tenant as additional rent upon demand.

     c.   LEGAL AND OTHER EXPENSES. If suit is successfully brought for recovery
          of possession of the Premises, for the recovery of rent or any other
          amount due under the provisions of this Lease, or because of the
          breach of any other covenant herein contained on the part of Tenant to
          be kept or performed, Tenant shall pay Landlord all expenses incurred
          therefore, including reasonable attorneys' fees.

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

     e.   OVERDUE PAYMENTS. All rents and other amounts due under this Lease
          from Tenant to Landlord shall be due on demand, unless otherwise
          specified, and if not paid within 10 days after the date when due,
          shall bear interest from the date when due at the rate of 4% per annum
          in excess of the then-current prime rate of interest as published in
          The Wall Street Journal (or, if such periodical no longer exists or no
          longer publishes the prime rate, a comparable rate designated by
          Landlord), or the highest rate permitted by law, whichever is less,
          until paid in full.


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20.  SUBORDINATION. Tenant agrees that this Lease shall be subordinate to any
     mortgage which may now or hereafter encumber the Premises and to any and
     all advances to be made thereunder and to the interest thereon and all
     renewals, replacements, and extensions thereof, and shall also be
     subordinate to all existing recorded restrictions, covenants, easements and
     agreements with respect to the Premises. Landlord is hereby irrevocably
     vested with full power and authority to subordinate Tenant's interest under
     this Lease to any mortgage lien hereafter placed on the Premises, and
     Tenant agrees upon demand to execute additional instruments subordinating
     this Lease as Landlord may reasonably require. If the interests of Landlord
     under this Lease shall be transferred by reason of foreclosure or other
     proceedings for enforcement or termination of any first mortgage on the
     Premises, Tenant shall be bound to the transferee (sometimes called the
     "Purchaser") under the terms, covenants and conditions of this Lease for
     the balance of the remaining Lease Term, including any extensions or
     renewals, with the same force and effect as if the Purchaser were the
     landlord under this Lease, and, if requested by the Purchaser, Tenant
     agrees to attorn to the Purchaser, including the mortgagee under any such
     mortgage if it be the Purchaser, as its Landlord.

21.  ACKNOWLEDGMENT. Tenant shall, within 10 days after receipt of any request
     from Landlord therefor, execute and deliver to Landlord, or to any holder
     or proposed holder of a security interest in the Premises or to any
     proposed purchaser of the Premises, a certificate in recordable form,
     certifying that this Lease is in full force and effect and that there are
     no offsets against rent nor defenses to performance of Tenant under this
     Lease, or setting forth any such offsets or defenses claimed by Tenant, as
     the case may be, and as to such other matters as is reasonably requested.
     Tenant shall make no charge for executing and delivering such certificate.

22.  HOLDING OVER. If Tenant remains in possession of the Premises after the
     expiration or termination of this Lease, Tenant shall be deemed to be
     occupying the Premises as a tenant at its sufferance, subject to all the
     conditions, provisions and obligations of this Lease insofar as the same
     can be applicable; provided, however, that the Base Rent required to be
     paid by Tenant during any holdover period shall be twice the amount of the
     Base Rent set forth above. No unauthorized holding over shall operate to
     renew or extend this Lease and Tenant shall indemnify Landlord against all
     claims for damages of any kind resulting from the holdover.

23.  NOTICES. Any notice required or permitted under this Lease shall be deemed
     sufficiently given or served if sent by registered or certified mail,
     return receipt requested, postage prepaid, to Tenant at the Premises and to
     Landlord at the Rent Payment Address, and either party may be written
     notice at any time designate a different address to which notices shall
     subsequently be sent. Such notices shall be deemed received by the party to
     whom they are sent on the third day following the date of delivery to the
     United States Postal Service.

24.  ENTRY BY LANDLORD. Landlord and any authorized representatives of Landlord
     may enter the Premises at any time during usual business hours upon
     reasonable notice or any time in case of emergency to inspect the same, to
     make any repairs or perform any work deemed necessary or desirable by
     Landlord. During the progress of any such work, Landlord may keep and store
     upon the Premises all necessary materials, tools and equipment. Landlord
     and any authorized representative of Landlord may also enter the Premises
     at any time during usual business hours to show the Premises to prospective
     purchasers or mortgagees, and may erect on the Premises suitable signs


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<PAGE>
     indicating the Premises are available for sale. Landlord shall not
     interfere with Tenant's operations in the Premises any more than reasonably
     necessary under the circumstances, but shall not in any event be liable for
     inconvenience, annoyance, disturbance, loss of business or other damage to
     the Tenant.

25.  SUCCESSORS AND ASSIGNS. The terms, covenants and conditions hereof are
     binding upon and inure to the benefit of Landlord and its successors and
     assigns, and are binding upon and inure to the benefit of Tenant and any of
     its successors and assigns as may be approved by Landlord or otherwise
     permitted under this Lease.

26.  ENVIRONMENTAL MATTERS. Tenant agrees that Tenant, its agents and
     contractors shall not use, manufacture, store or dispose of any flammable
     explosives, radioactive materials, hazardous wastes or materials, toxic
     wastes or materials, polychlorinated biphenyls, asbestos, urea
     formaldehyde, petroleum products or related substances, or other similar
     substances as defined pursuant to the Comprehensive Environmental Response,
     Compensation and Liability Act of 1980 ("CERCLA"), 42 U.S.C. Statute
     Section 9601-9657, as amended), the Resource Conservation and Recovery Act
     of 1976 ("RCRA"), 42 U.S.C. Statute Section 6901, et. seq., Federal Water
     Pollution Control Act, 33 U.S.C. Statute Section 1251 et. seq., or the
     Clean Air Act, 42 U.S.C. Statute 7401 Et. Seq., Minnesota Environmental
     Response and Liability Act Minn. Stat. 115B ("MERLA") and the Minnesota
     Petroleum Tank Release Cleanup Act, Minn. Stat. 115C (collectively
     "Hazardous Materials") on, under or about the Premises, provided that
     Tenant may handle, store, use or dispose of products containing small
     quantities of Hazardous Materials, which products are of a type customarily
     found in businesses similar to that of Tenant, provided further that Tenant
     shall handle, store, use and dispose of any such Hazardous Materials in a
     safe and lawful manner and shall not allow such Hazardous Materials to
     contaminate the Premises or the environment.

     If Landlord, in its sole discretion, believes that the Premises or the
     environment have become contaminated with Hazardous Materials, in breach of
     the provisions of this Lease, Landlord, in addition to its other rights
     under this Lease, may enter upon the Premises and obtain samples from the
     Premises, including the soil and groundwater under the building, for the
     purposes of analyzing the same to determine whether and to what extent the
     Premises or the environment have become so contaminated, Tenant shall
     reimburse Landlord for the costs of such inspection, sampling and analysis.

     Without limiting the above, Tenant hereby indemnifies and holds Landlord
     harmless from and against any and all claims, losses, liabilities, damages,
     costs and expenses, including without limitation, attorneys' fees and
     costs, arising out of or in any way connected with the use, manufacture,
     storage, or disposal of Hazardous Materials by Tenant, its agents or
     contractors on, under or about the Premises including, without limitation,
     the cost of any required or necessary repair, cleanup or remediation and
     the preparation of any closure or other required plans in connection
     herewith. The indemnity obligations to Tenant under this clause shall
     survive any termination or expiration of this Lease.

27.  DOCUMENT PREPARATION. Members of the firm of Moss & Barnett, A Professional
     Association ("Moss & Barnett"), drafted this Lease among the parties hereto
     and other agreements related to the ownership of Landlord and Tenant. Moss
     & Barnett has previously and currently represents Landlord and Tenant, the
     partners of Landlord ("Owners"), and may represent Landlord, Tenant and one
     or more of the Owners in the


                                       11
<PAGE>
     future. The parties acknowledge and understand that this past and present
     legal representation by Moss & Barnett of such persons represents a
     potential or actual conflict of interest on the part of Moss & Barnett in
     drafting this Lease and any other documents or agreements arising out of
     this Lease. Owners, Landlord and Tenant consent to such representation and
     acknowledge and agree that they have either sought out separate legal
     counsel to advise them in connection with the Lease, or if they have not
     done so, have been given the opportunity to do so and have voluntarily
     chosen not to do so. The parties, by executing this Lease and with full
     knowledge of the past, present and future legal representation by Moss &
     Barnett of the persons and entities described herein, hereby consent to the
     drafting of the Lease by Moss & Barnett and waive (a) the right to object
     to Moss & Barnett's continued representation of the Owners, Landlord and/or
     Tenant, and (b) the right to assert this conflict or potential conflict of
     interest as the basis for making a claim against the other parties to this
     Lease, their affiliates or Moss & Barnett.

28.  GENERAL.

     a.   No waiver of any default hereunder shall be implied from any failure
          by the non-defaulting party to take action on account of such default
          if such default persists or is repeated, and no express waiver shall
          affect any default other than the default specified in the express
          waiver and that only for the time and to the extent therein stated.
          One or more waivers by Landlord or Tenant shall not be construed as a
          waiver of a subsequent breach of the same covenant, term or condition.

     b.   This Lease and the Exhibits identified above, attached to and forming
          a part of this Lease, set forth all the covenants, promises,
          agreements, conditions and understandings between Landlord and Tenant
          affecting the Premises and there are no covenants, promises,
          agreements, conditions or understandings, either oral or written,
          between them other than are herein set forth.

     c.   The singular of all terms used herein shall include the plural, the
          plural s hall include the singular, and the use of any gender herein
          shall include all other genders, where the context so requires.

     d.   Tenant agrees to indemnify and hold harmless Landlord from all claims
          by any broker or agent of Tenant for compensation, commissions or
          charges arising out of this Lease or the negotiation of it. Landlord
          agrees to indemnify and hold harmless Tenant from all claims by any
          broker or agent of Landlord for compensation, commissions or charges
          arising out of this Lease or the negotiation of it.

     e.   Landlord and Tenant disclaim any intention to create a joint venture,
          partnership, or agency relationship.

     f.   This Lease is a Minnesota contract and all of its terms shall be
          construed according to the laws of Minnesota. Time is of the essence
          of each obligation of this Lease in which time is a factor.

     g.   Landlord and its partners, officers, agents and employees shall have
          no personal liability as to any of the obligations of Landlord under
          this Lease. Tenant agrees


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<PAGE>
          to look solely to the estate and property of Landlord in the Premises
          for the collection of any judgment or other judicial proceeding
          requiring the payment of money by Landlord, and no other property or
          asset shall be subject to levy, execution or other procedure for
          satisfaction of Tenant's remedies.

     IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Lease as of
the Lease Date set forth above.


                               LANDLORD:

                               JAIN-OLSEN PROPERTIES,
                               a Minnesota limited liability general partnership


                               By___/s/ Anil Jain___________

                                 ---------------------------
                                 Its Managing General Partner


                               TENANT:

                               APA OPTICS, INC.,
                               a Minnesota corporation


                               By ___/s/ Anil Jain__________
                                 Anil K. Jain
                                 Its President


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<PAGE>
                                                                      SCHEDULE A
                                                                      ----------

                           Option to Purchase Premises
                           ---------------------------

Right to Purchase
-----------------

Tenant or its assigns may purchase the Premises by delivering to Landlord its
written notice of its exercise within the Lease Term, provided that at the time
of closing of the purchase Tenant must cure all monetary defaults (if any) under
the Lease.  If Tenant exercises its option to purchase the Premises within the
last ninety (90) days of the Lease Term, and a closing on the purchase is not
held before the Lease Term has expired, then Tenant will be allowed to stay in
possession of the Premises pursuant to the terms and conditions of the Lease
until closing on the purchase of the Premises.

Purchase Price
--------------

If Tenant exercises its option to purchase the Premises, Landlord and Tenant
shall attempt to agree upon a purchase price for the Premises.  If they are
unable to agree within 30 days after the date of written notice of exercise of
the option, each party hereto shall appoint one appraiser not more than 20 days
after the expiration of said 30 day period.  The two appraisers shall, within 10
days after such 20 day period, appoint a third appraiser.  Within 20 days after
the appointment of the third appraiser, the three appraisers shall execute in
duplicate a report stating the fair market value of the Premises.  The report of
the three appraisers shall be conclusive upon the parties, and in the event the
three appraisers cannot agree, the report of the majority shall be conclusive
upon the parties.  In the event the third appraiser is not appointed within the
time allowed, either party may apply to the Senior Judge of the Ramsey County
District Court, and such judge shall appoint the third appraiser within 10 days
after application is made.  In the event the appraisers are unable to formulate
a majority opinion within the time herein specified, either party may make
application to the Senior Judge of the Ramsey County District Court and such
judge shall prepare a report after taking such evidence as he deems necessary
and proper, and in such event, the report of such judge shall be conclusive upon
the parties.  Each appraiser appointed shall be a M.A.I. appraiser and shall,
before entering upon the performance of his duties, take an oath to honestly,
fairly and impartially perform his duties as an appraiser and shall subscribe
this oath before an officer then authorized by the laws of the State of
Minnesota to administer oaths.  The costs and fees of the single appraiser
appointed by each party shall be paid by such party, but the fee of the third
appraiser shall be paid equally by Landlord and Tenant.  If either party makes
application to the Senior Judge of Ramsey County District Court either to
appoint a third appraiser or to make an appraiser's report, Landlord and Tenant
shall share the expense of such application.

The parties may agree to use only one or two appraisers, rather than three, and
to allocate the costs among themselves as they deem appropriate.

In setting the purchase price, the parties shall disregard any decreases in
value due to Tenant's defaults under the Lease (including, without limitation,
conditions of disrepair) and any increases in value attributable to improvements
by Tenant which are not required by the Lease.

The purchase price, as determined by negotiation or by the appraisal report,
shall be paid in cash upon delivery of a proper Warranty Deed to the Premises.


<PAGE>
Title
-----

Within a reasonable time after receipt of notice of exercise of the option,
Landlord shall furnish Tenant with an Abstract of Title or Registered Property
Abstract with proper searches to all lands included in the Premises.  Tenant
shall be allowed 30 days after receipt of the Abstract for examination of and
objection to title.  Objections shall be made in writing or deemed to be waived.
If any objections are made, Landlord shall be allowed 120 days to make the title
marketable.  All required performance of Tenant under any purchase agreement for
the Premises (a "PA") shall be suspended pending correction of title, but upon
correction of title and within 20 days after written notice to Tenant, Tenant
shall perform the PA according to its terms.

If title is not marketable and is not made so within 120 days from the date of
written objections, any PA resulting from the exercise of this option shall, at
the option of Tenant, be null and void.  In such event, neither party shall be
liable for damages to the other party under the PA.  Tenant shall exercise its
option to declare the PA null and void by delivering to Landlord a written
notice to such effect within 10 days after the expiration of the 120-day cure
period.  If Tenant fails to deliver such a notice, the transaction shall proceed
to closing as if there had been no title objections.

If title to said property is marketable or is made marketable within 120 days
from the date of written objections, or if Tenant fails to declare the PA null
and void, and Tenant then defaults in its agreement to pay the purchase price
and continues in default for a period of 20 days after notice from Landlord to
close, then Landlord may declare the exercise of the option null and void, time
being of the essence hereof, and may retain all monies paid in the exercise of
such option; but this provision shall not deprive either party of the right of
enforcing specific performance, provided that such action for specific
performance shall be commenced within six months after such right of action
arises.

Closing
-------

Subject to performance by Tenant, Landlord agrees to execute and deliver a
Warranty Deed conveying marketable title to the Premises, subject only to the
following exceptions:

(a)  Governmental building and zoning laws and ordinances and state and federal
     regulations;

(b)  Rights of subtenants of Tenant, its successors and assigns;

(c)  Streets and highway rights-of-way as they now exist or may then exist;

(d)  Real estate taxes, special assessments or installments thereof which are
     due and payable following the date of sale;

(e)  Liens or encumbrances suffered or caused to be suffered by or through
     Tenant;

(f)  Reservation of any minerals or mineral rights to the State of Minnesota;
     and

(g)  Utility and drainage easements of record.

The closing shall be within 120 days of the determination of the purchase price,
unless the closing is extended because of title defects.  All rents accruing to
the Premises prior to closing


                                        2
<PAGE>
shall be paid to Landlord until such time as the full purchase price (less
amounts deposited in escrow, if any, for title defects) has been paid to
Landlord and Landlord has delivered the Warranty Deed. The parties further agree
that pro rata adjustments for rents, insurance premiums and other matters shall
be made as of the date of delivery of the Warranty Deed.

Revocation
----------

The parties hereto hereby agree that, notwithstanding anything contained in the
Lease to the contrary, Tenant shall have the right at its option to unilaterally
revoke its exercise of the option to purchase the Premises at any time prior to
determination of the purchase price or within 120 days after determination of
the purchase price, but only if the purchase price is determined by the
appraisal method provided above.  Notice of revocation shall be given to
Landlord in writing within the period of time specified in the preceding
sentence.


                                        3
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