Document:

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                                                                    EXHIBIT 10.8

         This LOAN AND SECURITY AGREEMENT is entered into as of June 28, 1999,
by and between SILICON VALLEY BANK ("Bank") and ILX LIGHTWAVE CORPORATION
("Borrower").

                                    RECITALS

         Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower and Borrower will repay the amounts
owing to Bank.

                                    AGREEMENT

         The parties agree as follows:

         1.     DEFINITIONS AND CONSTRUCTION

                1.1    Definitions. As used in this Agreement, the following
terms shall have the following definitions:

                       "Accounts" means all presently existing and hereafter
arising accounts, contract rights, and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods (including, without
limitation, the licensing of software and other technology) or the rendering of
services by Borrower, whether or not earned by performance, and any and all
credit insurance, guaranties, and other security therefor, as well as all
merchandise returned to or reclaimed by Borrower and Borrower's Books relating
to any of the foregoing.

                       "Advance" or "Advances" means a cash advance under the
Revolving Facility.

                       "Affiliate" means, with respect to any Person, any Person
that owns or controls directly or indirectly such Person, any Person that
controls or is controlled by or is under common control with such Person, and
each of such Person's senior executive officers, directors, and partners.

                       "Bank Expenses" means all reasonable costs or expenses
(including reasonable attorneys' fees and expenses) incurred in connection with
the preparation, negotiation, administration, and enforcement of the Loan
Documents; reasonable Collateral audit fees; and Bank's reasonable attorneys'
fees and expenses incurred in amending, enforcing or defending the Loan
Documents (including fees and expenses of appeal), incurred before, during and
after an Insolvency Proceeding, whether or not suit is brought.

                       "Borrower's Books" means all of Borrower's books and
records including: ledgers; records concerning Borrower's assets or liabilities,
the Collateral, business operations or financial condition; and all computer
programs, or tape files, and the equipment, containing such information.

                       "Borrowing Base" means an amount equal to eighty percent
(80%) of Eligible Accounts, as determined by Bank with reference to the most
recent Borrowing Base Certificate delivered by Borrower, provided that,
notwithstanding the foregoing, until such time as an initial audit is completed
by Bank, the results of which are satisfactory to Bank, pursuant to Section 6.3,
"Borrowing Base" shall mean an amount equal to fifty percent (50%) of Eligible
Accounts, as determined by Bank with reference to the most recent Borrowing Base
Certificate delivered by Borrower.

                       "Business Day" means any day that is not a Saturday,
Sunday, or other day on which banks in the State of California or the State of
Colorado are authorized or required to close.

                       "Closing Date" means the date of this Agreement.

                       "Code" means the California Uniform Commercial Code.

                       "Collateral" means the property described on Exhibit A
attached hereto.

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                "Committed Revolving Line" means a credit extension of up to One
Million Five Hundred Thousand Dollars ($1,500,000).

                "Contingent Obligation" means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to (i) any indebtedness, lease, dividend, letter of credit or other
obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed, co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable; (ii) any obligations with respect to undrawn
letters of credit issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; provided, however,
that the term "Contingent Obligation" shall not include endorsements for
collection or deposit in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determined amount of the primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by such Person in good
faith; provided, however, that such amount shall not in any event exceed the
maximum amount of the obligations under the guarantee or other support
arrangement.

                "Copyrights" means any and all copyright rights, copyright
applications, copyright registrations and like protections in each work or
authorship and derivative work thereof, whether published or unpublished and
whether or not the same also constitutes a trade secret, now or hereafter
existing, created, acquired or held.

                "Credit Extension" means each Advance or any other extension of
credit by Bank for the benefit of Borrower hereunder.

                "Current Liabilities" means, as of any applicable date, all
amounts that should, in accordance with GAAP, be included as current liabilities
on the consolidated balance sheet of Borrower and its Subsidiaries, as at such
date, plus, to the extent not already included therein, all outstanding Advances
made under this Agreement, including all Indebtedness that is payable upon
demand or within one year from the date of determination thereof unless such
Indebtedness is renewable or extendible at the option of Borrower or any
Subsidiary to a date more than one year from the date of determination.

                "Daily Balance" means the amount of the Obligations owed at the
end of a given day.

                "Eligible Accounts" means those Accounts that arise in the
ordinary course of Borrower's business that comply with all of Borrower's
representations and warranties to Bank set forth in Section 5.4; provided, that
standards of eligibility may be fixed and revised from time to time by Bank as a
consequence of any Collateral audits done pursuant to Section 6.3 in Bank's
reasonable judgment and upon notification thereof to Borrower in accordance with
the provisions hereof. Unless otherwise agreed to by Bank, Eligible Accounts
shall not include the following:

                (a) Accounts that the account debtor has failed to pay within
ninety (90) days of invoice date;

                (b) Accounts with respect to an account debtor, fifty percent
(50%) of whose Accounts the account debtor has failed to pay within ninety (90)
days of invoice date;

                (c) Accounts with respect to which the account debtor is an
officer, employee, or agent of Borrower;

                (d) Accounts with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, bill and hold,
or other terms by reason of which the payment by the account debtor may be
conditional;

                (e) Accounts with respect to which the account debtor is an
Affiliate of Borrower;

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                (f) Accounts with respect to which the account debtor does not
have its principal place of business in the United States, except for Eligible
Foreign Accounts;

                (g) Accounts with respect to which the account debtor is the
United States or any department, agency, or instrumentality of the United
States;

                (h) Accounts with respect to which Borrower is liable to the
account debtor for goods sold or services rendered by the account debtor to
Borrower, but only to the extent of any amounts owing to the account debtor
against amounts owed to Borrower;

                (i) Accounts with respect to an account debtor, including
Subsidiaries and Affiliates, whose total obligations to Borrower exceed
twenty-five percent (25%) of all Accounts, to the extent such obligations exceed
the aforementioned percentage (the "Concentration Limit"), except as approved in
writing by Bank, provided that the Concentration Limit for each of Lucent
Technologies or Corning shall be thirty-five percent (35%) of all Accounts;

                (j) Accounts with respect to which the account debtor disputes
liability or makes any claim with respect thereto as to which Bank believes, in
its sole discretion, that there may be a basis for dispute (but only to the
extent of the amount subject to such dispute or claim), or is subject to any
Insolvency Proceeding, or becomes insolvent, or goes out of business; and

                (k) Accounts the collection of which Bank reasonably determines
to be doubtful.

                "Eligible Foreign Accounts" means Accounts with respect to which
the account debtor does not have its principal place of business in the United
States and that (i) are supported by one or more letters of credit in an amount
and of a tenor, and issued by a financial institution, acceptable to Bank, (ii)
that Bank approves on a case-by-case basis, or (iii) Accounts with respect to
which Corning, Marconi Communications, or Siemens are the account debtors
provided that the aggregate value of such accounts shall not exceed Two Hundred
Thousand Dollars ($200,000) at any given time.

                "Equipment" means all present and future machinery, equipment,
tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments
in which Borrower has any interest.

                "ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the regulations thereunder.

                "Event of Default" has the meaning assigned in Article 8.

                "GAAP" means generally accepted accounting principles as in
effect from time to time.

                "Indebtedness" means (a) all indebtedness for borrowed money or
the deferred purchase price of property or services, including without
limitation reimbursement and other obligations with respect to surety bonds and
letters of credit, (b) all obligations evidenced by notes, bonds, debentures or
similar instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.

                "Insolvency Proceeding" means any proceeding commenced by or
against any person or entity under any provision of the United States Bankruptcy
Code, as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extension generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.

                "Intellectual Property Collateral" means:

                (l) Copyrights, Trademarks and Patents;

                (m) Any and all trade secrets, and any and all intellectual
property rights in computer software and computer software products now or
hereafter existing, created, acquired or held;

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                (n) Any and all design rights which may be available to Borrower
now or hereafter existing, created, acquired or held;

                (o) Any and all claims for damages by way of past, present and
future infringement of any of the rights included above, with the right, but not
the obligation, to sue for and collect such damages for said use or infringement
of the intellectual property rights identified above;

                (p) All licenses or other rights to use any of the Copyrights,
Patents or Trademarks, and all license fees and royalties arising from such use
to the extent permitted by such license or rights;

                (q) All amendments, renewals and extensions of any of the
Copyrights, Trademarks or Patents; and

                (r) All proceeds and products of the foregoing, including
without limitation all payments under insurance or any indemnity or warranty
payable in respect of any of the foregoing.

                "Inventory" means all present and future inventory in which
Borrower has any interest, including merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process and finished products
intended for sale or lease or to be furnished under a contract of service, of
every kind and description now or at any time hereafter owned by or in the
custody or possession, actual or constructive, of Borrower, including such
inventory as is temporarily out of its custody or possession or in transit and
including any returns upon any accounts or other proceeds, including insurance
proceeds, resulting from the sale or disposition of any of the foregoing and any
documents of title representing any of the above, and Borrower's Books relating
to any of the foregoing.

                "Investment" means any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.

                "IRC" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder. "Lien" means any mortgage, lien, deed of trust,
charge, pledge, security interest or other encumbrance.

                "Loan Documents" means, collectively, this Agreement, any note
or notes executed by Borrower, and any other agreement entered into between
Borrower and Bank in connection with this Agreement, all as amended or extended
from time to time.

                "Material Adverse Effect" means a material adverse effect on (i)
the business operations or condition (financial or otherwise) of Borrower and
its Subsidiaries taken as a whole or (ii) the ability of Borrower to repay the
Obligations or otherwise perform its obligations under the Loan Documents.

                "Negotiable Collateral" means all of Borrower's present and
future letters of credit of which it is a beneficiary, notes, drafts,
instruments, securities, documents of title, and chattel paper, and Borrower's
Books relating to any of the foregoing.

                "Obligations" means all debt, principal, interest, Bank Expenses
and other amounts owed to Bank by Borrower pursuant to this Agreement or any
other agreement, whether absolute or contingent, due or to become due, now
existing or hereafter arising, including any interest that accrues after the
commencement of an Insolvency Proceeding and including any debt, liability, or
obligation owing from Borrower to others that Bank may have obtained by
assignment or otherwise.

                "Patents" means all patents, patent applications and like
protections including without limitation improvements, divisions, continuations,
renewals, reissues, extensions and continuations-in-part of the same.

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                "Periodic Payments" means all installments or similar recurring
payments that Borrower may now or hereafter become obligated to pay to Bank
pursuant to the terms and provisions of any instrument, or agreement now or
hereafter in existence between Borrower and Bank.

                "Permitted Indebtedness" means:

                (a) Indebtedness of Borrower in favor of Bank arising under this
Agreement or any other Loan Document;

                (b) Indebtedness existing on the Closing Date and disclosed in
the Schedule;

                (c) Indebtedness secured by a lien described in clause (c) of
the defined term "Permitted Liens," provided such Indebtedness does not exceed
the lesser of the cost or fair market value of the equipment financed with such
Indebtedness; and

                (d) Subordinated Debt.

                "Permitted Investment" means:

                (a) Investments existing on the Closing Date disclosed in the
Schedule; and

                (b) (i) marketable direct obligations issued or unconditionally
guaranteed by the United States of America or any agency or any State thereof
maturing within one (1) year from the date of acquisition thereof, (ii)
commercial paper maturing no more than one (1) year from the date of creation
thereof and currently having the highest rating obtainable from either Standard
& Poor's Corporation or Moody's Investors Service, Inc., (iii) certificates of
deposit maturing no more than one (1) year from the date of investment therein
issued by Bank, (iv) Bank's money market accounts, and (v) any Investments
permitted by Borrower's investment policy, provided that such investment policy
has been approved by Borrower's board of directors and by Bank.

                "Permitted Liens" means the following:

                (a) Any Liens existing on the Closing Date and disclosed in the
Schedule or arising under this Agreement or the other Loan Documents;

                (b) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings, provided the same have no priority over any of Bank's
security interests;

                (c) Liens (i) upon or in any equipment, acquired or held by
Borrower or any of its Subsidiaries to secure the purchase price of such
equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such equipment in the ordinary course of business, or (ii)
existing on such equipment at the time of its acquisition in the ordinary course
of business, provided that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such equipment; and

                (d) Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by Liens of the type described in
clauses (a) through (c) above, provided that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase.

                "Person" means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.

                "Prime Rate" means the variable rate of interest, per annum,
most recently announced by Bank, as its "prime rate," whether or not such
announced rate is the lowest rate available from Bank.

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                "Quick Assets" means, at any date as of which the amount thereof
shall be determined, the unrestricted cash and cash-equivalents, accounts
receivable and investments with maturities not to exceed twelve months, of
Borrower determined in accordance with GAAP.

                "Responsible Officer" means each of the Chief Executive Officer,
the Chief Operating Officer, the Chief Financial Officer and the Controller of
Borrower.

                "Revolving Facility" means the facility under which Borrower may
request Bank to issue Advances, as specified in Section 2.1 hereof.

                "Revolving Maturity Date" means June 27, 2000.

                "Schedule" means the schedule of exceptions attached hereto, if
any.

                "Subordinated Debt" means any debt incurred by Borrower that is
subordinated to the debt owing by Borrower to Bank on terms reasonably
acceptable to Bank (and identified as being such by Borrower and Bank).

                "Subsidiary" means any corporation or partnership in which (i)
any general partnership interest or (ii) more than 50% of the stock of which by
the terms thereof ordinary voting power to elect the Board of Directors,
managers or trustees of the entity, at the time as of which any determination is
being made, is owned by Borrower, either directly or through an Affiliate.

                "Tangible Net Worth" means at any date as of which the amount
thereof shall be determined, the sum of the capital stock and additional paid-in
capital plus retained earnings (or minus accumulated deficit) of Borrower and
its Subsidiaries minus intangible assets, plus Subordinated Debt, on a
consolidated basis determined in accordance with GAAP.

                "Total Liabilities" means at any date as of which the amount
thereof shall be determined, all obligations that should, in accordance with
GAAP be classified as liabilities on the consolidated balance sheet of Borrower,
including in any event all Indebtedness.

                "Trademarks" means any trademark and servicemark rights, whether
registered or not, applications to register and registrations of the same and
like protections, and the entire goodwill of the business of Borrower connected
with and symbolized by such trademarks.

            1.2 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP and all calculations
made hereunder shall be made in accordance with GAAP. When used herein, the
terms "financial statements" shall include the notes and schedules thereto.

     2.     LOAN AND TERMS OF PAYMENT

            2.1 Credit Extensions. Borrower promises to pay to the order of
Bank, in lawful money of the United States of America, the aggregate unpaid
principal amount of all Credit Extensions made by Bank to Borrower hereunder.
Borrower shall also pay interest on the unpaid principal amount of such Credit
Extensions at rates in accordance with the terms hereof.

                2.1.1 Revolving Advances.

                (a)   Subject to and upon the terms and conditions of this
Agreement, Borrower may request Advances in an aggregate outstanding amount not
to exceed the lesser of (i) the Committed Revolving Line or (ii) the Borrowing
Base. Subject to the terms and conditions of this Agreement, amounts borrowed
pursuant to this Section 2.1.1 may be repaid and reborrowed at any time prior to
the Revolving Maturity Date, at which time all Advances under this Section 2.1.1
shall be immediately due and payable. Borrower may prepay any Advances without
penalty or premium.

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                (b) Procedures. Whenever Borrower desires an Advance, Borrower
will notify Bank by facsimile transmission or telephone no later than 4:00 p.m.
Colorado time, on the Business Day that the Advance is to be made. Each such
notification shall be promptly confirmed by a Payment/Advance Form in
substantially the form of Exhibit B hereto. Bank is authorized to make Advances
under this Agreement, based upon instructions received from a Responsible
Officer or a designee of a Responsible Officer, or without instructions if in
Bank's discretion such Advances are necessary to meet Obligations which have
become due and remain unpaid. Bank shall be entitled to rely on any telephonic
notice given by a person who Bank reasonably believes to be a Responsible
Officer or a designee thereof, and Borrower shall indemnify and hold Bank
harmless for any damages or loss suffered by Bank as a result of such reliance.
Bank will credit the amount of Advances made under this Section 2.1.1 to
Borrower's deposit account.

            2.2 Overadvances. If at any time the aggregate amount of all
outstanding Advances exceeds the lesser of (i) the Borrowing Base or (ii) the
Committed Revolving Line, Borrower shall immediately pay to Bank, in cash, the
amount of such excess.

            2.3 Interest Rates, Payments, and Calculations.

                (a) Interest Rates.

                    (i)   Advances. Except as set forth in Section 2.3((b)), the
Advances shall bear interest, on the outstanding daily balance thereof, at a
rate equal to the Prime Rate plus one percent (1.0%).

                (b) Late Fee; Default Rate. If any payment is not made within
ten (10) days after the date such payment is due, Borrower shall pay Bank a late
fee equal to the lesser of (i) five percent (5%) of the amount of such unpaid
amount or (ii) the maximum amount permitted to be charged under applicable law.
All Obligations shall bear interest, from and after the occurrence and during
the continuance of an Event of Default, at a rate equal to five (5) percentage
points above the interest rate applicable immediately prior to the occurrence of
the Event of Default.

                (c) Payments. Interest hereunder shall be due and payable on the
eighteenth (18th) calendar day of each month during the term hereof. Borrower
hereby authorizes Bank to debit any accounts with Bank, including, without
limitation, Account Number 3300128757 for payments of principal and interest due
on the Obligations and any other amounts owing by Borrower to Bank. Bank will
notify Borrower of all debits which Bank has made against Borrower's accounts.
Bank shall, at its option, charge such interest, all Bank Expenses, and all
Periodic Payments against any of Borrower's deposit accounts or against the
Committed Revolving Line, in which case those amounts shall thereafter accrue
interest at the rate then applicable hereunder. Any interest not paid when due
shall be compounded by becoming a part of the Obligations, and such interest
shall thereafter accrue interest at the rate then applicable hereunder. Bank
shall deliver to Borrower statements of account in the ordinary course of
business reflecting charges made hereunder.

                (d) Computation. In the event the Prime Rate is changed from
time to time hereafter, the applicable rate of interest hereunder shall be
increased or decreased effective as of 12:01 a.m. on the day the Prime Rate is
changed, by an amount equal to such change in the Prime Rate. All interest
chargeable under the Loan Documents shall be computed on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed.

            2.4 Crediting Payments. Prior to the occurrence of an Event of
Default, Bank shall credit a wire transfer of funds, check or other item of
payment to such deposit account or Obligation as Borrower specifies. After the
occurrence of an Event of Default, the receipt by Bank of any wire transfer of
funds, check, or other item of payment shall be immediately applied to
conditionally reduce Obligations, but shall not be considered a payment on
account unless such payment is of immediately available federal funds or unless
and until such check or other item of payment is honored when presented for
payment. Notwithstanding anything to the contrary contained herein, any wire
transfer or payment received by Bank after 1:00 p.m. Colorado time shall be
deemed to have been received by Bank as of the opening of business on the
immediately following Business Day. Whenever any payment to Bank under the Loan
Documents would otherwise be due (except by reason of acceleration) on a date

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that is not a Business Day, such payment shall instead be due on the next
Business Day, and additional fees or interest, as the case may be, shall accrue
and be payable for the period of such extension.

            2.5 Fees. Borrower shall pay to Bank the following:

                (a) Facility Fee. A facility fee equal to Seven Thousand Five
Hundred Dollars ($7,500), which fee shall be due on the Closing Date and shall
be fully earned and non-refundable.

                (b) Financial Examination and Appraisal Fees. Bank's customary
fees and out-of-pocket expenses for Bank's audits of Borrower's Accounts, and
for each appraisal of Collateral and financial analysis and examination of
Borrower performed from time to time by Bank or its agents, provided that the
initial audit shall not exceed One Thousand Five Hundred Dollars ($1,500) and
each additional audit shall not exceed Two Thousand Dollars ($2,000);

                (c) Bank Expenses. On the Closing Date, all Bank Expenses
incurred through the Closing Date, including reasonable attorneys' fees and
expenses (such attorneys fees and expenses not to exceed $5,000), and, after the
Closing Date, all Bank Expenses, including reasonable attorneys' fees and
expenses, as and when they become due.

            2.6 Additional Costs. In case any law, regulation, treaty or
official directive or the interpretation or application thereof by any court or
any governmental authority charged with the administration thereof or the
compliance with any guideline or request of any central bank or other
governmental authority (whether or not having the force of law):

                (a) subjects Bank to any tax with respect to payments of
principal or interest or any other amounts payable hereunder by Borrower or
otherwise with respect to the transactions contemplated hereby (except for taxes
on the overall net income of Bank imposed by the United States of America or any
political subdivision thereof);

                (b) imposes, modifies or deems applicable any deposit insurance,
reserve, special deposit or similar requirement against assets held by, or
deposits in or for the account of, or loans by, Bank; or

                (c) imposes upon Bank any other condition with respect to its
performance under this Agreement,

and the result of any of the foregoing is to increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
the Obligations, Bank shall notify Borrower thereof. Borrower agrees to pay to
Bank the amount of such increase in cost, reduction in income or additional
expense as and when such cost, reduction or expense is incurred or determined,
upon presentation by Bank of a statement of the amount and setting forth Bank's
calculation thereof, all in reasonable detail, which statement shall be deemed
true and correct absent manifest error.

            2.7 Term. This Agreement shall become effective on the Closing Date
and, subject to Section 12.7, shall continue in full force and effect for a term
ending on the Revolving Maturity Date. Notwithstanding the foregoing, Bank shall
have the right to terminate its obligation to make Credit Extensions under this
Agreement immediately and without notice upon the occurrence and during the
continuance of an Event of Default. Notwithstanding termination, Bank's Lien on
the Collateral shall remain in effect for so long as any Obligations are
outstanding. Upon request by Borrower, Bank and Borrower shall terminate this
Agreement and Bank shall have no further obligation to make Credit Extensions to
Borrower, provided that (i) Bank receives three (3) days prior written notice
thereof, and (ii) all Obligations have been repaid in full.

     3.     CONDITIONS OF LOANS.

            3.1 Conditions Precedent to Initial Credit Extension. The obligation
of Bank to make the initial Credit Extension is subject to the condition
precedent that Bank shall have received, in form and substance satisfactory to
Bank, the following:

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                (a) this Agreement;

                (b) a certificate of the Secretary of Borrower with respect to
incumbency and resolutions authorizing the execution and delivery of this
Agreement;

                (c) financing statements (Form UCC-1) to be filed in Colorado
and Montana;

                (d) an intellectual property security agreement;

                (e) agreement to provide insurance;

                (f) payment of the fees and Bank Expenses then due specified in
Section 2.5 hereof; and

                (g) such other documents, and completion of such other matters,
as Bank may reasonably deem necessary or appropriate.

            3.2 Conditions Precedent to all Credit Extensions. The obligation of
Bank to make each Credit Extension, including the initial Credit Extension, is
further subject to the following conditions:

                (a) timely receipt by Bank of the Payment/Advance Form as
provided in Section 2.1;

                (b) timely receipt by Bank of the invoices or other documents as
provided in Section 4.2; and

                (c) the representations and warranties contained in Section 5
shall be true and correct in all material respects on and as of the date of such
Payment/Advance Form and on the effective date of each Credit Extension as
though made at and as of each such date, and no Event of Default shall have
occurred and be continuing, or would result from such Credit Extension
(provided, however, that those representations and warranties expressly
referring to another date shall be true, correct and complete in all material
respects as of such date). The making of each Credit Extension shall be deemed
to be a representation and warranty by Borrower on the date of such Credit
Extension as to the accuracy of the facts referred to in this Section 3.2(c).

     4.     CREATION OF SECURITY INTEREST

            4.1 Grant of Security Interest. Borrower grants and pledges to Bank
a continuing security interest in all presently existing and hereafter acquired
or arising Collateral in order to secure prompt repayment of any and all
Obligations and in order to secure prompt performance by Borrower of each of its
covenants and duties under the Loan Documents. Except as set forth in the
Schedule, such security interest constitutes a valid, first priority security
interest in the presently existing Collateral, and will constitute a valid,
first priority security interest in Collateral acquired after the date hereof.

            4.2 Delivery of Additional Documentation Required. Borrower shall
from time to time execute and deliver to Bank, at the request of Bank, all
Negotiable Collateral, all financing statements and other documents that Bank
may reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.

            4.3 Right to Inspect. Bank (through any of its officers, employees,
or agents) shall have the right, upon reasonable prior notice, from time to time
during Borrower's usual business hours but no more than once a year (unless an
Event of Default has occurred and is continuing) to inspect Borrower's Books and
to make copies thereof and to check, test, and appraise the Collateral in order
to verify Borrower's financial condition or the amount, condition of, or any
other matter relating to, the Collateral.

     5.     REPRESENTATIONS AND WARRANTIES

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<PAGE>   10

            Borrower represents and warrants as follows:

            5.1  Due Organization and Qualification. Borrower and each
Subsidiary is a corporation duly existing and in good standing under the laws of
its state of incorporation and qualified and licensed to do business in, and is
in good standing in, any state in which the conduct of its business or its
ownership of property requires that it be so qualified.

            5.2  Due Authorization; No Conflict. The execution, delivery, and
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Articles of Incorporation or Bylaws, nor will
they constitute an event of default under any material agreement to which
Borrower is a party or by which Borrower is bound. Borrower is not in default
under any agreement to which it is a party or by which it is bound, which
default could have a Material Adverse Effect.

            5.3  No Prior Encumbrances. Borrower has good and indefeasible title
to the Collateral, free and clear of Liens, except for Permitted Liens.

            5.4  Bona Fide Eligible Accounts. The Eligible Accounts are bona
fide existing obligations. The property giving rise to such Eligible Accounts
has been delivered to the account debtor or to the account debtor's agent for
immediate shipment to and unconditional acceptance by the account debtor.
Borrower has not received notice of actual or imminent Insolvency Proceeding of
any account debtor that is included in any Borrowing Base Certificate as an
Eligible Account.

            5.5  Merchantable Inventory. All Inventory is in all material
respects of good and marketable quality, free from all reasonable material
defects.

            5.6  Intellectual Property Collateral. Borrower is the sole owner of
the Intellectual Property Collateral, except for non-exclusive licenses granted
by Borrower to its customers in the ordinary course of business. Each of the
Patents is valid and enforceable, and no part of the Intellectual Property
Collateral has been judged invalid or unenforceable, in whole or in part, and no
claim has been made that any part of the Intellectual Property Collateral
violates the rights of any third party.

            5.7  Name; Location of Chief Executive Office. Except as disclosed
in the Schedule, Borrower has not done business under any name other than that
specified on the signature page hereof. The chief executive office of Borrower
is located at the address indicated in Section 10 hereof.

            5.8  Litigation. Except as set forth in the Schedule, there are no
actions or proceedings pending by or against Borrower or any Subsidiary before
any court or administrative agency in which an adverse decision could have a
Material Adverse Effect or a material adverse effect on Borrower or such
Subsidiary or Borrower's interest or Bank's security interest in the Collateral.
Borrower does not have knowledge of any such pending or threatened actions or
proceedings.

            5.9  No Material Adverse Change in Financial Statements. All
consolidated financial statements related to Borrower or any Subsidiary that are
delivered by Borrower to Bank fairly present in all material respects Borrower's
or such Subsidiary's consolidated financial condition as of the date thereof and
Borrower's or such Subsidiary's consolidated results of operations for the
period then ended. There has not been a material adverse change in the
consolidated financial condition of Borrower or Subsidiary since the date of the
most recent of such financial statements submitted to Bank.

            5.10 Solvency, Payment of Debts. Borrower is solvent and able to pay
its debts (including trade debts) as they mature.

            5.11 Regulatory Compliance. Borrower and each Subsidiary have met
the minimum funding requirements of ERISA with respect to any employee benefit
plans subject to ERISA. No event has occurred resulting from Borrower's failure
to comply with ERISA that is reasonably likely to result in Borrower's incurring
any liability that could have a Material Adverse Effect. Borrower is not an
"investment company" or a company

                                       10

<PAGE>   11

"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940. Borrower is not engaged principally, or as one of the
important activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulations T and U
of the Board of Governors of the Federal Reserve System). Borrower has complied
with all the provisions of the Federal Fair Labor Standards Act. Borrower has
not violated any statutes, laws, ordinances or rules applicable to it, violation
of which could have a Material Adverse Effect.

            5.12 Environmental Condition. Except as disclosed in the Schedule,
none of Borrower's or any Subsidiary's properties or assets has ever been used
by Borrower or any Subsidiary or, to the best of Borrower's knowledge, by
previous owners or operators, in the disposal of, or to produce, store, handle,
treat, release, or transport, any hazardous waste or hazardous substance other
than in accordance with applicable law; to the best of Borrower's knowledge,
none of Borrower's properties or assets has ever been designated or identified
in any manner pursuant to any environmental protection statute as a hazardous
waste or hazardous substance disposal site, or a candidate for closure pursuant
to any environmental protection statute; no lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned by Borrower or any Subsidiary; and neither Borrower nor any
Subsidiary has received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal, state or other
governmental agency concerning any action or omission by Borrower or any
Subsidiary resulting in the releasing, or otherwise disposing of hazardous waste
or hazardous substances into the environment.

            5.13 Taxes. Borrower and each Subsidiary has filed or caused to be
filed all tax returns required to be filed, and has paid, or has made adequate
provision for the payment of, all taxes reflected therein.

            5.14 Subsidiaries. Borrower does not own any stock, partnership
interest or other equity securities of any Person, except for Permitted
Investments.

            5.15 Government Consents. Borrower and each Subsidiary has obtained
all consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all governmental authorities that are necessary
for the continued operation of Borrower's or such Subsidiary's business as
currently conducted, the failure to obtain which could have a Material Adverse
Effect.

            5.16 Full Disclosure. No representation, warranty or other statement
made by Borrower in any certificate or written statement furnished to Bank
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained in such certificates or
statements not misleading.

     6.     AFFIRMATIVE COVENANTS

            Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
a Credit Extension hereunder, Borrower shall do all of the following:

            6.1  Good Standing. Borrower shall maintain its and each of its
Subsidiaries' corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify could have a Material Adverse Effect. Borrower shall
maintain, and shall cause each of its Subsidiaries to maintain in force all
licenses, approvals and agreements, the loss of which could have a Material
Adverse Effect.

            6.2  Government Compliance. Borrower shall meet, and shall cause
each Subsidiary to meet, the minimum funding requirements of ERISA with respect
to any employee benefit plans subject to ERISA. Borrower shall comply, and shall
cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which could have a Material Adverse Effect or a material adverse effect on the
Collateral or the priority of Bank's Lien on the Collateral.

            6.3  Financial Statements, Reports, Certificates. Borrower shall
deliver to Bank: (a) as soon as available, but in any event within thirty (30)
days after the end of each calendar month, a company prepared

                                       11

<PAGE>   12

consolidated balance sheet and income statement covering Borrower's consolidated
operations during such period, in a form acceptable to Bank and certified by a
Responsible Officer; (b) as soon as available, but in any event within one
hundred twenty (120) days after the end of Borrower's fiscal year, audited
consolidated financial statements of Borrower prepared in accordance with GAAP,
consistently applied, together with an unqualified opinion on such financial
statements of an independent certified public accounting firm reasonably
acceptable to Bank; (c) if applicable, copies of all statements, reports and
notices sent or made available generally by Borrower to its security holders or
to any holders of Subordinated Debt and all reports on Form 10-K and 10-Q filed
with the Securities and Exchange Commission; (d) promptly upon receipt of notice
thereof, a report of any legal actions pending or threatened against Borrower or
any Subsidiary that could result in damages or costs to Borrower or any
Subsidiary of Fifty Thousand Dollars ($50,000) or more; and (e) such budgets,
sales projections, operating plans or other financial information as Bank may
reasonably request from time to time generally prepared by Borrower in the
ordinary course of business.

     Within twenty (20) days after the last day of each month, Borrower shall
deliver to Bank a Borrowing Base Certificate signed by a Responsible Officer in
substantially the form of Exhibit C hereto, together with aged listings of
accounts receivable and accounts payable, provided that, for any month during
which no Obligations were outstanding at any time under Section 2.1 of this
Agreement, Borrower shall deliver the foregoing within thirty (30) days after
the last day of such month.

     Borrower shall deliver to Bank with the monthly financial statements a
Compliance Certificate signed by a Responsible Officer in substantially the form
of Exhibit D hereto.

     Bank shall have a right initially (the "Initial Audit") and from time to
time thereafter to audit Borrower's Accounts and appraise Collateral at
Borrower's expense, provided that such audits will be conducted no more often
than every twelve (12) months unless an Event of Default has occurred and is
continuing. The results of the Initial Audit shall be satisfactory to Bank by
May 30, 1999.

            6.4  Inventory; Returns. Borrower shall keep all Inventory in good
and marketable condition, free from all material defects. Returns and
allowances, if any, as between Borrower and its account debtors shall be on the
same basis and in accordance with the usual customary practices of Borrower, as
they exist at the time of the execution and delivery of this Agreement. Borrower
shall promptly notify Bank of all returns and recoveries and of all disputes and
claims, where the return, recovery, dispute or claim involves more than One
Hundred Thousand Dollars ($100,000).

            6.5  Taxes. Borrower shall make, and shall cause each Subsidiary to
make, due and timely payment or deposit of all material federal, state, and
local taxes, assessments, or contributions required of it by law, and will
execute and deliver to Bank, on demand, appropriate certificates attesting to
the payment or deposit thereof; and Borrower will make, and will cause each
Subsidiary to make, timely payment or deposit of all material tax payments and
withholding taxes required of it by applicable laws, including, but not limited
to, those laws concerning F.I.C.A., F.U.T.A., state disability, and local,
state, and federal income taxes, and will, upon request, furnish Bank with proof
satisfactory to Bank indicating that Borrower or a Subsidiary has made such
payments or deposits; provided that Borrower or a Subsidiary need not make any
payment if the amount or validity of such payment is contested in good faith by
appropriate proceedings and is reserved against (to the extent required by GAAP)
by Borrower.

            6.6  Insurance.

                 (a) Borrower, at its expense, shall keep the Collateral insured
against loss or damage by fire, theft, explosion, sprinklers, and all other
hazards and risks, and in such amounts, as ordinarily insured against by other
owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain insurance
relating to Borrower's ownership and use of the Collateral in amounts and of a
type that are customary to businesses similar to Borrower's.

                 (b) All such policies of insurance shall be in such form, with
such companies, and in such amounts as reasonably satisfactory to Bank. All such
policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional loss
payee thereof and all

                                       12

<PAGE>   13

liability insurance policies shall show the Bank as an additional insured, and
shall specify that the insurer must give at least twenty (20) days notice to
Bank before canceling its policy for any reason. Upon Bank's request, Borrower
shall deliver to Bank certified copies of such policies of insurance and
evidence of the payments of all premiums therefor. All proceeds payable under
any such policy shall, at the option of Bank, be payable to Bank to be applied
on account of the Obligations.

            6.7  Principal Depository. Borrower shall maintain its principal
depository and operating accounts with Bank.

            6.8  Quick Ratio. Borrower shall maintain, as of the last day of
each calendar month, a ratio of Quick Assets to Current Liabilities of at least
1.50 to 1.00.

            6.9  Tangible Net Worth. Borrower shall maintain, as of the last day
of each calendar month, a Tangible Net Worth of not less than Four Million
Dollars ($4,000,000) plus thirty-five percent (35%) of Borrower's quarterly net
income.

            6.10 Profitability. Borrower shall show a profit of at least One
Dollar ($1.00) for each fiscal quarter, except that in one and only one fiscal
quarter during the term of this Agreement, Borrower shall be permitted to fail
to show a profit of at least One Dollar ($1.00), provided that Borrower shall
not lose more than Three Hundred Thousand Dollars ($300,000) for such quarter.
In addition to the foregoing, Borrower shall show a profit of at least One
Dollar ($1.00) for each fiscal year during the term of this Agreement.

            6.11 Registration of Intellectual Property Rights. If an Event of
Default has occurred, upon Bank's reasonable request, Borrower shall do all of
the following:

                 (a) Register or cause to be registered on an expedited basis
(to the extent not already registered and to the extent commercially viable)
with the United States Patent and Trademark Office or the United States
Copyright Office, as applicable, those intellectual property rights listed on
Exhibits A, B and C to the Intellectual Property Security Agreement delivered to
Bank by Borrower in connection with this Agreement within thirty (30) days of
the date of this Agreement. Borrower shall, on an expedited basis, register or
cause to be registered with the United States Patent and Trademark Office or the
United States Copyright Office, as applicable, and notify Bank of, all
registerable intellectual property rights Borrower has developed as of the date
of this Agreement but heretofore failed to register and give Bank notice
thereof. Borrower shall register or cause to be registered with the United
States Patent and Trademark Office or the United States Copyright Office, as
applicable, and notify Bank of those additional intellectual property rights
developed or acquired by Borrower from time to time in connection with any
product prior to the sale or licensing of such product to any third party and
prior to Borrower's use of such product (including without limitation major
revisions or additions to the intellectual property rights listed on such
Exhibits A, B and C) and shall give Bank notice thereof;

                 (b) Execute and deliver such additional instruments and
documents from time to time as Bank shall reasonably request to perfect Bank's
security interest in the Intellectual Property Collateral;

                 (c) Borrower shall (i) protect, defend and maintain the
validity and enforceability of the Trademarks, Patents and Copyrights, (ii) use
its best efforts to detect infringements of the Trademarks, Patents and
Copyrights and promptly advise Bank in writing of material infringements
detected and (iii) not allow any material Trademarks, Patents or Copyrights to
be abandoned, forfeited or dedicated to the public without the written consent
of Bank, which shall not be unreasonably withheld.

                 (d) Bank may audit Borrower's Intellectual Property Collateral
to confirm compliance with this Section 6.11, provided such audit may not occur
more often than once per year, unless an Event of Default has occurred and is
continuing. Bank shall have the right, but not the obligation, to take, at
Borrower's sole expense, any actions that Borrower is required under this
Section 6.11 to take but which Borrower fails to take, after fifteen (15) days'
notice to Borrower. Borrower shall reimburse and indemnify Bank for all
reasonable costs and reasonable expenses incurred in the reasonable exercise of
its rights under this Section 6.11.

                 (e) Borrower shall within twenty-five (25) days of the last day
of each fiscal quarter, deliver to Bank in form and substance satisfactory to
Bank a report signed by Borrower, in form reasonably

                                       13

<PAGE>   14

acceptable to Bank, listing any applications or registrations that Borrower has
made or filed in respect of any Patents, Copyrights or Trademarks and the status
of any outstanding applications or registrations, as well as any material change
in Borrower's intellectual property, including but not limited to any subsequent
ownership right of Borrower in or to any Trademark, Patent or Copyright not
specified in Exhibits A, B, and C of the Intellectual Property Security
Agreement delivered to Bank by each Borrower in connection with this Agreement

            6.12 Further Assurances. At any time and from time to time Borrower
shall execute and deliver such further instruments and take such further action
as may reasonably be requested by Bank to effect the purposes of this Agreement.

     7.     NEGATIVE COVENANTS

            Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until payment in full of the outstanding Obligations or
for so long as Bank may have any commitment to make any Credit Extensions,
Borrower will not do any of the following:

            7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose
of (collectively, a "Transfer"), or permit any of its Subsidiaries to Transfer,
all or any part of its business or property, including intellectual property,
other than: (i) Transfers of Inventory in the ordinary course of business; (ii)
Transfers of non-exclusive licenses and similar arrangements for the use of the
property of Borrower or its Subsidiaries; or (iii) Transfers of surplus,
worn-out or obsolete Equipment.

            7.2 Change in Business. Engage in any business, or permit any of its
Subsidiaries to engage in any business, other than the businesses currently
engaged in by Borrower and any business substantially similar or related thereto
(or incidental thereto). Borrower will not, without thirty (30) days prior
written notification to Bank, relocate its chief executive office.

            7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of
its Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person.

            7.4 Indebtedness. Create, incur, assume or be or remain liable with
respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.

            7.5 Encumbrances. Create, incur, assume or suffer to exist any Lien
with respect to any of its property, or assign or otherwise convey any right to
receive income, including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens.

            7.6 Distributions. Pay any dividends or make any other distribution
or payment on account of or in redemption, retirement or purchase of any capital
stock. Notwithstanding the foregoing, Borrower may acquire capital stock or
property of another Person and/or repurchase its own capital stock in an
aggregate amount not to exceed twenty-five percent (25%) of Borrower's Tangible
Net Worth, as long as an Event of Default does not exist prior to such
repurchase or acquisition or would not exist after giving effect to such
repurchase or acquisition.

            7.7 Investments. Directly or indirectly acquire or own, or make any
Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments.

            7.8 Transactions with Affiliates. Directly or indirectly enter into
or permit to exist any material transaction with any Affiliate of Borrower
except for transactions that are in the ordinary course of Borrower's business,
upon fair and reasonable terms that are no less favorable to Borrower than would
be obtained in an arm's length transaction with a nonaffiliated Person.

            7.9 Subordinated Debt. Make any payment in respect of any
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.

                                       14

<PAGE>   15

            7.10  Inventory. Store the Inventory with a bailee, warehouseman, or
similar party unless Bank has received a pledge of the warehouse receipt
covering such Inventory. Except for Inventory sold in the ordinary course of
business and except for such other locations as Bank may approve in writing,
Borrower shall keep the Inventory only at the location set forth in Section 10
hereof and such other locations of which Borrower gives Bank prior written
notice and as to which Borrower signs and files a financing statement where
needed to perfect Bank's security interest.

            7.11  Compliance. Become an "investment company" or be controlled by
an "investment company," within the meaning of the Investment Company Act of
1940, or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Credit Extension for such
purpose. Fail to meet the minimum funding requirements of ERISA, permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur, fail
to comply with the Federal Fair Labor Standards Act or violate any law or
regulation, which violation could have a Material Adverse Effect or a material
adverse effect on the Collateral or the priority of Bank's Lien on the
Collateral, or permit any of its Subsidiaries to do any of the foregoing.

            7.12  Intellectual Property Agreements. Borrower shall not permit
the inclusion in any material contract to which it becomes a party of any
provisions that could or might in any way prevent the creation of a security
interest in Borrower's rights and interests in any property included within the
definition of the Intellectual Property Collateral acquired under such
contracts.

     8.     EVENTS OF DEFAULT

            Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:

            8.1  Payment Default. If Borrower fails to pay, when due, any of the
Obligations;

            8.2  Covenant Default. If Borrower fails to perform any obligation
under Article 6 or violates any of the covenants contained in Article 7 of this
Agreement, or fails or neglects to perform, keep, or observe any other material
term, provision, condition, covenant, or agreement contained in this Agreement,
in any of the Loan Documents, or in any other present or future agreement
between Borrower and Bank and as to any default under such other term,
provision, condition, covenant or agreement that can be cured, has failed to
cure such default within ten (10) days after Borrower receives notice thereof or
any officer of Borrower becomes aware thereof; provided, however, that if the
default cannot by its nature be cured within the ten (10) day period or cannot
after diligent attempts by Borrower be cured within such ten (10) day period,
and such default is likely to be cured within a reasonable time, then Borrower
shall have an additional reasonable period (which shall not in any case exceed
thirty (30) days) to attempt to cure such default, and within such reasonable
time period the failure to have cured such default shall not be deemed an Event
of Default (provided that no Credit Extensions will be required to be made
during such cure period);

            8.3  Material Adverse Change. If there occurs a material adverse
change in Borrower's business or financial condition, or if there is a material
impairment of the prospect of repayment of any portion of the Obligations or a
material impairment of the value or priority of Bank's security interests in the
Collateral;

            8.4  Attachment. If any material portion of Borrower's assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within ten (10) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within ten (10) days
after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Credit Extensions will be required to be made during such cure period);

                                       15

<PAGE>   16

            8.5  Insolvency. If Borrower becomes insolvent, or if an Insolvency
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced
against Borrower and is not dismissed or stayed within thirty (30) days
(provided that no Credit Extensions will be made prior to the dismissal of such
Insolvency Proceeding);

            8.6  Other Agreements. If there is a default in any agreement to
which Borrower is a party with a third party or parties resulting in a right by
such third party or parties, whether or not exercised, to accelerate the
maturity of any Indebtedness in an amount in excess of One Hundred Thousand
Dollars ($100,000) or that could have a Material Adverse Effect;

            8.7  Subordinated Debt. If Borrower makes any payment on account of
Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;

            8.8  Judgments. If a judgment or judgments for the payment of money
in an amount, individually or in the aggregate, of at least One Hundred Thousand
Dollars ($100,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of thirty (30) days (provided that no
Credit Extensions will be made prior to the satisfaction or stay of such
judgment); or

            8.9  Misrepresentations. If any material misrepresentation or
material misstatement exists now or hereafter in any warranty or representation
set forth herein or in any certificate delivered to Bank by any Responsible
Officer pursuant to this Agreement or to induce Bank to enter into this
Agreement or any other Loan Document.

     9.     BANK'S RIGHTS AND REMEDIES

            9.1  Rights and Remedies. Upon the occurrence and during the
continuance of an Event of Default, Bank may, at its election, without notice of
its election and without demand, do any one or more of the following, all of
which are authorized by Borrower:

                 (a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable (provided that upon the occurrence of an Event of Default described in
Section 8.5 all Obligations shall become immediately due and payable without any
action by Bank);

                 (b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement or under any other agreement between
Borrower and Bank;

                 (c) Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank reasonably
considers advisable;

                 (d) Make such payments and do such acts as Bank considers
necessary or reasonable to protect its security interest in the Collateral.
Borrower agrees to assemble the Collateral if Bank so requires, and to make the
Collateral available to Bank as Bank may designate. Borrower authorizes Bank to
enter the premises where the Collateral is located, to take and maintain
possession of the Collateral, or any part of it, and to pay, purchase, contest,
or compromise any encumbrance, charge, or lien which in Bank's determination
appears to be prior or superior to its security interest and to pay all expenses
incurred in connection therewith. With respect to any of Borrower's owned
premises, Borrower hereby grants Bank a license to enter into possession of such
premises and to occupy the same, without charge, in order to exercise any of
Bank's rights or remedies provided herein, at law, in equity, or otherwise;

                 (e) Set off and apply to the Obligations any and all (i)
balances and deposits of Borrower held by Bank, or (ii) indebtedness at any time
owing to or for the credit or the account of Borrower held by Bank;

                 (f) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Bank is hereby granted a license or other right,

                                       16

<PAGE>   17

solely pursuant to the provisions of this Section 9.1, to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section 9.1, Borrower's
rights under all licenses and all franchise agreements shall inure to Bank's
benefit;

                 (g) Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including Borrower's premises) as Bank
determines is commercially reasonable, and apply any proceeds to the Obligations
in whatever manner or order Bank deems appropriate;

                 (h) Bank may credit bid and purchase at any public sale; and

                 (i) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.

            9.2  Power of Attorney. Effective only upon the occurrence and
during the continuance of an Event of Default, Borrower hereby irrevocably
appoints Bank (and any of Bank's designated officers, or employees) as
Borrower's true and lawful attorney to: (a) send requests for verification of
Accounts or notify account debtors of Bank's security interest in the Accounts;
(b) endorse Borrower's name on any checks or other forms of payment or security
that may come into Bank's possession; (c) sign Borrower's name on any invoice or
bill of lading relating to any Account, drafts against account debtors,
schedules and assignments of Accounts, verifications of Accounts, and notices to
account debtors; (d) dispose of any Collateral; (e) make, settle, and adjust all
claims under and decisions with respect to Borrower's policies of insurance; (f)
settle and adjust disputes and claims respecting the accounts directly with
account debtors, for amounts and upon terms which Bank determines to be
reasonable; (g) to modify, in its sole discretion, any intellectual property
security agreement entered into between Borrower and Bank without first
obtaining Borrower's approval of or signature to such modification by amending
Exhibits A, B, and C, thereof, as appropriate, to include reference to any
right, title or interest in any Copyrights, Patents or Trademarks acquired by
Borrower after the execution hereof or to delete any reference to any right,
title or interest in any Copyrights, Patents or Trademarks in which Borrower no
longer has or claims to have any right, title or interest; (h) to file, in its
sole discretion, one or more financing or continuation statements and amendments
thereto, relative to any of the Collateral without the signature of Borrower
where permitted by law; and (i) to transfer the Intellectual Property Collateral
into the name of Bank or a third party to the extent permitted under the
California Uniform Commercial Code; provided Bank may exercise such power of
attorney to sign the name of Borrower on any of the documents described in
Section 4.2 regardless of whether an Event of Default has occurred. The
appointment of Bank as Borrower's attorney in fact, and each and every one of
Bank's rights and powers, being coupled with an interest, is irrevocable until
all of the Obligations have been fully repaid and performed and Bank's
obligation to provide advances hereunder is terminated.

            9.3  Accounts Collection. Subject to Section 6.3, upon the
occurrence and during the continuation of an Event of Default, Bank may notify
any Person owing funds to Borrower of Bank's security interest in such funds and
verify the amount of such Account. Upon the occurrence and during the
continuation of an Event of Default, Borrower shall collect all amounts owing to
Borrower for Bank, receive in trust all payments as Bank's trustee, and
immediately deliver such payments to Bank in their original form as received
from the account debtor, with proper endorsements for deposit.

            9.4  Bank Expenses. Effective only upon the occurrence and during
the continuance of an Event of Default, if Borrower fails to pay any amounts or
furnish any required proof of payment due to third persons or entities, as
required under the terms of this Agreement, then Bank may do any or all of the
following: (a) make payment of the same or any part thereof; (b) set up such
reserves under the Revolving Facility as Bank deems necessary to protect Bank
from the exposure created by such failure; or (c) obtain and maintain insurance
policies of the type discussed in Section 6.6 of this Agreement, and take any
action with respect to such policies as Bank deems prudent. Any amounts so paid
or deposited by Bank shall constitute Bank Expenses, shall be immediately due
and payable, and shall bear interest at the then applicable rate hereinabove
provided, and shall be secured by the Collateral. Any payments made by Bank
shall not constitute an agreement by Bank to make similar payments in the future
or a waiver by Bank of any Event of Default under this Agreement.

                                       17

<PAGE>   18

            9.5  Bank's Liability for Collateral. So long as Bank complies with
reasonable banking practices, Bank shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person whomsoever. All risk of
loss, damage or destruction of the Collateral shall be borne by Borrower.

            9.6  Remedies Cumulative. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Bank of one right
or remedy shall be deemed an election, and no waiver by Bank of any Event of
Default on Borrower's part shall be deemed a continuing waiver. No delay by Bank
shall constitute a waiver, election, or acquiescence by it. No waiver by Bank
shall be effective unless made in a written document signed on behalf of Bank
and then shall be effective only in the specific instance and for the specific
purpose for which it was given.

            9.7  Demand; Protest. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which Borrower may in any way be liable.

     10.    NOTICES

            Unless otherwise provided in this Agreement, all notices or demands
by any party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service, certified mail, postage prepaid, return receipt requested, or
by telefacsimile to Borrower or to Bank, as the case may be, at its addresses
set forth below:

     If to Borrower:                ILX Lightwave Corporation
                                    31950 E. Frontage Road
                                    Bozeman, MT 59771
                                    Attn:  Larry Johnson
                                    FAX:  (406) 586-9405

     If to Bank:                    Silicon Valley Bank
                                    4430 Arapahoe Avenue, Suite 225
                                    Boulder, CO  80303
                                    Attn:  Mike Devery / Megan Varveris
                                    Fax:  (303) 938-0486

     The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.

     11.    CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER

            The Loan Documents shall be governed by, and construed in accordance
with, the internal laws of the State of California, without regard to principles
of conflicts of law. Each of Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the County of Santa
Clara, State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.

                                       18

<PAGE>   19

     12.    GENERAL PROVISIONS

            12.1  Successors and Assigns. This Agreement shall bind and inure to
the benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
may be assigned by Borrower without Bank's prior written consent, which consent
may be granted or withheld in Bank's sole discretion. Bank shall have the right
without the consent of or notice to Borrower to sell, transfer, negotiate, or
grant participation in all or any part of, or any interest in, Bank's
obligations, rights and benefits hereunder.

            12.2  Indemnification. Borrower shall defend, indemnify and hold
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by the Loan Documents and
(b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank
as a result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under the Loan Documents or
otherwise (including without limitation reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.

            12.3  Time of Essence. Time is of the essence for the performance of
all obligations set forth in this Agreement.

            12.4  Severability of Provisions. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.

            12.5  Amendments in Writing, Integration. This Agreement cannot be
amended or terminated orally. All prior agreements, understandings,
representations, warranties, and negotiations between the parties hereto with
respect to the subject matter of this Agreement, if any, are merged into this
Agreement and the Loan Documents.

            12.6  Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.

            12.7  Survival. All covenants, representations and warranties made
in this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding. The obligations of Borrower to indemnify Bank
with respect to the expenses, damages, losses, costs and liabilities described
in Section 12.2 shall survive until all applicable statute of limitations
periods with respect to actions that may be brought against Bank have run.

                                       19
<PAGE>   20

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.

                                           ILX LIGHTWAVE CORPORATION

                                           By:
                                               ---------------------------------

                                           Title:
                                                  ------------------------------

                                           SILICON VALLEY BANK

                                           By:
                                               ---------------------------------

                                           Title:
                                                  ------------------------------

                                       20
<PAGE>   21

                                    EXHIBIT A

                        COLLATERAL DESCRIPTION ATTACHMENT
                         TO LOAN AND SECURITY AGREEMENT

The Collateral shall consist of all right, title and interest of Borrower in and
to the following:

                  (i)   All goods and equipment now owned or hereafter acquired,
including, without limitation, all machinery, fixtures, vehicles (including
motor vehicles and trailers), and any interest in any of the foregoing, and all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing, wherever located;

                  (ii)  All inventory, now owned or hereafter acquired,
including, without limitation, all merchandise, raw materials, parts, supplies,
packing and shipping materials, work in process and finished products including
such inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and
Borrower's Books relating to any of the foregoing;

                  (iii) All contract rights and general intangibles now owned or
hereafter acquired, including, without limitation, goodwill, trademarks,
servicemarks, trade styles, trade names, patents, patent applications, leases,
license agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;

                  (iv)  All now existing and hereafter arising accounts,
contract rights, royalties, license rights and all other forms of obligations
owing to Borrower arising out of the sale or lease of goods, the licensing of
technology or the rendering of services by Borrower, whether or not earned by
performance, and any and all credit insurance, guaranties, and other security
therefor, as well as all merchandise returned to or reclaimed by Borrower and
Borrower's Books relating to any of the foregoing;

                  (v)   All documents, cash, deposit accounts, securities,
letters of credit, certificates of deposit, instruments and chattel paper now
owned or hereafter acquired and Borrower's Books relating to the foregoing;

                  (vi)  All copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work thereof, whether published or unpublished, now owned or hereafter acquired;
all trade secret rights, including all rights to unpatented inventions,
know-how, operating manuals, license rights and agreements and confidential
information, now owned or hereafter acquired; all mask work or similar rights
available for the protection of semiconductor chips, now owned or hereafter
acquired; all claims for damages by way of any past, present and future
infringement of any of the foregoing; and

                  (vii) Any and all claims, rights and interests in any of the
above and all substitutions for, additions and accessions to and proceeds
thereof.

                                       21
<PAGE>   22

                                 FIRST AMENDMENT
                                       TO
                           LOAN AND SECURITY AGREEMENT

         This First Amendment to Loan and Security Agreement is entered into as
of March 23, 2000 (the "Amendment"), by and between SILICON VALLEY BANK ("Bank")
and ILX LIGHTWAVE CORPORATION ("Borrower").

                                    RECITALS

         Borrower and Bank are parties to that certain Loan and Security
Agreement dated as of July 27, 1999, as amended (the "Agreement"). The parties
desire to amend the Agreement in accordance with the terms of this Amendment.

         NOW, THEREFORE, the parties agree as follows:

         1.       Certain defined terms in Section 1.1 of the Agreement are
hereby added or amended to read as follows:

                  "Capitalized Product Development Costs" are all costs
         associated with the development of Borrower's product, including, but
         not limited to software, that are not recorded as an expense and have
         been classified as an asset account.

                  "Committed Revolving Line" means a credit extension of up to
         Two Million Dollars ($2,000,000).

                  "Credit Extension" means each Advance, Term Advance or any
         other extension of credit by Bank for the benefit of Borrower
         hereunder.

                  "Debt Service Coverage" means, as of any date of
         determination, a ratio of earnings after tax less Capitalized Product
         Development Costs plus interest, depreciation and amortization for the
         preceding quarter on an annualized basis to current maturities of long
         term debt and capitalized leases, plus interest expense annualized.

                  "Term Line" means a credit extension of up to One Million Four
         Hundred Thousand Dollars ($1,400,000).

                  "Term Maturity Date" means April 30, 2003.

                  "Revolving Maturity Date" means March 22, 2001.

         2.       A new Section 2.1.2 is hereby added to the Agreement to read
         as follows:

                           2.1.2    Term Loan.

                           (a) Subject to and upon the terms and conditions of
         this Agreement, at any time from the date hereof through April 30,
         2000, Bank agrees to make an advance (the "Term Advance") to Borrower
         in an amount not in excess of the Term Line.

                           (b) Interest shall accrue from the date of the Term
         Advance at the rate specified in Section 2.3(a). The Term Advance shall
         be payable in thirty-six (36) equal monthly installments of principal,
         plus all accrued interest, beginning on May 31, 2000, and continuing on
         the last day of each month thereafter through the Term Maturity Date,
         at which time all amounts due under this Section 2.1.2 shall be
         immediately due and payable. Once repaid, neither the Term Advance nor
         any portion thereof may be reborrowed. Borrower may prepay the Term
         Advance without penalty or premium.

                                       1
<PAGE>   23

                           (c) When Borrower desires to obtain the Term Advance,
         Borrower shall notify Bank (which notice shall be irrevocable) by
         facsimile transmission to be received no later than 4:00 p.m. Colorado
         time one (1) Business Day before the day on which the Term Advance is
         to be made. Such notice shall be substantially in the form of Exhibit
         B. The notice shall be signed by a Responsible Officer or its designee.

         3.       Section 2.3(a) is hereby amended in its entirety to read as
follows:

                           (a)      Interest Rates.

                                    (i)     Advances.  Except as set forth in
         Section 2.3(b), the Advances shall bear interest, on the outstanding
         daily balance thereof, at a rate equal to three quarters percent
         (0.75%) above the Prime Rate.

                                    (ii)    Term Advance.  Except as set forth
         in Section 2.3(b), the Term Advance shall bear interest, on the
         outstanding daily balance thereof, at a rate equal to one and one half
         percent (1.50%) above the Prime Rate.

         4.       The first sentence of Section 2.3(c) of the Agreement is
hereby amended in its entirety to read as follows: "Interest hereunder shall be
due and payable on the last calendar day of each month during the term hereof."

         5.       The first sentence of Section 2.7 is hereby amended in its
entirety to read as follows: "This Agreement shall become effective on the
Closing Date and, subject to Section 12.7, shall continue in full force and
effect for a term ending on the Term Maturity Date."

         6.       Section 6.8 is hereby amended in its entirety to read as
follows:

                  6.8      Quick Ratio. Borrower shall maintain, as of the last
         day of each calendar month through the month ending on February 28,
         2001, a ratio of Quick Assets to Current Liabilities of at least 1.25
         to 1.00. Borrower shall maintain, as of the last day of each calendar
         month thereafter, a ratio of Quick Assets to Current Liabilities of at
         least 1.50 to 1.00.

         7.       Sections 6.9 and 6.10 are hereby amended in their entirety to
read as follows:

                  6.9      Tangible Net Worth. As of the Closing Date, Borrower
         shall maintain, as of the last day of each calendar month, a Tangible
         Net Worth of not less than Four Million Dollars ($4,000,000) plus
         thirty-five percent (35%) of Borrower's quarterly net income after
         March 23, 2000.

                  6.10     Profitability. Borrower shall show a profit of at
         least One Dollar ($1.00) for each fiscal quarter.

         8.       A new Section 6.13 is hereby added to the Agreement to read as
follows:

                  6.13     Debt Service Coverage. Borrower shall maintain a Debt
         Service Coverage of at least 2.0 to 1.0 as of the last day of each
         quarter.

         9.       Section 7.6 of the Agreement is hereby amended in its entirety
to read as follows:

                  7.6      Distributions. Pay any dividends or make any other
         distribution or payment on account of or in redemption, retirement or
         purchase of any capital stock. Notwithstanding the foregoing, Borrower
         may (i) acquire capital stock or property of another Person in an
         aggregate amount not to exceed ten percent (10%) of Borrower's Tangible
         Net Worth and (ii) repurchase its own capital stock in an aggregate
         amount not to exceed One Million Four Hundred Fifty Thousand Dollars
         ($1,450,000), as long as an Event

                                       2

<PAGE>   24

         of Default does not exist prior to any such repurchase or acquisition
         and would not exist after giving effect to any such repurchase or
         acquisition.

         10. The Compliance Certificate to be delivered after the date of this
Amendment shall be in substantially the form of Exhibit D hereto.

         11. Borrower hereby acknowledges and agrees that the next audit of
Borrower's Accounts pursuant to Section 6.3 will be due in July of 2000.

         12. Unless otherwise defined, all capitalized terms in this Amendment
shall be as defined in the Agreement. Except as amended, the Agreement remains
in full force and effect.

         13. Borrower represents and warrants that the representations and
warranties contained in the Agreement are true and correct as of the date of
this Amendment, and that no Event of Default has occurred and is continuing.

         14. This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one instrument.

         15. As a condition to the effectiveness of this Amendment, Bank shall
have received, in form and substance satisfactory to Bank, the following:

             (a) this Amendment, duly executed by Borrower;

             (b) a non-refundable loan fee of Twelve Thousand Six Hundred
Twenty-Five Dollars ($12,625), plus all Bank Expenses incurred through the date
of this Amendment including reasonable attorneys' fees and expenses not to
exceed Two Thousand Dollars ($2,000);

             (c) Corporate Resolutions to Borrow; and

             (d) such other documents, and completion of such other matters, as
Bank may reasonably deem necessary or appropriate.

                                       3
<PAGE>   25

         IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the first date above written.

                                        ILX LIGHTWAVE CORPORATION

                                        By:
                                           -------------------------------------
                                        Title:
                                              ----------------------------------

                                        SILICON VALLEY BANK

                                        By:
                                           -------------------------------------
                                        Title:
                                              ----------------------------------

                                       4
<PAGE>   26

                                SECOND AMENDMENT
                                       TO
                           LOAN AND SECURITY AGREEMENT

         This Second Amendment to Loan and Security Agreement is entered into as
of October 23, 2000 (the "Amendment"), by and between SILICON VALLEY BANK
("Bank") and ILX LIGHTWAVE CORPORATION ("Borrower").

                                    RECITALS

         Borrower and Bank are parties to that certain Loan and Security
Agreement dated as of July 27, 1999, as amended including without limitation by
that certain First Amendment to Loan and Security Agreement dated as of March
23, 2000 (collectively, the "Agreement"). The parties desire to amend the
Agreement in accordance with the terms of this Amendment.

         NOW, THEREFORE, the parties agree as follows:

         1. Certain defined terms in Section 1.1 of the Agreement are hereby
added or amended to read as follows:

                  "Borrowing Base" is (i) 80% of Eligible Accounts plus (ii) the
         least of (A) 20% of the value of Borrower's Eligible Inventory (valued
         at the lower of cost or wholesale fair market value), (B) $500,000, or
         (C) 30% of Eligible Accounts, as determined by Bank from Borrower's
         most recent Borrowing Base Certificate.

                  "Committed Revolving Line" means a credit extension of up to
Five Million Dollars ($5,000,000).

                  "Eligible Accounts" means those Accounts that arise in the
         ordinary course of Borrower's business that comply with all of
         Borrower's representations and warranties to Bank set forth in Section
         5.4; provided, that standards of eligibility may be fixed and revised
         from time to time by Bank as a consequence of any Collateral audits
         done pursuant to Section 6.3 in Bank's reasonable judgment and upon
         notification thereof to Borrower in accordance with the provisions
         hereof. Unless otherwise agreed to by Bank, Eligible Accounts shall not
         include the following:

                           (a) Accounts that the account debtor has failed to
         pay within ninety (90) days of invoice date;

                           (b) Accounts with respect to an account debtor, fifty
         percent (50%) of whose Accounts the account debtor has failed to pay
         within ninety (90) days of invoice date;

                           (c) Accounts with respect to which the account debtor
         is an officer, employee, or agent of Borrower;

                           (d) Accounts with respect to which goods are placed
         on consignment, guaranteed sale, sale or return, sale on approval, bill
         and hold, or other terms by reason of which the payment by the account
         debtor may be conditional;

                           (e) Accounts with respect to which the account debtor
         is an Affiliate of Borrower;

                           (f) Accounts with respect to which the account debtor
         does not have its principal place of business in the United States to
         the extent that they exceed $500,000 in the aggregate;

                           (g) Accounts with respect to which the account debtor
         is the United States or any department, agency, or instrumentality of
         the United States;
<PAGE>   27

                           (h) Accounts with respect to which Borrower is liable
         to the account debtor for goods sold or services rendered by the
         account debtor to Borrower, but only to the extent of any amounts owing
         to the account debtor against amounts owed to Borrower;

                           (i) Accounts with respect to an account debtor,
         including Subsidiaries and Affiliates, whose total obligations to
         Borrower exceed twenty-five percent (25%) of all Accounts, to the
         extent such obligations exceed the aforementioned percentage (the
         "Concentration Limit"), except as approved in writing by Bank;
         notwithstanding the foregoing, the Concentration Limit for each of
         Lucent Technologies, JDS Uniphase, and Corning (collectively, the "High
         Concentration Companies") shall be thirty-five percent (35%) of all
         Accounts, provided that Accounts on which the Account debtor is a High
         Concentration Companies will be excluded to the extent that in the
         aggregate High Concentration Companies exceed 75% of all Accounts;

                           (j) Accounts with respect to which the account debtor
         disputes liability or makes any claim with respect thereto as to which
         Bank believes, in its sole discretion, that there may be a basis for
         dispute (but only to the extent of the amount subject to such dispute
         or claim), or is subject to any Insolvency Proceeding, or becomes
         insolvent, or goes out of business; and

                           (k) Accounts the collection of which Bank reasonably
         determines to be doubtful.

                  "Eligible Inventory" means Borrower's Inventory which is
         composed of raw materials, located at its principal place of business
         (or any other location of which Borrower has given Bank at least 10
         days prior written notice) that complies with representations and
         warranties in Section 5.5, but does not include used, returned,
         obsolete, consigned, work in progress, demonstrative or custom
         inventory, supplies, packing or shipping materials.

                  "Revolving Maturity Date" means October 22, 2002, with an
         annual renewal on October 22, 2001.

         2. Section 2.3(a)(i) is hereby amended in its entirety to read as
follows:

                                    (i) Advances.  Except as set forth in
         Section 2.3(b), the Advances shall bear interest, on the outstanding
         daily balance thereof, at a rate equal to one quarter percent (0.25%)
         above the Prime Rate.

         3. A new Section 2.5(d) is hereby added to the Agreement to read as
follows:

                           (d) Commitment Fee. On the last day of each fiscal
         quarter, an amount equal to one quarter of one percent (0.25%) per
         annum of the average unused portion of the Committed Revolving Line
         during that quarter. Unless Borrower chooses to terminate the Committed
         Revolving Line on October 22, 2001 and gives Bank at least 30 days
         prior written notice of such termination, in the event Borrower chooses
         to terminate the Committed Revolving Line prior to October 22, 2002,
         all future quarterly commitment fees will be immediately due and
         payable upon such termination.

         4. The first sentence of Section 2.7 of the Agreement is hereby amended
in its entirety to read as follows: "This Agreement shall become effective on
the Closing Date and, subject to Section 12.7, shall continue in full force and
effect for so long as any Obligations remain outstanding or Bank has any
obligation to make Credit Extensions under this Agreement."

         5. The second paragraph of Section 6.3 of the Agreement is hereby
amended in its entirety to read as follows:

                  Within twenty (20) days after the last day of each month,
         Borrower shall deliver to Bank a Borrowing Base Certificate signed by a
         Responsible Officer in substantially the form of Exhibit C hereto,
         together with aged listings of accounts receivable and accounts payable
         and an inventory report in form and substance satisfactory to Bank,
         provided that, for any month during which no Obligations were
         outstanding

<PAGE>   28

         at any time under Section 2.1.1 or Section 2.1.3 of this Agreement,
         Borrower shall deliver the foregoing within thirty (30) days after the
         last day of such month.

         6. Section 6.9 is hereby amended in its entirety to read as follows:

                  6.9 Tangible Net Worth. Borrower shall maintain, as of the
         last day of each calendar month, a Tangible Net Worth of not less than
         (i) before the effective date of Borrower's initial public offering
         (the "IPO Date"), Seven Million Dollars ($7,000,000), increasing each
         quarter by 35% of Borrower's quarterly net operating profit after tax,
         or (ii) after the IPO Date, 25% of the net equity raised by Borrower in
         such initial public offering, increasing each quarter by 35% of
         Borrower's quarterly net operating profit after tax.

         7. Section 7.3 of the Agreement is hereby amended in its entirety to
read as follows:

                  7.3 Mergers or Acquisitions. Merge or consolidate, or permit
         any of its Subsidiaries to merge or consolidate, with or into any other
         business organization, or acquire, or permit any of its Subsidiaries to
         acquire, all or substantially all of the capital stock or property of
         another Person. Notwithstanding the foregoing, acquisitions in which
         Borrower is the surviving entity and which meet the following criteria
         will be permitted, provided that no Event of Default has occurred which
         is continuing at the time of the acquisition or would exist after
         giving effect to the acquisition: (i) the sole consideration is
         Borrower's stock, and, after giving effect to such acquisition, the
         change in Borrower's ownership is not greater than 25%, or (ii) cash
         acquisitions in which the aggregate consideration paid by Borrower does
         not exceed the Applicable Percentage of Borrower's Tangible Net Worth
         both immediately prior to and immediately after such acquisition. As
         used herein, "Applicable Percentage" means 25%, provided that if
         Borrower completes a public offering with aggregate gross cash proceeds
         to Borrower of at least $60,000,000, thereafter, "Applicable
         Percentage" shall mean 50%.

         8. Section 7.6 of the Agreement is hereby amended in its entirety to
read as follows:

                  7.6 Distributions. Pay any dividends or make any other
         distribution or payment on account of or in redemption, retirement or
         purchase of any capital stock.

         9. The Borrowing Base Certificate to be delivered after the date of
this Amendment shall be in substantially the form of Exhibit C hereto.

         10. The Compliance Certificate to be delivered after the date of this
Amendment shall be in substantially the form of Exhibit D hereto.

         11. Unless otherwise defined, all capitalized terms in this Amendment
shall be as defined in the Agreement. Except as amended, the Agreement remains
in full force and effect.

         12. Borrower represents and warrants that the representations and
warranties contained in the Agreement are true and correct as of the date of
this Amendment, and that no Event of Default has occurred and is continuing.

         13. This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one instrument.

         14. As a condition to the effectiveness of this Amendment, Bank shall
have received, in form and substance satisfactory to Bank, the following:

                  (a) this Amendment, duly executed by Borrower;

                  (b) a non-refundable loan fee of Five Thousand Dollars
($5,000), plus all Bank Expenses incurred through the date of this Amendment,
including reasonable attorneys' fees and expenses for preparation and
negotiation of this Amendment (not to exceed Five Hundred Dollars ($500) if
Borrower negotiates in good faith);
<PAGE>   29

                  (c) Corporate Resolutions to Borrow; and

                  (d) such other documents, and completion of such other
matters, as Bank may reasonably deem necessary or appropriate.

         IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the first date above written.

                                         ILX LIGHTWAVE CORPORATION

                                         By: /s/ Randall T. Dugger
                                             -------------------------
                                         Title: Vice President and CFO

                                         SILICON VALLEY BANK

                                         By: /s/
                                             -------------------------
                                         Title: Senior Vice President<PAGE>   1

                                                                    Exhibit 10.9

                                 LEASE AGREEMENT

                                     between

                          DaPuzzo Investment Group, LLC
                                   as Landlord

                                       and

                                 ILX Lightwave,

                                    as Tenant

                             6797 Winchester Circle
                                Boulder, Colorado

<PAGE>   2

                                TABLE OF CONTENTS
<TABLE>
<S>                                                                                                    <C>
1.       BASIC LEASE DEFINITIONS, EXHIBITS AND ADDITIONAL DEFINITIONS...................................1

2.       GRANT OF LEASE.................................................................................3

3.       RENT...........................................................................................4

4.       PERMITTED USE AND OCCUPANCY....................................................................5

5.       UTILITIES, HVAC AND SECURITY...................................................................6

6.       REPAIRS........................................................................................7

7.       ALTERATION AND IMPROVEMENTS....................................................................7

8.       LIENS..........................................................................................8

9.       INSURANCE......................................................................................8

10.      DAMAGE OR DESTRUCTION..........................................................................9

11.      WAIVERS AND INDEMNITIES.......................................................................10

12.      CONDEMNATION..................................................................................10

13.      ASSIGNMENT AND SUBLETTING.....................................................................11

14.      PERSONAL PROPERTY.............................................................................12

15.      END OF TERM...................................................................................12

16.      ESTOPPEL CERTIFICATES.........................................................................13

17.      TRANSFERS OF LANDLORD'S INTEREST..............................................................13

18.      RULES AND REGULATIONS.........................................................................14

19.      TENANT'S DEFAULT AND LANDLORD'S REMEDIES......................................................14

20.      LANDLORD'S DEFAULT AND TENANT'S REMEDIES......................................................16

21.      SECURITY DEPOSIT..............................................................................17

22.      BROKERS.......................................................................................17

23.      LIMITATIONS ON LANDLORD'S LIABILITY...........................................................17

24.      NOTICES.......................................................................................17

25.      MISCELLANEOUS.................................................................................17
</TABLE>

<PAGE>   3

                                 LEASE AGREEMENT
                             6797 WINCHESTER CIRCLE
                                BOULDER, COLORADO

          THIS LEASE AGREEMENT (this "Lease") is entered into as of the Date,
and by and between the Landlord and Tenant, identified in Section 1.1 below.

1    BASIC LEASE DEFINITIONS, EXHIBITS AND ADDITIONAL DEFINITIONS.

          1.1  Basic Lease Definitions. IN THIS LEASE, THE FOLLOWING DEFINED
               TERMS HAVE THE MEANINGS INDICATED:

(a)  "Date" means September 18, 2000.

(b)  "Landlord" means DaPuzzo Investment Group, LLC, a Colorado limited
     liability company.

               (c)  "Tenant" means ILX Lightwave, a Minnesota corporation.

               (d)  "Property" means Lot 8, Replat of Gunbarrel Technical
                    Center, County of Boulder, State of Colorado, located at
                    6797 Winchester Circle, Boulder, Colorado.

               (e)  "Premises" means the Property and the Building and all other
                    improvements located on the Property.

               (f)  "Building" means the building and other related improvements
                    located on the Property. The Building contains 36,496 square
                    feet of measured area.

               (g)  "Permitted Use" means any use permitted under applicable
                    Laws and the Declaration, and for no other use or purpose.

               (h)  "Commencement Date" is defined in the Work Letter attached
                    to this Lease as Exhibit C.

               (i)  "Term" means the duration of this Lease, which will be
                    approximately 10 years, beginning on the Commencement Date
                    and ending on the "Expiration Date" (as defined below),
                    unless terminated earlier or extended further as provided in
                    this Lease. The "Expiration Date" means (1) if the
                    Commencement Date is the first day of a month, the 10-year
                    anniversary of the day immediately preceding, the
                    Commencement Date; or (2) if the Commencement Date is not
                    the first day of a month, the 10-year anniversary of the
                    last day of the month in which the Commencement Date occurs.
                    The Term will also include any exercised renewal or
                    extension of this Lease.

               (j)  "Base Rent" means the Rent payable in each Lease Year
                    according to Section 3.1, as follows:

<TABLE>
<CAPTION>
                                                     Base Rent             Base Rent
                           Lease Year(s)             Per Month             Per Year
                           -------------             ---------             --------
<S>                                                  <C>                   <C>
                           Lease Year     1          $38,777.00            $465,324.00
                           Lease Year     2          $40,134.20            $481,610.34
                           Lease Year     3          $41,538.89            $498,466.70
                           Lease Year     4          $42,992.75            $515,913.04
                           Lease Year     5          $44,497.50            $533,969.99
                           Lease Year     6          $46,054.91            $552,658.94
                           Lease Year     7          $47,666.83            $572,002.01
                           Lease Year     8          $49,335.17            $592,022.08
                           Lease Year     9          $51,061.90            $612,742.85
                           Lease Year    10          $52,849.07            $634,188.85
</TABLE>

               (k)  "Security Deposit" means $38,777.00.

               (l)  "Landlord's Address" means:

                             DaPuzzo Investment Group
                             6325 Gunpark Drive, Suite 200
                             Boulder, CO 80301

<PAGE>   4

               (m)  "Tenant's Address" means:

                             ILX Lightwave, a Minnesota corporation
                             6797 Winchester Circle
                             Boulder, Colorado 80301-3513

               (n)  "Broker" means The Colorado Group, Inc., acting as a
                    transaction broker representing both Landlord and Tenant.
                    Landlord will pay Broker a commission in accordance with a
                    separate listing agreement with Broker.

               (o)  "Exhibits" means those exhibits listed in Section 25.15
                    below.

          1.2  ADDITIONAL DEFINITIONS. In addition to those terms defined in
               Section 1.1 and other sections of this Lease, the following
               defined terms when used in this Lease have the meanings
               indicated:

               (a)  "ADA" means the American with Disabilities Act, as amended
                    from time to time.

               (b)  "Additional Rent" means all amounts required to be paid by
                    Tenant under this Lease in addition to Base Rent, including,
                    without limitation, the costs of Taxes and Landlord's
                    premises Expenses.

               (c)  "Affiliates" means, with respect to any party, any persons
                    or entities that own or control, are owned or controlled by,
                    or are under common ownership or control with, such party
                    and such party's and each of such other person's or entity's
                    respective officers, directors, shareholders, partners,
                    venturers, members, managers, agents and employees. For
                    purposes of this definition, a party is "owned" by anyone
                    that owns more than 50% of the equity interests in such
                    party and a party is "controlled" by anyone that owns
                    sufficient voting interests to control the management
                    decisions of such party.

               (d)  "Landlord's Premises Expenses" means all costs (other than
                    those expressly excluded below) incurred or accrued by
                    Landlord during each calendar year for maintaining,
                    repairing and keeping the Premises (including the Building,
                    and the landscaping and parking areas of the Premises) in
                    good order and repair and as otherwise required pursuant to
                    Section 6.1 of this Lease, including, without limitation,
                    costs and expenses of insurance, repairs, maintenance.
                    Replacements, cleaning, snow removal, painting (including
                    painting of the exterior of the Building; the cost of such
                    complete exterior painting shall be amortized over the
                    useful life of such painting), resurfacing of any parking
                    areas (the cost of any substantial or complete resurfacing
                    shall be amortized over the useful life of such
                    resurfacing); the costs of all insurance deductibles paid by
                    Landlord; reasonable management fees calculated according to
                    any management agreement between Landlord and its managing
                    agent or property manager, if any; fees and expenses
                    (including reasonable attorneys' fees) incurred in
                    contesting the validity of any Laws that would cause an
                    increase in Landlord's Premises Expenses; costs of
                    replacements and improvements that are incurred by Landlord;
                    and costs of any capital improvements (depreciated over the
                    useful economic life of such improvements together with
                    interest, at the average Prime Rate in effect during each
                    such calendar year) by Landlord (1) for the purpose of
                    reducing Landlord's Premises Expenses, or (2) after the date
                    of this Lease and which are required under any Laws that
                    were not applicable to the Building at the time it was
                    constructed and which are not a result of the nature of
                    Tenant's use of the Premises (whether or not such Laws are
                    applicable to the Building as a result of Landlord's or any
                    tenant's status under such Laws, Landlord's or any tenant's
                    use, occupancy or alteration of any portion of the Building
                    or improvements made by or for any tenant in its premises).
                    Notwithstanding the foregoing, Landlord's Premises Expenses
                    will not include (1) mortgage principal or interest; (2)
                    leasing commissions; costs or expenses for which Landlord is
                    reimbursed by insurance proceeds; (4) legal fees incurred
                    for negotiating future leases of the Premises; (5) costs
                    directly and solely related to the maintenance and operation
                    of the entity that constitutes the Landlord, such as
                    accounting fees incurred solely for the purpose of reporting
                    Landlord's financial condition; and (6) the cost of any
                    capital improvements other than those referred to above.

               (e)  "Declaration" means any declaration of covenants or
                    reciprocal easement agreements recorded against the
                    Premises, as the same may be adopted, amended, supplemented,
                    or superseded from time to time.
<PAGE>   5

               (f)  "Encumbrance" means any ground lease, first mortgage, or
                    first deed of trust now or later encumbering the Premises
                    and all their renewals, modifications, supplements,
                    consolidations, and replacements.

               (g)  "Environmental Laws" means the Resource Conservation and
                    Recovery Act, 42 U.S.C. ss. 6901, et seq.; the Comprehensive
                    Environmental Response, Compensation and Liability Act, 42
                    U.S.C. ss. 9601, et seq. (including the so-called
                    "Superfund" amendments thereto); the Clean Water Act, 33
                    U.S.C. ss. 1251, et seq.; the Hazardous Materials
                    Transportation Act, 49 U.S.C. ss. 1801, et seq., the Toxic
                    Substances Control Act, 15 U.S.C. ss. 2601, et seq.; the
                    Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C.
                    ss. 136, et seq.; the Atomic Energy Act of 1954, 42 U.S.C.
                    ss. 2014, et seq., and any other applicable Laws governing,
                    or pertaining to any hazardous substances, hazardous wastes,
                    chemicals or other materials, including, without limitation,
                    asbestos, polychlorinated biphenyls, radon, petroleum
                    products and any derivative thereof or any common law theory
                    based on nuisance or strict liability.

               (h)  "Hazardous Substance" means any substance, chemical or
                    material declared to be, or regulated as hazardous or toxic
                    under any Environmental Law or the presence of which may
                    give rise to liability under any Environmental Law.

               (i)  "Laws" means any and all present or future federal, state or
                    local laws, statutes, ordinances, rules, regulations or
                    orders of any and all Governmental or quasi-governmental
                    authorities having jurisdiction.

               (j)  "Lease Year" means each successive period of 12 calendar
                    months during the Term, ending on the same day and month
                    (but not year, except in the case of the last Lease Year) as
                    the day and month on which the Expiration Date will occur.
                    If the Commencement Date is not the first day of a month,
                    the first Lease Year will be greater than 12 months by the
                    number of days from the Commencement Date to the last day of
                    the month in which the Commencement Date occurs.

               (k)  "Leasehold Improvements" is defined in the Work Letter
                    attached to this Lease as Exhibit C.

               (l)  "Lender" means the ground lessor of any around lease, the
                    mortgagee of any mortgage or the beneficiary of any deed of
                    trust, that constitutes an Encumbrance.

               (m)  "Prime Rate" means the rate of interest announced from time
                    to time by The Chase Manhattan Bank, or any successor to it,
                    as its prime rate. If The Chase Manhattan Bank, or any
                    successor to it, ceases to announce a prime rate, Landlord
                    will designate a reasonably comparable financial institution
                    for purposes of determining the Prime Rate.

               (n)  "Rent" means the Base Rent, Additional Rent, and all other
                    amounts required to be paid by Tenant under this Lease.

               (o)  "Taxes" means the amount incurred by Landlord on an accrued
                    basis during the Term according to generally accepted
                    accounting principles for that portion of the following
                    items that is allocable to the Premises: all ad valorem real
                    and personal property taxes and assessments, special or
                    otherwise, levied upon or with respect to the Premises, the
                    personal property used in operating the Premises, and the
                    additional charges payable by Tenant as a tenant of the
                    Premises, and imposed by any taxing authority having,
                    jurisdiction, all taxes, levies and charges which are
                    assessed, levied or imposed in replacement of, or in
                    addition to, all or any part of ad valorem real or personal
                    property taxes or assessments as revenue sources, and which
                    in whole or in part are measured or calculated by or based
                    upon the Premises, the leasehold estate of Tenant, or the
                    rents and other charges payable by Tenant; and any
                    reasonable expenses incurred by Landlord in attempting, to
                    reduce or avoid an increase in Taxes, including, without
                    limitation, reasonable legal fees and costs. Taxes will not
                    include any net income taxes of Landlord. Tenant
                    acknowledges that Taxes may increase during the Term and
                    that if the Premises is currently subject to a Taxes
                    abatement program and such program ceases to benefit the
                    Premises during the Term, Taxes will increase.

2    GRANT OF LEASE.

          2.1  DEMISE. Subject to the terms, covenants, conditions and
               provisions of this Lease, Landlord leases to Tenant and Tenant
               leases from Landlord the Premises for the Term to be used for the
               Permitted Use.
<PAGE>   6

          2.2  QUIET ENJOYMENT. Landlord covenants that during the Term Tenant
               will have quiet and peaceable possession of the Premises, subject
               to the terms, covenants, conditions and provisions of this Lease,
               and Landlord will not disturb such possession except as expressly
               provided in this Lease.

3    RENT.

          3.1  BASE RENT. Commencing on the Commencement Date and then
               throughout the Term, Tenant will pay Landlord Base Rent
               according, to the following provisions. Base Rent during each
               Lease Year (or portion of a Lease Year) will be payable in
               monthly installments in the amount specified for such Lease Year
               (or portion thereof) in Section 1.10), in advance, on or before
               the first day of each and every month during the Term. However,
               if the Term commences on other than the first day of a month or
               ends on other than the last day of a month, Base Rent for such
               month will be appropriately prorated based on the number of days
               in such month. Tenant covenants to pay all Rent when due to
               Landlord's Address, or to such other place of which Landlord
               notifies Tenant from time to time, and to observe and perform all
               of the terms, covenants and conditions applicable to Tenant in
               this Lease. Tenant further agrees that the covenant to pay Rent
               is an independent covenant, not subject to abatement, offset, or
               deduction, except as may be provided in this Lease.

          3.2  PAYMENT OF LANDLORD'S PREMISES EXPENSES AND TAXES. Commencing on
               the Commencement Date and continuing for the duration of the
               Term, Tenant agrees to pay Landlord, as Additional Rent, in the
               manner provided below, Landlord's Premises Expenses and Taxes.

               (a)  Estimated Payments. Prior to or within 60 days after the
                    beginning, of each calendar year, Landlord will notify
                    Tenant of Landlord's estimate of Landlord's Premises
                    Expenses and Taxes for such calendar year. For calendar year
                    2000, Landlord estimates that Landlord's Premises Expenses
                    will be approximately $18,248.00, insurance will be
                    approximately $2,198.00 and that Taxes will be approximately
                    $36,496.00. On or before the first day of each month during
                    each calendar year, Tenant will pay to Landlord, in advance,
                    1/12 of the sum of such estimated amounts; provided that
                    until such notice is given with respect to the ensuing
                    calendar year, Tenant will continue to pay on the basis of
                    the prior calendar year's estimate until the month after the
                    month in which such notice is given. In the month Tenant
                    first pays based on Landlord's new estimate, Tenant will pay
                    to Landlord 1/12 of the difference between the new estimate
                    and the prior year's estimate for each month which has
                    elapsed since the beginning of the current calendar year. If
                    at any time or times it appears to Landlord that Landlord's
                    Premises Expenses or Taxes for the then-current calendar
                    year will vary from Landlord's estimate by more than 10%,
                    Landlord may, by notice to Tenant, revise its estimate for
                    such year, and subsequent payments by Tenant for such year
                    will be based upon the revised estimate.

               (b)  Annual Settlement. As soon as practicable after the close of
                    each calendar year, but in no event more than 90 days after
                    the close of each calendar year, Landlord will deliver to
                    Tenant its statement of Landlord's Premises Expenses and
                    Taxes for such calendar year. If, on the basis of such
                    statement, Tenant owes an amount that is less than the
                    estimated payments previously made by Tenant for such
                    calendar year, Landlord will either refund such excess
                    amount to Tenant or credit such excess amount against the
                    next Additional Rent payment(s), if any, due from Tenant to
                    Landlord. If, on the basis of such statement, Tenant owes an
                    amount that is more than the estimated payments previously
                    made by Tenant for such calendar year, Tenant "-ill pay the
                    deficiency to Landlord within 30 days after the delivery of
                    such statement. If this Lease commences on a day other than
                    the first day of a calendar year or terminates on a day
                    other than the last day of a calendar year, Landlord's
                    Premises Expenses and Taxes applicable to the calendar year
                    in which such commencement or termination occurs will be
                    prorated on the basis of the number of days within such
                    calendar year that are within the Term.

               (c)  Final Payment. Tenant's obligation to pay Landlord's
                    Premises Expenses and Taxes that accrue but are not paid for
                    periods prior to the expiration OR early termination of the
                    Term will survive such expiration or early termination.
                    Prior to or as soon as practicable after the expiration or
                    early termination of the Term, Landlord may submit an
                    invoice to Tenant stating Landlord's estimate of the amount
                    by which Landlord's Premises Expenses and Taxes through the
                    date of such expiration or early termination will exceed
                    Tenant's estimated payments for the calendar year in which
                    such expiration or termination has occurred or will occur.
                    Tenant will pay the amount of any such excess to Landlord
                    within 30 days after the date of Landlord's invoices.

          3.3  TENANT'S TAXES. Tenant will pay, before delinquency, all taxes
               assessed or levied upon its occupancy of the Premises, or upon
               Tenant's leasehold improvements, trade fixtures, furnishings,

<PAGE>   7

               equipment, or other personal property of Tenant located on the
               Premises, and any other taxes (including, without limitation,
               sales taxes and employee withholding taxes) which, if unpaid,
               could become a lien or charge against any such property and are
               not paid by Tenant as Taxes pursuant to Section 3.2. When
               possible, Tenant will cause such leasehold improvements, trade
               fixtures, furnishings, equipment, or other personal property to
               be assessed and billed separately from the property of Landlord.
               Tenant will reimburse Landlord upon demand for any and all such
               taxes billed to and paid by Landlord if Landlord is charged such
               taxes due to (a) the cost or value of Tenant's equipment,
               furniture, fixtures and other personal property located in the
               Premises; (b) upon or measured by Rent; (c) upon or with respect
               to the possession, leasing, operation, management, maintenance,
               alteration, repair, use or occupancy by Tenant of the Premises or
               any portion of the Premises; and (d) upon this transaction or any
               document to which Tenant is a party creating or transferring an
               interest or an estate in the Premises. If it is not lawful for
               Tenant to reimburse Landlord, the Base Rent payable to Landlord
               under this Lease will be revised to yield to Landlord the same
               net rental after the imposition of any such tax upon Landlord as
               would have been payable to Landlord prior to the imposition of
               any such tax.

          3.4  TAX CONTESTS. Landlord agrees to use reasonable efforts to
               contest Taxes in a manner similar to efforts being pursued by
               landlords of similar industrial or flex space properties
               containing similar tenants in the metropolitan area of the
               Building provided, however, in the event Landlord reasonably
               believes that the savings resulting from any such tax contest
               would be less than the costs incurred in connection therewith,
               Landlord will not be required to conduct any tax contest. Tenant
               will not contest Taxes. Landlord will pay to Tenant, Tenant's
               proportionate share of any refund in Taxes received by Landlord
               for a calendar year for which Tenant paid Taxes hereunder, net of
               Landlord's costs of obtaining such refund.

          3.5  LATE PAYMENTS. To compensate Landlord for its additional cost of
               processing late payments for any payment of Rent which is not
               received within 7 days after it is due, Tenant will pay a late
               charge of 1% of the late payment, but not less than $100 or more
               than $1,000. In addition, all amounts payable under this Lease by
               Tenant to Landlord, if not paid when due, will bear interest from
               the due date until paid at the lesser of the highest interest
               rate permitted by law or 5% in excess of the then-current Prime
               Rate.

          3.6  RIGHT TO ACCEPT PAYMENTS. No receipt by Landlord of an amount
               less than Tenant's full amount due will be deemed to be other
               than payment "on account," nor will any endorsement or statement
               on any check or any accompanying letter effect or evidence an
               accord and satisfaction. Landlord may accept such check or
               payment without prejudice to Landlord's right to recover the
               balance or pursue any right of Landlord. No payments by Tenant to
               Landlord after the expiration or other termination of the Term,
               or after the giving of any notice (other than a demand for
               payment of money) by Landlord to Tenant, will reinstate, continue
               or extend the Term or make ineffective any notice given to Tenant
               prior to such payment. After notice or commencement of a suit, or
               after final judgment granting Landlord possession of the
               Premises, Landlord may receive and collect any sums of Rent due
               under this Lease, and such receipt will not void any notice or in
               any manner affect any pending suit or any judgment obtained.

4    PERMITTED USE AND OCCUPANCY.

          4.1  PERMITTED USE. Tenant agrees to use and occupy the Premises only
               for the Permitted Use and for no other purpose without the prior
               written consent of Landlord, which written consent shall not be
               unreasonably withheld or delayed.

          4.2  COMPLIANCE.

               (a)  Use. Tenant agrees to use the Premises in a safe, careful
                    and proper manner, and to comply, at Tenant's expense, with
                    all Laws applicable to Tenant's use, occupancy or alteration
                    of the Premises and with any Laws that require any
                    alterations to the Building due to Tenant's status under
                    such Laws, including without limitation, the ADA. If due to
                    the nature or manner of any use or occupancy of the Premises
                    by Tenant, any improvements or alterations to the Premises
                    or Building are required to comply with any Laws, or with
                    requirements of Landlord's insurers, then Tenant will pay
                    all costs of the required improvements, alterations or
                    changes in services. Tenant will not keep anything on the
                    Premises for any purpose which increases the insurance
                    premium cost or invalidates any insurance policy carried on
                    the Premises by Landlord. Tenant will pay, as Rent and upon
                    demand of Landlord, any such

<PAGE>   8

                    increased premium cost due to Tenant's use or occupation of
                    the Premises. Tenant will not cause, maintain or permit any
                    nuisance or waste in or about the Premises. In addition,
                    except as expressly provided otherwise in the Lease, Tenant
                    will keep the Premises free of debris, and anything of a
                    dangerous, noxious, toxic or offensive nature or which could
                    create a fire hazard or undue vibration, heat, noise, fumes,
                    vapors or odors. If any item of equipment, building material
                    or other property brought into the Building by Tenant or on
                    Tenant's request causes a dangerous, noxious, toxic or
                    offensive effect (including an environmental effect) and in
                    Landlord's reasonable opinion such effect will not be
                    permanent but will only be temporary and is able to be
                    eliminated, then Tenant will not be required to remove such
                    item, provided that Tenant promptly and diligently causes
                    such effect to be eliminated. pays for all costs of
                    elimination and indemnifies Landlord against all liabilities
                    arising from such effect.

               (b)  Hazardous Materials. Landlord and Tenant agree that, during
                    the Term, each will comply with all Laws, including, without
                    limitation, all Environmental Laws, governing, and all
                    procedures established by Landlord for the use, abatement,
                    removal, storage, disposal or transport of any Hazardous
                    Substances and any required or permitted alteration, repair,
                    maintenance, restoration, removal or other work in or about
                    the Premises that involves or affects any Hazardous
                    Substances. Except for the lawful use of cleaning-agents
                    used in the course of regular janitorial service, no
                    Hazardous Substances will be stored, used, released,
                    produced, processed or disposed in, on or about, or
                    transported to or from, the Premises by Tenant or any of
                    Tenant's agents, employees, contractors or invitees, without
                    first obtaining Landlord's express written consent (any
                    Hazardous Substances which are stored, used, released,
                    produced, processed or disposed in, on or about, or
                    transported to or from, the Premises by any of such persons
                    or entities are called "Tenant's Hazardous Substances"). If
                    such approval is granted, any such use, storage or
                    production of the Hazardous Substances shall be done in
                    compliance with all Environmental Laws. Tenant, at its
                    expense, will take all action necessary to restore the
                    Building and Premises to the condition existing prior to the
                    introduction of Tenant's Hazardous Substances, whether such
                    action is required by any governmental authority in order to
                    comply with applicable Laws or by Landlord in order for
                    Landlord to make the same economic use of the Building, and
                    Premises as Landlord could have made prior to the
                    introduction of Tenant's Hazardous Substances. Such action
                    may include, without limitation, the investigation of the
                    environmental condition of the Building or Premises, the
                    preparation of remediation plans or feasibility studies and
                    the performance of cleanup, remedial, removal or restoration
                    work. Tenant will obtain Landlord's written approval before
                    undertaking any action required by this Section 4.2(b),
                    which approval will not be unreasonably withheld or delayed
                    so long, as the proposed actions will not have an avoidable
                    material and adverse effect on the Building. Each party will
                    indemnify and hold the other and the other's Affiliates
                    harmless from and against any and all claims, costs and
                    liabilities (including reasonable attorneys' fees) arising
                    out of or in connection with any breach by such party of its
                    covenants under this Section 4.2(b). The parties'
                    obligations under this Section 4.2(b) will survive the
                    expiration or early termination of the Term.

          4.3  SIGNS AND DISPLAYS. Tenant will not place, cause or permit to be
               placed and maintained on the exterior of the Premises any sign,
               awning, lettering or other advertising matter, unless previously
               approved by Landlord in Landlord's reasonable discretion.
               Landlord agrees to allow Tenant, subject to Landlord's reasonable
               approval, to apply for the maximum amount of signage allowable
               under applicable Laws.

5    UTILITIES, HVAC AND SECURITY.

          5.1  UTILITIES. Tenant will pay for all electricity, gas, water, sewer
               or other utility service provided to the Premises from and after
               the Commencement Date and will arrange with the providers of such
               services for separate metering and direct billing to Tenant.
               Neither Landlord nor its agents or employees will be liable to
               Tenant or any of Tenant's employees, agents or anyone claiming
               through or under Tenant, for any damages, injuries, losses,
               expenses, claims, or causes of action,

<PAGE>   9

               because of any interruption, curtailment or discontinuance of any
               utility service nor shall any such interruption, curtailment or
               discontinuance be deemed an eviction or disturbance of Tenant's
               use or possession of the Premises or any part thereof, nor
               relieve Tenant from full performance of Tenant's obligations
               under this Lease; provided, however, that if any utility service
               to the Premises shall become unavailable for a period in excess
               of seventy-two (72) consecutive hours and such unavailability is
               directly and proximately caused by the gross negligence or
               intentional misconduct of Landlord, its agents, contractors or
               employees, all Base Rent shall abate until utility service to the
               Premises is restored.

          5.2  HVAC. Tenant will pay the cost for all heating, air conditioning
               and ventilation service provided to the Premises, including the
               cost of maintenance, repair, and replacement of same, including,
               without limitation, rooftop units. Tenant will maintain a
               preventative maintenance contract on the HVAC units in the
               Premises, which contract will provide for periodic maintenance in
               accordance with the manufacturer's specifications, by a
               contractor reasonably approved by Landlord. Tenant will deliver
               to Landlord a copy of such maintenance contract on or before the
               Commencement Date and each anniversary of the Commencement Date
               during the Term. In the event Tenant fails to maintain such
               preventative maintenance contract, Landlord, at its option, may
               arrange for such a preventative maintenance contract for the HVAC
               units; provided, however, Landlord has notified Tenant of such
               failure of Tenant to comply with the maintenance requirements set
               forth herein and Tenant has failed to cure such noncompliance
               within 30 days from receipt by Tenant of Landlord's notice, in
               which event the cost of such preventative HVAC maintenance will
               be billed directly to Tenant and will be paid within 10 days of
               receipt of invoice therefor. Landlord reserves the right to
               obtain preventative maintenance contracts on all the HVAC units
               on the Building, and to include the cost in Landlord's Premises
               Expenses.

          5.3  SECURITY. Tenant will be responsible for any security services to
               the Premises, but Tenant will only use security services which
               are reputable in the Boulder, Colorado market. In no event will
               landlord be liable to Tenant, and Tenant hereby waives any claim
               against Landlord and Landlord's Affiliates, for (a) any entry of
               third parties onto the Premises or into the Building; (b) any
               damage or injury to persons or property, or (c) any loss of
               property in or about the Premises or the Building occurring as a
               result of any unauthorized or criminal acts of third parties,
               regardless of any action, inaction, failure, breakdown,
               malfunction or insufficiency of any security services provided by
               Landlord, unless such damage to the Premises was the result of
               Landlord's gross negligence or intentional misconduct.

6    REPAIRS.

          6.1  LANDLORD MAINTENANCE AND REPAIRS. Landlord will keep the exterior
               supporting, walls, foundations, roof and down spouting of the
               Building, and the parking areas, landscaping, and sidewalks on
               the Premises in reasonable condition and in good repair, provided
               that the costs of such maintenance and repairs will be included
               as Landlord's Premises Expenses as provided in this Lease.

          6.2  TENANT'S MAINTENANCE AND REPAIRS. Subject to the tenets of
               Articles 4, 10, and 12, and Section 5.1, Tenant will, at
               Tenant's own expense and at all times during the Term, maintain
               the Building, all windows and doors in the Building, and Tenant's
               furnishings, equipment, personal property, and trade fixtures in
               the Building, and any mechanical, plumbing, electrical, heating,
               ventilating, air conditioning, and the mechanical installations
               serving the Building ("Equipment"), in good working order, clean
               condition, and repair and in a condition that complies with all
               applicable Laws, including, without limitation, the replacement
               of the Equipment, fixtures and all broken glass (with a glass of
               the same size and quality), at Tenant's expense. Tenant will also
               be responsible for the cost of repairing all damage to the
               Premises or Building (or any equipment or fixtures in or serving
               the same) caused by Tenant or its subtenants, or an), of their
               respective agents, employees, contractors, licensees or invitees.
               All work done by Tenant or its contractors (which contractors
               will be subject to Landlord's reasonable prior written approval)
               is subject to Landlord's approval and must be done in a
               first-class workmanlike manner using, only grades of materials at
               least equal in quality to the materials being replaced and will
               comply with all insurance requirements and all applicable Laws.
               Tenant will not overload the electrical wiring and ventilation or
               utilities serving the Building and will install at Tenant's sole
               expense, after first obtaining Landlord's written approval, any
               additional electrical wiring that may be required in connection
               with Tenant's apparatus, equipment or fixtures. In the event that
               any warranties exist from time to time during the Term that cover
               and/or apply to any of the items required to be maintained and/or
               repaired by

<PAGE>   10

               Tenant hereunder, Landlord shall, upon the prior written notice
               from Tenant, use reasonable efforts to assist Tenant in pursing
               warranty claims for such items; provided, however, that Landlord
               shall not be obligated to expend any cost or expense in pursuing,
               such warranty claims. Nothing contained herein shall obligate
               Landlord to make any repair or perform any maintenance which is
               the responsibility of Tenant under this Section 6.2.

          6.3  FAILURE TO MAINTAIN PREMISES. If Tenant fails to perform any of
               its obligations under Section 6.2, then Landlord may perform such
               obligations and Tenant will pay as Rent to Landlord the cost of
               such performance, including an amount sufficient to reimburse
               Landlord for overhead and supervision, within 10 days after the
               date of Landlord's invoice therefor. For purposes of performing
               such obligations, or to inspect the Building, Landlord may enter
               the Building upon not less than 12 hours' prior notice to Tenant
               (except in cases of actual or suspected emergency, in which case
               no prior notice will be required) without liability to Tenant for
               any loss or damage incurred as a result of such entry, provided
               that Landlord will take reasonable steps in connection with such
               entry to minimize any disruption to Tenant's business or Tenant's
               use of the Premises.

          6.4  NOTICE OF DAMAGE. Tenant will notify Landlord promptly after
               Tenant learns of (a) any fire or other casualty on the Premises;
               (b) any damage to or defect in the Building, including any
               fixtures or equipment in or serving the same, which was Caused by
               Tenant or its agents, employees, contractors or invitees, or for
               the repair of which Landlord might be responsible; and (C) any
               damage to or defect in any parts or appurtenances of the
               Equipment located in the Premises.

7    ALTERATION AND IMPROVEMENTS. Tenant may, from time to time, at its own
     expense make nonstructural changes, additions, and improvements to the
     Premises (including the Building) to better adapt the same to its business,
     provided that any such change, addition, or improvement exceeding
     $15,000.00 in total value shall be approved by Landlord subject to the
     terms and conditions described in Paragraphs 13 and 14 of Exhibit C
     attached to this Lease. All changes, additions and improvements to the
     Premises (including, the Building) (but excluding Tenant's trade fixtures),
     whether temporary or permanent in character, made or paid for by Landlord
     or Tenant will, without compensation to Tenant, become Landlord's property
     upon installation. If at the time Landlord consents to their installation,
     Landlord requests or approves the removal by Tenant of any such changes,
     additions or improvements upon termination of this Lease, Tenant will
     remove the same upon termination of this Lease as provided in Section 15.1.
     All other changes, additions and improvements will remain Landlord's
     property upon termination of this Lease and will be relinquished to
     Landlord in good condition, ordinary wear and tear excepted.

8    LIENS. Tenant agrees to pay before delinquency all costs for work, services
     or materials furnished to Tenant for the Premises, the nonpayment of which
     could result in any lien against the Premises. Tenant will keep title to
     the Premises free and clear of any such lien. Tenant will immediately
     notify Landlord of the filing of any such lien or any pending claims or
     proceedings relating to any such lien and will indemnify and hold Landlord
     harmless from and against all loss, damages and expenses (including
     reasonable attorneys' fees) suffered or incurred by Landlord as a result of
     such lien, claims and proceedings. In case any such lien attaches, Tenant
     agrees to cause it to be immediately released and removed of record
     (failing which Landlord may do so at Tenant's sole expense), unless Tenant
     has a good faith dispute as to such lien in which case Tenant may contest
     such lien by appropriate proceedings so long as Tenant deposits with the
     court or Landlord, whichever is required by applicable Laws, a bond or
     other security in an amount reasonably acceptable to Landlord and any
     Lender which may be used by Landlord to release such lien if Tenant's
     contest is abandoned or is unsuccessful. If Landlord incurs any legal costs
     in causing the removal of such lien, Tenant will pay all legal costs
     incurred by Landlord, including, without limitation, Landlord's reasonable
     attorneys' fees. Upon final determination of any permitted contest, Tenant
     will immediately pay any judgment rendered and cause the lien to be
     released.

9    INSURANCE.

          9.1  LANDLORD'S INSURANCE.

               (k)  During the Term as part of Landlord's Premises Expenses,
                    Landlord will provide and keep in force the following,
                    insurance for its benefit and the benefit of any Lender:

                    (1) all-risk or fire insurance (including standard extended
                    coverage endorsement perils, leakage from fire protective
                    devices and other water damage relating to the Building (but
                    excluding Leasehold Improvements, Equipment, and Tenant's
                    documents, files, and work products),

                    (2) loss of rental income insurance or loss of insurable
                    gross profits; and

                    (3) such other insurance (including boiler, machinery,
                    earthquake, flood, and commercial general liability
                    insurance) as Landlord reasonably elects to obtain or any
                    Lender requires.
<PAGE>   11

               (l)  Insurance maintained by Landlord under this Section 9.1 will
                    be in amounts that Landlord from time to time reasonably
                    determines sufficient or any Lender requires; will be
                    subject to such deductibles and exclusions as Landlord
                    reasonably determines will, in the case of insurance under
                    Section 9.1(a)(1), permit the release of Tenant from certain
                    liability under Section I 1.1; and will otherwise be on such
                    terms and conditions as Landlord from time to time
                    reasonably determines sufficient.

          9.2  TENANT'S INSURANCE. During the Term, Tenant will provide and keep
               in force the following insurance:

               (a)  Commercial general liability insurance relating to Tenant's
                    business (carried on, in or from the Premises) and Tenant's
                    use and occupancy of the Premises, for personal and bodily
                    injury and death, and damage to others' property, with
                    limits of not less than $2,000,000 for any one accident or
                    occurrence;

               (b)  All risk or fire insurance (including standard extended
                    endorsement perils, leakage from fire protective devices and
                    other water damage) relating, to Leasehold Improvements,
                    Equipment, inventory and stock-in-trade on a full
                    replacement cost basis in amounts sufficient to prevent
                    Tenant from becoming a co-insurer and subject only to such
                    deductibles and exclusions as Landlord may reasonably
                    approve;

               (c)  If any boiler or machinery is operated in the Premises,
                    boiler and machinery insurance;

               (d)  If Tenant operates owned, hired or non-owned vehicles on the
                    Premises, automobile liability insurance with limits of not
                    less than $1,000,000 combined bodily injury and property
                    damage; and

               (e)  Workers' compensation and employer's liability insurance in
                    any amounts required to comply with applicable Laws.

               Landlord, Landlord's property manager (if any), and any Lender
               will be named as additional insureds in the policy described in
               Section 9.2(a), which will include cross liability and
               severability of interests clauses and will be on an 11
               occurrence" (and not a "claims made") form. The policies
               described in Sections 9.2(b) and (c) will permit the release of
               Landlord from certain liability under Section 11.2. Tenant's
               insurance policies will be written by insurers that are rated
               A-IX or better by Best's Rating Guide and licensed in the State
               of Colorado, will be written as primary policies, not
               contributing with and not supplemental to the coverage that
               Landlord may carry, and will otherwise be upon such terms and
               conditions as Landlord from time to time reasonably requires,
               including limits on Tenant's deductibles. Tenant will file with
               Landlord, on or before the Commencement Date and at least 10 days
               before the expiration date of expiring policies, such copies of
               either current policies or certificates, or other proofs, as may
               be reasonably required to establish Tenant's insurance coverage
               in effect from time to time and payment of premiums. Tenant's
               insurers will agree to give Landlord and all other additional
               insureds at least 30 days' prior notice of any non-renewal, and
               at least 10 days' prior notice of any cancellation, of any
               insurance coverage required by this Section 9.2. If Tenant fails
               to insure or pay premiums, or to file satisfactory proof as
               required, Landlord may, upon a minimum of 24 hours' notice,
               effect such insurance and Tenant will pay to Landlord, on demand,
               the cost of any premiums paid by Landlord. Tenant shall be
               entitled to maintain an umbrella policy covering all of Tenant's
               assets.

10   DAMAGE OR DESTRUCTION.

          10.1 TERMINATION OPTIONS. If fire or other casualty damages the
               Building, Landlord will, promptly after learning of such damage.
               Notify Tenant in writing of the time necessary to repair or
               restore such damage, as estimated by Landlord's architect,
               engineer or contractor (the "Repair Notice"). If the damage
               renders the Premises or a material part of the Premises
               untenantable and such Repair Notice states that repair or
               restoration of all of such damage that was caused to the Premises
               cannot be completed within 180 days from the date of such damage
               (or within 30 days from the date of such damage if such damage
               occurred within the last 12 months of the Term), then Tenant will
               have the option to terminate this Lease. If such Repair Notice
               states that repair or restoration of all of such damage that was
               caused to the Building cannot be completed within 180 days from
               the date of such damage, or if such damage occurred within the
               last 12 months of the Term and such Repair Notice states that
               repair or restoration of all such damage that was caused to the
               Premises cannot be

<PAGE>   12

               completed within 30 days from the date of such damage, or if such
               damage renders more than 50% of the rentable area of the Build in
               untenantable, or if such damage is not insured against by the
               insurance policies required to be maintained by Landlord
               according to Section 9.1, then Landlord will have the option to
               terminate this Lease. Any option to terminate granted above must
               be exercised by written notice to the other party given within 10
               days after Landlord delivers to Tenant the Repair Notice. If
               either party exercises its option to terminate this Lease, the
               Term will expire and this Lease will terminate 10 days after
               notice of termination is delivered; provided, however, that Rent
               for the period commencing on the date of such damage until the
               date this Lease terminates will be reduced to the reasonable
               value of any use or occupation of the Premises by Tenant during
               such period. If Tenant elects to terminate the Lease, Landlord
               will be entitled to up to a maximum of $802,912.00 of the
               proceeds of Tenant's insurance for Leasehold Improvements and
               Equipment (excluding Tenant's furnishings, equipment, personal
               property, and trade fixtures in the Building).

          10.2 REPAIR OBLIGATIONS. If the Building is damaged by fire or other
               casualty and neither party terminates this Lease according to
               Section 10.1, then Landlord will repair and restore such damage
               with reasonable promptness, subject to delays for insurance
               adjustments and delays caused by matters beyond Landlord's
               control. However, Landlord will not be required to spend more for
               such repair and restoration than the insurance proceeds available
               to Landlord as a result of the fire or other casualty. To the
               extent Tenant is responsible for insuring Leasehold Improvements,
               Equipment, and Tenant's inventory and stock-in-trade, Tenant
               agrees, promptly upon notice from Landlord that Landlord is
               repairing the Building, to file such claims and pursue such
               repairs to the Premises in order to rebuild the Leasehold
               Improvements and Equipment to reopen Tenant's business within 20
               days after the completion of Landlord's repairs. Landlord will
               have no liability to Tenant and Tenant will not be entitled to
               terminate this Lease if Landlord's repairs and restoration are
               not in fact completed within the estimated time period, provided
               that Landlord promptly commences and diligently pursues such
               repairs and restoration to completion. In no event will Landlord
               be obligated to repair, restore or replace any of the property
               required to be insured by Tenant according to Section 9.2.

          10.3 RENT ABATEMENT. If any fire or casualty damage renders the
               Premises untenantable and if this Lease is not terminated
               according to Section 10.1, then Rent will abate beginning on the
               date of such damage. Such abatement will end on the earlier of 30
               days after the date Landlord has substantially completed the
               repairs and restoration Landlord is required to perform according
               to Section 10.2 or the date Tenant accepts the Premises for
               occupancy. Such abatement will be in an amount bearing the same
               ratio to the total amount of Rent for such period as the
               untenantable portion of the Premises bears to the entire
               Premises. In no event will Landlord be liable for any
               inconvenience or annoyance to Tenant or injury to the business of
               Tenant resulting in any way from damage caused by fire or other
               casualty or the repair of such damage, provided however that, to
               the extent Tenant remains in possession of a portion of the
               Premises, Landlord will take all reasonable steps to minimize the
               disruption to Tenant's business and use of such portion of the
               Premises during the period of repair.

11   WAIVERS AND INDEMNITIES.

          11.1 LANDLORD'S WAIVERS. Tenant and its Affiliates will not be liable
               or in any way responsible to Landlord for, and Landlord waives
               all claims against Tenant and its Affiliates for, any loss,
               injury or damage that is insured or required to be insured by
               Landlord under Section 9.1(a)(1), so long as such loss, injury or
               damage results from or in connection with this Lease or Tenant's
               use and occupancy of the Premises.

          11.2 TENANT'S WAIVERS. Except to the extent caused by the willful or
               negligent act or omission or breach of this Lease by Landlord or
               its agents or employees, Landlord and its Affiliates will not be
               liable or in any way responsible for, and Tenant waives all
               claims against Landlord and its Affiliates for, any loss, injury
               or damage suffered by Tenant or others relating to (a) loss or
               theft of, or damage to, property of Tenant or others; (b) injury
               or damage to persons or property resulting, from fire, explosion,
               failing plaster, escaping steam or gas, electricity, water, rain
               or snow, or leaks from any part of the Building or from any
               pipes, appliances or plumbing, or from dampness; or (c) damage
               caused by the public or by construction of any private or public
               work. In addition, Landlord and its Affiliates will not be liable
               or in any way responsible to Tenant for, and Tenant waives all
               claims against Landlord and its Affiliates for, any loss, injury
               or damage that is insured

<PAGE>   13

               or required to be insured by Tenant under Sections 9.2(b) or
               9.2(c), so long as such loss, injury or damage results from or in
               connection with this Lease.

          11.3 LANDLORD'S INDEMNITY. Subject to Section 11.2 and except to the
               extent caused by the willful or negligent act or omission or
               breach of this Lease by Tenant, its subtenants or licensees, or
               any of their respective agents, employees or invitees, Landlord
               will indemnify and hold Tenant harmless from and against any and
               all liability, loss, claims, demands, damages or expenses
               (including reasonable attorneys' fees) due to or arising out of
               any willful or negligent act or omission or breach of this Lease
               by Landlord or its agents or employees. Landlord's obligations
               under this Section 1 1.3 will survive the expiration or early
               termination of the Term.

          11.4 TENANT'S INDEMNITY. Subject to Section I 1. I and except to the
               extent caused by the willful or negligent act or omission or
               breach of this Lease by Landlord or its agents or employees,
               Tenant will indemnify and hold Landlord harmless from and against
               any and all liability, loss, claims, demands, damages or expenses
               (including reasonable attorneys' fees) due to or arising out of
               any willful or negligent act or omission of or breach of this
               Lease by Tenant, its subtenants or licensees, or any of their
               respective agents, employees or invitees. Tenant's obligations
               under this Section 1 1.4 will survive the expiration or early
               termination of the Tenn.

12   CONDEMNATION.

          12.1 FULL TAKING. If all or substantially all of the Premises are
               taken for any public or quasi-public use under any applicable
               Laws or by right of eminent domain. or are sold to the condemning
               authority in lieu of condemnation, then this Lease will terminate
               as of the date when the condemning authority takes physical
               possession of the Premises.

          12.2 PARTIAL TAKING.

               (a)  Landlord's Termination of Lease. If only part of the
                    Building- or Premises is thus taken or sold, and if after
                    such partial taking in Landlord's reasonable judgment,
                    alteration or reconstruction of any affected improvements
                    necessary for Tenant's use and enjoyment of the Premises is
                    not economically justified, then Landlord (whether or not
                    the Building is affected) may terminate this Lease by giving
                    written notice to Tenant within 60 days after the taking.

               (b)  Tenant's Termination of Lease. If over 20% of the Building-
                    is thus taken or sold, Tenant may terminate this Lease if in
                    Tenant's reasonable judgment the Building cannot be operated
                    by Tenant in an economically viable fashion because of such
                    partial taking,. Such termination by Tenant must be
                    exercised by written notice to Landlord given not later than
                    60 days after Tenant is notified of the taking of the
                    Building.

               (c)  Effective Date of Termination. Termination by Landlord or
                    Tenant will be effective as o the date when physical
                    possession of the applicable portion of the Building or
                    Premises is taken by the condemning authority.

               (d)  Election to Continue Lease. If neither Landlord nor Tenant
                    elects to terminate this Lease upon a partial taking, of a
                    portion of the Premises, the Rent payable under this Lease
                    will be diminished b an amount allocable to the portion of
                    the Premises which was so taken or sold. If this Lease is no
                    terminated upon a partial taking, of the Building, or
                    Premises, Landlord will, at Landlord's sole expense promptly
                    restore and reconstruct the Building- and Premises to
                    substantially their former condition to the extent the same
                    is feasible. However, Landlord will not be required to spend
                    for such restoration o reconstruction an amount in excess of
                    the net amount received by Landlord as compensation or
                    damage for the part of the Building or Premises so taken. In
                    the event landlord is unable to restore and reconstruct the
                    Building and Premises to substantially their former
                    condition to the extent the same is acceptable to Tenant, in
                    Tenant's reasonable business judgment, Tenant may terminate
                    this Lease. Such termination by Tenant must be exercised by
                    written notice to Landlord given not later than 30 days
                    after Tenant is notified of the completion of such
                    restoration and reconstruction of the Building, and
                    Premises.

          12.3 AWARDS. As between the parties to this Lease, Landlord will be
               entitled to receive, and Tenant assigns to Landlord, all of the
               compensation awarded upon taking of any part or all of the
               Premises, including an award for the value of the unexpired Term.
               However, Tenant may assert a claim in a

<PAGE>   14

               separate proceeding against the condemning authority for any
               damages resulting from the taking of Tenant's trade fixtures or
               personal property or for moving expenses, business relocation
               expenses or damages to Tenant's business incurred as a result of
               such condemnation.

13   ASSIGNMENT AND SUBLETTING.

          13.1 LIMITATION. Except as permitted in Section 13.7, "without
               Landlord's prior written consent, Tenant will not assign all or
               any of its interest under this Lease, sublet all or any part of
               the Premises or permit the Premises to be used by any parties
               other than Tenant and its employees.

          13.2 NOTICE OF PROPOSED TRANSFER; LANDLORD'S OPTIONS. If Tenant
               desires to enter into an assignment of this Lease or a sublease
               of all or any part of the Premises, Tenant will first give
               Landlord written notice, at least 30 days prior to the proposed
               assignment or sublease, of the proposed assignment or sublease,
               which notice will contain (a) the name and address of the
               proposed transferee, (b) the proposed use of the Premises if
               other than the Permitted Use, (c) statements reflecting the
               proposed transferee's current financial condition and income and
               expenses for the past two years, and (d) the principal terms of
               the proposed assignment or sublease. Tenant shall not permit the
               proposed transferee to occupy the Premises, or a portion thereof,
               without Landlord's written consent. Except in the case of any
               transfer permitted under Section 13.7, Landlord will have the
               option, which must be exercised, if at all, by notice given to
               Tenant within 20 days after Landlord's receipt of Tenant's notice
               of the proposed transfer, either (a) if Tenant's notice relates
               to a subletting, to sublet from Tenant such space as i described
               in the notice for such portion of the Term as is described in the
               notice, upon the same terms and condition and for the same Rent
               (apportioned, as appropriate, to the amount of such space) as
               provided in this Lease; or (b) i such notice relates to an
               assignment, to become Tenant's assignee.

          13.3 CONSENT NOT TO BE UNREASONABLY WITHHELD. If Landlord does not
               exercise its applicable option under Section 13.2, then Landlord
               will not unreasonably withhold or delay ITS consent to the
               proposed assignment o subletting if each of the following
               conditions is satisfied:

               (a)  the proposed transferee, in Landlord's opinion, has
                    sufficient financial capacity an business experience to
                    perform Tenant's obligations under this Lease;

               (b)  the proposed transferee will make use of the Premises which
                    in Landlord's reasonable opinion (1) is lawful; (2) is
                    consistent with the Permitted Use of the Premises under this
                    Lease; (3) i consistent with the general character of uses
                    conducted by the other occupants of the Gunbarrel Technical
                    Center; (4) will not increase the likelihood of damage or
                    destruction to the Building; (5) will not increase the rate
                    of wear and tear to the Building; and (6) will not cause an
                    increase in insurance premiums for insurance policies
                    applicable to the Building;

               (c)  the proposed transferee does not have a poor reputation in
                    the general business community (such as a reputation for
                    engaging in illegal or unethical business practices);

               (d)  if the proposed transfer is a sublease, the rent which the
                    proposed transferee will be required to pay will be equal to
                    at least 90% of the then-current market rent for the portion
                    of the premises being sublet;

               (e)  the proposed transferee, at the time of the proposed
                    transfer, is neither a tenant in any building owned or
                    managed by Landlord or any Affiliate of Landlord in the same
                    county in which the Building is located, nor a party with
                    whom Landlord is then negotiating for the lease of space in
                    the Gunbarrel Technical Center;

               (f)  at the time of the proposed transfer no "Default" (as
                    defined in Section 19.1) exists under this Lease beyond any
                    applicable notice and cure period; and

               (g)  the proposed transferee or Tenant will pay Landlord's
                    reasonable costs associated with Landlord's review and
                    approval of the proposed transfer, including, without
                    limitation, attorneys' fees and costs.

          13.4 FORM OF TRANSFER. If Landlord consents to a proposed assignment
               or sublease, Landlord's consent will not be effective unless and
               until Tenant delivers to Landlord an original duly executed
               assignment or sublease, as the case may be, that provides, in the
               case of a sublease, that the subtenant will comply with all
               applicable terms and conditions of this Lease and, in the case of
               an assignment, an assumption by the assignee of all of the terms,
               covenants and conditions which this Lease requires Tenant to
               perform.
<PAGE>   15

          13.5 PAYMENTS TO LANDLORD. If Landlord does not exercise its
               applicable option under Section 13.2 and Tenant effects an
               assignment or sublease, then Landlord will be entitled to receive
               and collect, either from Tenant or directly from the transferee,
               50% of the amount by which the consideration required to be paid
               by the transferee for the use and enjoyment of Tenant's rights
               under this Lease (after deducting from such consideration
               Tenant's reasonable costs incurred in effecting the assignment or
               sublease) exceeds the Rent payable by Tenant to Landlord
               allocable to the transferred space. Such percentage of such
               amount will be payable to Landlord at the time(s) Tenant receives
               the same from its transferee (whether in monthly installments, a
               lump sum, or otherwise). Landlord hereby agrees that Tenant shall
               be entitled to retain the remaining 50% of the amount by which
               the consideration required to be paid by the transferee for the
               use and enjoyment of Tenant's rights under this Lease exceeds the
               Rent payable by Tenant to Landlord allocable to the transferred
               space.

          13.6 Change of Ownership. Any change by Tenant in the form of its
               legal organization (such as, for example, a change from a general
               to a limited partnership), any transfer of 5 1 % or more of
               Tenant's assets, and any other transfer of interest effecting a
               change in identity of persons exercising effective control of
               Tenant will be deemed an "assignment" of this Lease requiring
               Landlord's prior written consent. The transfer of any outstanding
               capital stock of a corporation whose stock is publicly traded
               will not, however, be deemed a "transfer of interest" under this
               Section 13.6. Landlord acknowledges that Tenant plans to initiate
               an initial public offering, ("IPO") of Tenant's stock sometime
               prior to or during the Term and Landlord expressly agrees that
               Tenant's IPO does not constitute an "assignment" of this Lease
               requiring Landlord's prior written consent.

          13.7 Permitted Transfers. Tenant may, upon notice to Landlord but
               without obtaining Landlord's consent, assign this Lease or
               sublease all or any part of the Premises to a wholly-owned
               subsidiary of Tenant or the parent of Tenant, providing, that the
               financial statements of the resulting entity are better than, or
               equal to, those of the initial Tenant.

          13.8 Effect of Transfers. No subletting, or assignment will release
               Tenant from any of its obligations under this Lease unless
               Landlord agrees to the contrary in writing Acceptance of Rent by
               Landlord from any person other than Tenant will not be deemed a
               waiver by Landlord of any provision of this Section 13.8. Consent
               to one assignment or sub-letting will not be deemed consent to
               any subsequent assignment or subletting. In the event of any
               default by any assignee or subtenant or any successor of Tenant
               in the performance of any Lease obligation, Landlord may proceed
               directly against Tenant without exhausting remedies against such
               assignee, subtenant or successor. The voluntary or other
               surrender of this Lease by Tenant or the cancellation of this
               Lease by mutual agreement of Tenant and Landlord will not work a
               merger and will, at Landlord's option, terminate all or any
               subleases or operate as an assignment to Landlord of all or any
               subleases; such option will be exercised by notice to Tenant and
               all known subtenants in the Premises.

14   PERSONAL PROPERTY. Tenant may install in the Premises its personal property
     (including- Tenant's usual trade fixtures) in a proper manner, provided
     that no such installation will interfere with or damage the mechanical,
     plumbing or electrical systems or the structure of the Building, and
     provided further that if such installation would require any change,
     addition or improvement to the Premises, such installation will be subject
     to Section 7. Any such personal property installed in the Premises by
     Tenant (a) may be removed from the Premises from time to time in the
     ordinary course of Tenant's business or in the course of making any
     changes, additions or improvements to the Premises permitted under Section
     7, and (b) will be removed by Tenant at the end of the Term according to
     Section 15.1. Tenant will promptly repair at its expense any damage to the
     Premises and the Building resulting from such installation or removal.

15   END OF TERM.

          15.1 SURRENDER. Upon the expiration or other termination of the Term,
               Tenant will immediately vacate and surrender possession of the
               Premises in good order, repair and condition, except for ordinary
               wear and tear. Upon the expiration or other termination of the
               Term, Tenant agrees to remove (a) all chances, additions and
               improvements to the Premises the removal of which Landlord
               requested or approved according to Section 7 at the time Landlord
               consented to their installation, and (b) all of tenant's trade
               fixtures, furnishings, equipment and other personal property.
               Tenant will pay Landlord on demand the cost of repairing any
               damage to the Premises or Building caused by the installation or
               removal of any such items. Any of Tenant's property remaining on
               the Premises will

<PAGE>   16

               be conclusively deemed to have been abandoned by Tenant and may
               be appropriated, stored, sold, destroyed or otherwise disposed of
               by Landlord without notice or obligation to account to or
               compensate Tenant, and Tenant will pay Landlord on demand all
               costs incurred by Landlord relating to such abandoned property.

          15.2 HOLDING OVER. Tenant understands that it does not have the right
               to hold over at any time and Landlord may exercise any and all
               remedies at law or in equity to recover possession of the
               Premises, as well as any damages incurred by Landlord, due to
               Tenant's failure to vacate the Premises and deliver possession to
               Landlord as required by this Lease. If Tenant holds over after
               the Expiration Date with Landlord's prior written consent, Tenant
               will be deemed to be a tenant from month to month, at a monthly
               Base Rent, payable in advance, equal to an amount agreed to in
               writing by Landlord and Tenant, but in no event less than the
               monthly Base Rent payable during the last Lease Year of the Term,
               and Tenant will be bound by all of the other terms, covenants and
               agreements of this Lease as the same may apply to a
               month-to-month tenancy. If Tenant holds over after the Expiration
               Date without Landlord's prior written consent, Tenant will be
               deemed a tenant at sufferance, at a daily Base Rent, payable in
               advance, equal to 150% of the Base Rent per day payable during
               the last year of the Term, and Tenant will be bound by all of the
               other terms, covenants and agreements of this Lease as the same
               may apply to a tenancy at sufferance.

16   ESTOPPEL CERTIFICATES. Promptly upon Landlord's request after Tenant has
     occupied the Premises, Tenant will execute and deliver to Landlord an
     Occupancy Estoppel Certificate in the form of Exhibit A. In addition,
     Tenant agrees that at any time and from time to time (but on not less than
     10 days' prior request by Landlord), Tenant will execute, acknowledge and
     deliver to Landlord a certificate indicating- any or all of the following:
     (a) the Commencement Date and Expiration Date; (b) that this Lease is
     unmodified and in full force and effect (or, if there have been
     modifications, that this Lease is in full force and effect, as modified,
     and stating- the date and nature of each modification); (c) the date, if
     any, through which Base Rent, Additional Rent and any other Rent payable
     have been paid; (d) that no default by Landlord or Tenant exists which has
     not been cured, except as to defaults stated in such certificate-, (e) that
     Tenant has no existing- defenses or setoffs to enforcement of this Lease,
     except as specifically stated in such certificate: (o provided such events
     have occurred, that Tenant has accepted the Premises and that all
     improvements required to be made to the Premises by Landlord have been
     completed according to this Lease; (g) that, except as specifically stated
     in such certificate, Tenant, and only Tenant, currently occupies the
     Premises; and (h) such other matters as may be reasonably requested by
     Landlord. Any such certificate may be relied upon by Landlord and any
     prospective purchaser or present or prospective mortgagee, deed of trust
     beneficiary or ground lessor of all or a portion of the Building.

17   TRANSFERS OF LANDLORD'S INTEREST.

          17.1 SALE, CONVEYANCE AND ASSIGNMENT. Subject only to Tenant's rights
               under this Lease, nothing, in this Lease will restrict Landlord's
               right to sell, convey, assign or otherwise deal with the Premises
               or Landlord's interest under this Lease.

          17.2 EFFECT OF SALE, CONVEYANCE OR ASSIGNMENT. A sale, conveyance or
               assignment of the Premises will automatically release Landlord
               from liability under this Lease from and after the effective date
               of the transfer, except for any liability relating to the period
               prior to such effective date; and Tenant will look solely to
               Landlord's transferee for performance of Landlord's obligations
               relating TO the period after such effective date. This Lease will
               not be affected by any such sale, conveyance or assignment and
               Tenant will attorn to Landlord's transferee.

          17.3 SUBORDINATION AND NONDISTURBANCE. This Lease is and will be
               subject and subordinate in all respects to any Encumbrance. With
               respect to any Encumbrance first encumbering the Building
               subsequent to the Date of this Lease, upon Tenant's request,
               Landlord will use its good faith efforts to cause the Lender to
               agree (either in the Encumbrance or in a separate agreement with
               Tenant) that so long as Tenant is not in default of its
               obligations under this Lease, this Lease will not be terminated
               and Tenant's possession of the Premises will not be disturbed by
               the termination or foreclosure, or proceedings for enforcement,
               of such Encumbrance. While such subordination will occur
               automatically, Tenant agrees, upon request by and without cost to
               Landlord or any successor in interest, to promptly execute and
               deliver to Landlord or any Lender such instrument(s) as may be
               reasonably required to evidence such subordination. In the
               alternative, however, any Lender may unilaterally elect to
               subordinate its Encumbrance to this Lease.

          17.4 ATTORNMENT. If the interest of Landlord is transferred to any
               person (a "Transferee") by reason of the termination or
               foreclosure, or proceedings for enforcement, of an Encumbrance,
               or by delivery

<PAGE>   17

               of a deed in lieu of such foreclosure or proceedings, Tenant will
               immediately and automatically attorn to the Transferee. Upon
               attornment this Lease will continue in full force and effect as a
               direct lease between the Transferee and Tenant, upon all of the
               same terms, conditions and covenants as stated in this Lease,
               except that the Transferee will not be: (a) liable for any act or
               omission of an prior landlord, including, Landlord (but such
               exemption will not excuse the Transferee from the performance of
               any obligations of the landlord under this Lease required to be
               performed subsequent to the transfer to the Transferee)-, (b)
               subject to any offsets or defenses which Tenant might have
               against any prior landlord, including, Landlord (excluding, any
               express right of abatement granted under this Lease, provided
               that the Lender who held the Encumbrance the enforcement of which
               resulted in the transfer to the Transferee (the "Foreclosing
               Lender") was afforded any notice and cure rights to which it was
               entitled under Section 20.1 with respect to the matter that gave
               rise to such express right of abatement); (c) bound by any Rent
               or advance Rent which Tenant might have paid for more than the
               current month or the next succeeding month to any prior landlord,
               including Landlord, and all such Rent will remain due and owing,
               regardless of such advance payment; (d) obligated for repayment
               to Tenant of the Security Deposit or any other security or
               advance rental deposit made by Tenant, except to the extent the
               same is paid over to the Transferee; or (e) bound by any
               termination, amendment or modification of this Lease (other than
               one expressly contemplated by the terms of this Lease and
               effected according to such express terms, such as termination
               b, Landlord due to a Default by Tenant) made without the
               written consent of the Foreclosing Lender. Tenant agrees, upon
               request by and without cost to the Transferee, to promptly
               execute and deliver to the Transferee such instrument(s) as may
               be reasonably required to evidence such attornment.

18   RULES AND REGULATIONS. Tenant agrees to faithfully observe and comply with
     the Rules and Regulations set forth on Exhibit B and with all reasonable
     modifications and additions to such Rules and Regulations (which will be
     applicable to all Building tenants) from time to time adopted by Landlord
     and of which Tenant is notified in writing. No such modification or
     addition will contradict or abrogate any right expressly granted to Tenant
     under this Lease.

19   TENANT'S DEFAULT AND LANDLORD'S REMEDIES.

          19.1 DEFAULT. Each of the following events will constitute a material
               breach by Tenant and a "Default" under this Lease:

               (a)  Failure to Pay Rent. Tenant fails to pay Base Rent,
                    Additional Rent or any other Rent payable by Tenant under
                    the terms of this Lease when due, and such failure continues
                    for 7 days after written notice from Landlord to Tenant of
                    such failure; provided that with respect to Base Rent,
                    Landlord's Premises Expenses and Taxes, Tenant will be
                    entitled to only two notices of such failure during any
                    Lease Year and if, after two such notices are given in any
                    Lease Year, Tenant fails, during such Lease Year, to pay any
                    such amounts when due. Such failure will constitute Default
                    without further notice by Landlord or additional cure
                    period.

               (b)  Failure to Perform Other Obligations. Except as otherwise
                    specifically provided in this Lease, Tenant breaches or
                    fails to comply with any other provision of this Lease
                    applicable to Tenant, and such breach or noncompliance
                    continues for a period of 30 days after notice by Landlord
                    to Tenant; or, if such breach or noncompliance cannot be
                    reasonably cured within such 30-day period, Tenant does not
                    IN good faith commence to cure such breach or noncompliance
                    within such 30-day period or does not diligently complete
                    such cure within 90 days after such notice from Landlord.
                    However, if such breach or noncompliance causes or results
                    in (1) a dangerous condition on the Premises or Building, or
                    (2) any insurance coverage carried by Landlord or Tenant
                    with respect to the Premises or Building- being jeopardized,
                    then a Default will exist if such breach or noncompliance is
                    not cured as soon as reasonably possible after notice by
                    Landlord to Tenant, and in any event is not cured within 30
                    days after such notice. For purposes of this Section
                    19.1(b), financial inability will not be deemed a reasonable
                    ground for failure to immediately cure any breach of, or
                    failure to comply with, the provisions of this Lease.

               (c)  Non-Occupancy of Premises. Tenant fails to occupy and use
                    the Premises within 60 days after the Commencement Date or
                    leaves substantially all of the Premises unoccupied for 30
                    consecutive days or vacates and abandons substantially all
                    of the Premises.

               (d)  Transfer of Interest Without Consent. Tenant's interest
                    under this Lease or in the Premises is transferred or passes
                    to, or devolves upon, any other party in violation of
                    Section 13.
<PAGE>   18

               (e)  Execution and Attachment Against Tenant. Tenant's interest
                    under this Lease or in the Premises is taken upon execution
                    or by other process of law directed against Tenant, or is
                    subject to any attachment by any creditor or claimant
                    against Tenant and such attachment is not discharged or
                    disposed of within 30 days after levy.

               (f)  Bankruptcy or Related Proceedings. Tenant files a petition
                    in bankruptcy or insolvency, or for reorganization or
                    arrangement under any bankruptcy or insolvency Laws, or
                    voluntarily takes advantage of any such Laws by answer or
                    otherwise, or dissolves or makes an assignment for the
                    benefit of creditors, or involuntary proceedings under any
                    such Laws or for the dissolution of Tenant are instituted
                    against Tenant, or a receiver or trustee IS appointed for
                    the Premises or for all or substantially all of Tenant's
                    property, and such proceedings are not dismissed or such
                    receivership or trusteeship vacated within 60 days after
                    such institution or appointment.

          19.2 REMEDIES. Time is of the essence. If any Default occurs, Landlord
               will have the right, at Landlord's election, then or at any later
               time, to exercise any one or more of the remedies described
               below. Exercise of any of such remedies will not prevent the
               concurrent or subsequent exercise of any other remedy provided
               for in this Lease or otherwise available to Landlord at law or in
               equity.

               (a)  Cure by Landlord. Landlord may, at Landlord's option but
                    without obligation to do so, and without releasing Tenant
                    from any obligations under this Lease, make any payment or
                    take any action as Landlord deems necessary or desirable to
                    cure any Default in such manner and to such extent as
                    Landlord deems necessary or desirable. Landlord may do so
                    without additional demand on, or additional written notice
                    to, Tenant and without giving Tenant an additional
                    opportunity to cure such Default. Tenant covenants and
                    agrees to pay Landlord, upon demand, all advances, costs and
                    expenses of Landlord in connection with making any such
                    payment or taking, any such action, including reasonable
                    attorney's fees, together with interest at the rate
                    described in Section 3.5, from the date of payment of any
                    such advances, costs and expenses by Landlord.

               (b)  Termination of Lease and Damages. Landlord may terminate
                    this Lease, effective at such time as may be specified by
                    written notice to Tenant, and demand (and, if such demand is
                    refused, recover) possession of the Premises from Tenant.
                    Tenant will remain liable to Landlord for damages in an
                    amount equal to the Base Rent, Taxes, Landlord's Premises
                    Expenses and other Rent which would have been owing by
                    Tenant for the balance of the Term had this Lease not been
                    terminated, less the net proceeds, if any, of any reletting
                    of the Premises by Landlord subsequent to such termination,
                    after deducting all Landlord's expenses in connection with
                    such recovery of possession or reletting. Landlord will be
                    entitled to collect and receive such damages from Tenant on
                    the days on which such Rent would have been payable if this
                    Lease had not been terminated. Alternatively, at Landlord's
                    option, Landlord will be entitled to recover from Tenant, as
                    damages for loss of the bargain and not as a penalty, an
                    aggregate sum equal to (1) all unpaid Base Rent, Landlord's
                    Premises Expenses, Taxes and other Rent for any period prior
                    to the termination date of this Lease (including interest
                    from the due date to the date of the award at the rate
                    described in Section 3.5), plus any other sum of money and
                    damages owed by Tenant to Landlord for events or actions
                    occurring prior to the termination date; plus (2) the
                    present value at the time of termination (calculated at the
                    rate commonly called the discount rate in effect at the
                    Federal Reserve Bank of New York on the termination date) of
                    the amount, if any, by which (A) the aggregate of such Rent
                    payable by Tenant under this Lease that would have accrued
                    for the balance of the Term after termination (with respect
                    to Landlord's Premises Expenses and Taxes, such aggregate
                    will be calculated by assuming that Landlord's Premises
                    Expenses and Taxes for the calendar year in which
                    termination occurs and for each subsequent calendar year
                    remaining, in the Term if this Lease had not been terminated
                    will increase by 4% per year over the amount of Landlord's
                    Premises Expenses and Taxes for the prior calendar year),
                    exceeds (B) the amount of such Rent which Landlord will
                    receive for the remainder of the Term from any relenting of
                    the Premises occurring prior to the date of the award, or if
                    the Premises have not been relet prior to the date of the
                    award, the amount, if any, of such Rent which could
                    reasonably be recovered by reletting the Premises for the
                    remainder of the Term at the then-current fair rental value,
                    in either case taking into consideration loss of rent while
                    finding a new tenant, tenant improvements and rent
                    abatements necessary to secure a new tenant, leasing,
                    brokers' commissions and other costs which Landlord has
                    incurred or might incur in leasing, the Premises to a new
                    tenant; plus (3) interest on the amount described in (2)
                    above from the termination date to the date of the award at
                    the rate described in Section 3.5.
<PAGE>   19

               (c)  Repossession and Reletting. Landlord may reenter and take
                    possession of all or any part of the Premises, without
                    additional demand or notice, and repossess the same and
                    expel Tenant and any party claiming by, through or under
                    Tenant, and remove the effects of both using, such force for
                    such purposes as may be necessary, without being liable for
                    prosecution for such action or being deemed guilty of any
                    manner of trespass, and without prejudice to any remedies
                    for arrears of Rent or right to bring any proceeding for
                    breach of covenants or conditions. No such reentry or taking
                    possession of the Premises by Landlord will be construed as
                    an election by Landlord to terminate this Lease unless a
                    written notice of such intention is given to Tenant. No
                    notice from Landlord or notice given under a forcible entry
                    and detainer statute or similar Laws will constitute an
                    election by Landlord to terminate this Lease unless such
                    notice specifically so states. Landlord reserves the right,
                    following, any reentry or reletting to exercise its right to
                    terminate this Lease by giving Tenant such written notice,
                    in which event the Lease will terminate as specified in such
                    notice. After recovering possession of the Premises,
                    Landlord may, from time to time, but will not be obligated
                    to, relet all or any part of the Premises for Tenant's
                    account, for such term or terms and on such conditions and
                    other terms as Landlord, in its discretion, determines.
                    Landlord hereby acknowledges, however, that Landlord shall
                    mitigate its damages to the extent required by applicable
                    Laws. Landlord may make such repairs, alterations or
                    improvements as Landlord considers appropriate to accomplish
                    such reletting, and Tenant will reimburse Landlord upon
                    demand for all costs and expenses, including attorneys'
                    fees, which Landlord may incur in connection with such
                    reletting. Landlord may collect and receive the rents for
                    such reletting but Landlord will in no way be responsible or
                    liable for any failure to relet the Premises or for any
                    inability to collect an, rent due upon such reletting.
                    Regardless of Landlord's recovery of possession of the
                    Premises, Tenant will continue to pay on the dates specified
                    in this Lease, the Rent which would be payable if such
                    repossession had not occurred, less a credit for the net
                    amounts, if any, actually received by Landlord through any
                    reletting of the Premises. Alternatively, at Landlord's
                    option, Landlord will be entitled to recover from Tenant, as
                    damages for loss of the bargain and not as a penalty, an
                    aggregate sum equal to (1) all unpaid Base Rent, Taxes and
                    Landlord's Premises Expenses and other Rent for any period
                    prior to the repossession date (including interest from the
                    due date to the date of the award at the rate described in
                    Section 3.5), plus any other sum of money and damages owed
                    by Tenant to Landlord for events or actions occurring prior
                    to the repossession date; plus (2) the present value at the
                    time of repossession (calculated at the rate commonly called
                    the discount rate in effect at the Federal Reserve Bank of
                    New York on the repossession date) of the amount, if any, by
                    which (A) the aggregate of such Rent payable by Tenant under
                    this Lease that would have accrued for the balance of the
                    Term after repossession (with respect to Landlord's Premises
                    Expenses and Taxes, such aggregate will be calculated by
                    assuming that Landlord's Premises Expenses and Taxes for the
                    calendar year in which repossession occurs and for each
                    subsequent calendar year remaining in the Term if Landlord
                    had not repossessed the Premises will increase by 4% per
                    year over the amount of Landlord's Premises Expenses and
                    Taxes for the prior calendar year), exceeds (B) the amount
                    of such Rent which Landlord will receive for the remainder
                    of the Term from any reletting of the Premises occurring
                    prior to the date of the award, or if the Premises have not
                    been relet prior to the date of the award, the amount, if
                    any, of such Rent which could reasonably be recovered by
                    reletting the Premises for the remainder of the Term at the
                    then-current fair rental value, in either case taking into
                    consideration loss of rent while finding a new tenant,
                    tenant improvements and rent abatements necessary to secure
                    a new tenant, leasing brokers' commissions and other costs
                    which Landlord has incurred or might incur in leasing, the
                    Premises to a new tenant; plus (3) interest on the amount
                    described in (2) above from the repossession date to the
                    date of the award at the rate described in Section 3.5. In
                    no event will Landlord be required to pay Tenant any excess
                    amounts if Landlord successfully relets the Premises.

               (d)  Bankruptcy Relief. Nothing contained in this Lease will
                    limit or prejudice Landlord's right to prove and obtain as
                    liquidated damages in any bankruptcy, insolvency,
                    receivership, reorganization or dissolution proceeding, an
                    amount equal to the maximum allowable by any Laws governing
                    such proceeding in effect at the time when such damages are
                    to be proved, whether or not such amount be greater, equal
                    or less than the amounts recoverable, either as damages or
                    Rent, under this Lease.

<PAGE>   20

20   LANDLORD'S DEFAULT AND TENANT'S REMEDIES.

          20.1 DEFAULT. If Tenant believes that Landlord has breached or failed
               to comply with any provision of this Lease applicable to
               Landlord, Tenant will give written notice to Landlord describing
               the alleged breach or noncompliance. Landlord will not be deemed
               in default under this Lease if Landlord cures the breach or
               noncompliance within 20 days after receipt of Tenant's notice or,
               if the same cannot reasonably be cured within such 20-day period,
               if Landlord in good faith commences to cure such breach or
               noncompliance within such period and then diligently pursues the
               cure to completion. Tenant will also send a copy of such notice
               to any Lender of whom Tenant has been notified in writing and
               such Lender will also have the right to cure the breach or
               noncompliance within the period of time described above.

          20.2 REMEDIES. If Landlord breaches or fails to comply with any
               provision of this Lease applicable to Landlord, and such breach
               or noncompliance is not cured within the period of time described
               in Section 20.1, then Tenant may exercise any right or remedy
               available to Tenant at law or in equity, except to the extent
               expressly waived or limited by the terms of this Lease.

21   SECURITY DEPOSIT.

          21.1 DEPOSIT. Upon execution of this Lease, Tenant will deposit the
               Security Deposit with Landlord. The Security Deposit will be used
               solely as security for Tenant's faithful and diligent performance
               of all of Tenant's obligations under this Lease, including
               payment of Rent. The Security Deposit will remain in Landlord's
               possession for the entire Ten-n, and Landlord will not be
               required to segregate it from Landlord's general funds, unless
               required by Law. Tenant will not be entitled to any interest on
               the Security Deposit, unless required by Law.

          21.2 USE AND RESTORATION. If Tenant fails to perform any of its
               obligations under this Lease, Landlord may, at its option, use,
               apply or retain all or any part of the Security Deposit for the
               payment of (a) any Rent in arrears; (b) any expenses Landlord may
               incur as a direct or indirect result of Tenant's failure to
               perform; and (c) any other losses or damages Landlord may suffer
               as a direct or indirect result of Tenant's failure to perform. If
               Landlord so uses or applies all or any portion of the Security
               Deposit, Landlord will notify Tenant of such use or application
               and Tenant will, within 10 days after the date of Landlord's
               notice, deposit with Landlord a sum sufficient to restore the
               Security Deposit to the amount held by Landlord immediately prior
               to such use or application. Tenant's failure to so restore the
               Security Deposit will constitute Default.

          21.3 TRANSFERS. Tenant will not assign or encumber the Security
               Deposit without Landlord's express written consent. Neither
               Landlord nor its successors or assigns will be bound by any
               assignment or encumbrance unless Landlord has given its consent.
               Landlord shall, at any time and from time to time, transfer the
               Security Deposit to any purchaser or lessee of the Building. Upon
               any such transfer, Tenant agrees to look solely to the new owner
               or lessee for the return of the Security Deposit.

          21.4 REFUND. Provided that Tenant has fully and faithfully performed
               all of its obligations under this Lease, Landlord will refund the
               Security Deposit, or any balance remaining, to Tenant or, at
               Landlord's option, to the latest assignee of Tenant's interest
               under this Lease, within 60 days after the expiration or early
               termination of the Term and Tenant's vacation and surrender of
               the Premises to Landlord in the condition required by Section 15.
               1. If Tenant fails to make any final estimated payment of
               Landlord's Premises Expenses and Taxes required by Landlord
               according to Section 3.2(c), Landlord may withhold such final
               payment from the amount of the Security Deposit refund.

22   BROKERS. Landlord and Tenant represent and warrant that no broker or agent
     negotiated or was instrumental in negotiating or consummating, this Lease
     except the Broker. Neither party knows of any other real estate broker or
     agent who is or might be entitled to a commission or compensation in
     connection with this Lease. Landlord will pay all fees, commissions or
     other compensation payable to the Broker to be paid by Landlord according
     to Section I.I (n). Tenant and Landlord will indemnify and hold each other
     harmless from all damages paid or incurred by the other resulting, from any
     claims asserted against either party by brokers or agents claiming through
     the other party. Tenant hereby acknowledges that Tenant does not have any
     separate agreement with the Broker.

23   LIMITATIONS ON LANDLORD'S LIABILITY. Any liability for damages, breach, or
     nonperformance by Landlord or arising out of the subject matter of, or the
     relationship created by, this Lease will be collectible only out of
     Landlord's interest in the Premises and no personal liability is assumed
     by, or will at any time be asserted

<PAGE>   21

      against, Landlord, its Affiliates, shareholders, partners, owners or
      members, Landlord's property manager or asset manager, or any of its or
      their successors or assigns; all such liability, if any, being expressly
      waived and released by Tenant.

24    NOTICES. All notices required or permitted under this Lease must be in
      writing and will only be deemed properly given and received (a) when
      actually given and received, if delivered in person to a party who
      acknowledges receipt in writing; or (b) one business day after deposit
      with a private courier or overnight delivery service, if such courier or
      service obtains a written acknowledgment of receipt; or (c) two business
      days after deposit in the United States mails, certified or registered
      mail with return receipt requested and postage prepaid. All such notices
      must be transmitted by one of the methods described above to the party to
      receive the notice at, in the case of notices to Landlord, Landlord's
      Address. and in the case of notices to Tenant, Tenant's Address, or, in
      either case, at such other address(es) as either party may notify the
      other of according to this Section 24.

25    MISCELLANEOUS.

            25.1  BINDING EFFECT. Each of the provisions of this Lease will
                  extend to bind or inure to the benefit of, as the case may be,
                  Landlord and Tenant. and their respective heirs, successors
                  and assigns, provided this clause will not permit any transfer
                  by Tenant contract to the provisions of Section 13.

            25.2  COMPLETE AGREEMENT; MODIFICATION. All of the representations
                  and obligations of the parties are contained in this Lease and
                  no modification, waiver or amendment of this Lease or of any
                  of its conditions or provisions will be binding upon a party
                  unless in writing sign by such party.

            25.3  DELIVERY FOR EXAMINATION. Submission of the form of the Lease
                  for examination will not bind Landlord in any manner, and no
                  obligations will arise under this Lease until it is signed by
                  both Landlord and Tenant and delivery is made to each.

            25.4  NO AIR RIGHTS. This Lease does not grant any easements or
                  rights for light, air, or view. Any diminution or blockage of
                  light, air, or view by any structure or condition now or later
                  erected will not affect this Lease or impose any liability on
                  Landlord.

            25.5  ENFORCEMENT EXPENSES. Each party agrees to pay, upon demand,
                  all of the other party's costs, charges and expenses,
                  including the fees and out-of-pocket expenses of counsel,
                  agents, and others retained, incurred in successfully
                  enforcing the other party's obligations under this Lease.

            25.6  NO WAIVER. No waiver of any provision of this Lease will be
                  implied by any failure of either party to enforce any remedy
                  upon the violation of such provision, even if such violation
                  is continued or repeated subsequently. No express waiver will
                  affect any provision other than the one specified in such
                  waiver, and that only for the time and in the manner
                  specifically stated.

            25.7  RECORDING; CONFIDENTIALITY. Tenant will not record this Lease,
                  or a short form memorandum, without Landlord's written consent
                  and any such recording without Landlord's written consent will
                  be Default. Tenant agrees to keep the Lease terms, provisions
                  and conditions confidential and will not disclose them to any
                  other person without Landlord's prior written consent.
                  However, Tenant may disclose Lease terms, provisions and
                  conditions to Tenant's accountants, attorneys, managing
                  employees and others in privity with Tenant, as reasonably
                  necessary for Tenant's business purposes, without such prior
                  consent.

            25.8  CAPTIONS. The captions of sections are for convenience only
                  and will not be deemed to limit, construe, affect or alter the
                  meaning of such sections.

            25.9  INVOICES. All bills or invoices to be given by Landlord to
                  Tenant will be sent to Tenant's Address. Tenant may change
                  Tenant's Address by notice to Landlord given according to
                  Section 24. If Tenant fails to give Landlord specific written
                  notice of its objections within 60 days after receipt of any
                  bill or invoice from Landlord, such bill or invoice will be
                  deemed true and correct and Tenant may not later question the
                  validity of such bill or invoice or the underlying information
                  or computations used to determine the amount stated.

            25.10 SEVERABILITY. If any provision of this Lease is declared void
                  or unenforceable by a final judicial or administrative order,
                  this Lease will continue in full force and effect, except that
                  the void or

<PAGE>   22

                  unenforceable provision will be deemed deleted and replaced
                  with a provision as similar in terms to such void or
                  unenforceable provision as may be possible and be valid and
                  enforceable.

            25.11 JURY TRIAL. LANDLORD AND TENANT WAIVE TRIAL BY JURY IN ANY
                  ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY LANDLORD OR
                  TENANT AGAINST THE OTHER WITH RESPECT TO ANY MATTER ARISING
                  OUT OF OR IN CONNECTION WITH THIS LEASE, TENANT'S USE AND
                  OCCUPANCY OF THE PREMISES, OR THE RELATIONSHIP OF LANDLORD AND
                  TENANT. HOWEVER, SUCH WAIVER OF JURY TRIAL WILL NOT APPLY TO
                  ANY CLAIMS FOR PERSONAL INJURY.

            25.12 AUTHORITY TO BIND. The individuals signing this Lease on
                  behalf of Landlord and Tenant represent and warrant that they
                  are empowered and duly authorized to bind Landlord or Tenant,
                  as the case may be, to this Lease according to its terms.

            25.13 ONLY LANDLORD/TENANT RELATIONSHIP. Landlord and Tenant agree
                  that neither any provision of this Lease nor any act of the
                  parties will be deemed to create any relationship between
                  Landlord and Tenant other than the relationship of landlord
                  and tenant. Tenant has only a usufruct not subject to levy and
                  sale and not assignable by Tenant except as set forth in this
                  Lease.

            25.14 GOVERNING LAW. This Lease will be governed by and construed
                  according to the laws of the State of Colorado.

            25.15 EXHIBITS. The following exhibits are attached to and made a
                  part of this Lease by this reference:

                        Exhibit A                 Occupancy Estoppel Certificate
                        Exhibit B                 Rules and Regulations
                        Exhibit C                 Work Letter

                  Having read and intending to be bound by the terms and
                  provisions of this Lease, Landlord and Tenant have signed it
                  as of the date.

TENANT:                                LANDLORD:

                                       DaPuzzo Investment Group, LLC, a Colorado
ILX Lightwave, A Minnesota Company     limited liability company

By: /s/ Lawrence A. Johnson            By: /s/ Douglas C. DaPuzzo
    ------------------------------         -------------------------------------

Printed Name: Lawrence A. Johnson      Name: Douglas C. DaPuzzo
              --------------------

Title: President and CEO               Title: Manager
       ---------------------------

STATE OF MONTANA                        )
                                        ) ss:
COUNTY OF GALLATIN                      )

          The foregoing instrument was acknowledged before me this 21 day of
September 2000, by Lawrence A. Johnson as President/CEO of ILX Lightwave, a
Minnesota corporation.

          Witness my hand and official seal.

          My commission expires:  3/25/2004.

                                        [ILLEGIBLE]
                                        ----------------------------------------
                                        Notary Public

<PAGE>   23
STATE OF COLORADO                       )
                                        )ss:
COUNTY OF BOULDER                       )

          The foregoing instrument was acknowledged before me this 22nd day of
September, 2000, by Douglas C. DaPuzzo, as Manager of DaPuzzo Investment Group,
LLC, a Colorado limited liability company.

          Witness my hand and official seal.

          My commission expires:  4/28/2003.

                                        Christine M. Holland
                                        ----------------------------------------
                                        Notary Public

                                 [NOTARY SEAL]
<PAGE>   24

                                    EXHIBIT A
                             6797 WINCHESTER CIRCLE
                         OCCUPANCY ESTOPPEL CERTIFICATE

          THIS OCCUPANCY ESTOPPEL CERTIFICATE (this "Certificate") is made upon
this       day of                   , 200 , by ILX Lightwave., a Minnesota
corporation (the "Tenant"), with respect to and forming a part of that certain
Lease Agreement (the "Lease") dated                                  2000,
between DaPuzzo Investment Group, LLC, a Colorado limited liability company (the
"Landlord") and Tenant for the property and building located at 6797 Winchester
Circle, Boulder, Colorado (the "Premises").

          In consideration of the mutual covenants and agreements stated in the
Lease, and intending that this Certificate may be relied upon by Landlord and
any prospective purchaser or present or prospective mortgagee, deed of trust
beneficiary, or ground lessor of all or a portion of the Premises, Tenant
certifies as follows:

          1. Except for those terms expressly defined in this Certificate, all
initially capitalized terms will have the meanings stated for such terms in the
Lease.

          2. The Commencement Date occurred on and the Expiration Date will
occur on                      .

          3. Tenant's obligation to make monthly payments of Base Rent under the
Lease began (or will begin) on              and is paid current through the date
of this Certificate.

          4. Tenant's obligation to make monthly estimated payments of
Additional Rent under the Lease and is paid current through the date of this
Certificate.

          5. Tenant has accepted the Premises, and all leasehold improvements
and other work required to be performed by Landlord under the Lease have been
satisfactorily completed.

          6. Tenant has no existing offset, credit, or defense to the payment of
any Rent.

          IN WITNESS WHEREOF, Tenant has executed this Certificate as of the day
and year first written above.

                                     TENANT:

                                     ILX Lightwave, a Minnesota corporation

                                     By
                                        ----------------------------------------

                                     Printed Name
                                                  ------------------------------

                                     Title
                                           -------------------------------------

                                       A-1

<PAGE>   25

                                    EXHIBIT B
                             6797 WINCHESTER CIRCLE
                              RULES AND REGULATIONS

        Tenant covenants and agrees to comply with the following rules and
regulations as they may be modified or amended during the Term. Landlord will
not be responsible to Tenant for the nonperformance of such rules and
regulations by any other tenant or occupant of the Building.

1.   No awning or other projections shall be attached to the outside walls of
     the Building without, in each instance, the prior written consent of
     Landlord, which consent shall not be unreasonably withheld or delayed.

2.   No sign, advertisement, display, notice, or other lettering, shall be
     exhibited, inscribed, painted, or affixed on any part of the outside of the
     Building without, in each instance, the prior written consent of Landlord.
     All such signs, displays, advertisements, and notices of Tenant so approved
     by Landlord shall be maintained by Tenant in good and attractive condition
     at Tenant's expense and risk.

3.   No aerial, dish, antenna or telecommunications tower shall be erected on
     the roof or exterior walls of the Building, or on the grounds of the
     Premises without, in each instance, the prior written consent of Landlord.
     Any such item so installed without such written consent shall be subject to
     removal without notice at any time.

4.   No loud speakers, television sets, phonographs, radios, musical instruments
     or other devices shall be used in a manner so as to be heard or seen off
     the Premises without the prior written consent of Landlord.

5.   Tenant shall not make or permit any noise, odor or gases which Landlord
     deems objectionable to emanate from the Premises. Tenant shall not suffer,
     allow, or permit any vibration, light, or other effect to emanate from the
     Premises, or from any machine or other installation therein, or otherwise
     suffer, allow, or permit the same to constitute a nuisance or otherwise
     interfere with the safety, comfort, or convenience of Landlord or any of
     the other occupants of the Gunbarrel Technical Center. Upon notice by
     Landlord to Tenant that any of the aforesaid is occurring, Tenant agrees to
     forthwith remove or control the same.

6.   During the last nine months of this Lease, or any renewal or extension
     thereof, or at any time that Tenant may be in default hereunder, Landlord
     shall have the right, upon reasonable advance notice, to enter the Premises
     at all reasonable times during usual business hours for the purpose of
     showing the same to prospective tenants. Landlord may also place signs on
     the exterior of the Building which are visible from the exterior off the
     Premises, for the purpose of advertising the availability of the Premises
     for lease.

7.   Tenant shall not permit its employees, licensees or invitees, to smoke any
     tobacco products in the vicinity of any entrance to the Building. With
     Landlord's prior consent, which will not be unreasonably withheld or
     delayed, Tenant may establish an outdoor smoking area in the rear of the
     Building that is not visible from Winchester Circle. Tenant shall keep such
     area free of cigarette butts and other trash and debris.

                                       B-1

<PAGE>   26

                                    EXHIBIT C
                                   WORK LETTER

         1. Controlling Document; Terms. If there is any conflict or
inconsistency between the provisions of the Lease and those of this Exhibit C
(this "Work Letter"), the provisions of this Work Letter will control. Except
for those terms expressly defined in this Work Letter, all initially capitalized
terms will have the meanings stated for such terms in the Lease. The following
terms, which are not defined in the Lease, have the meanings indicated:

         (a)      "Scheduled Commencement Date" means February 1, 2001.

         (b)      "Commencement Date" means the first day of the Term, which
                  will be the Scheduled Commencement Date, unless the
                  Commencement Date is extended according to Paragraph 4 below.

         (c)      "Landlord's Representative" means Doug DaPuzzo. Landlord may
                  designate another person as Landlord's Representative at any
                  time by three days' prior written notice to Tenant.

         (d)      "Tenant's Representative" means Kevin Smith of Creative
                  Project Solutions, Inc. Tenant may designate another person as
                  Tenant's Representative at any time by three days' prior
                  written notice to Landlord.

         (e)      "Submission Date" means September 22, 2000.

         (f)      "Landlord's Allowance" means $802,912.00.

         (g)      "Leasehold Improvements" means all alterations, leasehold
                  improvements and installations to be constructed or installed
                  by Landlord for Tenant in the Building according to this Work
                  Letter, as described in the Construction Documents, but
                  excluding, any Base Building work.

         (h)      "Preliminary Plans" means space plans and general
                  specifications for the Leasehold Improvements.

         (i)      "Construction Documents" means complete construction plans and
                  specifications for the Leasehold Improvements.

         (j)      "Total Cost" means the total cost of obtaining all necessary
                  permits, undertaking all necessary preparation activities,
                  preparing the Preliminary Plans and the Construction
                  Documents, obtaining bids and estimates on all cost items,
                  constructing- and installing the Leasehold Improvements in the
                  Building, and providing any Building services required during
                  construction (such as electricity and other utilities, refuse
                  removal and janitorial). Total Cost will not include the cost
                  incurred by Landlord in conducting the initial meeting between
                  Tenant, Landlord and Landlord's architect to begin work on the
                  Preliminary Plans.

         (k)      "Base Building" means the installation of eight 15-ton rooftop
                  HVAC units with gas and electric hookups on the Building, the
                  installation of new windows in the Building as depicted on the
                  plan attached hereto as Attachment 1, the installation of
                  2,000 AMP, 277/48OV, 3-phase electric service to the Building
                  and the installation of the restrooms and plumbing per
                  Attachment 1. The Base Building work will be performed by
                  Landlord at its sole cost and expense, which costs will not be
                  included within Total Cost and will not be paid out of the
                  Landlord's Allowance.

         2. Landlord's Obligations. Landlord will proceed to complete the
Leasehold Improvements according to this Work Letter and tender possession of
the Premises to Tenant when the Leasehold Improvements have been completed to
the extent that only minor construction details that do not materially interfere
with Tenant's use and enjoyment of the Premises, require completion or
correction. Tenant will accept the Premises when Landlord tenders possession,
provided that the Leasehold Improvements have been substantially completed as
described above, and provided further that Tenant will not be required to accept
possession prior to the Scheduled Commencement Date. Landlord and Tenant agree
that all alterations, improvements and additions made to the Premises according
to this Work Letter, whether paid for by Landlord or Tenant, will, without
compensation to Tenant, become Landlord's property upon installation and will
remain Landlord's property at the expiration or earlier termination of the Term.
<PAGE>   27

        3. Early Occupancy. Subject to the reasonable approval of Landlord's
contractor, Tenant will have a license to access the Building during the 60-day
period preceding the day on which Landlord reasonably estimates that the
Leasehold Improvements will be substantially completed for the purpose of
permitting Tenant to complete installation of data, telephone and other
communications and furniture installations necessary for the conducting of
Tenant's business from the Premises ("Tenant's Installations"). The making of
Tenant's Installations and all work performed in connection therewith will be
subject to the terms and conditions of Paragraph 14 and subparagraphs (a)
through (e) of Paragraph 13. With Landlord's express written consent, Tenant may
occupy the Premises for regular conduct of Tenant's business prior to the
Scheduled Commencement Date. If Tenant takes possession of any part of the
Premises for its regular business purposes prior to the Scheduled Commencement
Date with Landlord's prior written consent, then: (a) all of the covenants and
conditions of the Lease will bind both parties with respect to such portion of
the Premises; (b) Tenant will pay Landlord Rent for the period of such occupancy
according to the Lease at the rates applicable to the first Lease Year, prorated
for the time and portion of the Premises so occupied; and (c) Tenant will not
encase in or permit any activities that interfere with any construction work
being conducted within or about the Building, by Landlord, its employees or
contractors. No early occupancy under this Paragraph 3 will change the
Commencement Date or the Termination Date.

        4. Delayed Occupancy. If Landlord fails to tender possession of the
Premises to Tenant according to Paragraph 2 above on or before the Scheduled
Commencement Date, Landlord will not be in default or liable in damages to
Tenant, nor will the obligations of Tenant be affected, provided, however, that:

         (a)      The Commencement Date will be extended automatically by one
                  day for each day of the period after the Scheduled
                  Commencement Date to the day on which Landlord tenders
                  possession of the Premises to Tenant in accordance with
                  Paragraph 2 above, less any portion of that period
                  attributable to Tenant's delay as more particularly described
                  in Paragraph 15, and

         (b)      if Landlord does not tender possession of the Premises to
                  Tenant in accordance with Paragraph 2 above on or before June
                  1, 2001 (as extended by any period of delay caused by Tenant's
                  delay as described in Paragraph 15 below), Tenant will have
                  the right to terminate the Lease by delivering written notice
                  of termination to Landlord not more than 30 days after such
                  tender deadline date. Upon a termination of this Lease under
                  this subparagraph (b), each party will, upon the other's
                  request, execute and deliver an agreement in recordable form
                  containing, a release and surrender of all right, title and
                  interest in and to the Lease; neither Landlord nor Tenant will
                  have any further obligations to each other, including, without
                  limitation, any obligations to pay for work previously
                  performed in the Premises; all improvements to the Premises
                  will become and remain the property of Landlord, and Landlord
                  will refund to Tenant any sums paid to Landlord by Tenant in
                  connection with the Lease, including,, without limitation, any
                  payments to Landlord of construction costs for the Premises.
                  Such postponement of the commencement of the Term and such
                  termination and refund right will be in full settlement of all
                  claims that Tenant might otherwise have against Landlord by
                  reason of Landlord's failure to substantially complete its
                  obligations under this Work Letter by the Scheduled
                  Commencement Date.

         5. Punch List. Subject to Paragraph 11, Tenant's taking possession of
any portion of the Premises will be conclusive evidence that such portion of the
Premises was in good order and satisfactory condition when Tenant took
possession, except as to any defects identified on a Punch list prepared and
signed by Landlord's Representative and Tenant's Representative after an
inspection of the Premises by both such parties when Tenant takes possession.
Landlord will correct and complete all punch list items as soon as practicable
following such inspection; provided, however, that Landlord will not be
responsible for any items of damage caused by Tenant, its agents, employees,
independent contractors or suppliers. No promises to alter, remodel or improve
the Premises or Building and no representations concerning the condition of the
Premises or Building have been made by Landlord to Tenant other than as may be
expressly stated in the Lease (including, this Work Letter).

        6. Representatives. Landlord appoints Landlord's Representative to act
for Landlord in all matters covered by this Work Letter. Tenant appoints
Tenant's Representative to act for Tenant in all matters covered by this Work
Letter. All inquiries, requests, instructions, authorizations and other
communications with respect to the matters covered by this Work Letter will be
made to Landlord's Representative or Tenant's Representative, as the case may
be.

        7. Preliminary Plans. On or before the Submission Date, Tenant will
cooperate with Landlord and submit all information necessary for preparation of
the Preliminary Plans (the "Design Information"). Each day after the Submission
Date until Tenant has provided all Desit7n Information will be a day of Tenant's
delay. Promptly after receipt of all Design Information, Landlord will cause its
Architect to prepare the Preliminary Plans based on the submitted Design
Information. Within 5 business days after receipt of the proposed Preliminary
Plans, Tenant will

<PAGE>   28

either approve the same in writing or notify Landlord in writing, of how the
proposed Preliminary Plans are inconsistent with the Design Information and how
the Preliminary Plans must be chanced in order to overcome Tenant's objections.
Each day following the 5th business day after the proposed Preliminary Plans are
submitted to Tenant until Tenant either approves them or delivers such notice of
objections will be a day of Tenant's delay. Upon receipt of Tenant's notice of
objections, Landlord will cause its architect to prepare revised Preliminary
Plans according to such notice and submit the revised Preliminary Plans to
Tenant. Upon submittal to Tenant of the revised Preliminary Plans, and upon
submittal of any further revisions, the procedures described above will be
repeated. If the revised Preliminary Plans or any further revisions, are
consistent with the Design Information and all requirements identified in
Tenant's prior notice(s) of objections, then each day following Landlord's
receipt of Tenant's notice of any additional objections until the day on which
Landlord receives Tenant's written approval of the Preliminary Plans will be a
day of Tenant's delay.

        8. Cost Estimate. At such time as Preliminary Plans that have been
approved in writing or by both Landlord and Tenant have been prepared, Landlord
will obtain from Landlord's contractor, and notify Tenant of, an estimate of the
Total Cost based on the approved Preliminary Plans ("Cost Estimate"). If the
Cost Estimate is less than or equal to Landlord's Allowance, then Tenant will be
deemed to have approved the Cost Estimate. If the Cost Estimate is greater than
Landlord's Allowance, then Tenant, at Tenant's option, may either approve the
Cost Estimate in writing, or elect to eliminate or revise one or more items
shown on the Preliminary Plans so as to reduce the Cost Estimate and then
approve in writing the reduced Cost Estimate (based on the revised Preliminary
Plans). If the Cost Estimate is greater than Landlord's Allowance, then each day
following the 5th business day after Tenant's receipt of such Cost Estimate
until the day Landlord receives Tenant's written approval of the Cost Estimate
(as the same may have been revised) will be a day of Tenant's delay.

        9. Construction Documents. At such time as the Cost Estimate has been
approved (or deemed approved) by Tenant, Landlord will cause its architect and
engineer to prepare the Construction Documents based strictly on the Preliminary
Plans. The Construction Documents will be subject to Landlord's approval. Within
5 business days after receipt of the Construction Documents, Tenant will either
approve the same in writing or notify Landlord in writing, of how the
Construction Documents are inconsistent with the Preliminary Plans and how the
Construction Documents must be changed in order to overcome Tenant's objections.
Each day following the 5th business day after the Construction Documents are
submitted to Tenant until Tenant either approves them or delivers such notice of
objections will be a day of Tenant's delay. Upon receipt of Tenant's notice of
objections, Landlord will cause its architect and engineer to prepare revised
Construction Documents according to such notice and submit the revised
Construction Documents to Tenant. Upon submittal to Tenant of the revised
Construction Documents, and upon submittal of any further revisions, the
procedures described above will be repeated. If the revised Construction
Documents, or any further revisions, are consistent with the Preliminary Plans
and all requirements identified in Tenant's prior notice(s) of objections, then
each day following Landlord's receipt of Tenant's notice of any additional
objections until the day on which Landlord receives Tenant's written approval of
the Construction Documents will be a day of Tenant's delay.

         10. Cost Proposal. At such time as the Construction Documents have been
reviewed and approved pursuant to Paragraph 9 above, Landlord will obtain from
Landlord's contractor a bid for the Total Cost and will notify Tenant of the
proposed Total Cost (the "Cost Proposal"). If the Cost Proposal is less than or
equal to the Cost Estimate approved (or deemed approved) by Tenant, then Tenant
will be deemed to have approved the Cost Proposal. If the Cost Proposal is
greater than the Cost Estimate approved (or deemed approved) by Tenant, then
Tenant, at Tenant's option, may either approve the Cost Proposal in writing or
elect to eliminate or revise one or more items shown on the Construction
Documents so as to reduce the Cost Proposal and then approve in writing the
reduced Cost Proposal (based on the revised Construction Documents). If the Cost
Proposal approved or deemed approved by Tenant is greater than Landlord's
Allowance, then Tenant will immediately deposit with Landlord an amount (the
"Construction Deposit") equal to one-half of the difference between Landlord's
Allowance and the approved Cost Proposal. Each day following the 5th business
day after Tenant's receipt of the Cost Proposal until the day on which Landlord
has received Tenant's written approval of the Cost Proposal (if required) and
Landlord has received the Construction Deposit (if required) will be a day of
Tenant's delay.

         11. Construction of Leasehold Improvements. At such time as Tenant has
approved (or is deemed to have approved) the Cost Proposal and has made any
required Construction Deposit, Landlord will cause the Leasehold Improvements
(and the Base Building work, if not already completed) to be constructed or
installed in the Premises in a good and workmanlike manner and according to the
Construction Documents and all applicable Laws. Upon substantial completion of
the construction and installation of the Leasehold Improvements and prior to
Tenant's occupancy of the Premises, Tenant will pay to Landlord the amount, if
any, by which the Total Cost exceeds the sum of the Landlord's Allowance and the
Construction Deposit. If Landlord's Allowance exceeds t e Total Cost, Tenant
will be entitled, during the Term of the Lease, to use the unused portion of
Landlord's Allowance (the "Remaining Landlord's Allowance") for Approved
Additional Leasehold Improvements. "Approved Additional Leasehold Improvements"
shall mean any additional alterations, leasehold improvements and installations
to be constructed or

<PAGE>   29
installed by Tenant in the Premises, excluding any repairs, replacements and/or
maintenance to the Base Building work and the Leasehold Improvements. Approved
Additional Leasehold Improvements shall be subject to Landlord's prior written
approval in accordance with the terms and provisions of the Lease and this Work
Letter, which approval shall not be unreasonably withheld or delayed. Plans and
specifications for Approved Additional Leasehold Improvements shall be subject
to Landlord's approval according to Paragraph 14 below. If Landlord approves
Tenant's plans for the Approved Additional Leasehold Improvements, Tenant may
perform or cause to be performed the Approved Additional Leasehold Improvements
in accordance with and subject to the applicable terms, covenants and conditions
of the Lease and this Work Letter, including specifically, without limitation,
Paragraph 13 below and Paragraphs 8 and 9 of the Lease. With respect to the
Approved Additional Leasehold Improvements, Landlord agrees to pay Tenant an
allowance to be applied to the cost of designing and performing the Approved
Additional Leasehold Improvements in an amount equal to the lesser of (a)
Tenant's costs; or (b) the Remaining Landlord's Allowance. Landlord will
distribute the Remaining Landlord's Allowance (or any portion thereof actually
used by Tenant as herein provided), in a single payment to Tenant within thirty
(30) days after (a) Tenant has completed all of the Approved Additional
Leasehold Improvements in the Premises, and (b) Tenant delivers to Landlord
original lien waivers from all contractors and any and all applicable
subcontractors or suppliers indicating that claims for mechanics' or material
men's liens with respect to the Approved Additional Leasehold Improvements for
the Premises have been waived. Additionally, Tenant shall provide to Landlord
written notice from all contractors and Tenant's architect (or other evidence
satisfactory to Landlord) that the Approved Additional Leasehold Improvements
for the Premises have been completed.

         12. Change Orders. Tenant's Representative may authorize chances in the
Leasehold Improvements work during construction only by written instructions to
Landlord's Representative on a form approved by Landlord. All such changes will
be subject to Landlord's prior written approval according to Paragraph 14 below.
Prior to commencing any change, Landlord will prepare and deliver to Tenant, for
Tenant's approval, a change order ("Change Order") identifying the total cost of
such change, which will include associated architectural, engineering and
construction contractor's fees, and an amount sufficient to reimburse Landlord
for overhead and related expenses incurred in connection with the Change Order.
If Tenant fails to approve and pay for such Change Order within 10 days after
delivery by Landlord, Tenant will be deemed to have withdrawn the proposed
change and Landlord will not proceed to perform the chance. Upon Landlord's
receipt of Tenant's approval and payment, Landlord will proceed to perform the
change.

         13.      Additional Tenant Work. If Tenant desires any work in addition
                  to the Leasehold Improvements and Tenant's Installations to be
                  performed in the Premises ("Additional Tenant Work"), Tenant,
                  at Tenant's expense, will cause plans and specifications for
                  such work to be prepared either by Landlord's architect or
                  engineer or by consultants of Tenant's own selection. All
                  plans and specifications for Additional Tenant Work will be
                  subject to Landlord's approval according to Paragraph 14
                  below. If Landlord approves Tenant's plans and specifications
                  for any Additional Tenant Work, Landlord will, subject to the
                  following terms and conditions, grant to Tenant and Tenant's
                  agents a license to enter the Premises prior to the Scheduled
                  Commencement Date in order that Tenant may perform or cause to
                  be performed the Additional Tenant Work according to the plans
                  and specifications previously approved by Landlord:

                  (a)      Tenant will give Landlord not less than 5 days prior
                           written notice of the request to have such access to
                           the Premises, which notice must contain or be
                           accompanied by: (i) a description and schedule for
                           the work to be performed by those persons and
                           entities for whom such early access is being
                           requested; (ii) the names and addresses of all
                           contractors, subcontractors and material suppliers
                           for whom such access is being requested; (iii) the
                           approximate number of individuals, itemized by trade,
                           who will be present in the Premises; (iv) copies of
                           all contracts pertaining to the performance of the
                           work for which such early access is being requested;
                           (v) copies of all licenses and permits required in
                           connection with the performance of the work for which
                           such access is being requested; (vi) certificates of
                           insurance and instruments of indemnification against
                           a claims, costs, expenses, damages, suits, fines,
                           penalties, actions, causes of action and liabilities
                           which may arise in connection with such work, and
                           (vii) assurances of the availability of funds
                           sufficient to pay for all such work, if such
                           assurances are requested by Landlord. Each of such
                           matters will be subject to Landlord's approval, which
                           approval will not be arbitrarily withheld.

                  (b)      Such early access is subject to scheduling by
                           Landlord.

                  (c)      Tenant's agents, contractors, workers, mechanics,
                           suppliers and invitees must work in harmony and not
                           interfere with Landlord and Landlord's agents in
                           doing work in the Premises and in other premises and
                           Common Areas of the Building or the general operation
                           of the Building. If at any time any agent,
                           contractor, worker, mechanic, supplier or invitee of
                           Tenant
<PAGE>   30

                           causes or threatens to cause disharmony or
                           interference, including labor disharmony, Landlord
                           may immediately withdraw Tenant's license for access.

                  (d)      If Landlord's work in the Premises and Tenant's work
                           in the Premises (under such license granted by
                           Landlord) progress simultaneously, Landlord will not
                           be liable for any injury to person or damage to
                           property of Tenant, or of Tenant's contractors,
                           employees, licensees or invitees, from any cause
                           whatsoever occurring upon or about the Premises, and
                           Tenant will indemnify and save Landlord harmless from
                           any and all liability and claims arising out of or
                           connected with any such injury or damage.

                  (e)      Tenant agrees that it is liable to Landlord for any
                           damage to the Building (including the Premises) or
                           any portion of the work in the Building caused by
                           Tenant or any of Tenant's employees, agents,
                           contractors, workers or suppliers.

         14. Landlord's Approval. All Preliminary Plans, Construction Documents
and Change Orders, and any drawing space plans, plans and specifications for
Tenant's Installations and any Additional Tenant Work or any other improvements
or installations in the Premises, are expressly subject to Landlord's prior
written approval. Landlord may withhold its approval of any such items that
require work which:

                  (a)      exceeds or adversely affects the capacity or
                           integrity of the Building's structure or any of its
                           heating, ventilating, air conditioning, plumbing,
                           mechanical, electrical, communications or other
                           systems;

                  (b)      is not approved by the holder of any encumbrance upon
                           the Premises;

                  (c)      violates any agreement which affects the Premises or
                           binds Landlord;

                  (d)      Landlord reasonably believes will reduce the market
                           value of the Premises at the end of the Term;

                  (e)      does not comply with any applicable Law or is not
                           approved by any governmental authority having
                           jurisdiction over the Premises; or

                  (f)      would create any unsafe or hazardous condition or
                           risk of casualty or injury to person or property.

         15. Tenant's Delays. The Term of the Lease (and therefore Tenant's
obligation for the payment of Rent) will not commence until Landlord has
substantially completed all work to be performed by Landlord pursuant to
Paragraph 11 above; provided, however, that if Landlord is delayed in
substantially completing such work as a result of:

                  (a)      any Tenant's delay described in Paragraphs 7, 8 or 9
                           above;

                  (b)      any Change Orders or changes in any drawings, plans
                           or specifications requested by Tenant;

                  (c)      tenant's failure to review or approve in a timely
                           manner any item requiring Tenant's review or
                           approval;

                  (d)      performance of any of Tenant's Installations or
                           Additional Tenant Work or any failure to complete or
                           delay in completion of such work; or

                  (e)      any other act or omission of Tenant or Tenant's
                           architects, engineers, contractors or subcontractors
                           (all of which will be deemed to be delays caused by
                           Tenant), then the Commencement Date will only be
                           extended under Paragraph 4 above until the date on
                           which Landlord would have substantially completed the
                           performance of such work but for such delays.

         16. General. No approval by Landlord or Landlord's architect or
engineer of any drawings, plans or specifications which are prepared in
connection with construction of improvements in the Premises will constitute a
representation or warranty by Landlord as to the adequacy or sufficiency of such
drawings, plans or specifications, or the improvements to which they relate, for
any use, purpose or condition, but such approval will merely be the consent of
Landlord to the construction or installation of improvements in the Premises
according to such drawings, plans or specifications. Failure by Tenant to pay
any amounts due under this Work Letter will have the same effect as failure to
pay Rent under the Lease, and such failure or Tenant's failure to perform any of
its other obligations under this Work Letter will, subject to the notice and
cure provisions of the Lease, constitute a Default under Section 19.1 of the
Lease, entitling Landlord to all of its remedies under the Lease as well as all
remedies otherwise available to Landlord.

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