Document:

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                                                                    EXHIBIT 10.7

                                 LOAN AGREEMENT

                  THIS LOAN AGREEMENT, dated as of July 31, 2000 is by and
between Applied Epi, Inc., a corporation organized under the laws of the State
of Minnesota (the "Borrower"), and U.S. Bank National Association, a national
banking association (the "Lender").

                                    ARTICLE I

                        DEFINITIONS AND ACCOUNTING TERMS

                  Section 1.1 Defined Terms. As used in this Agreement the
following terms shall have the following respective meanings:

                  "Business Day": Any day (other than a Saturday, Sunday or
legal holiday in the State of Minnesota) on which national banks are permitted
to be open for business in Minneapolis, Minnesota.

                  "Closing Date": The date on which the conditions set forth in
Section 3.1 have been satisfied and the Loan is closed.

                  "Default": Any event which, with the giving of notice (whether
such notice is required under Section 6.1, or under some other provision of this
Agreement, or otherwise) or lapse of time, or both, would constitute an Event of
Default.

                  "Default Rate": As defined in the Note.

                  "ERISA": The Employee Retirement Income Security Act of 1974,
as amended.

                  "Event of Default": Any event described in Section 6.1.

                  "Financing Statement": The Financing Statement(s) executed by
the Borrower, as Debtor, in favor of the Lender, as Secured Party.

                  "GAAP": Generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession, which are applicable to the circumstances as of any
date of determination.

                  "Governmental Requirements": All laws, statutes, codes,
ordinances, and governmental rules, regulations and requirements applicable to
the Borrower, the Lender and the Project.

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                  "Guarantor": Applied Epi International, Inc., a Minnesota
corporation, Applied EPI Europe, Inc., a Minnesota corporation, and Paul E.
Colombo, an individual, whether one or more.

                  "Guaranty": The Guaranty dated of even date herewith, executed
by the Guarantor in favor of Lender.

                  "Improvements": The buildings and improvements located upon
the Land, if any.

                  "Indemnification Agreement": The Environmental and ADA
Indemnification Agreement dated of even date herewith, executed by the Borrower
and the Guarantor in favor of Lender.

                  "Land": The land legally described on Exhibit A attached
hereto and hereby made a part hereof.

                  "Lease": Any lease or other document or agreement, written or
oral, permitting any Person to use or occupy any part of the Project.

                  "Lien": With respect to any Person, any security interest,
mortgage, pledge, lien, charge, encumbrance, title retention agreement or
analogous instrument or device (including the interest of each lessor under any
capitalized lease), in, of or on any assets or properties of such Person, now
owned or hereafter acquired, whether arising by agreement or operation of law.

                  "Loan": As defined in Section 2.1.

                  "Loan Documents": This Agreement, the Note, the Mortgage, the
Indemnification Agreement, the Financing Statement, the Guaranty and any other
document collateral to or as security for the Loan.

                  "Loan Fee": As defined in Section 2.3.

                  "Material Adverse Effect": A material adverse effect on (a)
the business operations, property or condition (financial or otherwise) of the
Borrower and its Subsidiaries taken as a whole, (b) the ability of the Borrower
or any Guarantor to perform its obligations under the Loan Documents to which it
is a party or (c) the validity or enforceability of (i) this Agreement, the Note
or other Loan Documents or (ii) the rights and remedies of the Lender herein or
thereunder, including without 1imitation, the ability of the Lender to realize
on any material portion of the collateral.

                  "Maturity Date": August 1, 2005.

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                  "Mortgage": The Mortgage, Security Agreement, Assignment of
Leases and Rents and Fixture Financing Statement dated of even date herewith,
executed by the Borrower in favor of the Lender.

                  "Note": The Note dated of even date herewith, in the amount of
the Loan, executed by the Borrower and payable to the order of the Lender.

                  "Obligations": The Borrower's obligations in respect of the
due and punctual payment of principal and interest on the Note when and as due,
whether by acceleration or otherwise and all fees, expenses, indemnities,
reimbursements and other obligations of the Borrower under this Agreement or any
other Loan Document, in all cases whether now existing or hereafter arising or
incurred.

                  "Permitted Encumbrances": The liens, charges and encumbrances
on title to the Project listed on Schedule B of the Title Policy.

                  "Person": Any natural person, corporation, partnership,
limited partnership, joint venture, firm, association, trust, unincorporated
organization, government or governmental agency or political subdivision or any
other entity, whether acting in an individual, fiduciary or other capacity.

                  "Project": The Land, the Improvements and all fixtures,
equipment and personal property now or hereafter owned by the Borrower and
located or to be located in or on, and used in connection with the management,
maintenance or operation of, the Land and the Improvements.

                  "Regulatory Change": Any change after the date of this
Agreement in federal, state or foreign laws or regulations or the adoption or
making after such date of any interpretations, directives or requests applying
to a class of banks including the Lender under any federal, state or foreign
laws or regulations (whether or not having the force of law) by any court or
governmental or monetary authority charged with the interpretation or
administration thereof.

                  "Subsidiary": Any corporation or other entity of which
securities or other ownership interests having ordinary voting power for the
election of a majority of the board of directors or other Persons performing
similar functions are owned by the Borrower either directly or through one or
more Subsidiaries.

                  "Tenant": Any Person using or occupying any part of the
Project pursuant to a Lease.

                  "Title Company": Old Republic National Title Insurance
Company.

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                  "Title Policy": A current ALTA form loan title insurance
policy, dated as of the date of recording of the Mortgage, containing such
endorsements and assurances as the Lender may require, and containing only those
exceptions approved by the Lender.

                  Section 1.2 Accounting Terms and Calculations. Except as may
be expressly provided to the contrary herein, all accounting terms used herein
shall be interpreted and all accounting determinations hereunder shall be made
in accordance with GAAP.

                  Section 1.3 Other Definitional Terms, Terms of Construction.
The words "hereof", "herein" and "hereunder" and words of similar import when
used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. References to Sections, Exhibits,
Schedules and like references are to Sections, Exhibits, Schedules and the like
of this Agreement unless otherwise expressly provided. The words "include",
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation". Unless the context in which used herein otherwise clearly requires,
"or" has the inclusive meaning represented by the phrase "and/or". All
incorporations by reference of covenants, terms, definitions or other provisions
from other agreements are incorporated into this Agreement as if such provisions
were fully set forth herein, and include all necessary definitions and related
provisions from such other agreements. All covenants, terms, definitions and
other provisions from other agreements incorporated into this Agreement by
reference shall survive any termination of such other agreements until the
obligations of the Borrower under this Agreement and the Note are irrevocably
paid in full.

                                   ARTICLE II

                                TERMS OF LENDING

                  Section 2.1 Loan. Upon the terms and subject to the conditions
hereof, the Lender agrees to make a loan (the "Loan') to the Borrower of
$1,650,000 on the Closing Date.

                  Section 2.2 The Note; Interest and Repayment. The Loan shall
be evidenced by the Note. The Lender shall enter in its ledgers and records the
payments made on the Loan, and the Lender is authorized by the Borrower to enter
on a schedule attached to the Note a record of such payments. The Note shall
accrue interest and shall be payable, together with interest thereon, and may be
prepaid, if at all, and is subject to mandatory prepayment, as provided in the
Note. If not sooner paid, the Note, together with all accrued and unpaid
interest thereon, shall be due and payable in full on the Maturity Date.

                  Section 2.3 Loan Fee. In consideration of the Lender's
agreement to make the Loan, the Borrower shall pay the Lender, at or prior to
the closing of the Loan, a loan fee in the amount of $8,250.

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                  Section 2.4 Capital Adequacy. In the event that any Regulatory
Change reduces or shall have the effect of reducing the rate of return on the
Lender's capital or the capital of its parent corporation (by an amount the
Lender deems material) as a consequence of the Loan to a level below that which
the Lender or its parent corporation could have achieved but for such Regulatory
Change (taking into account the Lender's policies and the policies of its parent
corporation with respect to capital adequacy), then the Borrower shall, within
five days after written notice and demand from the Lender, pay to the Lender
additional amounts sufficient to compensate the Lender or its parent corporation
for such reduction. Any determination by the Lender under this Section and any
certificate as to the amount of such reduction given to the Borrower by the
Lender shall be final, conclusive and binding for all purposes, absent error.

                  Section 2.5 Use of Proceeds. The proceeds of the Loan shall be
used for the financing of the purchase of the Land.

                                   ARTICLE III

                              CONDITIONS PRECEDENT

                  Section 3.1 Conditions of the Loan. The obligation of the
Lender to make the Loan hereunder shall be subject to the prior or simultaneous
fulfillment of each of the following conditions:

                  3.1(a) Documents. The Lender shall have received the documents
and other materials as set forth on Schedule 3.1(a) attached hereto and hereby
made a part hereof.

                  3.1(b) Other Matters. All organizational and legal proceedings
relating to the Borrower and the Guarantor and all instruments and agreements in
connection with the transactions contemplated by this Agreement shall be
satisfactory in scope, form and substance to the Lender and its counsel, and the
Lender shall have received all information and copies of all documents,
including records of corporate proceedings, which it may reasonably have
requested in connection therewith, such documents where appropriate to be
certified by Borrower, Guarantor or governmental authorities.

                  3.1(c) Fees and Expenses. The Lender shall have received the
Loan Fee and all other fees and amounts due and payable by the Borrower on or
prior to the Closing Date, including the reasonable fees and expenses of counsel
to the Lender payable pursuant to Section 7.2.

                  3.1(d) Perfection. The Mortgage and the Financing Statement,
and any other Loan Document creating or evidencing a lien or security interest
which Lender requires to be filed of record, shall have been appropriately filed
to the satisfaction of the Lender and the priority and perfection of the Lien
created thereby shall have been established to the satisfaction of the Lender.

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                  3.1(e) No Default. All representations and warranties of the
Borrower made in this Agreement shall remain true and correct and no Default or
Event of Default shall exist.

                                   ARTICLE IV

                         REPRESENTATIONS AND WARRANTIES

                  The Borrower represents and warrants to the Lender:

                  Section 4.1 Organization, Standing, Etc. The Borrower is a
corporation duly organized and validly existing and in good standing under the
laws of the jurisdiction of its organization, and, if different, the
jurisdiction in which the Project is located, and has all requisite corporate
power and authority to own its properties and to carry on its business as now
conducted, to enter into this Agreement and the other Loan Documents to which it
is a party and to issue the Note and to perform its obligations hereunder and
thereunder. This Agreement, the Note and the other Loan Documents to which it is
a party have been duly authorized by all necessary corporate action and when
executed and delivered will be the legal and binding obligations of the
Borrower. The execution, delivery and performance of this Agreement, the Note
and the other Loan Documents to which it is a party will not violate the
Borrower's Articles of Incorporation or bylaws or any law applicable to the
Borrower, and will not violate or cause a default under or permit acceleration
of any agreement to which Borrower is a party or by which it or the Project is
bound. Except for consents, approvals and exemptions previously obtained (copies
of which have been delivered to the Lender), no approval of or exemption by any
Person is required in connection with the Borrower's execution, delivery and
performance of this Agreement, the Note and the other Loan Documents to which it
is a party. To the Borrower's knowledge, it is not in default (beyond any
applicable grace period) in the performance of any agreement, order, writ,
injunction, decree or demand to which it is a party or by which it is bound.

                  Section 4.2 Financial Statements and No Material Adverse
Change. The Borrower's audited financial statements as at December 31, 1999 and
its unaudited financial statements as at April 30, 2000, as heretofore furnished
to the Lender, have been prepared in accordance with GAAP. The Borrower has no
material obligation, liability or asset not disclosed in such financial
statements, and there has been no material adverse change in the condition of
the Borrower since the dates of such financial statements.

                  Section 4.3 Litigation. There are no actions, suits or
proceedings pending or, to the knowledge of the Borrower, threatened against or
affecting the Borrower or the Project which, if determined adversely to the
Borrower, would have a Material Adverse Effect on the condition of the Borrower
or on the ability of the Borrower to perform its obligations under the Loan
Documents. Neither the Borrower nor the Project is in violation of any
Governmental Requirement where such violation could reasonably be expected to
impose a material liability on the Borrower.

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                  Section 4.4 Taxes. The Borrower has filed all federal, state
and local tax returns required to be filed and has paid or made provision for
the payment of all taxes due and payable pursuant to such returns and pursuant
to any assessments made against it or any of its property (other than taxes,
fees or charges the amount or validity of which is currently being contested in
good faith by appropriate proceedings and with respect to which reserves in
accordance with GAAP have been provided on the books of the Borrower).

                  Section 4.5 Subsidiaries. The Borrower has the Subsidiaries
listed on Schedule 4.5 attached hereto and hereby made a part hereof.

                  Section 4.6 Employee Benefit Plans. Except as disclosed in
writing to the Lender: (a) the Borrower is not an employee benefit plan as
defined in Section 3(1) of ERISA, whether or not subject to ERISA; (b) no assets
of the Borrower constitute assets of any such plan under ERISA regulations or
rulings; (c) with respect to any such plan that the Borrower sponsors,
participates in or has fiduciary duties with respect to, the Borrower has
materially complied with all federal and state laws, plan documents and funding
requirements; (d) the Borrower does not sponsor, participate in, or have
fiduciary duties with respect to any defined benefit pension plan subject to
Title IV of ERISA or any multi-employer pension plan as defined in Section
3(37)(A) of ERISA or any plan providing medical or other welfare benefits to
retirees or other former employees (except as required by federal or state law);
and (e) the Borrower is not (and has not ever been) a member of a group of
trades or businesses (whether or not incorporated) that is treated as a single
employer under Section 414 of the Internal Revenue Code.

                  Section 4.7 Federal Reserve Regulations. Neither the Borrower
nor any Subsidiary is engaged principally or as one of its important activities
in the business of extending credit for the purpose of purchasing or carrying
margin stock (as defined in Regulation U of the Board of Governors of the
Federal Reserve System). The value of all margin stock owned by the Borrower
does not constitute more than 25% of the value of the assets of the Borrower.

                  Section 4.8 Year 2000. The Borrower has reviewed and assessed
its business operations and computer systems and applications to address the
"year 2000 problem" (that is, that computer applications and equipment used by
Borrower, directly or indirectly through third parties, may have been or may be
unable to properly perform date-sensitive functions before, during and after
January 1, 2000). The Borrower represents and warrants that the year 2000
problem has not resulted in and will not result in a material adverse change in
the Borrower's business condition (financial or otherwise), operations,
properties or prospects or ability to repay the Lender. The Borrower agrees that
this representation and warranty will be true and correct on and shall be deemed
made by the Borrower on each date the Borrower delivers any information to
Lender. The Borrower will promptly deliver to the Lender such information
relating to this representation and warranty as the Lender reasonably requests
from time to time.

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                                    ARTICLE V

                                    COVENANTS

                  Until the Note and all of the Borrower's other Obligations
shall have been paid and performed in full, unless the Lender shall otherwise
consent in writing:

                  Section 5.1 Financial Statements and Reports. The Borrower
will furnish to the Lender:

                          5.1(a) As soon as available and in any event within
120 days after the end of each fiscal year of the Borrower and any Guarantor
that is a corporation or other entity, financial statements of such parties
consisting of at least statements of income, cash flow and changes in
stockholder's equity (or the equivalent for any Guarantor), a balance sheet as
at the end of such year, and a statement of contingent liabilities as at the end
of such year, setting forth in each case in comparative form corresponding
figures from the previous annual statement, certified without qualification by
independent certified public accountants of recognized national standing
selected by the Borrower or the Guarantor, as the case may be, and acceptable to
the Lender. As to any Guarantor who is an individual, a financial statement
shall be delivered within 120 days after the end of each calendar year and shall
be certified by such Guarantor to be true, correct and complete.

                          5.1(b) As soon as available and in any event within 30
days after the end of each fiscal quarter of the Borrower and any Guarantor that
is a corporation or other entity, interim financial statements for such parties
for such quarter and for the period from the beginning of such fiscal year to
the end of such quarter, substantially similar to the annual audited statements.

                          5.1(c) As soon as available and in any event within 15
days after the deadline for filing the same, copies of all federal income tax
returns (with all supporting schedules) of the Borrower and the Guarantor.

                          5.1(d) As soon as practicable and in any event within
30 days after the end of each fiscal quarter, a statement signed by the chief
financial officer of the Borrower stating that as at the end of such quarter
there did not exist any Default or Event of Default or, if such Default or Event
of Default existed, specifying the nature and period of existence thereof and
what action the Borrower proposes to take with respect thereto.

                          5.1(e) Immediately upon any officer of the Borrower
becoming aware of any Default or Event of Default, a notice describing the
nature thereof and what action the Borrower proposes to take with respect
thereto.

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                          5.1(f) From time to time, such other information
regarding the business, operation and financial condition of the Borrower and
the Project as the Lender may reasonably request.

                  Section 5.2 Books and Records. The Borrower will keep adequate
and proper records and books of account in which full and correct entries will
be made of its dealings, business and affairs, including its use and operation
of the Project.

                  Section 5.3 Inspection. The Borrower will permit any Person
designated by the Lender to visit and inspect any of the properties (including
the Project), books and financial records of the Borrower, to examine and to
make copies of the books of accounts and other financial records of the
Borrower, and to discuss the affairs, finances and accounts of the Borrower with
its officers at such reasonable times and intervals as the Lender may designate.

                  Section 5.4 Existence. The Borrower will maintain its
existence in good standing under the laws of its jurisdiction of incorporation
or formation, and, if different, the jurisdiction where the Project is located,
and its qualification to transact business in each jurisdiction (including the
jurisdiction where the Project is located) where failure so to qualify would
permanently preclude the Borrower from enforcing its rights with respect to any
material asset or would expose the Borrower to any material liability.

                  Section 5.5 Notice of Litigation. The Borrower will give
prompt written notice to the Lender of the commencement of any action, suit or
proceeding for an amount in dispute of greater than $25,000 affecting the
Borrower.

                  Section 5.6 Employee Benefit Plans. The Borrower shall neither
take any action, nor omit to take any action, if such action or omission would
result in any of the statements set forth in Section 4.6 (including any written
disclosures made by the Borrower to the Lender under Section 4.6) becoming
inaccurate or misleading at any time while the Note remains outstanding.

                  Section 5.7 Insurance. The Borrower will maintain with
financially sound and reputable insurance companies such insurance as may be
required by law and such other insurance in such amounts and against such
hazards as is customary in the case of reputable companies engaged in the same
or similar business and similarly situated, including, without limitation, the
insurance which the Borrower is required to maintain pursuant to Section 1.4 of
the Mortgage.

                  Section 5.8 Payment of Taxes and Claims. The Borrower will
file all tax returns and reports which are required by law to be filed by it and
will pay before they become delinquent, all taxes, installments of assessments
and governmental charges and levies imposed upon it or its property and all
claims or demands of any kind (including those of suppliers, mechanics,
carriers, warehousemen, landlords and other like Persons) which, if unpaid,
might result in the creation of a Lien upon its property.

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                  Section 5.9  Maintenance of Properties, Compliance. The
Borrower will maintain its properties in good condition, repair and working
order, and supplied with all necessary equipment, and make all necessary
repairs, renewals, replacements, betterments and improvements thereto, all as
may be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times. The Borrower will comply in
all material respects with all laws, rules and regulations to which it may be
subject.

                  Section 5.10 Merger. The Borrower will not merge or
consolidate or enter into any analogous reorganization or transaction with any
Person or liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution) or permit any Subsidiary to do any of the foregoing; provided,
however, any Subsidiary may be merged with or liquidated into the Borrower or
any wholly-owned Subsidiary (if the Borrower or such wholly owned Subsidiary is
the surviving entity).

                  Section 5.11 Sale of Assets. The Borrower will not, and will
not permit any Subsidiary to, sell, transfer, lease or otherwise convey all or
any substantial part of its assets except for sales and leases of inventory in
the ordinary course of business.

                  Section 5.12 Additional Covenants. For additional covenants,
see Schedule V attached hereto and hereby made a part hereof.

                                   ARTICLE VI

                         EVENTS OF DEFAULT AND REMEDIES

                  Section 6.1  Events of Default. The occurrence of any one or
more of the following events shall constitute an Event of Default:

                  6.1(a) The Borrower shall fail to make when due, whether by
acceleration or otherwise, any payment of principal of or interest on the Note
or any other obligations of the Borrower to the Lender pursuant to this
Agreement or any of the other Loan Documents.

                  6.1(b) Any representation or warranty made by or on behalf of
the Borrower or the Guarantor in this Agreement or any of the other Loan
Documents or by or on behalf of the Borrower or the Guarantor in any
certificate, statement, report or document herewith or hereafter furnished to
the Lender pursuant to this Agreement or any of the other Loan Documents shall
prove to have been false or misleading in any material respect on the date as of
which the facts set forth are stated or certified.

                  6.1(c) The Borrower shall fail to comply with Sections 5.1,
5.7, 5.10 or 5.11 or any covenant contained in Schedule V hereto.

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                  6.1(d) A sale, transfer, conveyance or encumbrance of the
Project or any part thereof or of all or any part of the Borrower's interest
therein in violation of Section 1.3 of the Mortgage shall occur.

                  6.1(e) The Borrower or the Guarantor shall fail to comply with
any other agreement, covenant, condition, provision or term contained in this
Agreement or any of the other Loan Documents (other than those hereinabove set
forth in this Section 6.1) and such failure to comply shall continue for thirty
(30) calendar days after whichever of the following dates is the earliest: (i)
the date the Borrower gives notice of such failure to the Lender, (ii) the date
the Borrower should have given notice of such failure to the Lender pursuant to
Section 5.1, or (iii) the date the Lender gives notice of such failure to the
Borrower.

                  6.1(f) The Borrower or the Guarantor shall become insolvent or
shall generally not pay its debts as they mature or shall apply for, shall
consent to, or shall acquiesce in the appointment of a custodian, trustee or
receiver of itself or for a substantial part of its property, or, in the absence
of such application, consent or acquiescence, a custodian, trustee or receiver
shall be appointed for the Borrower or the Guarantor or for a substantial part
of the property thereof and shall not be discharged within forty-five (45) days,
or the Borrower or the Guarantor shall make an assignment for the benefit of
creditors.

                  6.1(g) Any bankruptcy, reorganization, debt arrangement or
other proceedings under any bankruptcy or insolvency law shall be instituted by
or against the Borrower or the Guarantor and, if instituted against the Borrower
or the Guarantor, shall have been consented to or acquiesced in by the Borrower
or the Guarantor, as the case may be, or shall remain undismissed for sixty (60)
days, or an order for relief shall have been entered against the Borrower or the
Guarantor.

                  6.1(h) Any dissolution or liquidation proceeding shall be
instituted by or against the Borrower or any Guarantor that is a corporation or
other entity and, if instituted against the Borrower or such Guarantor, shall be
consented to or acquiesced in by the Borrower or such Guarantor, as the case may
be, or shall remain for forty-five (45) days undismissed.

                  6.1(i) A judgment or judgments for the payment of money in
excess of the sum of $25,000 in the aggregate shall be rendered against the
Borrower or the Guarantor and either (i) the judgment creditor executes on such
judgment or (ii) such judgment remains unpaid or undischarged for more than
sixty (60) days from the date of entry thereof or such longer period during
which execution of such judgment shall be stayed during an appeal from such
judgment.

                  6.1(j) A default shall occur, and continue beyond any
applicable grace or cure period, under any note or other evidence of
indebtedness or credit or loan agreement, or other document or instruments
executed in connection therewith, now or hereafter entered into between the
Lender and the Borrower or the Lender and any Guarantor, as any of the same may
be amended, modified, supplemented, extended, renewed or replaced, and if any
such note or

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other evidence of indebtedness or credit or loan agreement or other document is
terminated, as the same existed immediately prior to such termination.

                  6.1(k) The maturity of any material indebtedness of the
Borrower (other than the Loan and any indebtedness referred to in the
immediately preceding subsection) or the Guarantor shall be accelerated, or the
Borrower or the Guarantor shall fail to pay any such material indebtedness when
due (after the lapse of any applicable grace period) or any event shall occur or
condition shall exist and shall continue for more than the period of grace, if
any, applicable thereto and shall have the effect of causing, or permitting the
holder of any such indebtedness to cause, such material indebtedness to become
due prior to its stated maturity or to realize upon any collateral given as
security therefor. For purposes of this Section, indebtedness shall be deemed
"material" if it exceeds $25,000 as to any item of indebtedness or in the
aggregate for all items of indebtedness with respect to which any of the events
described in this Section has occurred.

                  6.1(l) Any execution or attachment shall be issued whereby any
substantial part of the property of the Borrower or the Guarantor shall be taken
or attempted to be taken and the same shall not have been vacated or stayed
within thirty (30) days after the issuance thereof.

                  6.1(m) Any default shall occur under any other Loan Document,
and shall continue beyond any grace or cure period provided therein with respect
to such default.

                  6.1(n) A Guarantor shall die, and the Lender shall not have
received notice thereof within sixty (60) days after the deceased Person's
death; or in the event of such death a Person acceptable to the Lender shall not
have assumed the deceased Person's obligations pursuant to an agreement in form
and substance acceptable to the Lender, within fifty (50) days after the
Lender's receipt of notice of the deceased Person's death, or, if earlier, the
date ten (10) days prior to the date that the Lender's counsel shall advise as
being the date by which a claim must be filed against the estate of the deceased
Person.

         Section 6.2 Remedies. If (a) any Event of Default described in Sections
6.1 (f), (g) or (h) shall occur with respect to the Borrower, the Note and all
other obligations of the Borrower to the Lender under this Agreement and the
other Loan Documents shall automatically become immediately due and payable, or
(b) any other Event of Default shall occur and be continuing, then the Lender
may declare the Note and all other obligations of the Borrower to the Lender
under this Agreement and the other Loan Documents to be forthwith due and
payable, whereupon the same shall immediately become due and payable, in each
case without presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived, anything in this Agreement or in the Note or
in any of the other Loan Documents to the contrary notwithstanding. Upon the
occurrence of any of the events described in clauses (a) or (b) of the preceding
sentence the Lender may exercise all rights and remedies under this Agreement,
the Note and any of the other Loan Documents and under any applicable law. In
addition, the Lender may cure the Event of Default on behalf of the Borrower,
and, in doing so,

                                       12
<PAGE>   13

may enter upon the Project, and may expend such sums as it may deem desirable,
including reasonable attorneys' fees, all of which shall be deemed to be
advances hereunder and under the Note, even though causing the Loan to exceed
the face amount of the Note, shall bear interest at the Default Rate and shall
be payable by the Borrower on demand, and shall be secured by the Mortgage and
all other Loan Documents and securing the Loan.

         Section 6.3 Offset. In addition to the remedies set forth in Section
6.2, upon the occurrence of any Event of Default and thereafter while the same
be continuing, the Borrower hereby irrevocably authorizes the Lender to set off
all sums owing by the Borrower to the Lender against all deposits and credits of
the Borrower with, and any and all claims of the Borrower against, the Lender.

                                   ARTICLE VII

                                  MISCELLANEOUS

         Section 7.1 Modifications. Notwithstanding any provisions to the
contrary herein, any term of this Agreement may be amended with the written
consent of the Borrower; provided that no amendment, modification or waiver of
any provision of this Agreement or consent to any departure by the Borrower
therefrom shall in any event be effective unless the same shall be in writing
and signed by the Lender, and then such amendment, modification, waiver or
consent shall be effective only in the specific instance and for the purpose for
which given.

         Section 7.2 Costs and Expenses. Whether or not the transactions
contemplated hereby are consummated, the Borrower agrees to reimburse the Lender
upon demand for all reasonable out-of-pocket expenses paid or incurred by the
Lender (including filing and recording costs and fees and expenses of Dorsey &
Whitney LLP, counsel to the Lender) in connection with the negotiation,
preparation, approval, review, execution, delivery, amendment, modification,
interpretation, collection and enforcement of this Agreement, the Note and the
other Loan Documents. The obligations of the Borrower under this Section shall
survive any termination of this Agreement.

         Section 7.3 Waivers, etc. No failure on the part of the Lender or the
holder of the Note to exercise and no delay in exercising any power or right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any power or right preclude any other or further exercise thereof or
the exercise of any other power or right. The rights and remedies of the Lender
hereunder are cumulative and not exclusive of any right or remedy the Lender
otherwise has.

         Section 7.4 Notices. Except when telephonic notice is expressly
authorized by this Agreement, any notice or other communication to any party in
connection with this Agreement shall be in writing and shall be sent by manual
delivery, telegram, telex, facsimile transmission, overnight courier or United
States mail (postage prepaid) addressed to such party at the address specified
on the signature page hereof, or at such other address as such party shall have
specified to the other

                                       13
<PAGE>   14

party hereto in writing. All periods of notice shall be measured from the date
of delivery thereof if manually delivered, from the date of sending thereof if
sent by telegram, telex or facsimile transmission, from the first Business Day
after the date of sending if sent by overnight courier, or from four days after
the date of mailing if mailed. Either party may change its address for notices
by a notice given not less than five (5) Business Days prior to the effective
date of the change.

         Section 7.5 Successors and Assigns; Disposition of Loans. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, legal representatives, successors and assigns,
except that the Borrower may not assign its rights or delegate its obligations
hereunder without the prior written consent of the Lender. The Lender may at any
time sell, assign, transfer, grant participations in, or otherwise dispose of
any portion of the Loan to banks or other financial institutions. The Lender may
disclose any information regarding the Borrower in the Lender's possession to
any prospective buyer or participant.

         Section 7.6 Governing Law and Construction. THE VALIDITY, CONSTRUCTION
AND ENFORCEABILITY OF THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED BY THE
INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT OF
LAWS OR PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS OF THE UNITED
STATES APPLICABLE TO NATIONAL BANKS. WHENEVER POSSIBLE, EACH PROVISION OF THIS
AGREEMENT AND ANY OTHER STATEMENT, INSTRUMENT OR TRANSACTION CONTEMPLATED HEREBY
OR RELATING HERETO, SHALL BE INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND
VALID UNDER SUCH APPLICABLE LAW, BUT, IF ANY PROVISION OF THIS AGREEMENT OR ANY
OTHER STATEMENT, INSTRUMENT OR TRANSACTION CONTEMPLATED HEREBY OR RELATING
HERETO SHALL BE HELD TO BE PROHIBITED OR INVALID UNDER SUCH APPLICABLE LAW, SUCH
PROVISION SHALL BE INEFFECTIVE ONLY TO THE EXTENT OF SUCH PROHIBITION OR
INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE
REMAINING PROVISIONS OF THIS AGREEMENT OR ANY OTHER STATEMENT, INSTRUMENT OR
TRANSACTION CONTEMPLATED HEREBY OR RELATING HERETO.

         Section 7.7 Consent to Jurisdiction. AT THE OPTION OF THE LENDER, THIS
AGREEMENT AND THE NOTE MAY BE ENFORCED IN ANY FEDERAL COURT OR MINNESOTA STATE
COURT SITTING IN MINNEAPOLIS OR ST. PAUL, MINNESOTA; AND THE BORROWER CONSENTS
TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT
VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT THE BORROWER COMMENCES ANY
ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY
ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT,
THE LENDER AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE
OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE
ACCOMPLISHED UNDER

                                       14
<PAGE>   15

APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT PREJUDICE.

         Section 7.8  Waiver of Jury Trial. EACH OF THE BORROWER AND THE LENDER
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTE AND ANY OTHER LOAN
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

         Section 7.9  Captions. The captions or headings herein and any table of
contents hereto are for convenience only and in no way define, limit or describe
the scope or intent of any provision of this Agreement.

         Section 7.10 Number; Gender. The singular of all terms used herein
shall include the plural and the plural shall include the singular, and the use
of any gender herein shall include all other genders, where the context so
requires or permits.

         Section 7.11 Entire Agreement. This Agreement and the other Loan
Documents embody the entire agreement and understanding between the Borrower and
the Lender with respect to the subject matter hereof and thereof. This Agreement
supersedes all prior agreements and understandings relating to the subject
matter hereof.

         Section 7.12 Counterparts, This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument, and either of the parties hereto may execute this Agreement by
signing any such counterpart.

         Section 7.13 Security Agreement. Borrower acknowledges that the loan is
secured by that certain Security Agreement dated June 5, 2000, executed by
Borrower in favor of Lender.

                                       15

<PAGE>   16

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

                                        APPLIED EPI, INC.

                                        By           /s/ Frank Kraemer
                                           ---------------------------------
                                        Print Name   Frank Kraemer
                                                   -------------------------
                                        Title        COO
                                              ------------------------------
Borrower's Address:
Applied Epi, Inc.
4900 Constellation Drive
St. Paul, MN 55127
Attention:  Paul Colombo
Telecopy No. 651-482-0600

                                        U.S. BANK NATIONAL ASSOCIATION

                                        By           /s/ Gregory A. Wittnebel
                                           -------------------------------------
                                        Print Name   Gregory A. Wittnebel
                                                   -----------------------------
                                        Title        Vice President
                                              ----------------------------------

Lender's Address:
U.S. Bank National Association
322 Minnesota Street
St. Paul, Minnesota 55101
Attn:  Greg Wittnebel
Telecopy No.: 651-244-5590

                                       16<PAGE>   1

                                                                    EXHIBIT 10.8

                                      NOTE

$ 1,650,000                                               Minneapolis, Minnesota
                                                                   July 31, 2000

                  FOR VALUE RECEIVED, Applied Epi, Inc., a corporation organized
under the laws of the State of Minnesota ("Borrower"), hereby promises to pay to
the order of U.S. Bank National Association, a national banking association
("Lender", which term shall include any future holder hereof), at St. Paul,
Minnesota, or at such other place as Lender may from time to time designate in
writing, in lawful money of the United States of America, the principal sum of
One Million Six Hundred Fifty Thousand Dollars and No Cents ($1,650,000) or so
much thereof as may be advanced hereunder and to pay interest on the outstanding
principal balance hereof from time to time at a fluctuating rate equal to 1.90%
per annum in excess of the Adjusted Eurodollar Rate. Interest shall be computed
on the basis of actual days elapsed and a year of 360 days. For purposes hereof,
the following terms shall have the following meanings:

         "Adjusted Eurodollar Rate": With respect to each day, the rate (rounded
         upward, if necessary, to the next higher one hundredth of one percent)
         determined by dividing the Eurodollar Rate for such date by 1.00 minus
         Eurodollar Reserve Percentage.

         "Board": The Board of Governors of the Federal Reserve System or any
         successor thereto.

         "Eurodollar Business Day": A Business Day which is also a day for
         trading by and between banks in United States dollar deposits in the
         interbank Eurodollar market and a day on which banks are open for
         business in New York City.

         "Eurodollar Rate": With respect to each day, the rate per annum at
         which United States dollar deposits having a maturity of thirty days
         are offered to the Lender in the interbank Eurodollar market on such
         date for delivery in immediately available funds on such date;
         provided, that in lieu of determining the rate in the foregoing manner,
         the Lender may substitute the per annum rate for United States dollars
         displayed on the Reuters screen, LIBO page, at 10:00 A.M. (Minneapolis
         time) on such date or, if such date is not a Eurodollar Business Day,
         the most recent Eurodollar Business Day. "Reuters Screen LIBO page"
         means the display designated as page "LIBO" on the Reuters Monitor
         Money Rate Screen (or such other page as may replace the LIBO page on
         such service for the purpose of displaying London interbank offered
         rates of major banks for United States dollar deposits).

         "Eurodollar Reserve Percentage": As of any day, that percentage
         (expressed as a decimal) which is in effect on such day, as prescribed
         by the Board for determining the maximum reserve requirement (including
         any basic, supplemental or emergency reserves) for a member Lender of
         the Federal Reserve System, with deposits comparable in amount to those
         held by the Lender, in respect of "Eurocurrency Liabilities" as such
         term is defined in Regulation D of the Board. The rate of interest
         applicable to any

<PAGE>   2

         outstanding Eurodollar Rate Advances shall be adjusted automatically on
         and as of the effective date of any change in the Eurodollar Reserve
         Percentage.

Borrower shall make equal monthly payments of principal and interest of
$12,694.00 beginning September 1, 2000. This monthly amount is subject to
adjustment at the end of each calendar year by Lender, which shall determine the
monthly payment by calculating a reasonable approximation of the monthly amount
sufficient to fully amortize the amount due hereunder over a period of 20 years
starting August 1, 2000. The total unpaid principal amount and all interest
thereon shall be payable on August 1, 2005 (the "Maturity Date"). THIS NOTE
REQUIRES A BALLOON PAYMENT.

                  Borrower may not prepay this Note in whole or in part at any
time, without premium or penalty. Any such prepayment shall be preceded by at
least thirty (30) days and not more than ninety (90) days prior written notice
to Lender. No prepayment shall suspend any required payments of either principal
or interest on this Note or reduce the amount of any scheduled payment.
Notwithstanding anything to the contrary contained herein, however, no such
compensation shall be payable in connection with any prepayment of this Note
made with insurance proceeds or condemnation awards or proceeds unless such
insurance proceeds or condemnation awards or proceeds are not made available to
repair, rebuild or restore the property subject to the Mortgage by reason of the
existence of an Event of Default.

                  If, on or prior the to date for determining the Adjusted
Eurodollar Rate, Lender determines (which determination shall be conclusive and
binding, absent error) that:

                  (a) deposits in dollars (in the applicable amount) are not
         being made available to Lender in the relevant market, or

                  (b) the Adjusted Eurodollar Rate will not adequately and
         fairly reflect the cost to Lender of maintaining the loan evidenced
         hereby,

Lender shall forthwith give notice to Borrower of such determination, whereupon
the obligation of Lender to maintain the loan evidenced hereby at an interest
rate based on the Adjusted Eurodollar Rate shall be suspended until Lender
notifies Borrower that the circumstances giving rise to such suspension no
longer exist. While any such suspension continues, the loan evidenced hereby
shall bear interest at a fluctuating rate (the "Reference Based Rate") of
interest per annum from time to time publicly announced by Lender as its
"Reference Rate", as the same may fluctuate from time to time, provided that
Lender may lend to its customers at rates that are at, above or below the
Reference Rate during such time. Changes in the interest rates payable hereunder
shall be effective as of the same date as the date on which the change in the
Reference Rate is effective.

                  If any Regulatory Change (as defined in the Loan Agreement)

                  (a) shall subject Lender to any tax, duty or other charge with
         respect to the loan evidenced hereby of shall change the basis of
         taxation of payment to Lender of the

                                       2
<PAGE>   3

         principal or interest on such loan or any other amounts due under the
         Loan Agreement in respect of such loan (except for changes in the rate
         of tax on the overall net income of Lender imposed by the jurisdiction
         in which Lender's principal office is located); or

                  (b) shall impose, modify or deem applicable any reserve,
         special deposit, capital requirement or similar requirement (including,
         without limitation any such requirement imposed by the Board, but
         excluding any such requirement to the extent included in calculation
         the applicable Adjusted Eurodollar Rate) against assets of, deposits
         with or for the account of, or credit extended by, Lender or shall
         impose on Lender or on the interbank Eurodollar market or any other
         condition affecting the loan evidenced hereby;

and the result of the foregoing is to increase to cost to Lender of maintaining
the loan evidence hereby, or to reduce the amount of any sum received or
receivable by Lender under the Loan Agreement or under this Note, then, within
30 days after demand by Lender, Borrower shall pay to Lender such additional
amount or amounts as will compensate Lender for such increased cost or
reduction. Lender will promptly notify Borrower of any event of which it has
knowledge, occurring after the date hereof, which will entitle Lender to
compensation pursuant to the paragraph. A certificate of Lender claiming
compensation under this paragraph, setting forth the additional amount or
amounts to be paid to it hereunder and stating in reasonable detail the basis
for the charge and the method of computation, shall be conclusive in the absence
of error. In determining such amount, Lender may use reasonable averaging and
attribution methods. Failure on the part of Lender to demand compensation for
any increase costs or reduction in amounts received or receivable shall not
constitute a waiver of Lender's rights to demand compensation for any subsequent
increased costs or reduction in amounts received or receivable.

                  If any Regulatory Change shall make in unlawful or impossible
for Lender to maintain the loan evidenced hereby at an interest rate based on
the Adjusted Eurodollar Rate, Lender shall notify Borrower, whereupon the
obligation of Lender to so maintain the loan evidenced hereby shall be suspended
until Lender notifies Borrower that the circumstances giving rise to such
suspension no longer exist. Lender's request for compensation shall set forth
the basis for the amount requested and shall be final, conclusive and binding,
absent error.

                  If, at any time, Lender obtains an appraisal pursuant to
Section 1.10 of the Mortgage, and such appraisal demonstrates that the then
outstanding principal balance of this Note is more than 75% of the value of the
property subject to the Mortgage, Lender shall have the right, at its option, to
require Borrower to prepay a portion of the then outstanding principal balance
of this Note such that following such prepayment the outstanding principal
balance of this Note does not exceed 75% of the value of such property as
determined by such appraisal. Lender may exercise such right by giving written
notice of such exercise to Borrower at least sixty (60) days prior to the date
on which Lender requires that such prepayment be made, and in such event
Borrower shall make such prepayment on the date specified in such notice. Any
such prepayment shall not require the payment of a prepayment premium as
described in the immediately preceding paragraph of this Note.

                                       3
<PAGE>   4

This Note is secured by a Mortgage, Security Agreement, Assignment of Leases and
Rents and Fixture Financing Statement of even date herewith (the "Mortgage") on
real property located in Ramsey County, Minnesota, therein described. This Note
is the Note referred to in the Loan Agreement of even date herewith between
Borrower and Lender (the "Loan Agreement"), and is subject to the additional
terms and conditions set forth in the Loan Agreement and the documents referred
to therein.

                  If a payment due hereunder is not made within five days after
the date when due, Borrower shall pay to Lender a late payment charge of 5% of
the amount of the overdue payment to compensate Lender for a portion of the cost
related to handling the overdue payment. After an Event of Default, as defined
in the Loan Agreement, then the entire principal sum evidenced by this Note,
together with all accrued and unpaid interest, shall, at the option of the
holder hereof, bear interest at the rate per annum (the "Default Rate") equal to
3% in excess of the rate of interest per annum which would otherwise be payable
hereunder, and become immediately due and payable without further notice (except
as provided in the Loan Agreement), demand or presentment for payment, and
without any relief whatever from any valuation or appraisement laws. Failure to
exercise any option provided herein shall not constitute a waiver of the right
to exercise the same in the event of any subsequent default. Borrower agrees
that if, and as often as, this Note is given to an attorney for collection or to
defend or enforce any of Lender's rights hereunder, Borrower will pay to the
Lender Lender's reasonable attorneys' fees together with all court costs and
other expenses paid by Lender.

                  Borrower waives presentment, protest and demand, notice of
protest, demand and of dishonor and nonpayment of this Note and any lack of
diligence or delays in collection or enforcement of this Note. Borrower agrees
that this Note, or any payment hereunder, may be extended from time to time, and
Borrower consents to the release of any party liable for the obligation
evidenced by this Note, the release of any of the security for this Note, the
acceptance of any other security therefor, or any other indulgence or
forbearance whatsoever, all without notice to any party and without affecting
the liability of Borrower.

                  THIS NOTE SHALL BE CONSTRUED UNDER AND GOVERNED BY THE LAWS OF
THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS OR PRINCIPLES
THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS OF THE UNITED STATES APPLICABLE TO
NATIONAL BANKS. WHENEVER POSSIBLE, EACH PROVISION OF THIS NOTE AND ANY OTHER
STATEMENT, INSTRUMENT OR TRANSACTION CONTEMPLATED HEREBY OR RELATING HERETO,
SHALL BE INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER SUCH
APPLICABLE LAW, BUT, IF ANY PROVISION OF THIS NOTE OR ANY OTHER STATEMENT,
INSTRUMENT OR TRANSACTIONS CONTEMPLATED HEREBY OR RELATING HERETO SHALL BF HELD
TO BE PROHIBITED OR INVALID UNDER SUCH APPLICABLE LAW, SUCH PROVlSION SHALL BE
INEFFECTIVE ONLY TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY, WITHOUT
INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING PROVISIONS OF THIS
NOTE OR ANY OTHER STATEMENT, INSTRUMENT OR TRANSACTION CONTEMPLATED HEREBY OR
RELATING HERETO.

                                       4
<PAGE>   5

                  AT THE OPTION OF LENDER, THIS NOTE MAY BE ENFORCED IN ANY
FEDERAL COURT OR MINNESOTA STATE COURT SITTING IN MINNEAPOLIS OR ST. PAUL,
MINNESOTA; AND BORROWER CONSENTS TO THE JURISDICTION AND APPLICABLE LAW, BUT, IF
ANY PROVISION OF THIS NOTE OR ANY OTHER STATEMENT, INSTRUMENT OR TRANSACTIONS
CONTEMPLATED HEREBY OR RELATING HERETO SHALL BF HELD TO BE PROHIBITED OR INVALID
UNDER SUCH APPLICABLE LAW, SUCH PROVISION SHALL BE INEFFECTIVE ONLY TO THE
EXTENT OF SUCH PROHIBITION OR INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF
SUCH PROVISION OR THE REMAINING PROVISIONS OF THIS NOTE OR ANY OTHER STATEMENT,
INSTRUMENT OR TRANSACTION CONTEMPLATED HEREBY OR RELATING HERETO.

AT THE OPTION OF LENDER, THIS NOTE MAY BE ENFORCED IN ANY FEDERAL COURT OR
MINNESOTA STATE COURT SITTING IN MINNEAPOLIS OR ST. PAUL, MINNESOTA; AND
BORROWER CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY
ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT BORROWER
COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT
THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS
NOTE, LENDER AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE
OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE
ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT
PREJUDICE.

BORROWER AND LENDER EACH IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY
IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR ANY OF THE
LOAN DOCUMENTS (AS DEFINED IN THE LOAN AGREEMENT) OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.

                  IN WITNESS WHEREOF, Borrower has executed this Note as of the
date first above written.

                                             Applied Epi, Inc.

                                             By   /s/ Frank Kraemer
                                                ----------------------

                                             Its       COO
                                                 ---------------------

                                       5

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