18-AUG-04

                            AMENDMENT NO. 1 TO LEASE

     This Amendment No. 1 to Lease is entered into as of this 18 day of August,
2004 (the "Amendment"), by and between Veeco Compound Semiconductor Inc., a
Minnesota corporation (hereinafter "Landlord"), and APA Optics, Inc. a Minnesota
corporation (hereinafter "Tenant").

     The  parties  entered  into a Lease as of June, 2004 which they now wish to
amend  (the  "Lease").  Capitalized terms used but not defined herein shall have
the  meanings  assigned  to  such  terms  in  the  Lease.

     For good and valuable consideration, the parties agree to amend the Lease
as follows:

     1.   Immediately following Section 6 of the Lease, a new Section 6A shall
be added to read as follows:

     6A.  TENANT MACHINE USAGE: LANDLORD MACHINE USAGE.
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     During the term of this lease, Tenant shall provide usage of Tenant's
     Machine to the Landlord at prearranged times for the purposes of Customer
     demonstrations and related process development. In exchange for time used
     on the Tenant's Machine, Landlord shall make time available on Landlord's
     E300 Machine at a time-exchange rate. For every two (2) days that Landlord
     uses Tenant's Machine, one (1) day shall be made available for Tenant's
     usage on Landlord's E300 Machine.

     Any usage of the Tenant's Machine by the Landlord or the Landlord's machine
     by the Tenant will be on a mutually agreeable schedule. In addition, Tenant
     and Landlord agree to schedule times so as not to unduly interfere with
     Tenant's business usage of the Tenant's Machine or Landlord's business
     usage of Landlord's machine. Any usage of the Tenant's Machine by the
     Landlord or the Landlord's machine by the Tenant will be evaluated by both
     the Landlord and Tenant to verify suitability and compatibility of the
     process.

     Landlord will be held accountable for repairs to any Tenant equipment that
     is damaged by improper use or abuse by Landlord or its agents during the
     course of Customer demonstrations and related process development. Tenant
     will be held accountable for repairs to any Landlord equipment that is
     damaged by improper use or abuse by Tenant or its agents.

     2.   This Amendment may be executed in counterparts, each of which shall be
deemed an original, but both of which together shall constitute one and the same
instrument. A facsimile copy of a signed counterpart shall be treated the same
as a signed original.

     3.   Except as amended hereby, the Lease shall continue in full force and
effect.


     IN WITNESS WHEREOF, the parties hereto have hereunto set their hands the
day and year first written above.

LANDLORD:                               TENANT:

Veeco Compound Semiconductor Inc.       APA Optics, Inc.

By  /s/  Gregory Robbins                By  /s/  Anil K. Jain
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  Its  Secretary                          Its  Chief Executive Officer
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