BUSINESS LOAN AGREEMENT

Borrower: REAL GOODS TRADING CORPORATION
               555 LESLIE ST
                UKIAH, CA 95482
         
  Lender: National Bank of the Redwoods                           
                Main Office
             111 Santa Rosa Ave
           Santa Rosa, CA 95404-4905

THIS BUSINESS LOAN AGREEMENT between REAL GOODS TRADING
CORPORATION ("Borrower") and National Bank of the Redwoods
("Lender") is made and executed on the following terms
and conditions. Borrower has received prior commercial loans from
Lender or has applied to Lender for a commercial loan or loans
and other financial accommodations, including those which may be
described on any exhibit or schedule attached to this Agreement.
All such loans and financial accommodations, together with all
future loans and financial accommodations from Lender to
Borrower, are referred to in this Agreement Individually as the
"Loan" and collectively as the "Loans." Borrower understands and
agrees that: (a) In granting, renewing, or extending any Loan,
Lender is relying upon Borrower's representations, warranties,
and agreements, as set forth in this Agreement; (b) the granting,
renewing, or extending of any Loan by Lender at all times shall
be subject to Lender's sole judgment and discretion; and (c) all
such Loans shall be and shall remain subject to the following
terms and conditions of this Agreement.

TERM. This Agreement shall be effective as of June 24, 1996, and
shall continue thereafter until all Indebtedness of Borrower to
Lender has been performed in full and the parties terminate this
Agreement in writing.

DEFINITIONS. The following words shall have the following
meanings when used in this Agreement. Terms not otherwise defined
in this Agreement shall have the meanings attributed to such
terms in the Uniform Commercial Code. All references to dollar
amounts shall mean amounts in lawful money of the United States
of America.

     Agreement. The word "Agreement" means this Business Loan
Agreement, as this Business Loan Agreement may be amended or
modified from time to time, together with all exhibits and
schedules attached to this Business Loan Agreement from time to
time.

     Borrower. The word "Borrower" means REAL GOODS TRADING
CORPORATION. The word "Borrower" also includes, as applicable,
all subsidiaries and affiliates of Borrower as provided below in
the paragraph titled "Subsidiaries and Affiliates."

     CERCLA. The word "CERCLA" means the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980,
as amended.

     Collateral. The word "Collateral" means and includes without 
limitation all properly and assets granted as collateral
security for a Loan, whether real or personal property, whether
granted directly or indirectly, whether granted now or in the
future, and whether granted in the form of a security interest,
mortgage, deed of trust, assignment, pledge, chattel mortgage,
chattel trust, factor's lien, equipment trust, conditional sale,
trust receipt, lien, charge, lien or title retention contract,
lease or consignment intended as a security device, or any other
security or lien interest whatsoever, whether created by law,
contract, or otherwise.

     ERISA. The word "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.

     Event or Default. The words "Event of Default" mean and
include without limitation any of the Events of Default set forth
below in the section titled "EVENTS OF DEFAULT."

     Grantor. The word "Grantor" means and includes without
limitation each and all of the persons or entities granting a
Security Interest in any Collateral for the Indebtedness,
including without limitation all Borrowers granting such a
Security Interest.

     Guarantor. The word "Guarantor" means and includes without
limitation each and all of the guarantors, sureties, and
accommodation parties in connection with any Indebtedness. 
     Indebtedness. The word "Indebtedness" means and includes
without limitation all Loans, together with all other
obligations, debts and liabilities of Borrower to Lender, or any
one or more of them, as well as all claims by Lender against
Borrower, or any one or more of them; whether now or hereafter
existing, voluntary or involuntary, due or not due, absolute or
contingent, liquidated or unliquidated; whether Borrower may be
liable individually or jointly with others; whether Borrower may
be obligated as a guarantor, surety, or otherwise; whether
recovery upon such Indebtedness may be or hereafter may become
barred by any statute of limitations; and whether such
Indebtedness may be or hereafter may become otherwise
unenforceable.

     Lender. The word "Lender" means National Bank of the
Redwoods, its successors and assigns.

     Loan. The word "Loan" or "Loans" means and includes without
limitation any and all commercial loans and financial
accommodations from Lender to Borrower, whether now or hereafter
existing, and however evidenced, including without limitation
those loans and financial  Accommodations described herein or
described on any exhibit or schedule attached to this Agreement
from time to time.

     Note. The word "Note" means and includes without limitation
Borrower's promissory note or notes, if any, evidencing
Borrower's Loan obligations in favor of Lender, as well as any
substitute, replacement or refinancing note or notes therefor. 
     Permitted Liens. The words "Permitted Liens" mean: (a) liens
and security interests securing Indebtedness owed by Borrower to
Lender; (b) liens for taxes, assessments, or similar charges
either not yet due or being contested in good faith; (c) liens of
materialmen, mechanics, warehousemen, or carriers, or other like
liens arising in the ordinary course of business and securing
obligations which are not yet delinquent; (d) purchase money
liens or purchase money security interests upon or in any
property acquired or held by Borrower in the ordinary course of
business to secure indebtedness outstanding on the date of this
Agreement or permitted to be incurred under the paragraph of this
Agreement titled "Indebtedness and Liens"; (e) liens and security
interests which, as of the date of this  Agreement, have been
disclosed to and approved by the Lender in writing; and (f) those
liens and security interests which in the aggregate constitute an
immaterial and insignificant monetary amount with respect to the
net value of Borrower's assets.

     Related Documents. The words "Related Documents" mean and
include without limitation all promissory notes, credit
agreements, loan agreements, environmental agreements,
guaranties, security agreements, mortgages, deeds of trust, and
all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Indebtedness. 
     Security Agreement. The words "Security Agreement" mean and
include without limitation any agreements, promises, covenants,
arrangements, understandings or other agreements, whether created
by law, contract, or otherwise, evidencing, governing,
representing, or creating a Security Interest.

     Security Interest. The words "Security Interest" mean and
include without limitation any type of collateral security,
whether in the form of a lien, charge, mortgage, deed of trust,
assignment, pledge, chattel mortgage, chattel trust, factor's
lien, equipment trust, conditional sale, trust receipt, lien or
title retention contract, lease or consignment intended as a
security device, or any other security or lien interest
whatsoever, whether created by law, contract, or otherwise. 
     SARA. The word "SARA" means the Superfund Amendments and
Reauthorization Act of 1986 as now or hereafter amended.

CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make
the initial Loan Advance and each subsequent Loan Advance under
this Agreement shall be subject to the fulfillment to Lender's
satisfaction of all of the conditions set forth in this Agreement
and in the Related Documents.

     Loan Document. Borrower shall provide to Lender in form
satisfactory to Lender the following documents for the Loan: (a)
the Note, (b) Security Agreements granting to Lender security
interests in the Collateral, (c) Financing Statements perfecting
Lender's Security Interests; (d) evidence of insurance  as
required below; and (e) any other documents required under this
Agreement or by Lender or its counsel.

     Borrower's Authorization. Borrower shall have provided in
form and substance satisfactory to Lender properly certified
resolutions, duly authorizing the execution and delivery of this
Agreement, the Note and the Related Documents, and such other
authorizations and other documents and instruments as Lender or
its counsel, in their sole discretion, may require.

     Payment of Fees and Expenses. Borrower shall have paid to
Lender all fees, charges, and other expenses which are then due
and payable as specified in this Agreement or any Related
Document.

     Representations and Warranties. The representations and
warranties set forth in this Agreement, in the Related Documents,
and in any document or certificate delivered to Lender under this
Agreement are true and correct.

     No Event of Default. There shall not exist at the time of
any advance a condition which would constitute an Event of
Default under this Agreement.
  
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants
to Lender, as of the date of this Agreement, as of the date of
each disbursement of Loan proceeds, as of the date of any
renewal, extension or modification of any Loan, and at all times
any Indebtedness exists:

     Organization. Borrower is a corporation which is duly
organized, validly existing, and in good standing under the laws
of the State of California and is validly existing and in good
standing in all states in which Borrower is doing business.
Borrower has the full power and authority to own its properties
and to transact the businesses in which it is presently engaged
or presently proposes to engage. Borrower also is duly qualified
as a foreign corporation and is in good standing in all states in
which the failure to so qualify would have a material adverse
effect on its businesses or financial condition.

     Authorization. The execution, delivery, and performance of
this Agreement and all Related Documents by Borrower, to the
extent to be executed delivered or performed by Borrower, have
been duly authorized by all necessary action by Borrower, do not
require the consent or approval of any other person, regulatory
authority or governmental body; and do not conflict with, result
in a violation of, or constitute a default under (a) any
provision of its articles of incorporation or organization, or
bylaws, or any agreement or other instrument binding upon
Borrower or (b) any law, governmental regulation, court decree,
or order applicable to Borrower.

     Financial Information. Each financial statement of Borrower
supplied to Lender truly and completely disclosed Borrower's
financial condition as of the date of the statement, and there
has been no material adverse change in Borrower's financial
condition subsequent to the date of the most recent financial
statement supplied to Lender. Borrower has no material contingent
obligations except as disclosed in such financial statements. 
     Legal Effect. This Agreement constitutes, and any instrument
or agreement required hereunder to be given by Borrower when
delivered will constitute, Legal, valid and binding obligations
of Borrower enforceable against Borrower in accordance with their
respective terms.

     Properties. Except as contemplated by this Agreement or as
previously disclosed in Borrower's financial statements or in
writing to Lender and as accepted by Lender, and except for
property tax liens for taxes not presently due and payable,
Borrower owns and has good title to all of Borrower's properties
free and clear of all Security Interests, and has not executed
any security documents or financing statements relating to such
properties. All of Borrower's properties are titled in Borrower's
legal name, and Borrower has not used, or filed a financing
statement under, any other name for at least the last five (5)
years.

     Agreement. Any inspections or tests made by Lender shall be
at Borrower's expense and for Lender's purposes only and shall
not be construed to create any responsibility or liability on the
part of Lender to Borrower or to any other person. The
representations and warranties contained herein are based on
Borrower's due diligence in investigating the properties for
hazardous waste and hazardous substances. Borrower hereby
(a)releases and waives any future claims against Lender for
indemnity or contribution in the event Borrower becomes liable
for cleanup or other costs under any such laws, and (b) agrees to
indemnify and hold harmless Lender against any and all claims,
losses, liabilities, damages, penalties, and expenses which
Lender may directly or indirectly sustain or suffer resulting
from a breach of this section of the Agreement or as a
consequence of any use, generation, manufacture, storage,
disposal, release or threatened release occurring prior to
Borrower's ownership or interest in the properties, whether or
not the same was or should have been known to Borrower. The
provisions of this section of the Agreement, including the
obligation to indemnify, shall survive the payment of the
Indebtedness and the termination or expiration of this Agreement
and shall not be affected by Lenders acquisition of any interest
in any of the properties, whether by foreclosure or otherwise. 
     Litigation and Claims. No litigation, claim, investigation,
administrative proceeding or similar action (including those for
unpaid taxes) against Borrower is pending or threatened, and no
other event has occurred which may materially adversely affect
Borrower's financial condition or properties, other than
litigation, claims, or other events, if any, that have been
disclosed to and acknowledged by Lender in writing.

     Taxes. To the best of Borrower's knowledge, all tax returns
and reports of Borrower that are or were required to be filed,
have been filed, and all taxes, assessments and other
governmental charges have been paid in full, except those
presently being or to be contested by Borrower in good faith in
the ordinary course of business and for which adequate reserves
have been provided.

     Lien Priority. Unless otherwise previously disclosed to
Lender in writing, Borrower has not entered into or granted any
Security Agreements, or permitted the filing or attachment of any
Security Interests on or affecting any of the Collateral directly
or indirectly securing repayment of Borrower's Loan and Note,
that would be prior or that may in any way be superior to
Lender's Security Interests and rights in and to such Collateral. 
     Binding Effect. This Agreement, the Note, all Security
Agreements directly or indirectly securing repayment of
Borrower's Loan and Note and all of the Related Documents are
binding upon Borrower as  well as upon Borrower's successors,
representatives and assigns, and are legally enforceable in
accordance with their respective terms.

     Commercial Purposes. Borrower intends to use the Loan
proceeds solely for business or commercial related purposes. 
     Employee Benefit Plans. Each employee benefit plan as to
which Borrower may have any liability complies in all material
respects with all applicable requirements of law and regulations,
and (i) no Reportable Event nor Prohibited Transaction (as
defined in ERISA) has occurred with respect to any such plan,
(ii) Borrower has not withdrawn from any such plan or initiated
steps to do so, (iii) no steps have been taken to terminate any
such plan, and (iv) there are no unfunded liabilities other than
those previously disclosed to Lender in writing.

     Location of Borrower's Offices and Records. Borrower's place
of business, or Borrower's Chief executive office, if Borrower
has more than one place of business, is located at 555 LESLIE
STREET, UKIAH, CA 95482. Unless Borrower has designated otherwise
in writing this location is also the office or offices where
Borrower keeps its records concerning the Collateral.

     Information. All information heretofore or contemporaneously
herewith furnished by Borrower to Lender for the purposes of or
in connection with this Agreement or any transaction contemplated
hereby is, and all information hereafter furnished by or on
behalf of Borrower to Lender will be, true and accurate in every
material respect on the date as of which such information is
dated or certified; and none of such information is or will be
incomplete by omitting to state any material fact necessary to
make such information not misleading.

     Survival of Representations and Warranties. Borrower
understands and agrees that Lender, without independent
investigation, is relying upon the above representations and
warranties in making the above referenced Loan to Borrower.
Borrower further agrees that the foregoing representations and
warranties shall be continuing in nature and shall remain in full
force and effect until such time as Borrower's Indebtedness shall
be paid in full, or until this Agreement shall be terminated in
the manner provided above, whichever is the last to occur. 
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender
that, while this Agreement is in effect, Borrower will:

     Litigation. Promptly inform Lender in writing of (a) all
material adverse changes in Borrower's financial condition, and
(b) all existing and all threatened litigation, claims,
investigations, administrative proceedings or similar actions
affecting Borrower or any Guarantor which could materially affect
the financial condition of Borrower or the financial condition of
any Guarantor.

     Financial Records. Maintain its books and records in
accordance with generally accepted accounting principles, applied
on a consistent basis, and permit Lender to examine and audit
Borrower's books and records at all reasonable times.

     Additional Information. Furnish such additional information
and statements, lists of assets and liabilities, agings of
receivables and payables, inventory schedules, budgets,
forecasts, tax returns, and other reports with respect to
Borrower's financial condition and business operations as Lender
may request from time to time.

     Insurance. Maintain fire and other risk insurance, public
liability insurance, and such other insurance as Lender may
require with respect to Borrower's properties and operations, in
form, amounts, coverages and with insurance companies reasonably
acceptable to Lender. Borrower, upon request of Lender, will
deliver to Lender from time to time the policies or certificates
of insurance in form satisfactory to Lender, including
stipulations that coverages will not be cancelled or diminished
without at least ten (10) days' prior written notice to Lender.
Each insurance policy also shall include an endorsement providing
that coverage in favor of Lender will not be impaired in any way
by any act, omission or default of Borrower or any other person.
In connection with all policies covering assets in which Lender
holds or is offered a security Interest for the Loans, Borrower
will provide Lender with such loss payable or other  endorsements
as Lender may require.

     Insurance Reports. Furnish to Lender, upon request of
Lender, reports on each existing insurance policy showing such
information as Lender may reasonably request, including without
limitation the following: (a) the name of the insurer; (b) the
risks insured; (c) the amount of the policy; (d) the properties
insured; (e) the then current property values on the basis of
which insurance has been obtained, and the manner of determining
those values; and (f) the expiration date of the policy. In
addition, upon request of Lender (however not more often than
annually), Borrower will have an independent appraiser
satisfactory to Lender determine, as applicable, the actual cash
value or replacement cost of any Collateral. The cost of such
appraisal shall be paid by Borrower.

     Other Agreements. Comply with all terms and conditions of
all other agreements, whether now or hereafter existing, between
Borrower and any other party and notify Lender immediately in
writing of any default in connection with any other such
agreements.
 
     Loan Proceeds. Use all Loan proceeds solely for Borrower's
business operations, unless specifically consented to the
contrary by Lender in writing.

     Taxes, Charges and Liens. Pay and discharge when due all of
its indebtedness and obligations, including without limitation
all assessments taxes, governmental charges, levies and liens, of
every kind and nature, imposed upon Borrower or its properties,
income, or profits, prior to the date on which penalties would
attach, and all lawful claims that, if unpaid, might become a
lien or charge upon any of Borrowers properties, income, or
profits. Provided however, Borrower will not be required to pay
and discharge any such assessment, tax, charge, levy, lien or
claim so long as (a) the legality of the same shall be contested
in good faith by appropriate proceedings, and (b) Borrower shall
have established on its books adequate reserves with respect to
such contested assessment, tax, charge, levy, lien, or claim in
accordance with generally accepted accounting practices.
Borrower, upon demand of Lender, will furnish to Lender evidence
of payment of the assessments, taxes, charges, levies, liens and
claims and will authorize the appropriate governmental official
to deliver to Lender at any bme a written statement of any
assessments, taxes, charges, levies, liens and claims against
Borrower's properties, income, or profits.

     Performance. Perform and comply with all terms, conditions,
and provisions set forth in this Agreement and in the Related
Documents in a timely manner, and promptly notify Lender if
Borrower learns of the occurrence of any event which constitutes
an Event of Default under this Agreement or under any of the
Related Documents.

     Operations. Maintain executive and management personnel with
substantially the same qualifications and experience as the
present executive and management personnel; provide written
notice to Lender of any change in executive and management
personnel; conduct its business affairs in a reasonable and
prudent manner and in compliance with all applicable federal,
state and municipal laws, ordinances, rules and regulations
respecting its properties, charters, businesses and operations,
including without limitation, compliance with the Americans With
Disabilities Act and with all minimum funding standards and other
requirements of ERISA and other laws applicable to Borrower's
employee benefit plans.

     Inspection. Permit employees or agents of Lender at any
reasonable time to inspect any and all Collateral for the Loan or
Loans and Borrower's other properties and to examine or audit
Borrower's books, accounts, and records and to make copies and
memoranda of Borrower's books, accounts, and records. If Borrower
now or at any time hereafter maintains any records (including
without limitation computer generated records and computer
software programs for the generation of such records) in the
possession of a third party, Borrower, upon request of Lender,
shall notify such party to permit Lender free access to such
records at all reasonable times and to provide Lender with copies
of any records it may request, all at Borrower's expense.

     Compliance Certificate. Unless waived in writing by Lender,
provide Lender at least annually and at the time of each
disbursement of Loan proceeds with a certificate executed by
Borrower's chief financial officer, or other officer or person
acceptable to Lender, certifying that the representations and
warranties set forth in this Agreement are true and correct as of
the date of the certificate and further certifying that, as of
the date of the certificate, no Event of Default exists under
this Agreement.

     Environmental Compliance and Reports. Borrower shall comply
in all respects with all environmental protection federal, state
and local laws, statutes, regulations and ordinances; not cause
or permit to exist, as a result of an intentional or
unintentional action or omission on its part or on the part of
any third party, on property owned and/or occupied by Borrower,
any environmental activity where damage may result to the
environment, unless such environmental activity is pursuant to
and in compliance with the conditions of a permit issued by the
appropriate federal, state or local governmental authorities;
shall furnish to Lender promptly and in any event within thirty
(30) days after receipt thereof a copy of any notice, summons,
lien, citation, directive, letter or other communication from any
governmental agency or instrumentality concerning any intentional
or unintentional action or omission on Borrower's part in
connection with any environmental activity whether or not there
is damage to the environment and/or other natural resources.   
     Additional Assurances. Make, execute and deliver to Lender
such promissory notes, mortgages, deeds of trust, security
agreements, financing statements, instruments, documents and
other agreements as Lender or its attorneys may reasonably
request to evidence and secure the Loans and to perfect all
Security Interests.
  
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender
that while this Agreement is in effect, Borrower shall not,
without the prior written consent of Lender:

     Indebtedness and Liens. (a) Except for trade debt incurred
in the normal course of business and indebtedness to Lender
contemplated by this Agreement, create, incur or assume
indebtedness for borrowed money, including capital leases, (b)
except as allowed as a Permitted Lien, sell, transfer, mortgage,
assign, pledge, lease, grant a security interest in, or encumber
any of Borrower's assets, or (c) sell with recourse any of
Borrower's accounts, except to Lender.

     Continuity of Operations. (a) Engage in any business
activities substantially different than those in which Borrower
is presently engaged, (b) cease operations, liquidate, merge,
transfer, acquire or consolidate with any other entity, change
ownership, change its name, dissolve or transfer or sell
Collateral out of the ordinary course of business, (c) pay any
dividends on Borrower's stock (other than dividends payable in
its stock), provided, however that not withstanding the
foregoing, but only so long as no Event of Default has occurred
and is continuing or would result from the payment of dividends,
if Borrower is a "Subchapter S Corporation" (as defined in the
Internal Revenue Code of 1986, as amended), Borrower may pay cash
dividends on its stock to its shareholders from time to time in
amounts necessary to enable the shareholders to pay income taxes
and make estimated income tax payments to satisfy their
liabilities under federal and state law which arise solely from
their status as Shareholders of a Subchapter S Corporation
because of their ownership of shares of stock of Borrower, or (d)
purchase or retire any of Borrower's outstanding shares or alter
or amend Borrower's capital structure.

     Loans, Acquisitions and Guaranties. (a) Loan, invest in or
advance money or assets, (b) purchase, create or acquire any
interest in any other enterprise or entity, or (c) incur any
obligation as surety or guarantor other than in the ordinary
course of business.

     CESSATION OF ADVANCES. If Lender has made any commitment to
make any Loan to Borrower, whether under this Agreement or under
any other agreement, Lender shall have no obligation to make Loan
Advances or to disburse Loan proceeds if: (a) Borrower or any
Guarantor is in default under the terms of this Agreement or any
of the Related Documents or any other agreement that Borrower or
any Guarantor has with Lender; (b) Borrower or any Guarantor
becomes insolvent, files a petition in bankruptcy or similar
proceedings, or is adjudged a bankrupt; (c) there occurs a
material adverse change in Borrower's financial condition, in the
financial condition of any Guarantor, or in the value of any
Collateral securing any Loan; or (d) any Guarantor seeks, claims
or otherwise attempts to limit, modify or revoke such Guarantor's
guaranty of the Loan or any other loan with Lender.

     EXHIBIT "A" - COVENANTS. An exhibit, titled "Exhibit "A" -
Covenants," is attached to this Agreement and by this reference
is made a part of this Agreement just as if all the provisions,
terms and conditions of the Exhibit had been fully set forth in
this Agreement.

EVENTS OF DEFAULT. Each of the following shall constitute an
Event of Default under this Agreement: Default on Indebtedness.
Failure of Borrower to make any payment when due on the Loans 
     Other Defaults. Failure of Borrower or any Grantor to comply
with or to perform when due any other term, obligation, covenant
or condition contained in this Agreement or in any of the Related
Documents, or failure of Borrower to comply with or to perform
any other term, obligation, covenant or condition contained in
any other agreement between Lender and Borrower Default in Favor
of Third Parties. Should Borrower or any Grantor default under
any loan, extension of credit, security agreement, purchase or
sales agreement, or any other agreement, in favor of any other
creditor or person that may materially affect any of Borrower's
property or Borrower's or any Grantor's ability to repay the
Loans or perform their respective obligations under this
Agreement or any of the Related Documents.

     False Statement. Any warranty, representation or statement
made or furnished to Lender by or on behalf of Borrower or any
Grantor under this Agreement or the Related Documents is false or
misleading in any material respect at the time made or furnished,
or becomes false or misleading at any time thereafter.

     Detective Collateralization. This Agreement or any of the
Related Documents ceases to be in full force and effect
(including failure of any Security Agreement to create a valid
and perfected Security Interest) at any time and for any reason. 

     Insolvency. The dissolution or termination of Borrower's
existence as a going business, the insolvency of Borrower, the
appointment of a received for any part of Borrower's property,
any assignment for the benefit of creditors, any type of creditor
workout, or the commencement of any proceeding under any
bankruptcy or insolvency laws by or against Borrower.

     Creditor or Forfeiture Proceedings. Commencement of
foreclosure or forfeiture proceedings, whether by judicial
proceeding, self-help, repossession or any other method, by any
creditor of Borrower, any creditor of any Grantor against any
collateral securing the Indebtedness, or by any governmental
agency. This includes a garnishment, attachment, or levy on or of
any of Borrower's deposit accounts with Lender. Event Affecting
Guarantor. Any of the preceding events occurs with respect to any
Guarantor of any of the Indebtedness or any Guarantor dies or
becomes incompetent, or revokes or disputes the validity of, or
liability under, any Guaranty of the Indebtedness.

     Change In Ownership. Any change in ownership of twenty-five
percent (25%) or more of the common stock of Borrower.

     Adverse Change. A material adverse change occurs in
Borrower's financial condition, or Lender believes the prospect
of payment or performance of the Indebtedness is impaired. 
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall
occur, except where otherwise provided in this Agreement or the
Related Documents, all commitments and obligations of Lender
under this Agreement or the Related Documents or any other
agreement immediately will terminate and, at Lender's option, all
Indebtedness immediately will become due and payable, all without
notice of any kind to Borrower, except that in the case of an
Event of Default of the type described in the "Insolvency"
subsection above, such acceleration shall be automatic and not
optional. In addition, Lender shall have all the rights and
remedies provided in the Related Documents or available at law,
in equity, or otherwise. Except as may be prohibited by
applicable law, all of Lender's rights and remedies shall be
cumulative and may be exercised singularly or concurrently.
Election by Lender to pursue any remedy shall not exclude pursuit
of any other remedy, and an election to make expenditures or to
take action to perform an obligation of Borrower or of any
Grantor shall not affect Lender's right to decline a default and
to exercise its rights and remedies.

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions
are a put of this Agreement:

     Amendments. This Agreement, together with any Related
Documents, constitutes the enbre understanding and agreement of
the parties as to the manners set forth in this Agreement. No
alteration of or amendment to this Agreement shall be effective
unless given in writing and signed by the party or parties sought
to be charged or bound by the alteration or amendment.

     Applicable Law. This Agreement has been delivered to Lender
and accepted by Lender In the State of California. If there is a
Lawsuit, Borrower agrees upon Lender's request to submit to the
jurisdiction of the courts of Sonoma County, the State of
California. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.

     Caption Headings. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or
define the provisions of this Agreement.

     Consent to Loan Participation. Borrower agrees and consents
to Lender's sale or transfer, whether now or later, of one or
more participation interests in the Loans to one or more
purchasers, whether related or unrelated to Lender. Lender may
provide, without any limitation whatsoever, to any one or more
purchasers, or potential purchasers, any information or knowledge
Lender may have about Borrower or about any other manner relating
to the Loan, and Borrower hereby waives any rights to privacy it
may have with respect to such matters. Borrower additionally
waives any and all notices of sale of participation interests, as
well as all notices of any repurchase of such participation
interests. Borrower also agrees that  the purchasers of any such
participation interests will be considered as the absolute owners
of such interests in the Loans and will have all the rights
granted under the participation agreement or agreements governing
the sale of such participation interests. Borrower further waives
all rights of offset or counterclaim that it may have now or
later against Lender or against any purchaser of such a
participation interest and unconditionally agrees that either
Lender or such purchaser may enforce Borrower's obligation under
the Loans irrespective of the failure or insolvency of any holder
of any interest in the Loans. Borrower further agrees that the
purchaser of any such participation interests may enforce its
interests irrespective of any personal claims or defenses that
Borrower may have against Lender.

     Costs and Expenses. Borrower agrees to pay upon demand all
of Lender's expenses, including without limitation attorneys'
fees, incurred in connection with the preparation, execution,
enforcement, modification and collection of this Agreement or in
connection with the Loans made pursuant to this Agreement. Lender
may pay someone else to help collect the Loans and to enforce
this Agreement, and Borrower will pay that amount. This includes,
subject to any limits under applicable law, Lender's attorney's
fees and Lender's legal expenses, whether or not there is a
lawsuit, including attorneys' fees for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment
collection services. Borrower also will pay any court costs, in
addition to all other sums provided by law.

     Notices. All notices required to be given under this
Agreement shall be given in writing, may be sent by
telefacsimile, and shall be effective when actually delivered or
when deposited with a nationally recognized overnight courier or
deposited in the United States mail, first class, postage
prepaid, addressed to the party to whom the notice is to be given
at the address shown above. Any party may change its address for
notices under this Agreement by giving formal written notice to
the other parties, specifying that the purpose of the notice is
to change the party's address. To the extent permitted by
applicable law, if there is more than one Borrower, notice to any
Borrower will constitute notice to all Borrowers. For notice
purposes, Borrower will keep Lender informed at all times of
Borrower's current address(es).

     Severability. If a court of competent jurisdiction finds any
provision of this Agreement to be invalid or unenforceable as to
any person or circumstance, such finding shall not render that
provision invalid or unenforceable as to any other persons or
circumstances. If feasible, any such offending provision shall be
deemed to be modified to be within the limits of enforceability
or validity; however, if the offending provision cannot be so
modified, it shall be stricken and all other provisions of this
Agreement in all other respects shall remain valid and
enforceable.

     Subsidiaries and Affiliates of Borrower. To the extent the
context of any provisions of this Agreement makes it appropriate,
including without limitation any representation, warranty or
covenant, the word "Borrower" as used herein shall include all
subsidiaries and affiliates of Borrower. Notwithstanding the
foregoing however, under no circumstances shall this Agreement be
construed to require Lender to make any Loan or other financial
accommodation to any subsidiary or affiliate of Borrower.

     Successors and Assigns. All covenants and agreements
contained by or on behalf of Borrower shall bind its successors
and assigns and shall inure to the benefit of Lender, its
successors and assigns. Borrower shall not, however, have the
right to assign its rights under this Agreement or any interest
therein, without the prior written consent of Lender.

     Survival. All warranties, representations, and covenants
made by Borrower in this Agreement or in any certificate or other
instrument delivered by Borrower to Lender under this Agreement
shall be considered to have been relied upon by Lender and will
survive the making of the Loan and delivery to Lender of the
Related Documents, regardless of any investigation made by Lender
or on Lender's behalf.

     Time Is of the Essence. Time is of the essence in the
performance of this Agreement.

     Waiver. Lender shall not be deemed to have waived any rights
under this Agreement unless such waiver is given in writing and
signed by Lender. No delay or omission on the part of Lender in
exercising any right shall operate as a waiver of such right or
any other right. A waiver by Lender of a provision of this
Agreement shall not prejudice or constitute a waiver of Lender's
right otherwise to demand strict compliance with that provision
or any other provision of this Agreement. No prior waiver by
Lender, nor any course of dealing between Lender and Borrower, or
between Lender and any Grantor, shall constitute a waiver of any
of Lender's rights or of any obligations of Borrower or of any
Grantor as to any future transactions. Whenever the consent of
Lender is required under this Agreement, the granting of such
consent by Lender in any instance shall not constitute continuing
consent in subsequent instances where such consent is required,
and in all cases such consent may be granted or withheld in the
sole discretion of Lender.

BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
BUSINESS LOAN AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS
AGREEMENT IS DATED AS OF JUNE 24, 1996.

BORROWER:  REAL GOODS TRADING CORPORATION
    BY:[S]John C. Schaeffer, President
          John C. Schaeffer, President

LENDER:   National Bank of the Redwoods
    By:[S]Marshall McDonald
          Authorized Officer
<PAGE>            EXHIBIT "A" - COVENANTS

References In the shaded area are for Lender's use only and do
not limit the applicability of this document to any particular
loan or item.

Borrower: REAL GOODS TRADING CORPORATION
              555 LESLIE STREET
               UKIAH, CA 95482

 Lender: National Bank of the Redwoods
                 Main Office
              111 Santa Rosa Ave
                Santa Rosa, CA 
                 95404-4905

This Exhibit "A" - Covenants is attached to and by this reference
is made a part of each Business Loan Agreement or Negative Pledge
Agreement, dated June 24, 1996, and executed in connection with a
loan or other financial accommodations between National Bank of
the Redwoods and REAL GOODS TRADING CORPORATION.

BORROWER AGREES TO PROVIDE:

Quarterly corporate financial statements which can be company
prepared due within 30 days of quarter end, starting with the
June 30, 1996 quarter end.

Annual CPA audited FYE business financials due by June 30 of each
year.

Copy of annual corporate tax return due within 90 days of March
31st of each year, beginning 3-31-97.

Annual personal financial statement of John C. Schaeffer to be
submitted no later than September 30th of each year.

Copy of annual personal tax return of John C. Schaeffer, to be
submitted by June 30th of each year, beginning 6/30/97 for the
1996 tax year.

BORROWER AGREES THAT:

National Bank of the Redwoods will be major depository bank
during term of loan. Evidence of insurance coverage for flood,
fire, and property on the property known as 13701 Highway 101,
Hopland, CA is required and must be maintained during term of
loan. National Bank of the Redwoods to be named Lender's Loss
Payee.

THIS EXHIBIT "A" - COVENANTS IS EXECUTED ON JUNE 24, 1996. 
BORROWER:   REAL GOODS TRADING CORPORATION
      By:[S]JOHN C. SCHAEFFER, PRESIDENT
            John C. Schaeffer, President

  LENDER:   National Bank of the Redwoods
      By:[S]MARSHALL MCDONALD
            Authorized Officer
<PAGE>
                               PROMISSORY NOTE

References in the shaded area are for Lender's use only and do
not limit the applicability of this document to any particular
loan or item.

Borrower:  REAL GOODS TRADING CORPORATION 
                  555 LESLIE ST 
                 UKIAH, CA 95482

  Lender:  National Bank of the Redwoods
                   Main Office
                 111 Santa Rosa Ave
              Santa Rosa, CA 95404-4905

PRINCIPAL AMOUNT:  $585,000.00     INITIAL RATE:  10.750% 
DATE OF NOTE:  June 24, 1996

PROMISE TO PAY. REAL GOODS TRADING CORPORATION ("Borrower")
promises to pay to National Bank of the Redwoods ("Lender"), or
order, In lawful money of the United States of America, the
principal amount of Five Hundred Eighty Five Thousand & 00/100
Dollars ($585,000.00), together with interest on the unpaid
principal balance from June 24, 1996, until paid in full.

PAYMENT. Subject to any payment changes resulting from changes in
the index, Borrower will pay this loan on demand, or 11 days no
demand is made, in 299 principal payments of $1,950.00 each and
one final principal and interest payment of $1,967.23. Borrower's
first principal payment is due July 31, 1996, and all subsequent
principal payments are due on the last day of each month after
that In addition, Borrower will pay regular monthly payments of
all accrued unpaid interest due as of each payment date.
Borrower's first interest payment is due July 31, 1996, and all
subsequent interest payments are due on the last day of each
month after that Borrower's final payment due June 30, 2021,
will be for all principal and accrued interest not yet paid.
Interest on this Note is computed on a 365/365 simple interest
basis; that is, by applying the rate of the annual interest rate
over the number of days in a year, multiplied by the outstanding
principal balance, multiplied by the actual number of days the
principal balance is outstanding. Borrower will pay Lender at
Lender's address shown above or at such other place as Lender
may designate in writing.  Unless otherwise agreed or required
by applicable law, payments will be applied first to accrued
unpaid interest, then to principal, and any remaining amount to
any unpaid collection costs and late charges.

VARIABLE INTEREST RATE. The interest rate on this Note is subject
to change from time to time based on changes in an independent
index which is the "NBR REFERENCE RATE". This index is calculated
by adding .50 percentage points to the PRIME RATE as published in
the MONEY RATES section of the West Coast Edition of the Wall
Street Journal (the "Index'). The Index is not necessarily the
lowest rate charged by Lender on its loans. If the index becomes
unavailable during the term of this loan, Lender may designate a
substitute index after notice to Borrower. Lender will tell
Borrower the current index rate upon Borrower's request. Borrower
understands that Lender may make loans based on other rates as
well. The interest rate change will not occur more often than
each day the independent index changes. When PRIME RATE is
published as a range of rates, the index will not change until a
single rate has been published for two consecutive days. The
index currently is 9.000% per annum. The Interest rate to be
applied to the unpaid principal balance of this Note will be at
a rate of 2.000 percentage points over the index, resulting in
initial rate of 10.750% per annum. NOTICE: Under no circumstances
will the interest rate on this Note be more than the maximum rate
allowed by applicable law.

PREPAYMENT. Borrower agrees that all loan fees and other prepaid
finance charges are earned fully as of the date of the loan and
will not be subject to refund upon early payment (whether
voluntary or as a result of default), except as otherwise required
by law.  Except for the foregoing, Borrower may pay without penalty
all or a portion of the amount owed earlier than it is due. Early
payments will not, unless agreed to by Lender in writing, relieve
Borrower of Borrower's obligation to continue to make payments under
the payment schedule. Rather, they will reduce the principal balance
due and may result in Borrower making fewer payments.

LATE CHARGE. If a payment is 11 days or more late, Borrower will
be charged 5.000% of the regularly scheduled payment or $75.00,
whichever is less.

LENDER'S RIGHTS. Upon Lender's demand, Lender may declare the
entire unpaid principal balance on this Note and all accrued
unpaid interest immediately due, without notice, and then
Borrower will pay that amount. Lender may hire or pay someone
else to help collect this Note if Borrower does not pay. Borrower
also will pay Lender that amount. This includes, subject to any
limits under applicable law, Lender's attorneys' fees and Lender's
legal expenses whether or not there is a lawsuit, including
attorneys' fees and legal expenses for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection
services.  Borrower also will pay any court costs, in addition
to all other sums provided by law. This Note has been delivered
to Lender and accepted by Lender In the State of California.
If there is a lawsuit, Borrower agrees upon Lender's request
to submit to the jurisdiction of the courts of Sonoma County,
in the State of California. This Note shall be governed by and 
construed in accordance with the laws of the State of California.

COLLATERAL. Borrower acknowledges this Note is secured by, in
addition to any other collateral, a Deed of Trust dated June
24,1996, to a trustee in favor of Lender on real property located
in MENDOCINO County, State of California. That agreement contains
the following due on sale provision:  Lender may, at its option,
declare immediately due and payable all sums secured by this Deed
of Trust upon the sale or transfer, without the Lender's prior
written consent, of all or any part of the Real Property, or any
interest in the Real Property. A "sale or transfer" means the
conveyance of Real Property or any right, title or interest
therein; whether legal, beneficial or equitable; whether
voluntary or involuntary; whether by outright sale, deed,
installment sale contract, land contract, contract for deed,
leasehold interest with a term greater than three (3) years,
lease-option contract, or by sale, assignment, or transfer of
any beneficial interest in or to any land trust holding title
to the Real Property, or by any other method of conveyance of
Real Property interest. If any Trustor is a corporation,
partnership or limited liability company, transfer also
includes any change in ownership of more than twenty-five
percent (25%) of the voting stock, partnership interests or
limited liability company interests, as the case may
be, of Trustor. However, this option shall not be exercised by
Lender if such exercise is prohibited by applicable law.

DEFAULT INTEREST RATE - 18.00% PER YEAR. Not withstanding any
other provisions of this note, Borrower acknowledges that in the
event of default, the interest rate applied to this indebtedness
will be increased to 18.00%. Borrower will be notified in
writing, with a copy to all guarantors, that an event of default
has occurred and that failure to cure the default will result
in the application of the default interest rate as of a certain
date.  That date will be at least seven (7) calendar days from
the date of notification to the Borrower.

ADDITIONAL PROVISION. Borrower acknowledges that this note is
secured by, in addition to any other collateral, a separate
Security Agreement dated August 10,1995 covering leasehold
improvements.

GENERAL PROVISIONS. Lender may delay or forgo enforcing any of
its rights or remedies under this Note without losing them.
Borrower and any other person who signs, guarantees or endorses
this Note, to the extent allowed by law, waive any applicable
statute of limitations, presentment demand for payment, protest
and notice of dishonor. Upon any change in the terms of this
Note, and unless otherwise expressly stated in writing, no
party who signs this Note, whether as maker, guarantor,
accommodation maker or endorser, shall be released from 
liability. All such parties agree that Lender may renew or
extend (repeatedly and for any length of time) this loan,
or release any party or guarantor or collateral;
or impair, fail to realize upon or perfect Lender's security
interest in the collateral; and take any other action deemed
necessary by Lender without the consent of or notice to anyone.
All such parties also agree that Lender may modify this loan
without the consent of or notice to anyone other than the
party with whom the notification is made.

PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE
PROVISIONS. BORROWER AGREES TO THE TERMS OF THE NOTE AND
ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.

BORROWER:  REAL GOODS TRADING CORPORATION
    By:[S]JOHN C. SCHAEFFER
          JOHN C. SCHAEFFER, PRESIDENT

LENDER:   National Bank of the Redwoods
    BY:[S]MARSHALL MCDONALD
          Authorized Officer
<PAGE>
               COMMERCIAL SECURITY AGREEMENT

References in the shaded area are for Lender's use only and do
not limit the applicability of this document to any particular
loan or item.

Borrower:  REAL GOODS TRADING CORPORATION
                  555 LESLIE ST 
                 UKIAH, CA 95482 

  Lender:  National Bank of the Redwoods
                   Main Office 
                111 Santa Rosa Ave
              Santa Rosa, CA 95404-4905

THIS COMMERCIAL SECURITY AGREEMENT is entered into between REAL
GOODS TRADING CORPORATION (referred to below as "Grantor"); and
National Bank of the Redwoods (referred to below as "Lender").
For valuable consideration, Grantor grants to Lender a security
interest in the Collateral to secure the Indebtedness and agrees
that Lender shall have the rights stated in this Agreement with 
respect to the Collateral, in addition to all other rights which
Lender may have by law.

DEFINITIONS. The following words shall have the following
meanings when used in this Agreement. Terms not otherwise defined
in this Agreement shall have the meanings attributed to such
terms in the Uniform Commercial Code. All references to dollar
amounts shall mean amounts in lawful money of the United States
of America.

     Agreement. The word "Agreement" means this Commercial
Security Agreement, as this Commercial Security Agreement may be
amended or modified from time to time, together with all exhibits
and schedules attached to this Commercial Security Agreement from
time to time.

     Collateral. The word "Collateral" means the following
described property of Grantor, whether now owned or hereafter
acquired, whether now existing or hereafter arising, and wherever
located:

     SEE ADDENDUM "A" ATTACHED HERETO AND MADE A PART HEREOF.

     In addition, the word "Collateral" includes all the
following, whether now owned or hereafter acquired, whether now
existing or hereafter arising, and wherever located:
       (a) All attachments, accessions, accessories, tools,
parts, supplies, increases, and additions to and all replacement
of and substitutions for any property described above. 
       (b) All products and produce of any of the property
described in this Collateral section.
       (c) All accounts, general intangibles, instruments, rents,
monies, payments, and all other rights arising out of a sale,
lease, or other disposition of any of the property described in
this Collateral section.
       (d) All proceeds (including insurance proceeds) from the
sale, destruction, loss, or other disposition of any of the
property described in this collateral section.
       (e) All records and data relating to any of the property
described in this Collateral section, whether in the form of a
writing, photograph, microfilm, microfiche, or electronic media,
together with all of Grantor's right, title, and interest in and
to all computer software required to Utilize, create, maintain,
and process any such records or data on electronic media.

     Event of Default. The words "Event of Default" mean and
include without limitation any of the Event of Default set forth
below in the section titled "Events of Default."

     Grantor. The word "Grantor" means REAL GOODS TRADING
CORPORATION, its successors and assigns.

     Guarantor. The word "Guarantor" means and includes without
limitation each and all of the guarantors, sureties, and
accommodation parties in connection with the indebtedness.

     Indebtedness. The word "Indebtedness" means the indebtedness
evidenced by the Note, including all principal and interest,
together with all other indebtedness and costs and expenses for
which Grantor is responsible under this Agreement or under any of
the Related Documents.

     Lender. The word "Lender" means National Bank of the
Redwoods, its successors and assigns.

     Note. The word "Note" means the note or credit agreement
dated June 24, 1996, in the principal amount of $585,000.00 from
REAL GOODS TRADING CORPORATION to Lender, together with all
renewals of, extensions of, modifications of, refinancings of,
consolidations of and substitutions for the note or credit
agreement.

     Related Documents. The words "Related Documents" mean and
include without limitation all promissory notes, credit
agreement, loan agreements, environmental agreements, guaranties,
security agreements, mortgages, deeds of trust, and all other
instruments, agreements and documents, whether now or hereafter
existing, executed in connection with the Indebtedness.

OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender
as follows:

     Perfection of Security Interest. Grantor agrees to execute
such financing statements and to take whatever other actions are
requested by Lender to perfect and continue Lender's security
interest in the Collateral. Upon request of Lender, Grantor will
deliver to Lender any and all of the documents evidencing or
constituting the Collateral, and Grantor will note Lender's
interest upon any and all chattel paper not delivered to Lender
for possession by Lender. Grantor hereby appoints Lender as its
irrevocable attorney-in-fact for the purpose of executing any
documents necessary to perfect or to continue the security
interest granted in this Agreement. Lender may at any time, and
without further authorization from Grantor, file a carbon,
photographic or other reproduction of any financing statement or
of this Agreement for use as a financing statement. Grantor
will reimburse Lender for all expenses for the perfection and the
continuation of the perfection of Lender's security interest in
the Collateral. Grantor promptly will notify Lender before any
change in Grantor's name including any change to the assumed
business names of Grantor.

     No Violation. The execution and delivery of this Agreement
will not violate any law or agreement governing Grantor or to
which Grantor is a party, and its certificate or articles of
incorporation and bylaws do not prohibit any term or condition of
this Agreement.

     Enforceability of Collateral. To the extent the Collateral
consists of accounts, chattel paper, or general intangibles, the
Collateral is enforceable in accordance with its terms, is
genuine, and complies with applicable laws concerning form,
content and manner of preparation and execution, and all persons
appearing to be obligated on the Collateral have authority and
capacity to contract and are in fact obligated as they appear to
be on the Collateral.

     Location of the Collateral. Grantor, upon request of Lender,
will deliver to Lender in form satisfactory to Lender a schedule
of real properties and Collateral locations relating to Grantor's
operations, including without limitation the following: (a) all
 real property owned or being purchased by Grantor; (b) all real
property being rented or leased by Grantor; (c) all storage
facilities owned, rented, leased, or being used by Grantor; and
(d) all other properties where Collateral is or may be located.
Except in the ordinary course of its business, Grantor shall not
remove the Collateral from its existing locations without the
prior written consent of Lender.

     Removal of Collateral. Grantor shall keep the Collateral (or
to the extent the Collateral consists of intangible property such
as accounts, the records concerning the Collateral) at Grantor's
address shown above, or at such other locations as are acceptable
to Lender. Except in the ordinary course of its business,
including the sales of inventory, Grantor shall not remove the
Collateral from its existing locations without the prior written
consent of Lender. To the extent that the Collateral consists of
vehicles, or other titled property, Grantor shall not take or
permit any action which would require application for
certificates of title for the vehicles outside the State of
California, without the prior written consent of Lender.

     Transactions Involving Collateral. Except for inventory sold
or accounts collected in the ordinary course of Grantor's
business, Grantor shall not sell, offer to sell, or otherwise
transfer or dispose of the Collateral. While Grantor is not in
default under this Agreement, Grantor may sell inventory, but
only in the ordinary course of its business and only to buyers
who qualify as a buyer in the ordinary course of business. A
sale in the ordinary course of Grantor's business does not
include a transfer in partial or total satisfaction of a
debt or any bulk sale. Grantor shall not pledge, mortgage,
encumber or otherwise permit the Collateral to be
subject to any lien, security interest, encumbrance, or charge,
other than the security interest provided for in this
Agreement, without the prior written consent of Lender. This
includes security interests even if junior in right to
the security interests granted under this Agreement. Unless
waived by Lender, all proceeds from any disposition
of the Collateral (for whatever reason) shall be held in trust
for Lender and shall not be commingled with any
other funds; provided however, this requirement shall not
constitute consent by Lender to any sale or other
desolation. Upon receipt. Grantor shall immediately deliver any
such proceeds to Lender.

     Title. Grantor represents and warrants to Lender that it
holds good and marketable title to the Collateral,
free and clear of all liens and encumbrances except for the lien
of this Agreement. No financing statement covering any of the
Collateral is on file in any public office other than those which
reflect the security interest created by this Agreement or to
which Lender has specifically consented. Grantor shall defend
Lender's rights in the Collateral against the claims and demands
of all other persons.

     Collateral Schedules and Locations. Insofar as the
Collateral consists of inventory, Grantor shall deliver to
Lender, as often as Lender shall require, such lists,
descriptions, and designations of such Collateral as Lender may
require to identify the nature, extent, and location of such
Collateral. Such information shall be submitted for Grantor and
each of its subsidiaries or related companies.

     Maintenance and Inspection of Collateral. Grantor shall
maintain all tangible Collateral in good condition and repair.
Grantor will not commit or permit damage to or destruction of the
Collateral or any part of the Collateral. Lender and its
designated representatives and agents shall have the right at all
reasonable times to examine, inspect, and audit the Collateral
wherever located. Grantor shall immediately notify Lender of all
cases involving the return, rejection, repossession, loss or
damage of or to any Collateral; of any request for credit or
adjustment or of any other dispute arising with respect to the
Collateral; and generally of all happenings and events affecting
the Collateral or the value or the amount of the Collateral.

     Taxes, Assessments and Liens. Grantor will pay when due all
taxes, assessments and liens upon the Collateral, its use or
operation, upon this Agreement, upon any promissory note or notes
evidencing the Indebtedness, or upon any of the other Related
Documents. Grantor may withhold any such payment or may elect to
contest any lien if Grantor is in good faith conducting an
appropriate proceeding to contest the obligation to pay and so
long as Lender's interest in the Collateral is not jeopardized in
Lender's sole opinion. If the Collateral is subjected to a lien
which is not discharged within fifteen (15) days, Grantor shall
deposit with Lender cash, a sufficient corporate surety bond or
other security satisfactory to Lender in an amount adequate to
provide for the discharge of the lien plus any interest, costs,
attorneys' fees or other charges that could accrue as a result of
foreclosure or sale of the Collateral. In any contest Grantor
shall defend itself and Lender and shall satisfy any final
adverse judgment before enforcement against the Collateral.
Grantor shall name Lender as an additional obligee under any
surety bond furnished in the contest proceedings.

     Compliance With Governmental Requirements. Grantor shall
comply promptly with all laws, ordinances, rules and regulations
of all governmental authorities, now or hereafter in effect,
applicable to the ownership, production, disposition, or use of
the Collateral. Grantor may contest in good faith any such law,
ordinance or regulation and withhold compliance during any
proceeding, including appropriate appeals, so long as Lender's
interest in the Collateral, in Lender's opinion, is not
jeopardized.

     Maintenance of Casualty Insurance. Grantor shall procure and
maintain all risks insurance, including without limitation fire,
theft and liability coverage together with such other insurance
as Lender may require with respect to the Collateral, in form,
amounts, coverages and basis reasonably acceptable to Lender and
issued by a company or companies reasonably acceptable to Lender.
Grantor, upon request of Lender, will deliver to Lender from time
to time the policies or certificates of insurance in form
satisfactory to Lender, including stipulations that coverages
will not be cancelled or diminished without at least ten (10)
days' prior written notice to Lender and not including any
disclaimer of the insurer's liability for failure to give such a
notice. Each insurance policy also shall include an endorsement
providing that coverage in favor of Lender will not be impaired
in any way by any act, omission or default of Grantor or any
other person. In connection with all policies covering assets in
which Lender holds or is offered a security interest, Grantor
will provide Lender with such loss payable or other endorsements
as Lender may require. If Grantor at any time fails to obtain or
maintain any insurance as required under this Agreement, Lender
may (but shall not be obligated to) obtain such insurance as
Lender deems appropriate, including if it so chooses "single
interest insurance," which will cover only Lender's interest in
the Collateral.
 
     Application of Insurance Proceeds. Grantor shall promptly
notify Lender of any loss or damage to the Collateral. Lender may
make proof of loss if Grantor fails to do so within fifteen (15)
days of the casualty. All proceeds of any insurance on the
Collateral, including accrued proceeds thereon, shall be held by
Lender as part of the Collateral. If Lender consents to repair or
replacement of the damaged or destroyed Collateral, Lender shall,
upon satisfactory proof of expenditure, pay or reimburse Grantor
from the proceeds for the reasonable cost of repair or
restoration. If Lender does not consent to repair or replacement
of the Collateral, Lender shall retain a sufficient amount of the
proceeds to pay all of the Indebtedness, and shall pay the
balance to Grantor. Any proceeds which have not been disbursed
within six (6) months after their receipt and which Grantor has
not committed to the repair or restoration of the Collateral
shall be used to prepay the Indebtedness.

     Insurance Reserves. Lender may require Grantor to maintain
with Lender reserves for payment of insurance premiums, which
reserves shall be created by monthly payments from Grantor of a
sum estimated by Lender to be sufficient to produce, at least
fifteen (15) days before the premium due date, amounts at least
equal to the insurance premiums to be paid. If fifteen (15) days
before payment is due, the reserve funds are insufficient,
Grantor shall upon demand pay any deficiency to Lender. The
reserve funds shall be held by Lender as a general deposit and
shall constitute a non-interest-bearing account which Lender may
satisfy by payment of the insurance premiums required to be paid
by Grantor as they become due. Lender does not hold the reserve
funds in trust for Grantor, and Lender is not the agent of
Grantor for payment of the insurance premiums
required to be paid by Grantor. The responsibility for the
payment of premiums shall remain Grantor's sole responsibility.

     Insurance Reports. Grantor, upon request of Lender, shall
furnish to Lender reports on each existing policy of insurance
showing such information as Lender may reasonably request
including the following: (a) the name of the insurer; (b) the
risks insured; (c) the amount of the policy; (d) the property
insured; (e) the then current value on the basis of which
insurance has been obtained and the manner of determining that
value, and (f) the expiration date of the policy. In addition,
Grantor shall upon request by Lender (however not more often
than annually) have an independent appraiser satisfactory to
Lender determine, as applicable, the cash value or replacement
cost of the Collateral.
  
GRANTOR'S RIGHT TO POSSESSION. Until default, Grantor may have
 possession of the tangible personal property and beneficial use
of all the Collateral and may use it in any lawful manner not
inconsistent with this Agreement or the Related Documents,
provided that Grantor's right to possession and beneficial use
shall not apply to any Collateral where possession of the
Collateral by Lender is required by law to perfect Lender's
Security Interest in Such Collateral. If Lender at any time has
possession of any Collateral, whether before or after an Event of
Default, Lender shall be deemed to have exercised reasonable care
in the custody and preservation of the Collateral if Lender takes
such action for that purpose as Grantor shall request or as
Lender, in Lender's sole discretion, shall deem appropriate
under the circumstances, but failure to honor any request by
Grantor shall not of itself be deemed to be a failure to exercise
reasonable care. Lender shall not be required to take any steps
necessary to preserve any rights in the Collateral against prior
parties, nor to protect, preserve or maintain any security
interest given to secure the indebtedness.

EXPENDITURES BY LENDER. If not discharged or paid when due,
Lender may (but shall not be obligated to) discharge or pay any
amounts required to be discharged or paid by Grantor under this
Agreement, including without limitation all taxes, liens,
security interests, encumbrances, and other claims, at any time
levied or placed on the Collateral. Lender also may (but shall
not be obligated to) pay all costs for insuring, maintaining
and preserving the Collateral. All such expenditures incurred or
paid by Lender for such purposes will then bear interest at the
rate charged under the Note from the date incurred or paid by
Lender to the date of repayment by Grantor. All such expenses
shall become a part of the Indebtedness and at Lender's option,
will (a) be payable on demand, (b) be added to the balance of the
Note and be apportioned among and be payable with any installment
payments to become due during either (i) the term of any
applicable insurance policy or (ii) the remaining term of the
Note, or (c) be treated as a balloon payment which will be due
and payable at the Note's maturity. This Agreement also will
secure payment of these amounts. Such right shall be in addition
to all other rights and remedies to which Lender may be
entitled upon the occurrence of an Event of Default.

EVENTS OF DEFAULT. Each of the following shall constitute an
Event of Default under this Agreement:

     Default on Indebtedness. Failure of Grantor to make any
payment when due on the Indebtedness.

     Other Defaults. Failure of Grantor to comply with or to
perform any other term, obligation, covenant or condition
contained in this Agreement or in any of the Related Documents or
in any other agreement between Lender and Grantor.

     Default In Favor of Third Parties. Should Borrower or any
Grantor default under any loan, extension of credit,
security agreement, purchase or sales agreement, or any other
agreement, in favor of any other creditor or person that may
materially affect any of Borrower's property or Borrower's or any
Grantor's ability to repay the Loans or perform their respective
obligations under this Agreement or any of the Related Documents.

     False Statements. Any warranty, representation or statement
made or furnished to Lender by or on behalf of Grantor under this
Agreement, the Note or the Related Documents is false or
misleading in any material respect, either now or at the time
made  or furnished.

     Defective Collateralization. This Agreement or any of the
Related Documents ceases to be in full force and effect
(including failure of any collateral documents to create a valid
and perfected security interest or lien) at any time and for any
reason.

     Insolvency. The dissolution or termination of Grantor's
existence as a going business, the insolvency of Grantor, the
appointment of a receiver for any pan of Grantor's property, any
assignment for the benefit of creditors, any type of creditor
workout, or the commencement of any proceeding under any
bankruptcy or insolvency laws by or against Grantor.

     Creditor or Forfeiture Proceedings. Commencement of
foreclosure or forfeiture proceedings, whether by judicial
proceeding, self-help, repossession or any other method, by any
creditor of Grantor or by any governmental agency against the
Collateral or any other collateral securing the indebtedness.
This includes a garnishment of any of Grantor's deposit accounts
with Lender.

     Events Affecting Guarantor. Any of the preceding events
occurs with respect to any Guarantor of any of the Indebtedness
or such Guarantor dies or becomes incompetent.

     Adverse Change. A material adverse change occurs in
Grantor's financial condition, or Lender believes the prospect of
payment or performance of the Indebtedness is impaired.

RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs
under this Agreement, at any time thereafter, Lender shall have
all the rights of a secured party under the California Uniform
Commercial Code. In addition and without limitation, Lender may
exercise any one or more of the following rights and remedies:

     Accelerate Indebtedness. Lender may declare the entire
Indebtedness, including any prepayment penalty which Grantor
would be required to pay, immediately due and payable, without
notice.

     Assemble Collateral. Lender may require Grantor to deliver
 to Lender all or any option of the Collateral and any and all
certificates of title and other documents relating to the
Collateral. Lender may require Grantor to assemble the Collateral
and make it available to Lender at a place to be designated by
Lender. Lender also shall have full power to enter upon the
property of Grantor to take possession of and remove the
Collateral. If the Collateral contains other goods not covered by
this Agreement at the time of repossession, Grantor agrees
Lender may take such other goods, provided that Lender makes
reasonable efforts to return them to Grantor after repossession.

     Sell the Collateral. Lender shall have full power to sell,
lease, transfer, or otherwise deal with the Collateral or
proceeds thereof in its own name or that of Grantor. Lender may
sell the Collateral at public auction or private sale. Unless the
Collateral threatens to decline speedily in value or is of a type
customarily sold on a recognized market, Lender will give Grantor
reasonable notice of the time after which any private sale or any
other intended disposition of the Collateral is to be made. The
requirements of reasonable notice shall be met if such notice is
given at least ten (10) days, or such lesser time as required by
state law, before the time of the sale or disposition. All
expenses relating to the disposition of the Collateral,
including without limitation the expenses of retaking, holding,
insuring, preparing for sale and selling the Collateral, shall
become a pan of the indebtedness secured by this Agreement and
shall be payable on demand, with interest at the Note rate from
date of expenditure until  repaid.

     Appoint Receiver. To the extent permitted by applicable law,
Lender shall have the following rights and remedies regarding the
appointment of a receiver: (a) Lender may have a receiver
appointed as a matter of right, (b) the receiver may be an
employee of Lender and may serve without bond, and (c) all fees
of the receiver and his or her attorney shall become part of the
Indebtedness secured by this Agreement and shall be payable on
demand, with interest at the Note rate from date of expenditure
until repaid.

     Collect Revenues, Apply Accounts. Lender, either itself or
through a receiver, may collect the payments, rents, income, and
revenues from the Collateral. Lender may at any time in its
discretion transfer any Collateral into its own name or that of
its nominee and receive the payments, rents, income, and revenues
therefrom and hold the same as security for the Indebtedness or
apply it to payment of the Indebtedness in such
order of preference as Lender may determine. Insofar as the
Collateral consists of accounts, general intangibles,
insurance policies, instruments, chattel paper, chooses in
action, or similar property, Lender may demand, collect, receipt
for, settle, compromise, adjust, sue for, foreclose, or  realize
on the Collateral as Lender may determine, whether or not
Indebtedness or Collateral is then due. For these purposes,
Lender may, on behalf of and in the name of Grantor, receive,
open and dispose of mail addressed to Grantor; change any address
to which mail and payments are to be sent; and endorse notes,
checks, drafts, money orders, documents of title, instruments and
items pertaining to payment, shipment, or storage of any
Collateral. To facilitate collection, Lender may notify account
debtors and obligators on any Collateral to make payments
directly to Lender.

     Obtain Deficiency. If Lender chooses to sell any or all of
the Collateral, Lender may obtain a judgment against Grantor for
any deficiency remaining on the Indebtedness due to Lender after
application of all amounts received from the exercise of the
rights provided in this Agreement. Grantor shall be liable for a
deficiency even if the transaction described in this subsection
is a sale of accounts or chattel paper.

     Other Rights and Remedies. Lender shall have all the rights
and remedies of a secured creditor under the provisions of the
Uniform Commercial Code, as may be amended from time to time. In
addition, Lender shall have and may exercise any or all other
rights and remedies it may have available at law, in equity, or
otherwise.

     Cumulative Remedies. All of Lender's rights and remedies,
whether evidenced by this Agreement or the Related Documents or
by any other writing, shall be cumulative and may be exercised
singularly or concurrently. Election by Lender to pursue any
remedy shall not exclude pursuit of any other remedy, and an
election to make expenditures or to take action to perform an
obligation of Grantor under this Agreement, after Grantor's
failure to perform, shall not affect Lender's right to declare a
default and to exercise its remedies.

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions
are a part of this Agreement:

     Amendments. This Agreement, together with any Related
Documents, constitutes the entire understanding and agreement of
the parties as to the matters set forth in this Agreement. No
alteration of or amendment to this Agreement shall be
effective unless given in writing and signed by the party or
parties sought to be charged or bound by the alteration or
amendment.

     Applicable Law. This Agreement has been delivered to Lender
and accepted by Lender in the State of California. If there is a
lawsuit, Grantor agrees upon Lender's request to submit to the
jurisdiction of the courts of the State of California. This
Agreement shall be governed by and construed in accordance with
the laws of the State of California.

     Attorneys' Fees; Expenses. Grantor agrees to pay upon demand
all of Lender's costs and expenses, including attorneys' fees
and Lender's legal expenses, incurred in connection with the
enforcement of this Agreement. Lender may pay someone else to
help enforce this Agreement, and Grantor shall pay the costs and
expenses of such enforcement. Costs and expenses include Lender's
attorneys' fees and legal expenses whether or not there is a
lawsuit, including attorneys' fees and legal expenses for
bankruptcy proceedings (and including efforts to modify or vacate
any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Grantor also shall pay all
court costs and such additional fees as may be directed by the
court.

     Caption Headings. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or
define the provisions of this Agreement.

     Notices. All notices required to be given under this
Agreement shall be given in writing, may be sent by
telefacsimile,  and shall be effective when actually delivered or
when deposited with a nationally recognized overnight courier or
deposited in the United States mail, first class, postage
prepaid, addressed to the party to whom the notice is to be given
at the address shown above. Any party may change its address for
notices under this Agreement by giving formal written notice to
the other parties, specifying that the purpose of the notice is
to change the party's address. To the extent permitted by
applicable law, if there is more than one Grantor, notice to any
Grantor will constitute notice to all Grantors. For notice
purposes, Grantor will keep Lender informed at all times of
Grantor's current address(es).

     Power of Attorney. Grantor hereby appoints Lender as its
true and lawful attorney-in-fact irrevocably, with full power of
substitution to do the following: (a) to demand, collect,
receive, receipt for, sue and recover all sums of money o; other
property which may now or hereafter become due, owing or payable
from the Collateral; (b) to execute, sign and endorse any and all
claims, instruments, receipts, checks, drafts or warrants issued
in payment for the Collateral, (c) to settle or compromise any
and all claims arising under the Collateral, and, in the place
and stead of Grantor, to execute and deliver its release and
settlement for the claim; and (d) to file any claim or claims or
to take any action or institute or take part in any proceedings,
either in its own name or in the name of Grantor, or otherwise,
which in the discretion of Lender may seem to be necessary or
advisable. This power is given as security for the Indebtedness,
and the authority hereby conferred is and shall be irrevocable
and shall remain in full force and effect until renounced
by Lender.

     Preference Payments. Any monies Lender pays because of an
asserted preference claim in Borrower's bankruptcy will become a
part of the Indebtedness and, at Lender's option, shall be
payable by Borrower as provided above in the "EXPENDITURES BY
LENDER" paragraph.

     Severability. If a court of competent jurisdiction finds any
provision of this Agreement to be invalid or unenforceable as to
any person or circumstance, such finding shall not render that
provision invalid or unenforceable as to any other persons or
circumstances. If feasible, any such offending provision shall be
deemed to be modified to be within the limits of enforceability
or validity; however, if the offending provision cannot be so
modified, it shall be stricken and all other provisions of this
Agreement in all other respects shall remain valid and
enforceable.

     Successor Interests. Subject to the limitations set forth
above on transfer of the Collateral, this Agreement shall be
binding upon and inure to the benefit of the parties, their
successors and assigns.

     Waiver. Lender shall not be deemed to have waived any rights
under this Agreement unless such waiver is given in writing and
signed by Lender. No delay or omission on the part of Lender in
exercising any right shall operate as a waiver of such right or
any other right. A waiver by Lender of a provision of this
Agreement shall not prejudice or constitute a waiver of Lender's
right otherwise to demand strict compliance with that provision
or any other provision of this Agreement. No prior waiver
by Lender, nor any course of dealing between Lender and Grantor,
shall constitute a waiver of any of Lender's rights or of any of
Grantor's obligations as to any future transactions. Whenever the
consent of Lender is required under this Agreement, the granting
of such consent by Lender in any instance shall not constitute
continuing consent to subsequent instances where such consent is
required and in all cases such consent may be granted or withheld
in the sole discretion of Lender.

     Waiver of Co-obligator's Rights. If more than one person is
obligated for the Indebtedness, Borrower irrevocably waives,
disclaims and relinquishes all claims against such other person
which Borrower has or would otherwise have by virtue of payment
of the Indebtedness or any part thereof, specifically including
but not limited to all rights of indemnity, contribution or
exoneration.

GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
COMMERCIAL SECURITY AGREEMENT, AND GRANTOR AGREES TO ITS TERMS.
THIS AGREEMENT IS DATED JUNE 24, 1996.

GRANTOR:   REAL GOODS TRADING CORPORATION
     BY:[S]JOHN C. SCHAEFFER