EXHIBIT 10.90

                      REIMBURSEMENT AND SECURITY AGREEMENT

     This  REIMBURSEMENT AND SECURITY  AGREEMENT,  dated as of May 6, 1997 (this
"Agreement"),  is made by SOUTHWALL  TECHNOLOGIES,  INC., a Delaware corporation
(the "Grantor"),  and TEIJIN LIMITED, a Japanese  corporation,  as secured party
(the "Secured Party").

     PRELIMINARY STATEMENTS:

     (1) The Secured  Party has entered  into that certain  Guarantee  Agreement
Regarding  10 Million US$ Credit  Facility,  dated as of the date  hereof  (said
agreement,  as it may  hereafter be amended or otherwise  modified  from time to
time,  the "Guaranty  Agreement";  the terms  defined  therein and not otherwise
defined  herein are used  herein as therein  defined),  under  which the Secured
Party has agreed to provide  LENDER with a letter of  guarantee  (the "Letter of
Guarantee") as an inducement to extend a LOAN to the Grantor.

     (2) It is a  condition  precedent  to the  making of the  guarantee  by the
Secured Party under the Guaranty Agreement that the Grantor shall have agreed to
the reimbursement and security interest contemplated by this Agreement.

     NOW, THEREFORE, in consideration of the premises and in order to induce the
Secured Party to make the guarantee  under the Guaranty  Agreement,  the Grantor
hereby agrees with the Secured Party as follows.

     SECTION 1. Reimbursement; Assignment and Grant of Security Interest.

     (a) The Grantor  hereby agrees to reimburse the Secured Party on demand for
and in the amount of any payment  made by the Secured  Party to LENDER under the
Letter of Guarantee. All payments made by the Grantor under this Agreement shall
be made by the Grantor free and clear of and without  deduction  for any and all
present  and  future  taxes,  levies,  charges,   deductions  and  withholdings,
excluding,  in the case of the Secured Party, any of the foregoing imposed on or
measured  by its net  income  or  gross  receipts  by the  jurisdiction  (or any
political  subdivision  thereof)  under the laws of which the  Secured  Party is
organized or maintains a lending office ("Taxes").  To the extent applicable law
requires a deduction  or  withholding  for Taxes,  then the gross amount of such
payment made by the Grantor  shall be increased at the  Grantor's  sole cost and
expense such that the net payment to the Secured  Party or its  assignee  equals
that amount which the Secured Party or its assignee  would have received if such
deduction or withholding were not made. In addition,  the Grantor shall pay upon
demand any stamp or other  taxes,  levies or charges  of any  jurisdiction  with
respect to the execution, delivery, registration, performance and enforcement of
this Agreement.


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Upon  request  by  the  Secured  Party,   the  Grantor  shall  furnish  evidence
satisfactory  to  the  Secured  Party  that  all  requisite  authorizations  and
approvals  by, and notices to and filings  with,  governmental  authorities  and
regulatory  bodies have been  obtained  and made and that all  requisite  taxes,
levies and charges  have been paid.  Any  amounts  payable by the Grantor to the
Secured  Party  hereunder  not paid upon demand shall bear interest at an annual
rate equal to the six (6) months  LIBOR rate  established  by BBA at the time of
non-payment plus five percent (5%).

     (b) The Grantor  hereby  assigns to the Secured Party for its benefit,  and
hereby grants to the Secured  Party for its benefit a security  interest in, all
of the  Grantor's  right,  title and interest in and to  Grantor's  property set
forth on Exhibit A attached hereto (the  "Collateral"),  and all proceeds of any
and all of the foregoing Collateral.  The list of Collateral may be amended from
time to time by mutual  agreement of the parties;  provided,  however,  that the
Secured  Party shall have no obligation to agree to the amendment of the list of
Collateral if it believes that such amendment would impair the security interest
in the Grantor's property created hereunder.

     SECTION 2. Security for Obligations.  This Agreement secures the payment of
all  obligations  of the Grantor now or  hereafter  existing  under the Guaranty
Agreement   and  under  this   Agreement   (all  such   obligations   being  the
"Obligations").

     SECTION  3.   Representations,   Warranties  and  Covenants.   The  Grantor
represents and warrants as follows.

     (a) The Grantor is a corporation  duly organized,  validly  existing and in
good  standing  under the laws of the State of  Delaware;  the  Grantor  has the
lawful power to own its  properties and to engage in the businesses it conducts,
and is duly  qualified  and in good  standing  as a foreign  corporation  in the
jurisdictions  wherein the failure to so qualify  would have a material  adverse
effect on the Grantor or its business or prospects.

     (b) The  Grantor is not in  default  with  respect  to any of its  existing
indebtedness,  and the  making  and  performance  of  this  Agreement  will  not
(immediately or with the passage of time, the giving of notice, or both):

          (i)  violate  the   articles  of   incorporation,   by-laws  or  other
organizational  of the Grantor or violate any laws or result in a default  under
any  contract,  agreement,  or  instrument to which the Grantor is a party or by
which the Grantor or any of its property is bound; or

          (ii) result in the creation or imposition of any security interest in,
or lien or  encumbrance  upon,  any of the assets of the Grantor,  other than in
favor of the Secured Party.

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     (c) The Grantor has the power and  authority to enter into and perform this
Agreement and to incur the  obligations  herein  provided for, and has taken all
actions necessary to authorize the execution,  delivery, and performance of this
Agreement.

     (d) This Agreement is valid,  binding,  and  enforceable in accordance with
its terms.

     (e) The chief place of business and chief  executive  office of the Grantor
and the office where the Grantor keeps its records  concerning  the  Collateral,
are located at 1029 Corporation Way, Palo Alto, California 94303.

     (f) The Grantor is, or as soon as  practicable  following  the Closing will
be, the legal and beneficial owner of the Collateral free and clear of any lien,
security interest, option or other charge or encumbrance except for the security
interest created by this Agreement and Permitted  Liens. No effective  financing
statement or other  document  similar in effect  covering all or any part of the
Collateral  is on file in any  recording  office,  except  such as may have been
filed in favor of the Secured  Party  relating to this  Agreement  and Permitted
Liens.  As used  herein,  "Permitted  Liens"  means (i)  liens to secure  taxes,
assessments  or charges not yet due or which are being  contested  in good faith
and by appropriate  proceedings and for which adequate  reserves are maintained;
(ii) carriers',  mechanics',  warehousemen's  artisans',  repairmen's or similar
liens arising in the ordinary  course of business which are not overdue or which
are being  contested in good faith and by appropriate  proceedings and for which
adequate  reserves are maintained;  and (iii) liens and  encumbrances  which (A)
existed on property  acquired by the Grantor before the time of its  acquisition
and was not created in anticipation of such event, or (B) were taken or retained
by the  seller of such  property  to secure  all or part of its price or created
solely for the purpose of  securing  indebtedness  representing,  or incurred to
finance or refinance the cost of such property; provided that no such Lien shall
extend to or cover any  property  of the  Grantor  other  than the  property  so
acquired and improvements on such property.

     (g) This Agreement  creates a valid and perfected  first priority  security
interest in the  Collateral  (other than with respect to  Permitted  Liens given
priority as a matter of law),  securing the payment of the Obligations,  and all
filings and other  actions  necessary  or  desirable to perfect and protect such
security interest have been duly taken.

     (h) No consent of any other person or entity and no authorization, approval
or other action by, and no notice to or filing with, any governmental  authority
or  regulatory  body is  required  (i)  for  the  grant  by the  Grantor  of the
assignment and security  interest granted hereby or for the execution,  delivery
or  performance  of this  Agreement by the Grantor,  (ii) for the  perfection or
maintenance of the assignment and security  interest  created hereby  (including
the first priority  nature of such  assignment  and security  interest) or (iii)
except as required by  applicable  law, for the exercise by the Secured Party of
its rights and remedies hereunder.

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     (i)  There  are no  conditions  precedent  to  the  effectiveness  of  this
Agreement that have not been satisfied or waived.

     (j)  Grantor  shall  pay  Secured  Party  a risk  bearing  commission  as a
Guarantee Fee  (hereinafter  called  "Guarantee Fee") at the rate of 0.5625% per
year on the outstanding amount of the principal amount of the LOAN, as specified
in the Guaranty Agreement.

     (k) The  Guarantee Fee shall be paid by Grantor in arrears on each Interest
Payment Date (as such term is defined in the Guaranty  Agreement) for the period
commencing  either on and including the date of the First  Draw-Down,  or on and
including the immediately  preceding  Interest  Payment Date up to and including
the date immediately preceding such relevant Interest Payment Date, as specified
in the Guaranty Agreement.

     (l) The Guarantee Fee shall accrue daily and shall be computed on the basis
of a year of three  hundred and sixty  (360) days and the actual  number of days
elapsed.

     (m)  Guarantee  Fee payments  shall be made by wire  transfer by Grantor to
Secured  Party in US Dollars to Secured  Party's  Account No.  403-401  with The
Sanwa Bank, Limited, Osaka Head Office.

     (n) Any taxes,  charges,  or other  expenses with respect to each Guarantee
Fee  payment  made to  Secured  Party by  Grantor  shall  be  borne by  Grantor.
Nevertheless,  Grantor may deduct  withholding  tax duly levied on Guarantee Fee
payments  to the extent  that a tax credit  will be obtained by such party under
the convention for the avoidance of double  taxation  between the governments of
U.S.A.  and  Japan.  Grantor  shall  secure  for  Secured  Party  a tax  receipt
acceptable to Japanese tax  authorities for said tax purpose and will send it to
Secured Party within thirty (30) days after such payment.

     (o) During the term of the LOAN,  as specified  in the Guaranty  Agreement,
Grantor  shall  maintain the  following  financial  covenants,  as measured on a
quarterly  basis as of the last  day of each  fiscal  quarter  of  Grantor  from
financial  data publicly  reported in Grantor's  Form 10-Q and Form 10-K Reports
filed with the Securities and Exchange  Commission,  or from supporting data for
such reports:

          (1) Minimum Quick Ratio: 1.00 to 1.00

              Minimum Quick Ratio is defined as Cash and Equivalents  plus Short
              Term  Investments  plus  Accounts  Receivables  to  Total  Current
              Liabilities.

          (2) Minimum Tangible Net Worth:  $24,000,000 and to increase  annually
              by 50% of annual  Net  After Tax  Profits,  such  increases  to be
              cumulative. Grantor shall remain profitable in each fiscal year.

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              Tangible  Net  Worth  is  defined  as  Stockholders   Equity  plus
              Subordinated  Debt minus Intangible  Assets  (including  Goodwill,
              Patents and Licenses).

              Net After Tax  Profits is defined as Net  Operating  Income  minus
              recorded Tax Provision for the period, excluding any extraordinary
              adjustments due to changes in accounting  rules as provided by the
              Financial  Accounting  Standard  Board  or  for  recording  of Net
              Operating  Loss  Carryforward  or other tax assets or  liabilities
              relating to prior year results or activities.

              Maximum Debt to Tangible Net Worth ratio: 0.65 to 1.00

              Debt is defined as Total Liabilities minus Subordinated Debt.

              Grantor shall  provide to Secured  Party a quarterly  certificate,
              signed by a responsible  officer of Grantor,  together with a copy
              of the current  quarter's  Form 10-Q Report as early as reasonably
              possible but no later than sixty (60) days  following the last day
              of the fiscal  quarter,  or following the end of Grantor's  fiscal
              fourth  quarter,  a copy of the  Form  10-K  Report,  as  early as
              reasonably possible but no later than one hundred and twenty (120)
              days following the last day of the fiscal quarter.

          (p) In the event of any actual or  expected  default by Grantor in any
payment  of  principal  or  interest  on the LOAN or of any  actual or  expected
default by Grantor in any  financial  covenants in Section  3(o),  Grantor shall
immediately  give a written notice of such actual or expected default to Secured
Party. Such notice shall include detailed  information on the LOAN including the
payment amount and due date for the payment which is or may become in default.

          SECTION 4. Further Assurances.

          (a) The Grantor  agrees that from time to time,  at the expense of the
Grantor,  the Grantor will promptly execute and deliver all further  instruments
and documents,  and take all further action, that may be necessary or desirable,
or that the  Secured  Party may  reasonably  request,  in order to  perfect  and
protect the assignment and security  interest granted or purported to be granted
hereby or to enable the  Secured  Party to  exercise  and enforce its rights and
remedies  hereunder  with  respect  to  any  Collateral.  Without  limiting  the
generality of the foregoing,  the Grantor will: (i) if any  Collateral  shall be
evidenced by a promissory  note or other  instrument or chattel paper,  promptly
notify the Secured Party  thereof and, if  requested,  deliver and pledge to the
Secured Party  hereunder  such note or instrument or chattel paper duly endorsed
and accompanied by duly executed  instruments of transfer or assignment,  all in
form and substance  reasonably  satisfactory to the Secured Party;  (ii) execute
and file such financing or continuation  statements,  or amendments thereto, and
such other instruments or notices,  as may be necessary or desirable,  or as the
Secured Party may

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reasonably request, in order to perfect and preserve the assignment and security
interest granted or purported to be granted hereby; and (iii) mark conspicuously
any  Collateral  and, at the request of the Secured  Party,  each of its records
pertaining to the  Collateral  with a legend,  in form and substance  reasonably
satisfactory to the Secured Party, indicating that such Collateral is subject to
the assignment and security interest granted pursuant hereto.

          (b) The Grantor  hereby  authorizes  the Secured  Party to file one or
more financing or continuation statements,  and amendments thereto,  relating to
all or any part of the  Collateral  without the  signature of the Grantor  where
permitted by law. A photocopy  or other  reproduction  of this  Agreement or any
financing  statement  covering  the  Collateral  or any party  thereof  shall be
sufficient as a financing statement where permitted by law.

          (c)  During  the  term  of the  LOAN,  as  specified  in the  Guaranty
Agreement,  the amount of  Grantor's  inventory,  consisting  of raw  materials,
work-in-process and finished goods  ("Inventory"),  that shall constitute a part
of the Collateral will at all times be an amount equal to the difference between
120% of the principal and accrued interest then owing under the LOAN and the net
value  (defined  as the  purchase  price  for  the  equipment  less  accumulated
depreciation  calculated  at the rate of 10% per  annum)  of the  equipment  and
machinery that  constitutes a part of the  Collateral.  The Secured Party agrees
that its security  interest in Inventory shall be limited to Inventory  having a
value  equal to the amount  described  in the  preceding  sentence.  The Grantor
acknowledges  that, upon the occurrence of a Default,  the Secured Party intends
to look to the  components of the Inventory in the following  order of priority:
finished goods, work-in-process and raw materials.

          (d) The Secured Party agrees to execute such  agreements and documents
that may be  reasonably  necessary  to confirm the scope of its  interest in the
Inventory upon the reasonable request of Grantor.

          SECTION 5. Place of  Perfection;  Records.  The Grantor shall keep its
chief place of business  and chief  executive  offices and the offices  where it
keeps its records  concerning  the  Collateral,  and the original  copies of all
chattel paper or other documents or instruments  that evidence the Collateral at
the locations therefor specified in Section 3(e) or, upon 30 days' prior written
notice to the Secured Party, at any other locations in a jurisdiction  where all
action  required  by  Section  4 shall  have  been  taken  with  respect  to the
Collateral.  The Grantor will hold and preserve such  records,  and such chattel
paper,  documents and instruments and will permit representatives of the Secured
Party at any time during normal  business  hours and upon  reasonable  notice to
inspect and make  abstracts  from such  records,  chattel  paper,  documents and
instruments.

          SECTION 6. As to the Collateral.

          (a) The Grantor shall at its expense:

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               (i) properly  maintain the Collateral and take all such action to
such end as may be from time to time reasonably  requested by the Secured Party;
and

              (ii) furnish to the Secured Party  promptly  upon receipt  thereof
copies of all  notices,  requests  and other  documents  received by the Grantor
relating  to the  Collateral,  and from time to time (A)  furnish to the Secured
Party such information and reports regarding the Collateral as the Secured Party
may  reasonably  request and (B) upon  request of the Secured  Party make to any
other party such demands and requests for  information and reports or for action
as the Grantor is entitled to make, respecting the Collateral.

          (b) The Grantor shall not:

               (i) sell,  assign (by operation of law or otherwise) or otherwise
dispose of, or grant any option with  respect to, any of the  Collateral  (other
than a proposed sale or other disposition of obsolete or worn-out equipment,  in
which events Grantor shall provide  Secured Party with thirty (30) days advanced
written  notice),  or create or  permit  to exist any lien,  security  interest,
option  or  other  charge  or  encumbrance  upon or with  respect  to any of the
Collateral,  except  for the  assignment  and  security  interest  under by this
Agreement or Permitted Liens; or

               (ii) take any  other  action in  connection  with the  Collateral
which would  impair the value  thereof or the  interest or rights of the Grantor
therein  or which  would  impair the  interest  or rights of the  Secured  Party
therein.

          SECTION 7.  Secured  Party  Appointed  Attorney-in-Fact.  The  Grantor
hereby  appoints the Secured  Party the  Grantor's  attorney-in-fact,  with full
authority  in the place and stead of the  Grantor and in the name of the Grantor
or  otherwise,  from time to time,  after the  Secured  Party has  notified  the
Grantor of a Default  under this  Agreement  and for so long as any such Default
exists, in the Secured Party's  discretion to take any action and to execute any
instrument which the Secured Party may deem necessary or advisable to accomplish
the purposes of this Agreement, including, without limitation:

               (i) to  ask,  demand,  collect,  sue  for,  recover,  compromise,
receive and give  acquitance and receipts for moneys due and to become due under
or in connection with the Collateral;

               (ii)  to  receive,  endorse  and  collect  any  drafts  or  other
instruments, documents and chattel paper in connection therewith; and

              (iii) to file any  claims  or take any  action  or  institute  any
proceedings  which the Secured Party may deem  necessary or desirable to enforce
the rights of the Secured Party with respect to any of the Collateral.

          SECTION 8. Secured Party May Perform.  If the Grantor fails to perform
any agreement contained herein after having a reasonable  opportunity  therefor,
the Secured Party may itself perform,  or cause  performance of, such agreement,
and the

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expenses of the Secured Party incurred in connection  therewith shall be payable
by the Grantor under Section 11(b).

          SECTION 9. The Secured  Party's  Duties.  The powers  conferred on the
Secured Party hereunder are solely to protect its interest in the Collateral and
shall not impose any duty upon it to exercise  any such  powers.  Except for the
safe custody of any  Collateral in its  possession and the accounting for moneys
actually  received by it  hereunder,  the Secured Party shall have no duty as to
any  Collateral  or as to the taking of any necessary  steps to preserve  rights
against  any  parties or any other  rights  pertaining  to any  Collateral.  The
Secured Party shall be deemed to have exercised  reasonable  care in the custody
and  preservation  of any  Collateral in its  possession  if such  Collateral is
accorded treatment  substantially  equal to that which the Secured Party accords
its own property.

          SECTION  10.  Remedies.  If after  five (5) days'  written  notice the
Grantor  fails to  reimburse  or pay any amounts due to the Secured  Party under
Section 1(a) of this  Agreement,  or if the Grantor  fails to observe or perform
any other  material term of this  Agreement  which  continues  unremedied  for a
period of thirty (30) days after written notice thereof (each a "Default"):

          (a) The  Secured  Party may  exercise  any and all legal or  equitable
rights  and  remedies  of the  Grantor in  connection  with or in respect of the
Collateral in any court or other  tribunal of proper  jurisdiction;  the Grantor
and the Secured  Party  acknowledge  and agree that the  remedies of the Secured
Party under this  Agreement are not subject to the  arbitration  provisions  set
forth in Section 8.2 of the Guaranty Agreement;

          (b) All payments  received by the Grantor in  connection or in respect
of the  Collateral  shall be  received  in trust for the  benefit of the Secured
Party,  shall be  segregated  from  other  funds  of the  Grantor  and  shall be
forthwith  paid over to the Secured Party in the same form as so received  (with
any necessary endorsement);

          (c) All payments made under or in connection with or in respect of the
Collateral, and all cash proceeds in respect of any sale of, collection from, or
other  realization  upon  all or any  part of the  Collateral,  received  by the
Secured  Party may,  in the  discretion  of the  Secured  Party,  be held by the
Secured Party as collateral for,  and/or then or at any time thereafter  applied
(after  payment of any amounts  payable to the Secured Party pursuant to Section
11) in whole or in part by the  Secured  Party  against,  all or any part of the
Obligations in such order as the Secured Party shall elect.  Any surplus of such
payments or cash proceeds held by the Secured Party and remaining  after payment
in  full  of all the  Obligations  shall  be  paid  over  to the  Grantor  or to
whomsoever may be lawfully entitled to receive such surplus; and

          (d) The Secured  Party may exercise in respect of the  Collateral,  in
addition to other rights and remedies provided for herein or otherwise available
to it, all the  rights  and  remedies  of a secured  party on default  under the
Uniform Commercial Code in

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effect in the State of California, at that time (the "Code") (whether or not the
Code applies to the affected Collateral).

          SECTION 11. Indemnity and Expenses; Payments.

          (a) The Grantor agrees to indemnify the Secured Party from and against
any and all claims,  losses and  liabilities  (including  reasonable  attorneys'
fees)  growing  out of or  resulting  from this  Agreement  (including,  without
limitation, enforcement of this Agreement), except claims, losses or liabilities
resulting from the Secured Party's gross negligence or willful misconduct.

          (b) The Grantor  will upon demand pay to the Secured  Party the amount
of any and all reasonable out-of-pocket expenses,  including the reasonable fees
and  expenses of its  counsel  and of any experts and agents,  which the Secured
Party may incur in connection  with (i) the  administration  of this  Agreement,
(ii) the custody or  preservation  of, or the sale of,  collection from or other
realization  upon, any of the  Collateral,  (iii) the exercise or enforcement of
any of the rights of the  Secured  Party  hereunder  or (iv) the  failure by the
Grantor to perform or observe any of the provisions hereof.

          SECTION 12.  Amendments;  etc. No amendment or waiver of any provision
of this Agreement, and no consent to any departure by the Grantor herefrom shall
in any event be effective  unless the same shall be in writing and signed by the
Secured  Party,  and then such waiver or consent shall be effective  only in the
specific instance and for the specific purpose for which given.

          SECTION   13.   Addresses   for   Notices.   All   notices  and  other
communications provided for hereunder shall be in writing (including telecopier,
telegraphic, telex or cable communication) and mailed, telecopied,  telegraphed,
telexed,  cabled or delivered  to it, if to the Grantor,  at its address at 1029
Corporation  Way,  Palo  Alto,  California  94303,  Attention:  Chief  Executive
Officer, Facsimile 415/967-8713,  and if to the Secured Party, at its address at
1-1, Uchisaiwaicho 2-Chome,  Chiyoda-ku,  Tokyo 100, Japan,  Attention:  General
Manager, Films Planning and Administration Dept., Facsimile  011-81-3-3506-4378,
or, as to either  party,  at such other  address as shall be  designated by such
party in a  written  notice  to the  other  party.  All such  notices  and other
communications shall be effective, if sent via facsimile,  upon confirmation via
telephone of receipt of  transmission  in legible  form, if sent via air courier
express delivery, upon the third business day after deposit for delivery with an
international air courier service,  if sent via telegraph,  telex or cable, when
delivered to the telegraph  company,  confirmed by telex answerback or delivered
to the cable company, respectively, or if mailed, upon the first business day of
the recipient that is after the tenth day after the date deposited into the U.S.
or Japanese mail, or if delivered, upon delivery.

          SECTION 14. Continuing  Assignment and Security Interest;  Assignments
Under Credit Agreement.  This Agreement shall create a continuing  assignment of
and

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security  interest  in the  Collateral  and shall (i)  remain in full  force and
effect  until the later of (X), the payment in full of the  Obligations  and all
other amounts payable under this Agreement and (Y) the expiration or termination
of the Guaranty Agreement,  (ii) be binding upon the Grantor, its successors and
assigns,  and (iii) inure,  together with the rights and remedies of the Secured
Party  hereunder,  to the  benefit  of the  Secured  Party  and its  successors,
transferees and assigns. Without limiting the generality of the foregoing clause
(iii), if the Secured Party assigns or otherwise transfers all or any portion of
its rights and obligations  under the Guaranty  Agreement to any other person or
entity,  such other person or entity shall thereupon  become vested with all the
benefits in respect  hereof  granted to the Secured  Party herein or  otherwise.
Upon the later of the payment in full of the  Obligations  and all other amounts
payable under this  Agreement and the  expiration or termination of the Guaranty
Agreement,  the security  interest granted hereby shall terminate and all rights
to the Collateral shall revert to the Grantor.  Upon any such  termination,  the
Secured Party will, at the Grantor's expense, execute and deliver to the Grantor
such  documents  as the  Grantor  shall  reasonably  request  to  evidence  such
termination.

          SECTION 15. Governing Law; Terms.  This Agreement shall be governed by
and construed in accordance with the laws of the State of California,  except to
the extent that the  validity  or  perfection  of the  assignment  and  security
interest  hereunder,  or  remedies  hereunder,  in  respect  of  any  particular
Collateral  are governed by the laws of a  jurisdiction  other than the State of
California.  Unless  otherwise  defined herein,  terms used in Division 9 of the
Uniform  Commercial Code in effect in the State of California are used herein as
therein defined.

          SECTION 16.  Waiver of Jury Trial.  THE GRANTOR AND SECURED PARTY BOTH
HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVES ANY RIGHTS THEY MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS AGREEMENT,  OR ANY COURSE OF CONDUCT,  COURSE
OF DEALING,  STATEMENTS  (WHETHER VERBAL OR WRITTEN),  OR ACTIONS OF THE GRANTOR
AND SECURED PARTY.

               [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

                                       10
<PAGE>

          IN WITNESS  WHEREOF,  the parties hereto have caused this Agreement to
be duly  executed and  delivered by their  respective  officers  thereunto  duly
authorized as of the date first above written.

                                                SOUTHWALL TECHNOLOGIES, INC.
                                                
                                                By: /s/ L. Ray Christie
                                                   -----------------------------
                                                Name: L. Ray Christie
                                                     ---------------------------
                                                Title: Vice President, Chief
                                                      --------------------------
                                                      Financial Officer

                                                TEIJIN LIMITED
                                                
                                                By: /s/ Shasaku Yasui
                                                   -----------------------------
                                                Name: Shasaku Yasui
                                                     ---------------------------
                                                Title: Senior Managing Director
                                                      --------------------------
                                                      Member of the Board

                                       11


<PAGE>

                                   EXHIBIT A

1. Inventory in an amount as described in Section 4(c).

2. The following equipment and machinery located at the Southwall  Technologies,
   Inc. facility at 8175 S. Hardy Street, Tempe, Arizona 85284:

--------------------------------------------------------------------------------
                                     ITEMS
--------------------------------------------------------------------------------

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Custom Designed and Fabricated High Vacuum Planar Magnetron Sputter Roll Coating
System, known as PM5
--------------------------------------------------------------------------------
15 Planar  Magnetron  Sputter Sources with Supported  Fixed Flange,  Gas Inlets,
Electrical  Feedthrough,  Water Cooling  Connections,  Backing  Plates and Power
Adaption Modules, for use with PM5
--------------------------------------------------------------------------------
Power Generation System for use with PM5
--------------------------------------------------------------------------------
Vacuum Deposition Machine, known as PM6
--------------------------------------------------------------------------------
Power Generation System for use with PM6
--------------------------------------------------------------------------------
Trane Chiller RTHB-150 460 A, Process Chilling System
--------------------------------------------------------------------------------
Water Cooled Dual Zone Chiller/Heater, Process Chilling System
--------------------------------------------------------------------------------
Resistance Monitoring Equipment; Non-contact Resistance Monitoring
--------------------------------------------------------------------------------
Solvent Based Tandem Coating Line
--------------------------------------------------------------------------------
5500 SCFM Catalytic  System with  Allen-Bradley  SLC502 PLC networked to coating
line
--------------------------------------------------------------------------------
610 Slitter/Rewinder
--------------------------------------------------------------------------------
Toray Sheeting Machine
--------------------------------------------------------------------------------