ex10_1.htm


    
      

    

    Exhibit
10.1

     

    WELLS FARGO BUSINESS
CREDIT

    CREDIT
AND SECURITY AGREEMENT

    
 

    THIS CREDIT AND
SECURITY AGREEMENT (the “Agreement”) is dated May 19, 2008,
and is entered into between Southwall
Technologies Inc., a Delaware
corporation
(“Company”), and Wells Fargo Bank,
National Association (as more fully defined in Exhibit A, “Wells Fargo”),
acting through its Wells Fargo Business Credit operating
division.

     

    
       
RECITALS

    

     

    Company
has asked Wells Fargo to provide it with a $3,000,000
revolving line of credit (the “Line of Credit”) for working capital purposes and
to facilitate the issuance of letters of credit.  Wells Fargo is
agreeable to meeting Company's request, provided that Company agrees to the
terms and conditions of this Agreement.

     

    For
purposes of this Agreement, capitalized terms not otherwise defined in the
Agreement shall have the meaning given them in Exhibit A.

     

    1.           AMOUNT
AND TERMS OF THE LINE OF CREDIT

     

    
      	
              1.1

            	
              Line
      of Credit; Limitations on Borrowings; Termination Date; Use of
      Proceeds.

            


    

     

    
      	
              (a)

            	
              Line
      of Credit and Limitations on Borrowing.  Wells Fargo
      shall make Advances to Company under the Line of Credit that, together
      with the L/C Amount, shall
      not at any time exceed in the aggregate the lesser
      of (i) $3,000,000
      (the “Maximum Line Amount”), or (ii) the Borrowing Base limitations
      described in Section 1.2.  Within these limits, Company may
      periodically borrow, prepay in whole or in part, and
      reborrow.  Wells Fargo has no obligation to make an Advance
      during a Default Period or at any time Wells Fargo believes that an
      Advance would result in an Event of Default.
  

            


    

     

    
      	
              (b)

            	
              Maturity
      and Termination Dates.  Company may request Advances from
      the date that  the conditions set forth in Section 3 are
      satisfied until the earlier of: (i) May 19, 2009
      (the “Maturity Date”), (ii) the date Company terminates the Line of
      Credit, or (iii) the date Wells Fargo terminates the Line of Credit
      following an Event of Default. (The earliest of these dates is the
      “Termination Date.”)

            


    

     

    
      	
              (c)

            	
              Use
      of Line of Credit Proceeds.  Company shall use the
      proceeds of each Advance and
      each Letter of Credit for ordinary working capital
      purposes.

            


    

     

    
      	
              (d)

            	
              Revolving
      Note.  Company’s obligation to repay Line of Credit
      Advances, regardless of how initiated under Section 1.3, shall be
      evidenced by a revolving promissory note (as renewed, amended or replaced
      from time to time, the “Revolving
Note”).

            


    

     

    1.2           Borrowing Base;
Mandatory Prepayment.

     

    
      	
              (a)

            	
              Borrowing
      Base.  The borrowing base (the “Borrowing Base”) is an
      amount equal to:

            


    

     

    
      (i)            
85% or
such lesser percentage of Eligible Accounts as Wells Fargo in its sole
discretion may deem appropriate; provided that this rate may be reduced at any
time by
Wells Fargo’s in its sole discretion by one (1) percent for each percentage
point by which Dilution on the date of determination is in excess of five
percent (5.0%), less

    

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    
      (ii)    the
Borrowing Base Reserve, less

    

     

    
      (iii)   
   Indebtedness
that Company owes Wells Fargo that has not been advanced on the Revolving Note,
less

    

     

    
      (iv)       
  Indebtedness
that is not otherwise described in Section 1, including Indebtedness that Wells
Fargo in its sole discretion finds on the date of determination to be equal to
Wells Fargo’s net credit exposure with respect to any swap, derivative, foreign
exchange, hedge, deposit, treasury management or similar transaction or
arrangement extended to Company by Wells Fargo and any Indebtedness owed by
Company to Wells Fargo Merchant Services, L.L.C.

    

     

    
      
        	
                (b)

              	
                Mandatory Prepayment;
      Overadvances.  If unreimbursed Line of Credit Advances
      evidenced by the Revolving Note plus the L/C Amount exceed the Borrowing
      Base or the Maximum Line Amount at any time, then Company shall
      immediately prepay the Revolving Note in an amount sufficient to eliminate
      the excess, and if payment in full of the Revolving Note is insufficient
      to eliminate this excess and the L/C Amount continues to exceed the
      Borrowing Base, then Company shall deliver cash to Wells Fargo in an
      amount equal to the remaining excess for deposit to the Special
      Account, unless in each
      case, Wells Fargo has delivered to Company an Authenticated Record
      consenting to the Overadvance prior to its
      occurrence, in which event the Overadvance shall be temporarily permitted
      on such terms and conditions as Wells Fargo in its sole discretion may
      deem appropriate, including the payment of additional fees or interest, or
      both.

              


      

    

    


    
      	
              1.3

            	
              Procedures
      for Line of Credit Advances.

            


    

    


    
      	
              (a)

            	
              Advances to Operating
      Account.  Advances shall be credited to Company’s demand
      deposit account maintained with Wells Fargo (the “Operating Account”),
      unless the parties agree in a Record Authenticated by both of them to
      disburse to another account.

            


    

    


    
      (i)   
 Advances upon Company’s
Request.  Each Advance will be funded as a Floating Rate
Advance upon Company’s request, which must be communicated to Wells Fargo no
later than 10:00 a.m. Pacific Time on the Business Day on which Company wants
the Advance to be funded, and no request will be deemed received until Wells
Fargo acknowledges receipt, and Company, if requested by Wells Fargo, confirms
the request in an Authenticated Record.  Company shall repay all
Advances, even if the Person requesting the Advance on behalf of Company lacked
authorization.

    

     

    
      (ii)   
Advances through Loan
Manager.  If Wells Fargo has separately agreed that Company may
use the Wells Fargo Loan Manager service ("Loan Manager"), Line of Credit
Advances will be initiated by Wells Fargo and credited to the Operating Account
as Floating Rate Advances as of the end of each Business Day in an amount
sufficient to maintain an agreed upon ledger balance in the Operating Account,
subject only to Line of Credit availability as provided in Section
1.1(a).  If Wells Fargo terminates Company's access to Loan Manager,
Company may continue to request Line of Credit Advances as provided in Section
1.3(a)(i).  Wells Fargo shall have no obligation to make an Advance
through Loan Manager during a Default Period, or in an amount in excess of Line of
Credit availability, and may terminate Loan Manager at any time in its sole
discretion.

    


    
      
         


      

      
        -2-

        
          

        

      

      
         


      

    

     

    
      	
              (b)

            	
              Protective Advances;
      Advances to Pay Indebtedness Due.  Wells Fargo may
      initiate a Floating Rate Advance on the Line of Credit in its sole
      discretion for any reason at any time, without Company’s compliance with
      any of the conditions of this Agreement, and (i) disburse the proceeds
      directly to third Persons in order to protect Wells Fargo’s interest in
      Collateral or to perform any of Company’s obligations under this
      Agreement, or (ii) apply the proceeds to the amount of any Indebtedness
      then due and payable to Wells
Fargo.

            


    

    


    
      	
              1.4

            	
              Collection
      of Accounts and Application to Revolving
Note.

            


    

     

    
      	
              (a)

            	
              The Collection
      Account.  Company has granted a security interest to
      Wells Fargo in the Collateral, including all Accounts. Except as otherwise
      agreed by both parties in an Authenticated Record, all Proceeds of
      Accounts and other Collateral, upon receipt or collection, shall be
      deposited each Business Day into the Collection Account. Funds so
      deposited (“Account Funds”) are the property of Wells Fargo, and may only
      be withdrawn from the Collection Account by Wells
  Fargo.

            


    

    


    
      	
              (b)

            	
              Payment of Accounts by
      Company’s Account Debtors.  Company shall instruct all
      account debtors to make payments either directly to the Lockbox for
      deposit by Wells Fargo directly to the Collection Account, or instruct
      them to deliver such payments to Wells Fargo by wire transfer, ACH, or
      other means as Wells Fargo may direct for deposit to the Collection
      Account or for direct application to the Line of Credit. If Company
      receives a payment or the Proceeds of Collateral directly, Company will
      promptly deposit the payment or Proceeds into the Collection Account.
      Until deposited, it will hold all such payments and Proceeds in trust for
      Wells Fargo without commingling with other funds or
      property.  All deposits held in the Collection Account shall
      constitute Proceeds of Collateral and shall not constitute the payment of
      Indebtedness.

            


    

    


    
      	
              (c)

            	
              Application of
      Payments to Revolving Note.  Wells Fargo will withdraw
      Account Funds deposited to the Collection Account and pay down borrowings
      on the Line of Credit by applying them to the Revolving Note on the first
      Business Day following the Business Day of deposit to the Collection
      Account, or, if payments are received by Wells Fargo that are not first
      deposited to the Collection Account pursuant to any treasury management
      service provided to Company by Wells Fargo, such payments shall be applied
      to the Revolving Note as provided in the Master Agreement for Treasury
      Management Services and the relevant service
  description.

            


    

    


    
      	
              1.5

            	
              Interest
      and Interest Related Matters.

            


    

     

    
      	
              (a)

            	
              Interest Rates
      Applicable to Line of Credit.  Except as otherwise
      provided in this Agreement, the unpaid principal amount of each Line of
      Credit Advance evidenced by the Revolving Note shall accrue interest at an
      annual interest rate equal to the Prime Rate plus 0.75% per annum which
      interest rate shall change whenever the Prime Rate changes (the “Floating
      Rate”).

            


    

    


    
      	
               (b)

            	
              Minimum Interest
      Charge.  Notwithstanding the other terms of Section 1.5
      to the contrary, and except as limited by the usury savings provision of
      Section 1.5(e), Company shall pay Wells Fargo at least $50,000 of interest
      each calendar quarter (the “Minimum Interest Charge”) during the term of
      this Agreement, and Company shall pay any
      deficiency between the Minimum Interest Charge and the amount of interest
      otherwise payable on the first day of each quarter and on the Termination
      Date; provided that if Company executes all of its foreign exchange trades
      and transactions through Wells Fargo in a quarter, then said minimum
      interest charge shall be waived for such quarter.  When
      calculating the foregoing deficiency, the Default Rate set forth in
      Section 1.5(c), if applicable, shall be
  disregarded.

            


    


    
      
         


      

      
        -3-

        
          

        

      

      
         


      

    

     

    
      	
              (c)

            	
              Default Interest
      Rate.  Commencing on the day an Event of Default occurs,
      through and including the date identified by Wells Fargo in a Record as
      the date that the Event of Default has been cured or waived (each such
      period a “Default Period”), or during a time period specified in Section
      1.8, or at any time following the Termination Date, in Wells Fargo’s sole
      discretion and without waiving any of its other rights or remedies, the
      principal amount of the Revolving Note shall bear interest at a rate that
      is three percent (3.0%) above the contractual rate set forth in Section
      1.5(a) (the “Default Rate”), or any lesser rate that Wells Fargo may deem
      appropriate, starting on the first day of the month in which the Default
      Period begins through the last day of that Default Period, or any shorter
      time period to which Wells Fargo may agree in an Authenticated
      Record.

            


    

    


    
      	
              (d)

            	
              Interest Accrual on
      Payments Applied to Revolving Note.  Payments received by
      Wells Fargo shall be applied to the Revolving Note as provided in Section
      1.4(c), but the principal amount paid down shall continue to accrue
      interest through the end of the first Business Day following the Business
      Day that the payment was applied to the Revolving
  Note.

            


    

    


    
      	
              (e)

            	
              Usury.  No
      interest rate shall be effective which would result in a rate greater than
      the highest rate permitted by law.  Payments in the nature of
      interest and other charges made under any Loan Documents or any other
      document or agreement described in or related to this Agreement that are
      later determined to be in excess of the limits imposed by applicable usury
      law will be deemed to be a payment of principal, and the Indebtedness
      shall be reduced by that amount so that such payments will not be deemed
      usurious.

            


    

    


    1.6          Fees.

     

    
      	
              (a)

            	
              Origination
      Fee.  Company shall pay Wells Fargo a one time
      origination fee of $12,000, which shall be fully earned and payable upon
      the execution of this Agreement.

            


    

     

    
      	
              (b)

            	
              Unused Line
      Fee.  Company shall pay
      Wells Fargo an annual unused line fee of one-quarter of one percent
      (0.25%) of the daily average of the Maximum Line Amount reduced by
      outstanding Advances and the L/C Amount (the “Unused Amount”), from the
      date of this Agreement to and including the Termination Date, which unused
      line fee shall be payable monthly in arrears on the first day of each
      month and on the Termination Date.

            


    

     

    
      	
              (c)

            	
              Facility
      Fee.  [intentionally
omitted]

            


    

     

    
      	
              (d)

            	
              Collateral Exam
      Fees.  Company shall pay Wells Fargo fees in connection
      with any collateral exams, audits or inspections conducted by or on behalf
      of Wells Fargo at the current rates established from time to time by Wells
      Fargo as its collateral exam fees (which fees are currently $105.00 per
      hour per collateral examiner), together with all actual
      out-of-pocket costs and expenses incurred in conducting any collateral
      examination or inspection.

            


    

     

    
      
         


      

      
        -4-

        
          

        

      

      
         


      

    

     

    
      	
              (e)

            	
              [intentionally
      omitted]

            


    

     

    
      	
              (f)

            	
              Line of Credit
      Termination and/or Reduction Fees.  If (i) Wells Fargo
      terminates the Line of Credit during a Default Period, or if (ii) Company
      terminates the Line of Credit on a date prior to the Maturity Date, or if
      (iii) Company and Wells Fargo agree to reduce the Maximum Line Amount,
      then Company shall pay Wells Fargo a termination or reduction fee in an
      amount equal to two percent (2.00%) of the Maximum Line Amount (or the
      reduction of the Maximum Line Amount, as the case may
  be).

            


    

    


    
      	
              (g)

            	
              Overadvance
      Fees.  Company shall pay a $500 Overadvance fee for each
      day that an Overadvance exists which was not agreed to by Wells Fargo in
      an Authenticated Record prior to its occurrence; provided that Wells
      Fargo’s acceptance of the payment of such fees shall not constitute either
      consent to the Overadvance or waiver of the resulting Event of
      Default.  Company shall pay additional Overadvance fees and
      interest in such amounts and on such terms as Wells Fargo in its sole
      discretion may consider appropriate for any Overadvance to which Wells
      Fargo has specifically consented in an Authenticated Record prior to its
      occurrence.

            


    

     

    
      	
              (h)

            	
              Treasury Management
      Fees.  Company will pay service fees to Wells Fargo for
      treasury management services provided pursuant to the Master Agreement for
      Treasury Management Services or any other agreement entered into by the
      parties, in the amount prescribed in Wells Fargo’s current service fee
      schedule.

            


    

     

    
      	
              (i)

            	
              Letter of Credit
      Fees.  Company shall pay a fee with respect to each
      Letter of Credit issued by Wells Fargo of one and one-half percent (1.5%)
      per annum of the aggregate undrawn amount of the Letter of Credit (the
      “Aggregate Face Amount”) accruing daily from and including the date the
      Letter of Credit is issued until the date that it either expires or is
      returned, which shall be payable monthly in arrears on the first day of
      each month and on the date that the Letter of Credit either expires or is
      returned; and following an Event of Default, this fee shall increase to
      four and one-half percent (4.5%) of the Aggregate Face Amount, commencing
      on the first day of the month in which the Default Period begins and
      continuing through the last day of such Default Period, or any shorter
      time period that Wells Fargo in its sole discretion may deem appropriate,
      without waiving any of its other rights and
  remedies.

            


    

     

    
      	
              (j)

            	
              Letter of Credit
      Administrative Fees.  Company shall pay all
      administrative fees charged by Wells Fargo in connection with the honoring
      of drafts under any Letter of Credit, and any amendments to or transfers
      of any Letter of Credit, and any other activity with respect to the
      Letters of Credit at the current rates published by Wells Fargo for such
      services rendered on behalf of its customers
  generally.

            


    

    


    
      	
              (k)

            	
              Other Fees and
      Charges.  Wells Fargo may impose additional fees and
      charges during a Default Period for (i) waiving an Event of Default, or
      for (ii) the administration of Collateral by Wells Fargo. All such fees
      and charges shall be imposed at Wells Fargo’s sole discretion following
      written notice to Company on either an hourly, periodic, or flat fee
      basis, and in lieu of or in addition to imposing interest at the Default
      Rate, and Company’s request for an Advance following such notice shall
      constitute Company’s agreement to pay such fees and
    charges.

            


    


    
      
         


      

      
        -5-

        
          

        

      

      
         


      

    

     

    1.7           Interest
Accrual; Principal and Interest Payments; Computation.

     

    
      	
              (a)

            	
              Interest Payments and
      Interest Accrual.  Accrued and unpaid interest under the
      Revolving Note on Floating Rate Advances shall be due and payable on the
      first day of each month (each an "Interest Payment Date") and on the
      Termination Date, and shall be paid in the manner provided in Section
      1.4(c).  Interest shall accrue from the most recent date to
      which interest has been paid or, if no interest has been paid, from the
      date of Advance to the Interest Payment
Date.

            


    

     

    
      	
              (b)

            	
              Payment of Revolving
      Note Principal.  The principal amount of the Revolving
      Note shall be paid from time to time as provided in this Agreement, and
      shall be fully due and payable on the Termination
  Date.

            


    

     

    
      	
              (c)

            	
              Payments Due on
      Non-Business Days.  If an Interest Payment Date or the
      Termination Date falls on a day which is not a Business Day, payment shall
      be made on the next Business Day, and interest shall continue to accrue
      during that time period.

            


    

     

    
      	
              (d)

            	
              Computation of
      Interest and Fees.  Interest accruing on the unpaid
      principal amount of the Revolving Note and fees payable under this
      Agreement shall be computed on the basis of the actual number of days
      elapsed in a year of 360 days.

            


    

    


    
      	
              (e)

            	
              Liability
      Records.  Wells Fargo shall maintain accounting and
      bookkeeping records of all Advances and payments under the Line of Credit
      and all other Indebtedness due to Wells Fargo in such form and content as
      Wells Fargo in its sole discretion deems appropriate.  Wells
      Fargo’s calculation of current Indebtedness shall be presumed correct
      unless proven otherwise by Company.  Upon Wells Fargo’s request,
      Company will admit and certify in a Record the exact principal balance of
      the Indebtedness that Company then believes to be
      outstanding.  Any billing statement or accounting provided by
      Wells Fargo shall be conclusive and binding unless Company notifies Wells
      Fargo in a detailed Record of its intention to dispute the billing
      statement or accounting within 30 days of
  receipt.

            


    

     

    
      	
              1.8

            	
              Termination,
      Reduction or Non-Renewal of Line of Credit by Company;
    Notice.

            


    

     

    
      	
              (a)

            	
              Termination by Company
      after Advance Notice.  Company may terminate or reduce
      the Line of Credit at any time prior to the Maturity Date, if it
      (i) delivers an Authenticated Record notifying Wells Fargo of its
      intentions at least 90 days prior to the proposed Termination Date,
      (ii) pays Wells Fargo the termination fee set forth in Section
      1.6(f), and (iii) pays the Indebtedness in full or down to the reduced
      Maximum Line Amount.

            


    

     

    
      	
              (b)

            	
              Termination by Company
      without Advance Notice.  If Company fails to deliver
      Wells Fargo timely notice of its intention to terminate the Line of Credit
      or reduce the Maximum Line Amount as provided in Section 1.8(a), Company
      may nevertheless terminate the Line of Credit or reduce the Maximum Line
      Amount and pay the Indebtedness in full or down to the reduced Maximum
      Line Amount if it (i) pays the termination fee set forth in Section
      1.6(f), and (ii) pays the Default Rate on the Revolving Note commencing on
      the 90th
      day prior to the proposed Termination Date and continuing through the date
      that Wells Fargo receives delivery of an Authenticated Record giving it
      actual notice of Company’s intention to
  terminate.

            


    

     

    
      
         


      

      
        -6-

        
          

        

      

      
         


      

    


    
      	
              (c)

            	
              Non-Renewal by
      Company; Notice.  If Company does not wish Wells Fargo to
      consider renewal of the Line of Credit on the next Maturity Date, Company
      shall deliver an Authenticated Record to Wells Fargo at least 90 days
      prior to the Maturity Date notifying Wells Fargo of its intention not to
      renew. If Company fails to deliver to Wells Fargo such timely notice, then
      the Revolving Note shall accrue interest at the Default Rate commencing on
      the 90th
      day prior to the Maturity Date and continuing through the date that Wells
      Fargo receives delivery of an Authenticated Record giving it actual notice
      of Company’s intention not to
renew.

            


    

     

    1.9           Letters
of Credit

     

    
      	
              (a)

            	
              Issuance of Letters of
      Credit; Amount.  Wells Fargo, subject to the terms and
      conditions of this Agreement, shall issue, on or after the date that Wells
      Fargo is obligated to make its first Advance under this Agreement and
      prior to the Termination Date, one or more irrevocable standby or
      documentary letters of credit (each, a “Letter of Credit”, and
      collectively, “Letters of Credit”) for Company’s account.  Wells
      Fargo will not issue any Letter of Credit if the face amount of the Letter
      of Credit would exceed the lesser of: (i) $1,000,000 less the L/C Amount,
      or (ii) the Borrowing Base, less an amount equal to aggregate unreimbursed
      Line of Credit Advances plus the L/C
Amount.

            


    

     

    
      	
              (b)

            	
              Additional Letter of
      Credit Documentation.  Prior to requesting issuance of a
      Letter of Credit, Company shall first execute and deliver to Wells Fargo a
      Standby Letter of Credit Agreement or a Commercial Letter of Credit
      Agreement, as applicable, an L/C Application, and any other documents that
      Wells Fargo may request, which shall govern the issuance of the Letter of
      Credit and Company’s obligation to reimburse Wells Fargo for any related
      Letter of Credit draws (the “Obligation of
  Reimbursement”).

            


    

     

    
      	
              (c)

            	
              Expiration.  No
      Letter of Credit shall be issued that has an expiry date that is later
      than one (1) year from the date of issuance, or the Maturity Date in
      effect on the date of issuance, whichever is
  earlier.

            


    

     

    
      	
              (d)

            	
              Obligation of
      Reimbursement During Default Periods.  If Company is
      unable, due to the existence of a Default Period or for any other reason,
      to obtain an Advance to pay any Obligation of Reimbursement, Company shall
      pay Wells Fargo on demand and in immediately available funds, the amount
      of the Obligation of Reimbursement together with interest, accrued from
      the date presentment of the underlying draft until reimbursement in full
      at the Default Rate.  Wells Fargo is authorized, alternatively
      and in its sole discretion, to make an Advance in an amount sufficient to
      discharge the Obligation of Reimbursement and pay all accrued but unpaid
      interest and fees with respect to the Obligation of
      Reimbursement.

            


    

     

    
      	
              1.10

            	
              Special
      Account.  If
      the Line of Credit is terminated for any reason while a Letter of Credit
      is outstanding, or if after prepayment of the Revolving Note the L/C
      Amount continues to exceed the Borrowing Base, then Company shall promptly
      pay Wells Fargo in immediately available funds for deposit to the Special
      Account, an amount equal, as the case may be, to either (a) the L/C Amount
      plus any anticipated fees and costs, or (b) the amount by which the L/C
      Amount exceeds the Borrowing Base.  If Company fails to pay
      these amounts promptly, then Wells Fargo may in its sole discretion make
      an Advance to pay these amounts and deposit the proceeds to the Special
      Account.  The Special Account shall be an interest bearing
      account maintained with Wells Fargo or any other financial institution
      acceptable to Wells Fargo.  Wells Fargo may in its sole discretion
      apply amounts on deposit in the Special Account to the
      Indebtedness.  Company may not withdraw amounts deposited to the
      Special Account until the Line of Credit has been terminated and all
      outstanding Letters of Credit have either been returned to Wells Fargo or
      have expired and the Indebtedness has been fully
    paid.

            


    


    
      
         


      

      
        -7-

        
          

        

      

      
         


      

    


    
    

    2.            SECURITY
INTEREST AND OCCUPANCY OF COMPANY’S PREMISES

     

    
      	
              2.1

            	
              Grant of Security
      Interest. Company hereby pledges, assigns and grants to Wells Fargo
      , for the benefit of Wells Fargo and as agent for Wells Fargo Merchant
      Services, L.L.C., a Lien and security interest (collectively referred to
      as the “Security Interest”) in the Collateral, as security for the payment
      and performance of all Indebtedness. Following request by Wells Fargo,
      Company shall grant Wells Fargo, for the benefit of Wells Fargo and as
      agent for Wells Fargo Merchant Services, L.L.C., a Lien and security
      interest in all commercial tort claims that it may have against any
      Person.

            


    

    
      	
               
      

            	 


    

    
      	
              2.2

            	
              Notifying Account Debtors and
      Other Obligors;
      Collection of Collateral. If an Event of Default has occurred and
      is continuing Wells Fargo may deliver a Record giving an account debtor or
      other Person obligated to pay an Account, a General Intangible, or other
      amount due, notice that the Account, General Intangible, or other amount
      due has been assigned to Wells Fargo for security and must be paid
      directly to Wells Fargo.  Company shall join in giving such
      notice and shall Authenticate any Record giving such notice upon Wells
      Fargo’s request.  After Company or Wells Fargo gives such
      notice, Wells Fargo may, but need not, in Wells Fargo’s or in Company’s
      name, demand, sue for, collect or receive any money or property at any
      time payable or receivable on account of, or securing, such Account,
      General Intangible, or other amount due, or grant any extension to, make
      any compromise or settlement with or otherwise agree to waive, modify,
      amend or change the obligations (including collateral obligations) of any
      account debtor or other obligor.  Wells Fargo may, in Wells
      Fargo’s name or in Company’s name, as Company’s agent and
      attorney-in-fact, notify the United States Postal Service to change the
      address for delivery of Company’s mail to any address designated by Wells
      Fargo, otherwise intercept Company’s mail, and receive, open and dispose
      of Company’s mail, applying all Collateral as permitted under this
      Agreement and holding all other mail for Company’s account or forwarding
      such mail to Company’s last known
address.

            


    

     

    
      	
              2.3

            	
              Assignment of
      Insurance.  As
      additional security for the Indebtedness, Company hereby assigns to Wells
      Fargo and to Wells Fargo Merchant Services, L.L.C., all rights of Company
      under every policy of insurance covering the Collateral and all business
      records and other documents relating to it, and all monies (including
      proceeds and refunds) that may be payable under any policy, and Company
      hereby directs the issuer of each policy to pay all such monies directly
      to Wells Fargo, up to the then current balance of the Indebtedness
      outstanding. Wells Fargo may (but need not), in Wells Fargo’s or Company’s
      name, execute and deliver proofs of claim, receive payment of proceeds, up
      to the then current balance of the Indebtedness outstanding, and endorse
      checks and other instruments representing payment of the policy of
      insurance, and, during a Default Period, in a commercially reasonable
      manner, adjust, litigate, compromise or release claims against the issuer
      of any policy.  Any monies received under any insurance policy
      assigned to Wells Fargo, other than liability insurance policies, or
      received as payment of any award or compensation for condemnation or
      taking by eminent domain, shall be paid to Wells Fargo, up to the then
      current balance of the Indebtedness outstanding, and, as determined by
      Wells Fargo in its sole discretion, either
      be applied to prepayment of the Indebtedness up to the then current
      balance of the Indebtedness outstanding, or disbursed to Company under
      terms reasonably satisfactory to Wells Fargo for application to the cost
      of repairs, replacements, or restorations which shall be effected with
      reasonable promptness and shall be of a value at least equal to the value
      of the items or property
destroyed.

            


    


    
      
         


      

      
        -8-

        
          

        

      

      
         


      

    

     

    
      	
              2.4

            	
              Company’s
      Premises

            


    

    


    
      	
              (a)

            	
              Wells Fargo’s Right to
      Occupy Company’s Premises.  Company hereby grants to
      Wells Fargo the right, at any time during a Default Period which has not
      been cured within three Business Days after commencement of the Default
      Period, with notice to Company, to take exclusive possession of all
      locations where Company conducts its business or has any rights of
      possession, including the locations described on Exhibit B (the
      “Premises”), until the earlier of (i) payment in full and discharge
      of all Indebtedness and termination of the Line of Credit, or
      (ii) final sale or disposition of all items constituting Collateral
      and delivery of those items to
purchasers.

            


    

     

    
      	
              (b)

            	
              Wells Fargo’s Use of
      Company’s Premises.  Subject to notice to Company, Wells
      Fargo may use the Premises to store, process, manufacture, sell, use, and
      liquidate or otherwise dispose of items that are Collateral, and for any
      other purposes incidental to Company deemed appropriate by Wells Fargo in
      good faith.

            


    

     

    
      	
              (c)

            	
              Company’s Obligation
      to Reimburse Wells Fargo.  Wells Fargo shall not be
      obligated to pay rent or other compensation for the possession or use of
      any Premises, but if Wells Fargo elects to pay rent or other compensation
      to the owner of any Premises in order to have access to the Premises, then
      Company shall promptly reimburse Wells Fargo all such amounts, as well as
      all taxes, fees, charges and other reasonable expenses at any time payable
      by Wells Fargo with respect to the Premises by reason of the execution,
      delivery, recordation, performance or enforcement of any terms of this
      Agreement.

            


    

     

    
      	
              2.5

            	
              License.  Without
      limiting the generality of any other Security Document, Company hereby
      grants to Wells Fargo a non-exclusive, worldwide and royalty-free license
      to use or otherwise exploit all Intellectual Property Rights of Company
      for the purpose of: (a) completing the manufacture of any in-process
      materials during any Default Period so that such materials become saleable
      Inventory, all in accordance with the same quality standards previously
      adopted by Company for its own manufacturing and subject to Company’s
      reasonable exercise of quality control; and (b) selling, leasing or
      otherwise disposing of any or all Collateral during any Default
      Period.

            


    

     

    
      	
              2.6

            	
              Financing Statements.  Company
      authorizes Wells Fargo to file financing statements describing Collateral
      to perfect Wells Fargo’s Security Interest in the Collateral, and Wells
      Fargo may describe the Collateral as “all personal property” or “all
      assets” or describe specific items of Collateral including commercial tort
      claims as Wells Fargo may consider necessary or useful to perfect the
      Security Interest.  All financing statements filed before the
      date of this Agreement to perfect the Security Interest were authorized by
      Company and are hereby re-authorized.  Following the termination
      of the Line of Credit and payment of all Indebtedness, Wells Fargo shall,
      at Company’s expense and within the time periods required under applicable
      law, release or terminate any filings or other agreements that perfect the
      Security Interest.  

            


    

     

    
      
         


      

      
        -9-

        
          

        

      

      
         


      

    


    
      	
              2.7

            	
              Setoff.  Wells
      Fargo may at any time, in its sole discretion, with notice to Company,
      setoff any liability owed to Company by Wells Fargo against any
      Indebtedness, whether or not due. 

            


    

     

    
      	
              2.8

            	
              Collateral Related
      Matters.  This Agreement does not contemplate a sale of
      Accounts or chattel paper, and, as provided by law, Company is entitled to
      any surplus and shall remain liable for any deficiency.  Wells
      Fargo’s duty of care with respect to Collateral in its possession (as
      imposed by law) will be deemed fulfilled if it exercises reasonable care
      in physically keeping such Collateral, or in the case of Collateral in the
      custody or possession of a bailee or other third Person, exercises
      reasonable care in the selection of the bailee or third Person, and Wells
      Fargo need not otherwise preserve, protect, insure or care for such
      Collateral.  Wells Fargo shall not be obligated to preserve
      rights Company may have against prior parties, to liquidate the Collateral
      at all or in any particular manner or order or apply the Proceeds of the
      Collateral in any particular order of application.  Wells Fargo
      has no obligation to clean-up or prepare Collateral for
      sale.  Company waives any right it may have to require Wells
      Fargo to pursue any third Person for any of the
    Indebtedness.

            


    

     

    
      	
              2.9

            	
              Notices Regarding Disposition
      of Collateral.  If notice to Company of any intended
      disposition of Collateral or any other intended action is required by
      applicable law in a particular situation, such notice will be deemed
      commercially reasonable if given in the manner specified in Section 7.4 at
      least ten calendar days before the date of intended disposition or other
      action.

            


    

     

    3.            CONDITIONS
PRECEDENT

     

    
      	
              3.1

            	
              Conditions Precedent to Initial
      Advance and
      Issuance of Initial Letter of Credit.  Wells Fargo’s
      obligation to make the initial Advance  or issue the first
      Letter of Credit shall be subject to the condition that Wells Fargo shall
      have received this Agreement and each of the Loan Documents, and any
      document, agreement, or other item described in or related to this
      Agreement, and all fees and information described in Exhibit C, executed
      and in form and content satisfactory to Wells
  Fargo.

            


    

     

    
      	
              3.2

            	
              Additional Conditions Precedent
      to All Advances and Letters of Credit.  Wells Fargo’s
      obligation to make any Advance (including the initial Advance) or issue
      any Letter of Credit shall be subject to the further additional
      conditions: (a) that the representations and warranties described in
      Exhibit D are correct on the date of the Advance or the issuance of the
      Letter of Credit, except to the extent that such representations and
      warranties relate solely to an earlier date; and (b) that no event has
      occurred and is continuing, or would result from the requested Advance or
      issuance of the Letter of Credit that would result in an Event of
      Default.

            


    

     

    
      	
              3.3

            	
              Line
      Activation Periods.

            


    

     

    
      	
            	
              (a)

            	
              As
      used herein “Line Activation Period” means any period in which (i) any
      Advances or Non-Cash Secured LCs are outstanding or in which Advances or
      Non-Cash Secured LCs may be requested by Company hereunder, subject to all
      of the terms and conditions of this Agreement, or (ii) Wells Fargo’s net
      credit exposure under Section 1.2(a)(iv) above exceeds
      $500,000.

            


    

     


    
      
         


      

      
        -10-

        
          

        

      

      
         


      

    


    
      
        
          	
                	
                  (b)

                	
                  Initially,
      the Line Activation Period shall not be in effect.  Hereafter,
      Company may, at its option, put a Line Activation Period into effect, by
      giving Wells Fargo written notice at least 30 days before the Line
      Activation Period is to go into effect, together with such information
      relating to the Accounts and other Collateral as Wells Fargo shall
      specify.  Putting the Line Activation Period into effect will be
      conditioned on the following: (i) Wells Fargo shall have completed an
      up-dated Collateral examination and the results thereof shall be
      satisfactory to Wells Fargo in its discretion, and (ii) no Default or
      Event of Default shall have occurred and be
  continuing.

                


        

      

    

     

    
      
        
          	
                	
                  (c)

                	
                  Company
      may, at its option, elect to terminate a Line Activation Period, by giving
      Wells Fargo at least 10 days prior written notice thereof, specifying the
      date the Line Activation Period is to be terminated.  On or
      prior to the Business Day immediately preceding the date the Line
      Activation Period is to be terminated, Company will pay to Wells Fargo, by
      wire transfer, an amount sufficient to repay in full all outstanding
      Advances, all accrued interest thereon and all other outstanding monetary
      Obligations, and cause all outstanding Non-Cash Secured LCs to be
      cancelled with the consent of the beneficiary thereof, pursuant to
      documentation acceptable to Wells Fargo, in its discretion, and provide
      evidence to Wells Fargo confirming that Company’s cash and Cash
      Equivalents plus availability under the Line of Credit are equal to
      or more than $3,000,000, and reduce Wells Fargo’s net credit exposure
      under Section 1.2(a)(iv) above to $500,000 or
  less.

                


        

      

    

     

    
      
        
          	
                	
                  (d)

                	
                  During
      any period which is not a Line Activation Period, (i) no Advances will be
      made and no Non-Cash Secured LCs will be issued, (ii) Company shall at all
      times maintain cash and Cash Equivalents, plus availability under the Line
      of Credit totaling $3,000,000 or more, and (iii) Wells Fargo’s net credit
      exposure under Section 1.2(a)(iv) above shall not exceed
      $500,000.

                


        

      

    

     

    
      
        
          	
                	
                  (e)

                	
                  As
      used herein, “Non-Cash Secured LC” means a Letter of Credit with respect
      to which the Company’s obligations to reimburse Wells Fargo are not
      secured by separate, dedicated cash collateral held by Wells Fargo in an
      amount equal to not less than 100% of the amount of such Letter of
      Credit.

                


        

      

    

     

    
      	
              4.

            	
              REPRESENTATIONS
      AND WARRANTIES

            


    

    


    
      	
               
      

            	
              To
      induce Wells Fargo to enter into this Agreement, Company makes the
      representations and warranties described in Exhibit D.  Any
      request for an Advance will be deemed a representation by Company that all
      representations and warranties described in Exhibit D are true, correct,
      and complete as of the time of the request, unless they relate exclusively
      to an earlier date. Company shall promptly deliver a Record notifying
      Wells Fargo of any change in circumstance that would affect the accuracy
      of any representation or warranty, unless the representation and warranty
      specifically relates to an earlier
date.

            


    

    


    
      	
              5.

            	
              COVENANTS

            


    

    


    
      	
               
      

            	
              So
      long as the Indebtedness remains unpaid, or the Line of Credit has not
      been terminated, Company shall comply with each of the following
      covenants, unless Wells Fargo shall consent otherwise in an Authenticated
      Record delivered to Company.

            


    


    
      
         


      

      
        -11-

        
          

        

      

      
         


      

    

    
       


    

    
      	
              5.1

            	
              Reporting
      Requirements.  Company
      shall deliver to Wells Fargo the following information, compiled where
      applicable using GAAP consistently applied, in form and content acceptable
      to Wells Fargo:

            


    

     

    
      	
              (a)

            	
              Annual Financial
      Statements.  As soon as available and in any event within
      120 days after Company’s fiscal year end, Company’s audited financial
      statements prepared by an independent certified public accountant
      reasonably acceptable to Wells Fargo, prepared, if
      requested by Wells Fargo, on a consolidated and consolidating basis to
      include Company’s Affiliates.  The annual financial statements
      shall be accompanied by a certificate (the “Compliance Certificate”) in
      the form of Exhibit E that is signed by Company’s chief accounting
      officer.

            


    

    


    Each
Compliance Certificate that accompanies an annual financial statement shall also
be accompanied by (i) copies of all management letters prepared by
Company’s accountants; and (ii) a report signed by the accountant stating
that in making the investigations necessary to render the opinion, the
accountant obtained no knowledge, except as specifically stated, of any Event of
Default under the Agreement, and a detailed statement, including computations,
demonstrating whether or not Company is in compliance with the financial
covenants of this Agreement. 

    
       


    

    
      	
              (b)

            	
              Monthly Financial
      Statements.  As soon as available and in any event within
      25 days after the end of each month, a Company prepared balance sheet,
      income statement, and statement of retained earnings prepared for that
      month and for the year–to-date period then ended, prepared, if requested
      by Wells Fargo, on a consolidated and consolidating basis to include
      Company’s Affiliates, and stating in comparative form the figures for the
      corresponding date and periods in the prior fiscal year, subject to
      year-end adjustments.  The financial statements shall be
      accompanied by a Compliance Certificate in the form of Exhibit E that is
      signed by Company’s chief accounting
officer.

            


    

    


    
      	
              (c)

            	
              Collateral
      Reports.  No later than 15 days after each month end (or
      more frequently if Wells Fargo shall request it), detailed agings of
      Company’s accounts receivable and accounts payable, a calculation of
      Company’s Accounts and Eligible Accounts as of the end of that month or
      shorter time period requested by Wells Fargo, and an Inventory summary
      report by location and category.

            


    

     

    
      	
              (d)

            	
              Projections.  No
      later than 60 days after the beginning of each fiscal year end, Company’s
      projected balance sheet and income statement for each month of the next
      fiscal year, certified as accurate by Company’s chief accounting officer
      and accompanied by a statement of assumptions and supporting schedules and
      information.

            


    

     

    
      	
              (e)

            	
              Supplemental
      Reports.

            


    

     

    
      (1)    During
any Line Activation Period, and during any Default Period, weekly, or more
frequently if Wells Fargo requests, Company’s standard form of “daily collateral
report”, together with the following for such week:  receivables
schedules, collection reports, and copies of invoices in excess of $50,000,
shipment documents and delivery receipts for goods sold to account debtors in
excess of $100,000.

    

     

    
      
         


      

      
        -12-

        
          

        

      

      
         


      

    


    
      (2)    During
any period which is not a Line Activation Period, monthly Borrowing Base reports
in such form as Wells Fargo shall specify, as of the end of each month, within
seven days after the end of each month.

    

     

    
      	
               (f)

            	
              Litigation.  No
      later than three Business Days after discovery, a Record notifying Wells
      Fargo of any litigation or other proceeding before any court or
      governmental agency which seeks a monetary recovery against Company in
      excess of $10,000.

            


    

     

    
      	
              (g)

            	
              Intellectual
      Property.  (i)
      No later than 30 days before it acquires material Intellectual Property
      Rights, a Record notifying Wells Fargo of Company’s intention to acquire
      such rights; (ii) except for transfers permitted under Section 5.18, no
      later than 30 days before it disposes of material Intellectual Property
      Rights, a Record notifying Wells Fargo of Company’s intention to dispose
      of such rights, along with copies of all proposed documents and agreements
      concerning the disposal of such rights as requested by Wells Fargo; (iii)
      promptly upon discovery, a Record notifying Wells Fargo of (A) any
      Infringement of Company’s Intellectual Property Rights by any Person, (B)
      claims that Company is Infringing another Person’s Intellectual Property
      Rights and (C) any threatened cancellation, termination or material
      limitation of Company’s Intellectual Property Rights; and (iv) promptly
      upon receipt, copies of all registrations and filings with respect to
      Company’s Intellectual Property
Rights.

            


    

     

    
      	
              (h)

            	
              Defaults.  No
      later than three days after learning of the probable occurrence of any
      Event of Default, a Record notifying Wells Fargo of the Event of Default
      and the steps being taken by Company to cure the Event of
      Default.

            


    

     

    
      	
              (i)

            	
              Disputes.  Promptly
      upon discovery, a Record notifying Wells Fargo of (i) any disputes or
      claims by Company’s customers exceeding $5,000 individually or $10,000 in
      the aggregate during any fiscal year; (ii) credit memos not
      previously reported in Section 5.1(e); and (iii) any goods returned
      to or recovered by Company outside of the ordinary course of business or
      in the ordinary course of business but with a value in an amount in excess
      of $25,000.

            


    

     

    
      	
              (j)

            	
              Changes in Officers
      and Directors.  Promptly following occurrence, a Record
      notifying Wells Fargo of any change in the persons constituting Company’s
      Officers and Directors.

            


    

     

    
      	
              (k)

            	
              Collateral.  Promptly
      upon discovery, a Record notifying Wells Fargo of any loss of or material
      damage to any Collateral or of any substantial adverse change in any
      Collateral or the prospect of its
payment.

            


    

     

    
      	
              (l)

            	
              Commercial Tort
      Claims.  Promptly upon discovery, a Record notifying
      Wells Fargo of any commercial tort claims brought by Company against any
      Person, including the name and address of each defendant, a summary of the
      facts, an estimate of Company’s damages, copies of any complaint or demand
      letter submitted by Company, and such other information as Wells Fargo may
      request.

            


    

     

    
      	
              (m)

            	
              Reports to
      Owners.  Promptly upon distribution, copies of all
      financial statements, reports and proxy statements which Company shall
      have sent to its Owners.

            


    

     

    
      
         


      

      
        -13-

        
          

        

      

      
         


      

    


    
      	
              (n)

            	
              Tax Returns of
      Company.  No later than five days after they are
      required to be filed, copies of Company’s signed and dated state and
      federal income tax returns and all related schedules, and copies of any
      extension requests.

            


    

     

    
      	
              (o)

            	
              [intentionally
      omitted] 

            


    

     

    
      	
              (p)

            	
              Violations of
      Law.  No later than three days after discovery of any
      violation, a Record notifying Wells Fargo of Company’s violation of any
      law, rule or regulation, the non-compliance with which could have a
      Material Adverse Effect on Company.

            


    

     

    
      	
              (q)

            	
              Pension
      Plans.  (i) Promptly upon discovery, and in any event
      within 30 days after Company knows or has reason to know that any
      Reportable Event with respect to any Pension Plan has occurred, a Record
      authenticated by Company’s chief accounting officer notifying Wells Fargo
      of the Reportable Event in detail and the actions which Company proposes
      to take to correct the deficiency, together with a copy of any related
      notice sent to the Pension Benefit Guaranty Corporation; (ii) promptly
      upon discovery, and in any event within 10 days after Company fails
      to make a required quarterly Pension Plan contribution under Section
      412(m) of the IRC, a Record authenticated by the Company’s chief
      accounting officer notifying Wells Fargo of the failure in detail and the
      actions that Company will take to cure the failure, together with a copy
      of any related notice sent to the Pension Benefit Guaranty Corporation;
      and (iii) promptly upon discovery, and in any event within 10 days after
      Company knows or has reason to know that it may be liable or may be
      reasonably expected to have liability for any withdrawal, partial
      withdrawal, reorganization or other event under any Multiemployer Plan
      under Sections 4201 or 4243 of ERISA, a Record authenticated by Company’s
      chief accounting officer notifying Wells Fargo of the details of the event
      and the actions that Company proposes to take in
  response.

            


    

     

    
      	
              (r)

            	
              Other
      Reports.  From time to time, with reasonable promptness,
      all receivables schedules, collection reports, deposit records, equipment
      schedules, invoices to account debtors, shipment documents and delivery
      receipts for goods sold, and such other materials, reports, records or
      information as Wells Fargo may
request.

            


    

     

    
      	
              5.2

            	
              Financial Covenants.  Company
      agrees to comply with the financial covenants described below, which shall
      be calculated using GAAP consistently applied, except as they may be
      otherwise modified by the following capitalized
    definitions:

            


    

    


    
      	
              (a)

            	
              Minimum Book Net
      Worth.  Company shall maintain, at each date below, its
      Book Net Worth, determined as of the end of each month, in an amount not
      less than the amount set forth
below:

            


    

     

    
      	
              End of Month

            	
              Minimum Book Net Worth

            
	
              April,
      2008

            	
              $18,500,000

            
	
              May,
      2008

            	
              $19,250,000

            
	
              June,
      2008

            	
              $20,000,000

            
	
              July,
      2008

            	
              $20,400,000

            
	
              August,
      2008

            	
              $20,800,000

            
	
              September,
      2008

            	
              $21,000,000

            
	
              October,
      2008

            	
              $21,500,000

            
	
              November,
      2008

            	
              $22,000,000

            
	
              December, 2008 and each month thereafter

            	
              $21,500,000

            


    

     

    
      
        
        

      

      
        -14-

        
          

        

      

      
        
        

      

    

    


    
      	
              (b)

            	
              Minimum Net
      Income.  Company shall achieve, for each period described
      below, Net Income of not less than the amount set forth for each such
      period (numbers appearing between “< >” are
    negative):

            


    

     

    
      	
              Period

            	
              Minimum Net Income

            
	
              January
      1, 2008 Through June 30, 2008

            	
              $2,500,000

            
	
              January
      1, 2008 Through September 30, 2008

            	
              $3,300,000

            
	
              January
      1, 2008 Through December 31, 2008

            	
              $4,000,000

            


    

    


    
      	
              (c)

            	
              Capital
      Expenditures.  Company shall not incur or contract to
      incur non-financed Capital Expenditures of more than $2,000,000 in the
      aggregate during any fiscal
year.  

            


    

     

    
      	
              5.3

            	
              Other
      Liens and Permitted
Liens.  

            


    

     

    
      	
              (a)

            	
              Other Liens; Permitted
      Liens. Company shall not
      create, incur or suffer to exist any Lien upon any of its assets, now
      owned or later acquired, as security for any indebtedness, with the
      exception of the following (each a “Permitted Lien”; collectively,
      “Permitted Liens”): (i) In the case of real property, covenants,
      restrictions, rights, easements and minor irregularities in title which do
      not materially interfere with Company’s business or operations as
      presently conducted; (ii) Liens in existence on the date of this Agreement
      that are described in Exhibit F and secure indebtedness for borrowed money
      permitted under Section 5.4; (iii) The Security Interest and Liens created
      by the Security Documents; and (iv) Purchase money Liens relating to the
      acquisition of Equipment not exceeding the lesser of cost or fair market
      value, and not exceeding $1,000,000 for any one purchase or $3,000,000 in
      the aggregate during any fiscal year, and so long as no Default Period is
      then in existence and none would exist immediately after such
      acquisition.

            


    

     

    
      	
              (b)

            	
              Financing
      Statements.  Company shall not authorize the filing of
      any financing statement by any Person as Secured Party with respect to any
      of Company’s assets, other than Wells Fargo.  Company shall not
      amend any financing statement filed by Wells Fargo as Secured Party except
      as permitted by law.

            


    

     

    
      
         


      

      
        -15-

        
          

        

      

      
         


      

    


    
      	
              5.4

            	
              Indebtedness.  Company
      shall not incur, create, assume or permit to exist any indebtedness or
      liability on account of deposits or letters of credit issued on Company’s
      behalf, or advances or any indebtedness for borrowed money of any kind,
      whether or not evidenced by an instrument, except: (a) Indebtedness
      described in this Agreement; (b) indebtedness of Company described in
      Exhibit F; and (c) indebtedness secured by Permitted
  Liens.

            


    

     

    
      	
              5.5

            	
              Guaranties.  Company
      shall not assume, guarantee, endorse or otherwise become directly or
      contingently liable for the obligations of any Person, except: (a) the
      endorsement of negotiable instruments by Company for deposit or collection
      or similar transactions in the ordinary course of business; and (b)
      guaranties, endorsements and other direct or contingent liabilities in
      connection with the obligations of other Persons in existence on the date
      of this Agreement and described in Exhibit
F.

            


    

     

    
      	
              5.6

            	
              Investments and
      Subsidiaries.  Company
      shall not make or permit to exist any loans or advances to, or make any
      investment or acquire any interest whatsoever in, any Person or Affiliate,
      including any partnership or joint venture, nor purchase or hold
      beneficially any stock or other securities or evidence of indebtedness of
      any Person or Affiliate, except:

            


    

     

    
      	
              (a)

            	
              Investments
      in direct obligations of the United States of America or any of its
      political subdivisions whose obligations constitute the full faith and
      credit obligations of the United States of America and have a maturity of
      one year or less, commercial paper issued by U.S. corporations rated “A-1”
      or “A-2” by Standard & Poor’s Ratings Services or “P-1” or “P-2”
      by Moody’s Investors Service or certificates of deposit or bankers’
      acceptances having a maturity of one year or less issued by members of the
      Federal Reserve System having deposits in excess of $100,000,000 (which
      certificates of deposit or bankers’ acceptances are fully insured by the
      Federal Deposit Insurance
Corporation);

            


    

     

    
      	
              (b)

            	
              Travel
      advances or loans to Company’s Officers and employees not exceeding at any
      one time an aggregate of $15,000;

            


    

     

    
      	
              (c)

            	
              Prepaid
      rent not exceeding one month or security deposits;
  and

            


    

     

    
      	
              (d)

            	
              Current
      investments and future investments in those Subsidiaries in existence on
      the date of this Agreement which are identified on Exhibit D, such future
      investments not to exceed $1,000,000 in the aggregate for all investments
      in all such Subsidiaries.

            


    

     

    
      	
              5.7

            	
              Dividends and
      Distributions.
      Company shall not declare or pay any dividends (other than
      dividends payable solely in stock of Company) on any class of its stock,
      or make any payment on account of the purchase, redemption or retirement
      of any shares of its stock, or other securities or evidence of its
      indebtedness or make any distribution regarding its stock, either directly
      or indirectly.  Accrual of dividends on Company’s existing
      Series A Preferred Stock shall not be deemed to violate this Section 5.7,
      provided Company does not declare or pay any such dividends, without the
      prior written consent of Wells Fargo (which shall be a matter of its good
      faith business judgment).

            


    

     

    
      	
              5.8

            	
              [intentionally
      omitted]

            


    

     

    
      	
              5.9

            	
              [intentionally
      omitted]

            


    

     

    
      
         


      

      
        -16-

        
          

        

      

      
         


      

    


    
      	
              5.10

            	
              Books
      and Records; Collateral Examination; Inspection and
      Appraisals.

            


    

     

    
      	
              (a)

            	
              Books and Records;
      Inspection.  Company shall keep complete and accurate
      books and records with respect to the Collateral and Company’s business
      and financial condition and any other matters that Wells Fargo may
      request, in accordance with GAAP. Company shall permit any auditor or
      collateral examiner, attorney, accountant or other agent of Wells Fargo to
      audit, review, make extracts from and copy any of its books and records at
      any time during ordinary business hours, with two Business Days prior
      notice to Company (except that such notice shall not be required if an
      Event of Default or an event which, with notice or lapse of time or both
      would constitute an Event of Default, has occurred and is continuing), and
      to discuss Company’s affairs with any of its Directors, Officers,
      employees, Owners or agents.

            


    

     

    
      	
              (b)

            	
              Authorization to
      Company’s Agents to Make Disclosures to Wells
      Fargo.  Company authorizes all accountants and other
      Persons acting as its agent to disclose and deliver to Wells Fargo’s
      employees, accountants, attorneys and other Persons acting as its agent,
      at Company’s expense, all financial information, books and records, work
      papers, management reports and other information in their possession
      regarding Company, except for documents protected by the attorney client
      privilege or the attorney work product
    privilege.  

            


    

     

    
      	
              (c)

            	
              Collateral Exams and
      Inspections.  Company shall permit Wells Fargo’s
      employees, accountants, attorneys or other Persons acting as its agent, to
      examine and inspect any Collateral or any other property of Company at any
      time during ordinary business
hours.

            


    

     

    
      	
              (d)

            	
              [intentionally
      omitted]

            


    

     

    
      	
              5.11

            	
              Account
      Verification; Payment of Permitted
Liens.

            


    

     

    
      	
              (a)

            	
              Account
      Verification.  Wells Fargo or its agents may (i) contact
      account debtors and other obligors at any time to verify Company’s
      Accounts; and (ii) require Company to send requests for verification of
      Accounts or send notices of assignment of Accounts to account debtors and
      other obligors.  

            


    

     

    
      	
              (b)

            	
              Covenant to Pay
      Permitted Liens.  Company shall pay when due each account
      payable due to any Person holding a Permitted Lien (as a result of such
      payable) on any Collateral.

            


    

     

    
      	
              5.12

            	
              Compliance
      with Laws.

            


    

     

    
      	
              (a)

            	
              General Compliance
      with Applicable Law; Use of Collateral.  Company shall
      (i) comply, and cause each Subsidiary to comply, with the
      requirements of applicable laws and regulations, the non-compliance with
      which would have a Material Adverse Effect on  its business or
      its financial condition and (ii) use and keep the Collateral, and
      require that others use and keep the Collateral, only for lawful purposes,
      without violation of any federal, state or local law, statute or
      ordinance.

            


    

     

    
      	
              (b)

            	
              Compliance with
      Federal Regulatory Laws.  Company shall (i) prohibit, and
      cause each Subsidiary to prohibit, any Person that is an Owner or Officer
      from being listed on the Specially Designated Nationals and Blocked Person
      List or other similar lists maintained by the Office of Foreign Assets
      Control ("OFAC"), the Department of the Treasury or included
      in any Executive Orders, (ii) not permit the proceeds of the Line of
      Credit or any other financial accommodation extended by Wells Fargo to be
      used in any way that violates any foreign asset control regulations of
      OFAC or other applicable law, (iii) comply , and cause each Subsidiary to
      comply, with all applicable Bank Secrecy Act laws and regulations, as
      amended from time to time, and (iv) otherwise comply with the USA Patriot
      Act and Wells Fargo's related policies and
    procedures.

            


    

     

    
      
         


      

      
        -17-

        
          

        

      

      
         


      

    

     

    
      	
              (c)

            	
              Compliance with
      Environmental Laws.  Company shall (i) comply , and cause
      each Subsidiary to comply, with the requirements of applicable
      Environmental Laws and obtain and comply with all permits, licenses and
      similar approvals required by them, and (ii) not generate, use, transport,
      treat, store or dispose of any Hazardous Substances in such a manner as to
      create any material liability or obligation under the common law of any
      jurisdiction or any Environmental
Law.

            


    

     

    
      	
              5.13

            	
              Payment of Taxes and Other
      Claims.  Company
      shall pay or discharge, when due, and cause each Subsidiary to pay or
      discharge, when due, (a) all taxes, assessments and governmental
      charges levied or imposed upon it or upon its income or profits, upon any
      properties belonging to it (including the Collateral) or upon or against
      the creation, perfection or continuance of the Security Interest, prior to
      the date on which penalties attach, (b) all federal, state and local
      taxes required to be withheld by it, and (c) all lawful claims for
      labor, materials and supplies which, if unpaid, might by law become a Lien
      upon any properties of Company, although Company shall not be required to
      pay any such tax, assessment, charge or claim whose amount, applicability
      or validity is being contested in good faith by appropriate proceedings
      and for which proper reserves have been
made.

            


    

     

    
      	
              5.14

            	
              Maintenance
      of Collateral and
Properties.  

            


    

     

    
      	
              (a)

            	
              Company
      shall keep and maintain the Collateral and all of its other properties
      necessary or useful in its business in good condition, repair and working
      order (normal wear and tear excepted) and will from time to time replace
      or repair any worn, defective or broken parts, although Company may
      discontinue the operation and maintenance of any properties if Company
      believes that such discontinuance is desirable to the conduct of its
      business and not disadvantageous in any material respect to Wells
      Fargo.  Company shall take all commercially reasonable steps
      necessary to protect and maintain its Intellectual Property
      Rights.

            


    

     

    
      	
              (b)

            	
              Company
      shall defend
      the Collateral against all Liens, claims and demands of all third Persons
      claiming any interest in the Collateral. Company shall keep all Collateral
      free and clear of all Liens except Permitted Liens. Company shall take all
      commercially reasonable steps necessary to prosecute any Person Infringing
      its Intellectual Property Rights and to defend itself against any Person
      accusing it of Infringing any Person’s Intellectual Property
      Rights.       

            


    

     

    
      	
              5.15

            	
              Insurance.  Company
      shall at all times maintain insurance with insurers acceptable to Wells
      Fargo, in such amounts, on such terms (including any deductibles) and
      against such risks as Wells Fargo may require, in such amounts and against
      such risks as is usually carried by companies engaged in similar business
      and owning similar properties in the same geographical areas in which
      Company operates.  Company shall also, at all times and without
      limitation maintain business interruption insurance (including force
      majeure coverage) an so-called
      extended coverage), theft, collision (for Collateral consisting of motor
      vehicles) and such other risks and in such amounts as Wells Fargo may
      reasonably request, with any loss payable to Wells Fargo to the extent of
      its interest, and all such policies of insurance shall contain a lender’s
      loss payable endorsement for the benefit of Wells Fargo.  All
      policies of liability insurance shall name Wells Fargo as an additional
      insured.d keep all tangible Collateral insured against risks of
      fire (including

            


    

     

    
      
         


      

      
        -18-

        
          

        

      

      
         


      

    

     

    
      	
              5.16

            	
              Preservation of
      Existence.  Company
      shall preserve and maintain its existence and all of its rights,
      privileges and franchises necessary or desirable in the normal conduct of
      its business and shall conduct its business in an orderly, efficient and
      regular manner.

            


    

     

    
      	
              5.17

            	
              Delivery of Instruments,
      etc.  Upon
      request by Wells Fargo, Company shall promptly deliver to Wells Fargo in
      pledge all instruments, documents and chattel paper constituting
      Collateral, endorsed or assigned by
Company.

            


    

     

    
      	
              5.18

            	
              Sale or Transfer of Assets;
      Suspension of Business Operations.  Company
      shall not sell, lease, assign, transfer or otherwise dispose of
      (a) the stock of any Subsidiary, (b) all or a substantial part
      of its assets, or (c) any Collateral or any interest in Collateral
      (whether in one transaction or in a series of transactions) to any other
      Person other than the sale of Inventory in the ordinary course of business
      and shall not liquidate, dissolve or suspend business
      operations.  Company shall not transfer any part of its
      ownership interest in any Intellectual Property Rights and shall not
      permit its rights as licensee of Licensed Intellectual Property to lapse,
      except that Company may transfer such rights or permit them to lapse if it
      has reasonably determined that such Intellectual Property Rights are no
      longer useful in its business.  If Company transfers any
      Intellectual Property Rights for value, Company shall pay the Proceeds to
      Wells Fargo for application to the Indebtedness.  Company shall
      not license any other Person to use any of Company’s Intellectual Property
      Rights, except that Company may grant licenses in the ordinary course of
      its business in connection with sales of Inventory or the provision of
      services to its customers. 

            


    

     

    
      	
              5.19

            	
              Consolidation and Merger; Asset
      Acquisitions.  Company
      shall not consolidate with or merge into any other entity, or permit any
      other entity to merge into it, or acquire (in a transaction analogous in
      purpose or effect to a consolidation or merger) all or substantially all
      of the assets of any other entity.

            


    

     

    
      	
              5.20

            	
              Sale and Leaseback.  Company
      shall not enter into any arrangement, directly or indirectly, with any
      other Person pursuant to which Company shall sell or transfer any real or
      personal property, whether owned now or acquired in the future, and then
      rent or lease all or part of such property or any other property which
      Company intends to use for substantially the same purpose or purposes as
      the property being sold or
transferred.

            


    

     

    
      	
              5.21

            	
              Restrictions on Nature of
      Business.  Company
      will not engage in any line of business materially different from that
      presently engaged in by Company, and will not purchase, lease or otherwise
      acquire assets not related to its business.  The manufacture of
      insulated glass units by Company’s affiliate, Southwall Insulating Glass,
      LLC, shall not be deemed to breach this Section
  5.21.

            


    

     

    
      	
              5.22

            	
              Accounting.  Company
      will not adopt any material change in accounting principles except as
      required by GAAP, consistently applied.  Company will not change
      its fiscal year.

            


    

     


    
      
         


      

      
        -19-

        
          

        

      

      
         


      

    


    
      	
              5.23

            	
              Discounts, etc.  After
      notice from Wells Fargo, Company will not grant any discount, credit or
      allowance to any customer of Company or accept any return of goods
      sold.  Company will not at any time modify, amend, subordinate,
      cancel or terminate any Account.

            


    

     

    
      	
              5.24

            	
              Pension Plans.  Except as
      disclosed to Wells Fargo in a Record prior to the date of this Agreement,
      neither Company nor any ERISA Affiliate will (a) adopt, create, assume or
      become party to any Pension Plan, (b) become obligated to contribute to
      any Multiemployer Plan, (c) incur any obligation to provide
      post-retirement medical or insurance benefits with respect to employees or
      former employees (other than benefits required by law) or (d) amend any
      Plan in a manner that would materially increase its funding
      obligations.

            


    

     

    
      	
              5.25

            	
              Place of Business;
      Name.  Company
      will not transfer its chief executive office or principal place of
      business, or move, relocate, close or sell any business
      Premises.  Company will not permit any tangible Collateral or
      any records relating to the Collateral to be located in any state or area
      in which, in the event of such location, a financing statement covering
      such Collateral would be required to be, but has not in fact been, filed
      in order to perfect the Security Interest.  Company will not
      change its name or jurisdiction of
organization.

            


    

     

    
      	
              5.26

            	
              Constituent Documents; S
      Corporation Status.  Company
      will not amend its Constituent Documents. Company will not become an
      S Corporation.

            


    

     

    
      	
              5.27

            	
              Performance by Wells
      Fargo.  If Company fails to perform or observe any of its
      obligations under this Agreement at any time, Wells Fargo may, but need
      not, perform or observe them on behalf of Company and may, but need not,
      take any other actions which Wells Fargo may reasonably deem necessary to
      cure or correct this failure; and Company shall pay Wells Fargo upon
      demand the amount of all costs and expenses (including reasonable
      attorneys’ fees and legal expense) incurred by Wells Fargo in performing
      these obligations, together with interest on these amounts at the Default
      Rate.

            


    

     

    
      	
              5.28

            	
              Wells Fargo Appointed as
      Company’s Attorney in Fact.  To facilitate Wells Fargo’s
      performance or observance of Company’s obligations under this Agreement,
      Company hereby irrevocably appoints Wells Fargo and Wells Fargo’s agents,
      as Company’s attorney in fact (which appointment is coupled with an
      interest) with the right (but not the duty) to create, prepare, complete,
      execute, deliver, endorse or file on behalf of Company any instruments,
      documents, assignments, security agreements, financing statements,
      applications for insurance and any other agreements or any Record required
      to be obtained, executed, delivered or endorsed by Company in accordance
      with the terms of this Agreement, provided that said power of attorney
      shall be exercised in good faith and only in the event (i) an Event of
      Default has occurred and is continuing, or (ii) action is required
      pursuant hereto to protect the Collateral or Wells Fargo’s interest
      therein.

            


    

     

    6.            EVENTS
OF DEFAULT AND REMEDIES

     

    
      	
              6.1

            	
              Events of Default.  An “Event
      of Default” means any of the
following:

            



      
        
           


        

        
          -20-

          
            

          

        

        
           


        

      

    

     

    
      	
              (a)

            	
              Company
      fails to pay any the amount of any Indebtedness on the date that it
      becomes due and payable;

            


    

     

    
      	
              (b)

            	
              Company
      fails to observe or perform any covenant or agreement of Company set forth
      in this Agreement, or in any of the Loan Documents, or in any other
      document or agreement described in or related to this Agreement or to any
      Indebtedness, or any covenant in Section 5.2 becomes inapplicable due to
      the lapse of time, and Company and Wells Fargo fail to come to an
      agreement acceptable to Wells Fargo in Wells Fargo’s sole discretion to
      amend the covenant to apply to future
periods;

            


    

     

    
      	
              (c)

            	
              An
      Overadvance arises as the result of any reduction in the Borrowing Base,
      or arises in any manner or on terms not otherwise approved of in advance
      by Wells Fargo in a Record that it has
  Authenticated;

            


    

     

    
      	
              (d)

            	
              An
      event of default or termination event (however defined) occurs under any
      swap, derivative, foreign exchange, hedge or any similar transaction or
      arrangement entered into between Company and Wells
  Fargo;

            


    

     

    
      	
              (e)

            	
              A
      Change of Control shall occur;

            


    

     

    
      	
              (f)

            	
              Company
      or any Guarantor becomes insolvent or admits in a Record an inability to
      pay debts as they mature, or Company or any Guarantor makes an assignment
      for the benefit of creditors; or Company or any Guarantor applies for or
      consents to the appointment of any receiver, trustee, or similar officer
      for the benefit of Company or any Guarantor, or for any of their
      properties; or any receiver, trustee or similar officer is appointed
      without the application or consent of Company or such Guarantor; or any
      judgment, writ, warrant of attachment or execution or similar process is
      issued or levied against a substantial part of the property of Company or
      any Guarantor;

            


    

     

    
      	
              (g)

            	
              Company
      or any Guarantor files a petition under any chapter of the United States
      Bankruptcy Code or under the laws of any other jurisdiction naming Company
      or such Guarantor as debtor; or any such petition is instituted against
      Company or any such Guarantor; or Company or any Guarantor institutes (by
      petition, application, answer, consent or otherwise) any bankruptcy,
      insolvency, reorganization, debt arrangement, dissolution, liquidation or
      similar proceeding under the laws of any jurisdiction; or any such
      proceeding is instituted (by petition, application or otherwise) against
      Company or any such Guarantor.

            


    

     

    
      	
              (h)

            	
              [intentionally
      omitted]

            


    

    


    
      	
              (i)

            	
              Any
      representation or warranty made by Company in this Agreement or by any
      Guarantor in any Guaranty, or by Company (or any of its Officers) or any
      Guarantor in any agreement, certificate, instrument or financial statement
      or other statement delivered to Wells Fargo in connection with this
      Agreement or pursuant to such Guaranty is untrue or misleading in any
      material respect when delivered to Wells
Fargo;

            


    

     

    
      	
              (j)

            	
              A
      final, non-appealable arbitration award, judgment, or decree or order for
      the payment of money is entered against Company, which is not immediately
      stayed or appealed, and which is in an amount in excess of (i) $500,000
      for any individual arbitration award, judgment, or decree or order for the
      payment of money, or (ii) $1,000,000 for all individual
      arbitration award, judgment, or decree or order for the payment of money
      during the term of this
Agreement;

            


    

     

    
      
         


      

      
        -21-

        
          

        

      

      
         


      

    

     

    
      	
              (k)

            	
              Company
      is in default with respect to any bond, debenture, note or other evidence
      of material indebtedness issued by Company that is held by any third
      Person other than Wells Fargo, or under any instrument under which any
      such evidence of indebtedness has been issued or by which it is governed,
      or under any material lease or other contract, and the applicable grace
      period, if any, has expired, regardless of whether such default has been
      waived by the holder of such
indebtedness;

            


    

     

    
      	
              (l)

            	
              Company
      liquidates, dissolves, terminates or suspends its business operations or
      otherwise fails to operate its business in the ordinary course, or merges
      with another Person; or sells or attempts to sell all or substantially all
      of its assets;

            


    

     

    
      	
              (m)

            	
              Company
      fails to pay any indebtedness or obligation owed to Wells Fargo which is
      unrelated to the Line of Credit or this Agreement as it becomes due and
      payable;

            


    

     

    
      	
              (n)

            	
              Any
      Guarantor repudiates or purports to revoke the Guarantor’s Guaranty, or
      fails to perform any obligation under such Guaranty, or any individual
      Guarantor dies or becomes incapacitated, or any other Guarantor ceases to
      exist for any reason;

            


    

     

    
      	
              (o)

            	
              Company
      engages in any act prohibited by any Subordination Agreement, or makes any
      payment on Subordinated Indebtedness (as defined in the Subordination
      Agreement) that the Subordinated Creditor was not contractually entitled
      to receive;

            


    

     

    
      	
              (p)

            	
              Any
      event or circumstance occurs that Wells Fargo in good faith believes may
      impair the prospect of payment of all or part of the Indebtedness, or
      Company’s ability to perform any of its material obligations under any of
      the Loan Documents, or any other document or agreement described in or
      related to this Agreement, or there occurs which has a Material Adverse
      Effect. 

            


    

     

    
      	
              (q)

            	
              The
      chairman, president, chief operating officer or chief accounting officer
      of the Company or any Owner of at least fifteen percent (15%) of the
      issued and outstanding common stock of the Company is convicted of a
      felony under state or federal law, or Company hires a chairman, president,
      chief operating officer or chief accounting officer of the Company who has
      been convicted of any such felony, or a Person becomes an Owner of at
      least fifteen percent (15%) of the issued and outstanding common stock of
      Company who has been convicted of any such
  felony.

            


    

    
       


    

    
      	
              (r)

            	
              Any
      Reportable Event, which Wells Fargo in good faith believes to constitute
      sufficient grounds for termination of any Pension Plan or for the
      appointment of a trustee to administer any Pension Plan, has occurred and
      is continuing 30 days after Company gives Wells Fargo a Record
      notifying it of the Reportable Event; or a trustee is appointed by an
      appropriate court to administer any Pension Plan; or the Pension Benefit
      Guaranty Corporation institutes proceedings to terminate or appoint a
      trustee to administer any Pension Plan; or Company or any ERISA Affiliate
      files for a distress termination of any Pension Plan under Title IV of
      ERISA; or Company or any ERISA Affiliate fails to make any quarterly
      Pension Plan contribution required under Section 412(m) of the IRC, which
      Wells Fargo in good faith believes may, either by itself or in combination
      with other failures, result in the imposition of a Lien on Company’s
      assets in favor of the Pension Plan; or any withdrawal, partial
      withdrawal, reorganization or other event occurs with respect
      to a Multiemployer Plan which could reasonably be expected to result in a
      material liability by Company to the Multiemployer Plan under Title IV of
      ERISA.

            


    


    
      
         


      

      
        -22-

        
          

        

      

      
         


      

    

    
       

    

    
      	
              6.2

            	
              Rights and Remedies.  During any
      Default Period, Wells Fargo may in its discretion exercise any or all of
      the following rights and remedies:

            


    

     

    
      	
              (a)

            	
              Wells
      Fargo may, with notice to Company, terminate the Line of Credit and
      decline to make Advances, and terminate any services extended to Company
      under the Master Agreement for Treasury Management
    Services;

            


    

     

    
      	
              (b)

            	
              Wells
      Fargo may declare the Indebtedness to be immediately due and payable and
      accelerate payment of the Revolving Note, and all Indebtedness shall
      immediately become due and payable, without presentment, notice of
      dishonor, protest or further notice of any kind, all of which Company
      hereby expressly waives;

            


    

     

    
      	
              (c)

            	
              Wells
      Fargo may, with notice to Company, apply any money owing by Wells Fargo to
      Company to payment of the
Indebtedness;

            


    

     

    
      	
              (d)

            	
              Wells
      Fargo may exercise and enforce any rights and remedies available upon
      default to a secured party under the UCC, including the right to sell,
      lease or otherwise dispose of Collateral for cash or on credit (with or
      without giving warranties as to condition, fitness, merchantability or
      title to Collateral, and in the event of a credit sale, Indebtedness shall
      be reduced only to the extent that payments are actually received), and
      Company will upon Wells Fargo’s demand assemble the Collateral and make it
      available to Wells Fargo at any place designated by Wells Fargo which is
      reasonably convenient to both
parties;

            


    

     

    
      	
              (e)

            	
              Wells
      Fargo may exercise and enforce its rights and remedies under any of the
      Loan Documents and any other document or agreement described in or related
      to this Agreement; 

            


    

     

    
      	
              (f)

            	
              Company
      will pay Wells Fargo upon demand in immediately available funds an amount
      equal to the Aggregate Face Amount plus any anticipated costs and fees for
      deposit to the Special Account pursuant to Section
  1.10;

            


    

    


    
      	
              (g)

            	
              Wells
      Fargo may for any reason apply for the appointment of a receiver of the
      Collateral, to which appointment Company hereby consents;
    and

            


    

     

    
      	
              (h)

            	
              Wells
      Fargo may exercise any other rights and remedies available to it by law or
      agreement.

            


    

     

    
      	
              6.3

            	
              Immediate Default and
      Acceleration.  Following the occurrence of an Event of
      Default described in Section 6.1(f) or (g), the Line of Credit shall
      immediately terminate and all of Company’s Indebtedness shall immediately
      become due and payable without presentment, demand, protest or notice of
      any kind.

            


    

     

    
      	
              7. 

            	
              MISCELLANEOUS

            


    

    


    
      	
              7.1

            	
              No Waiver; Cumulative
      Remedies.  No delay or any single or partial exercise by
      Wells Fargo of any right, power or remedy under the Loan Documents, or
      under any other document or agreement described in or related to this
      Agreement, shall constitute a waiver
      of any other right, power or remedy under the Loan Documents or granted by
      Company to Wells Fargo under other agreements or documents that are
      unrelated to the Loan Documents.  No notice to or demand on
      Company in any circumstance shall entitle Company to any additional notice
      or demand in any other circumstances.  The remedies provided in
      the Loan Documents or in any other document or agreement described in or
      related to this Agreement are cumulative and not exclusive of any remedies
      provided by law.  Wells Fargo may comply with applicable law in
      connection with a disposition of Collateral, and such compliance will not
      be considered to adversely affect the commercial reasonableness of any
      sale of the Collateral.

            


    

     

    
      
         


      

      
        -23-

        
          

        

      

      
         


      

    

     

    
      	
              7.2

            	
              Amendment; Consents and
      Waivers; Authentication.  No amendment or modification of
      any Loan Documents, or any other document or agreement described in or
      related to this Agreement, or consent to or waiver of any Event of
      Default, or consent to or waiver of the application of any covenant or
      representation set forth in any of the Loan Documents, or any other
      document or agreement described in or related to this Agreement, or any
      release of Wells Fargo’s Security Interest in any Collateral, shall be
      effective unless it has
      been agreed to by Wells Fargo and memorialized in a Record that: (a)
      specifically states that it is intended to amend or modify specific Loan
      Documents, or any other document or agreement described in or related to
      this Agreement, or waive any Event of Default or the application of any
      covenant or representation of any terms of specific Loan Documents, or any
      other document or agreement described in or related to this Agreement, or
      is intended to release Wells Fargo’s Security Interest in specific
      Collateral; and (b) is Authenticated by the signature of an authorized
      employee of both parties, or by an authorized employee of Wells Fargo with
      respect to a consent or waiver.  The terms of an amendment,
      consent or waiver memorialized in any Record shall be effective only to
      the extent, and in the specific instance, and for the limited purpose to
      which Wells Fargo has agreed.

            


    

    


    
      	
              7.3

            	
              Execution in Counterparts;
      Delivery of Counterparts.  This Agreement and all other
      Loan Documents, or any other document or agreement described in or related
      to this Agreement, and any amendment or modification to them may be
      Authenticated by the parties in any number of counterparts, each of which,
      once authenticated and delivered in accordance with the terms of this
      Section 7.3, will be deemed an original, and all such counterparts, taken
      together, shall constitute one and the same
      instrument.  Delivery by fax or by encrypted e-mail or e-mail
      file attachment of any counterpart to any Loan Document Authenticated by
      an authorized signature will be deemed the equivalent of the delivery of
      the original Authenticated instrument.  Company shall send the
      original Authenticated counterpart to Wells Fargo by first class U.S. mail
      or by overnight courier, but Company’s failure to deliver a Record in this
      form shall not affect the validity, enforceability, and binding effect of
      this Agreement or the other Loan Documents, or any other document or
      agreement described in or related to this
  Agreement.

            


    

     

    
      	
              7.4

            	
              Notices, Requests, and
      Communications; Confidentiality.  Except as otherwise
      expressly provided in this
Agreement:

            


    

     

    
      	
              (a)

            	
              Delivery of Notices,
      Requests and Communications.  Any notice, request,
      demand, or other communication by either party that is required under the
      Loan Documents, or any other document or agreement described in or related
      to this Agreement, to be in the form of a Record (but excluding any Record
      containing information Company must report to Wells Fargo under Section
      5.1) may be delivered (i) in person, (ii) by first class U.S. mail,
      (iii) by overnight courier of national reputation, or (iv) by fax, or
      the Record may be sent
      as an Electronic Record and delivered (v) by an encrypted e-mail, or (vi)
      through Wells Fargo’s Commercial Electronic
      Office® (“CEO®”) portal or other
      secure electronic channel to which the parties have
      agreed.

            


    

     

    
      
         


      

      
        -24-

        
          

        

      

      
         


      

    

     

    
      	
              (b)

            	
              Addresses for
      Delivery.  Delivery of any Record under this Section 7.4
      shall be made to the appropriate address set forth on the last page of
      this Agreement (which either party may modify by a Record sent to the
      other party), or through Wells Fargo’s CEO portal or other
      secure electronic channel to which the parties have
  agreed.

            


    

     

    
      	
              (c)

            	
              Date of
      Receipt. Each Record sent
      pursuant to the terms of this Section 7.4 will be deemed to have been
      received on (i) the date of delivery if delivered in person,
      (ii) the date deposited in the mail if sent by mail, (iii) the
      date delivered to the courier if sent by overnight courier, (iv) the date
      of transmission if sent by fax, or (v) the date of transmission, if
      sent as an Electronic Record by electronic mail or through Wells Fargo’s
      CEO portal or
      similar secure electronic channel to which the parties have agreed; except that any
      request for an Advance or any other notice, request, demand or other
      communication from Company required under Section 1, and any request for
      an accounting under Section 9-210 of the UCC, will not be deemed to have
      been received until actual receipt by Wells Fargo on a Business Day by an
      authorized employee of Wells Fargo.

            


    

     

    
      	
              (d)

            	
              Confidentiality of
      Unencrypted E-mail.  Company acknowledges that if it
      sends an Electronic Record to Wells Fargo without encryption by e-mail or
      as an e-mail file attachment, there is a risk that the Electronic Record
      may be received by unauthorized Persons, and that by so doing it will be
      deemed to have accepted this risk and the consequences of any such
      unauthorized disclosure.

            


    

     

    
      	
              7.5

            	
              Company Information Reporting;
      Confidentiality.  Except as otherwise expressly provided
      in this Agreement:

            


    

     

    
      	
              (a)

            	
              Delivery of Company
      Information Records.  Any information that Company is
      required to deliver under Section 5.1 in the form of a Record may be
      delivered to Wells Fargo (i) in person, or by (ii) first class U.S.
      mail, (iii) overnight courier of national reputation, or
      (iv) fax, or the Record may be sent as an Electronic Record (v) by
      encrypted e-mail, or (vi) through the file upload service of Wells Fargo’s
      CEO portal or
      other secure electronic channel to which the parties have
      agreed.

            


    

     

    
      	
              (b)

            	
              Addresses for
      Delivery.  Delivery of any Record to Wells Fargo under
      this Section 7.5 shall be made to the appropriate address set forth on the
      last page of this Agreement (which Wells Fargo may modify by a Record sent
      to Company), or through Wells Fargo’s CEO portal or other
      secure electronic channel to which the parties have
  agreed.

            


    

     

    
      	
              (c)

            	
              Date of
      Receipt. Each Record sent
      pursuant to this Section will be deemed to have been received on (i) the
      date of delivery to an authorized employee of Wells Fargo, if delivered in
      person, or by U.S. mail, overnight courier, fax, or e-mail; or
      (ii) the date of transmission, if sent as an Electronic Record
      through Wells Fargo’s CEO portal or similar
      secure electronic channel to which the parties have
  agreed.

            


    

     

    
      	
              (d)

            	
              Authentication of
      Company Information Records.  Company shall Authenticate
      any Record delivered (i) in person, or by U.S. mail, overnight courier, or
      fax, by the signature of the Officer or employee of Company who prepared
      the Record; (ii) as an Electronic Record
      sent via encrypted e-mail, by the signature of the Officer or employee of
      Company who prepared the Record by any file format signature that is
      acceptable to Wells Fargo, or by a separate certification signed and sent
      by fax; or (iii) as an Electronic Record via the file upload service of
      Wells Fargo’s CEO
      portal or similar secure electronic channel to which the parties
      have agreed, through such credentialing process as Wells Fargo and Company
      may agree to under the CEO
      agreement.

            


    

     

    
      
         


      

      
        -25-

        
          

        

      

      
         


      

    

     

    
      	
              (e)

            	
              Certification of
      Company Information Records.  Any Record
      (including any Electronic Record) Authenticated and delivered to Wells
      Fargo under this Section 7.5 will be deemed to have been certified as
      materially true, correct, and complete by Company and each Officer or
      employee of Company who prepared and Authenticated the Record on behalf of
      Company, and may be legally relied upon by Wells Fargo without regard to
      method of delivery or transmission.

            


    

     

    
      	
              (f)

            	
              Confidentiality of
      Company Information Records Sent by Unencrypted
      E-mail.  Company acknowledges that if it sends an
      Electronic Record to Wells Fargo without encryption by e-mail or as an
      e-mail file attachment, there is a risk that the Electronic Record may be
      received by unauthorized Persons, and that by so doing it will be deemed
      to have accepted this risk and the consequences of any such unauthorized
      disclosure.  Company acknowledges that it may deliver Electronic
      Records containing Company information to Wells Fargo by e-mail pursuant
      to any encryption tool acceptable to Wells Fargo and Company, or through
      Wells Fargo’s CEO
      portal file upload service without risk of unauthorized
      disclosure.

            


    

     

    
      	
              7.6

            	
              Further Documents.  Company
      will from time to time execute, deliver, endorse and authorize the filing
      of any instruments, documents, conveyances, assignments, security
      agreements, financing statements, control agreements and other agreements
      that Wells Fargo may reasonably request in order to secure, protect,
      perfect or enforce the Security Interest or Wells Fargo’s rights under the
      Loan Documents, or any other document or agreement described in or related
      to this Agreement (but any failure to request or assure that Company
      executes, delivers, endorses or authorizes the filing of any such item
      shall not affect or impair the validity, sufficiency or enforceability of
      the Loan Documents, or any other document or agreement described in or
      related to this Agreement, and the Security Interest, regardless of
      whether any such item was or was not executed, delivered or endorsed in a
      similar context or on a prior occasion); provided that (i) Company shall
      have 60 days to close its deposit accounts at Bridge Bank (the “Bridge
      Bank Accounts”), and during such time Company shall not be required to
      provide a control agreement to Wells Fargo with respect to the Bridge Bank
      Accounts, and (ii) Company shall not be required to provide documentation
      to Wells Fargo to perfect its security interest in Company’s account in
      Germany maintained with Deutsche Bank Agent, Berlin (Branch #710), Account
      No. 5390745 (the “German Account”).  Company represents and
      covenants that (a) the Bridge Bank Accounts, until closed, shall only
      contain sufficient funds to meet checks which are outstanding on the date
      hereof and no further checks will be written on the Bridge Bank Accounts,
      and (b) the German Account shall only contain funds reasonably necessary
      to fund Company’s obligations to pay VAT
taxes.

            


    

     

    
      	
              7.7

            	
              Costs and Expenses.  Company
      shall pay on demand all costs and expenses, including reasonable
      attorneys’ fees, incurred by Wells Fargo in connection with the
      Indebtedness, this Agreement, the Loan Documents, or any other document or
      agreement described in or related to this Agreement, and the transactions
      contemplated by
      this Agreement, including all such costs, expenses and fees incurred in
      connection with the negotiation, preparation, execution, amendment,
      administration, performance, collection and enforcement of the
      Indebtedness and all such documents and agreements and the creation,
      perfection, protection, satisfaction, foreclosure or enforcement of the
      Security Interest.

            


    

     


    
      
         


      

      
        -26-

        
          

        

      

      
         


      

    

     

    
      	
              7.8

            	
              Indemnity.  In
      addition to its obligation to pay Wells Fargo’s expenses under the terms
      of this Agreement, Company shall indemnify, defend and hold harmless Wells
      Fargo, its parent Wells Fargo & Company, and any of its affiliates and
      successors, and all of their present and future Officers, Directors,
      employees, attorneys and agents (the “Indemnitees”) from and against any
      of the following (collectively, “Indemnified
  Liabilities”):

            


    

     

    
      	
              (a)

            	
              Any
      and all transfer taxes, documentary taxes, assessments or charges made by
      any governmental authority by reason of the execution and delivery of the
      Loan Documents, or any other document or agreement described in or related
      to this Agreement or the making of the
Advances;

            


    

     

    
      	
              (b)

            	
              Any
      claims, loss or damage to which any Indemnitee may be subjected if any
      representation or warranty contained in Exhibit D proves to be incorrect
      in any respect or as a result of any violation of the covenants contained
      in Section 5.12; and

            


    

     

    
      	
              (c)

            	
              Any
      and all other liabilities, losses, damages, penalties, judgments, suits,
      claims, costs and expenses of any kind or nature whatsoever (including the
      reasonable fees and disbursements of counsel) in connection with this
      Agreement and any other investigative, administrative or judicial
      proceedings, whether or not such Indemnitee shall be designated a party to
      such proceedings, which may be imposed on, incurred by or asserted against
      any such Indemnitee, in any manner related to or arising out of or in
      connection with the making of the Advances and the Loan Documents, or any
      other document or agreement described in or related to this Agreement, or
      the use or intended use of the proceeds of the Advances, with the
      exception of any Indemnified Liability caused by the gross negligence or
      willful misconduct of an
Indemnitee.

            


    

     

    
      	
               
      

            	
              If
      any investigative, judicial or administrative proceeding described in this
      Section is brought against any Indemnitee, upon the Indemnitee’s request,
      Company, or counsel designated by Company and satisfactory to the
      Indemnitee, will resist and defend the action, suit or proceeding to the
      extent and in the manner directed by the Indemnitee, at Company’s sole
      cost and expense.  Each Indemnitee will use its best efforts to
      cooperate in the defense of any such action, suit or
      proceeding.  If this agreement to indemnify is held to be
      unenforceable because it violates any law or public policy, Company shall
      nevertheless make the maximum contribution to the payment and satisfaction
      of each of the Indemnified Liabilities to the extent permissible under
      applicable law.  Company’s obligations under this Section shall
      survive the termination of this Agreement and the discharge of Company’s
      other obligations under this
Agreement.

            


    

     

    
      	
              7.9

            	
              Retention of Company’s
      Records.  Wells
      Fargo shall have no obligation to maintain Electronic Records or retain
      any documents, schedules, invoices, agings, or other Records delivered to
      Wells Fargo by Company in connection with the Loan Documents, or any other
      document or agreement described in or related to this Agreement for more
      than 30 days after receipt by Wells Fargo.  If there is a
      special need to retain specific Records, Company must notify Wells Fargo
      of its need to retain or return such Records with
      particularity, which notice must be delivered to Wells Fargo in accordance
      with the terms of this Agreement at the time of the initial delivery of
      the Record to Wells Fargo.

            


    

     

    
      
         


      

      
        -27-

        
          

        

      

      
         


      

    

     

    
      	
              7.10

            	
              Binding Effect; Assignment;
      Complete Agreement.  The Loan
      Documents, or any other document or agreement described in or related to
      this Agreement, shall be binding upon and inure to the benefit of Company
      and Wells Fargo and their respective successors and assigns, except that
      Company shall not have the right to assign its rights under this Agreement
      or any interest in this Agreement without Wells Fargo’s prior consent,
      which must be confirmed in a Record Authenticated by Wells Fargo. To the
      extent permitted by law, Company waives and will not assert against any
      assignee any claims, defenses or set-offs which Company could assert
      against Wells Fargo. This Agreement shall also bind all Persons who become
      a party to this Agreement as a borrower.  This Agreement,
      together with the Loan Documents, or any other document or agreement
      described in or related to this Agreement, comprises the complete and
      integrated agreement of the parties on the subject matter of this
      Agreement and supersedes all prior agreements, whether oral or evidenced
      in a Record.  To the extent that any provision of this Agreement
      contradicts other provisions of the Loan Documents other than this
      Agreement, or any other document or agreement described in or related to
      this Agreement, this Agreement shall
control.

            


    

     

    
      	
              7.11

            	
              Sharing of
      Information.  Wells Fargo may share any information that
      it may have regarding Company and its Affiliates with its accountants,
      lawyers, and other advisors, and Wells Fargo and each direct and indirect
      subsidiary of Wells Fargo & Company may also share any information
      that they have with each other, and Company waives any right of
      confidentiality it may have with respect to the sharing of all such
      information.

            


    

     

    
      	
              7.12

            	
              Severability of
      Provisions.  Any
      provision of this Agreement which is prohibited or unenforceable shall be
      ineffective to the extent of such prohibition or unenforceability without
      invalidating the remaining terms of this
  Agreement.

            


    

     

    
      	
              7.13

            	
              Headings.  Section
      and subsection headings in this Agreement are included for convenience of
      reference only and shall not constitute a part of this Agreement for any
      other purpose.

            


    

     

    
      	
              7.14

            	
              Governing Law; Jurisdiction,
      Venue; Waiver of Jury Trial.  The Loan
      Documents (other than real estate related documents, if any) shall be
      governed by and construed in accordance with the substantive laws (other
      than conflict laws) of the State of California. The parties to this
      Agreement (a) consent to the personal jurisdiction of the state and
      federal courts located in the State of California in connection with any
      controversy related to this Agreement; (b) waive any argument that
      venue in any such forum is not convenient; (c) agree that any
      litigation initiated by Wells Fargo or Company in connection with this
      Agreement or the other Loan Documents may be venued in either the state or
      federal courts located in the City and County  of Los Angeles,
      State of California; and (d) agree that a final judgment in any such
      suit, action or proceeding shall be conclusive and may be enforced in
      other jurisdictions by suit on the judgment or in any other manner
      provided by law.

            


    

     

    
      	
              7.15

            	
              Arbitration.

            


    

     

    (a)           Arbitration.  The
parties hereto agree, upon demand by any party, to submit to binding arbitration
all claims, disputes and controversies between or amon them (and their
respective employees, officers, directors, attorneys, and other agents), whether
in tort, contract or otherwise arising out of or relating to in any way (i) the
loan and related Loan Documents which are the subject of this Agreement and its
negotiation, execution, collateralization, administration, repayment,
modification, extension, substitution, formation, inducement, enforcement,
default or termination; or (ii) requests for additional credit.


    
      
         


      

      
        -28-

        
          

        

      

      
         


      

    

     

    (b)           Governing
Rules.  Any arbitration proceeding will (i) proceed in a location in
California selected by the American Arbitration Association (“AAA”); (ii) be
governed by the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the documents
between the parties; and (iii) be conducted by the AAA, or such other
administrator as the parties shall mutually agree upon, in accordance with the
AAA’s commercial dispute resolution procedures, unless the claim or counterclaim
is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and
costs in which case the arbitration shall be conducted in accordance with the
AAA’s optional procedures for large, complex commercial disputes (the commercial
dispute resolution procedures or the optional procedures for large, complex
commercial disputes to be referred to, as applicable, as the
“Rules”).  If there is any inconsistency between the terms hereof and
the Rules, the terms and procedures set forth herein shall
control.  Any party who fails or refuses to submit to arbitration
following a demand by any other party shall bear all costs and expenses incurred
by such other party in compelling arbitration of any dispute.  Nothing
contained herein shall be deemed to be a waiver by any party that is a bank of
the protections afforded to it under 12 U.S.C. §91 or any similar applicable
state law.

     

    (c)           No
Waiver of Provisional Remedies, Self-Help and Foreclosure.  The
arbitration requirement does not limit the right of any party to (i) foreclose
against real or personal property collateral; (ii) exercise self-help remedies
relating to collateral or proceeds of collateral such as setoff or repossession;
or (iii) obtain provisional or ancillary remedies such as replevin, injunctive
relief, attachment or the appointment of a receiver, before during or after the
pendency of any arbitration proceeding.  This exclusion does not
constitute a waiver of the right or obligation of any party to submit any
dispute to arbitration or reference hereunder, including those arising from the
exercise of the actions detailed in sections (i), (ii) and (iii) of this
paragraph.

     

    (d)           Arbitrator
Qualifications and Powers.  Any arbitration proceeding in which the
amount in controversy is $5,000,000.00 or less will be decided by a single
arbitrator selected according to the Rules, and who shall not render an award of
greater than $5,000,000.00.  Any dispute in which the amount in
controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel
of three arbitrators; provided however, that all three arbitrators must actively
participate in all hearings and deliberations.  The arbitrator will be
a neutral attorney licensed in the State of California or a neutral retired
judge of the state or federal judiciary of California, in either case with a
minimum of ten years experience in the substantive law applicable to the subject
matter of the dispute to be arbitrated.  The arbitrator will determine
whether or not an issue is arbitratable and will give effect to the statutes of
limitation in determining any claim.  In any arbitration proceeding
the arbitrator will decide (by documents only or with a hearing at the
arbitrator's discretion) any pre-hearing motions which are similar to motions to
dismiss for failure to state a claim or motions for summary
adjudication.  The arbitrator shall resolve all disputes in accordance
with the substantive law of California and may grant any remedy or relief that a
court of such state could order or grant within the scope hereof and such
ancillary relief as is necessary to make effective any award.  The
arbitrator shall also have the power to award recovery of all costs and fees, to
impose sanctions and to take such other action as the arbitrator deems necessary
to the same extent a judge could pursuant to the Federal Rules of Civil
Procedure, the California Rules of Civil Procedure or other applicable
law.  Judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction.  The institution and
maintenance of an action for judicial relief or pursuit of a provisional or
ancillary remedy shall not constitute a waiver of the right of any party,
including the plaintiff, to submit the controversy or claim to arbitration if
any other party contests such action for judicial relief.


    
      
         


      

      
        -29-

        
          

        

      

      
         


      

    

     

    (e)           Discovery.  In
any arbitration proceeding discovery will be permitted in accordance with the
Rules.  All discovery shall be expressly limited to matters directly
relevant to the dispute being arbitrated and must be completed no later than 20
days before the hearing date and within 180 days of the filing of the dispute
with the AAA.  Any requests for an extension of the discovery periods,
or any discovery disputes, will be subject to final determination by the
arbitrator upon a showing that the request for discovery is essential for the
party's presentation and that no alternative means for obtaining information is
available.

     

    (f)     
      Class Proceedings and
Consolidations.  The resolution of any dispute arising pursuant to the
terms of this Agreement shall be determined by a separate arbitration proceeding
and such dispute shall not be consolidated with other disputes or included in
any class proceeding.

     

    (g)           Payment
Of Arbitration Costs And Fees.  The arbitrator shall award all costs
and expenses of the arbitration proceeding.

     

    (h)           Real
Property Collateral; Judicial Reference.  Notwithstanding anything
herein to the contrary, no dispute shall be submitted to arbitration if the
dispute concerns indebtedness secured directly or indirectly, in whole or in
part, by any real property unless (i) the holder of the mortgage, lien or
security interest specifically elects in writing to proceed with the
arbitration, or (ii) all parties to the arbitration waive any rights or benefits
that might accrue to them by virtue of the single action rule statute of
California, thereby agreeing that all indebtedness and obligations of the
parties, and all mortgages, liens and security interests securing such
indebtedness and obligations, shall remain fully valid and
enforceable.  If any such dispute is not submitted to arbitration, the
dispute shall be referred to a referee in accordance with California Code of
Civil Procedure Section 638 et seq., and this general reference agreement is
intended to be specifically enforceable in accordance with said Section
638.  A referee with the qualifications required herein for
arbitrators shall be selected pursuant to the AAA’s selection
procedures.  Judgment upon the decision rendered by a referee shall be
entered in the court in which such proceeding was commenced in accordance with
California Code of Civil Procedure Sections 644 and 645.

     

    (i)        
    Miscellaneous.  To the maximum extent
practicable, the AAA, the arbitrators and the parties shall take all action
required to conclude any arbitration proceeding within 180 days of the filing of
the dispute with the AAA.  No arbitrator or other party to an
arbitration proceeding may disclose the existence, content or results thereof,
except for disclosures of information by a party required in the ordinary course
of its business or by applicable law or regulation.  If more than one
agreement for arbitration by or between the parties potentially applies to a
dispute, the arbitration provision most directly related to the Loan Documents
or the subject matter of the dispute shall control.  This arbitration
provision shall survive termination, amendment or expiration of any of the Loan
Documents or any relationship between the parties.

     

    [Signatures
on Next Page]


    
      
         


      

      
        -30-

        
          

        

      

      
         


      

    

     

    COMPANY AND WELLS FARGO have
executed this Credit and Security Agreement through their authorized officers as
of the date set forth above.

     

    
    

     

    
      	WELLS
      FARGO BANK,	 	SOUTHWALL
      TECHNOLOGIES INC.	 
	
              NATIONAL
      ASSOCIATION

            	 	 	 	 
	 	 	 	 	 	 
	 By:	 	 	 	 	 
	 	 	 	By:	 	 
	 	 	 	 	 	 
	 	 Its Vice
      President 	 	 	 
	 	 	 	Its  	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	By:	 	 
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	 	Its	 	 
	 	 	 	 	 	 


    

    
      	
              Wells
      Fargo Bank, National Association

              245
      S. Los Robles Avenue

              Suite
      700

              Pasadena,
      CA  91101

              Fax:
      (626) 844-9063

              Attention:
      Mr. Robert Mostert

              e-mail:
      robert.n.mostert @wellsfargo.com

               

            	
              Southwall
      Technologies Inc.

              3788
      Fabian Way

              Palo
      Alto, CA

              Fax:  _______________________

              Attention:  Chief
      Accounting Officer

              e-mail:
      mburak@southwall.com

              Federal
      Employer Identification No.

              95-2551470

              Organizational
      Identification No.

              0865245

            


    

     

    
      
         


      

      
        -31-

        
          

        

      

      
         


      

    

     

    REVOLVING
NOTE

     

    $3,000,000.00 May
19, 2008

     

    FOR VALUE RECEIVED, the
undersigned, SOUTHWALL
TECHNOLOGIES INC., a Delaware corporation (the “Company”), hereby
promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION (“Wells
Fargo”), acting through its WELLS FARGO BUSINESS CREDIT operating division, on
the Termination Date described in the Credit and Security Agreement dated of
even date herewith (as amended from time to time, the “Agreement”) and entered
into between Wells Fargo and Company, at Wells Fargo’s office at 245 S. Los
Robles Avenue, Suite 700, Pasadena, CA  91101, or at any other place
designated at any time by the holder, in lawful money of the United States of
America and in immediately available funds, the principal sum of THREE MILLION Dollars
($3,000,000.00) or the aggregate unpaid principal amount of all Advances
made by Wells Fargo to Company under the terms of the Agreement, together with
interest on the principal amount computed on the basis of actual days elapsed in
a 360-day year, from the date of this Revolving Note until this Revolving Note
is fully paid at the rate from time to time in effect under the terms of the
Agreement.  Principal and interest accruing on the unpaid principal
balance amount of this Revolving Note shall be due and payable as provided in
the Agreement.  This Revolving Note may be prepaid only in accordance
with the Agreement.

     

    This
Revolving Note is the Revolving Note referred to in the Agreement, and is
subject to the terms of the Agreement, which provides, among other things, for
the acceleration of this Revolving Note.  This Revolving Note is
secured, among other things, by the Agreement and the Security Documents as
defined in the Agreement, and by any other security agreements, mortgages, deeds
of trust, assignments or other instruments or agreements that may subsequently
be given for good and valuable consideration as security for this Revolving
Note.

     

    Company
shall pay all costs of collection, including reasonable attorneys’ fees and
legal expenses if this Revolving Note is not paid when due, whether or not legal
proceedings are commenced.

     

    Presentment
or other demand for payment, notice of dishonor and protest are expressly
waived.

     

    
    

     

    
      	 	 	SOUTHWALL
      TECHNOLOGIES INC.
	 	 	 	 
	 	 	 	 
	 	 	By:            	 
	 	 	Name:	 
	 	 	Its:	 
	 	 	 	 
	 	 	By:  	 
	 	 	Name:  	 
	 	 	Its:	 
	 	 	 	 


    

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    Exhibit
A to Credit and Security Agreement

    


    DEFINITIONS

     

    “Account
Funds” is defined in Section 1.4(a).

    


    “Accounts”
shall have the meaning given it under the UCC.

    


    “Advance”
and “Advances” means an advance or advances under the Line of
Credit.

    


    “Affiliate”
or “Affiliates” means any Person controlled
by, controlling or under common control with Company, including any Subsidiary
of Company.  For purposes of this definition, “control,” when used
with respect to any specified Person, means the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise.

     

    “Aggregate
Face Amount” means the aggregate amount that may then be drawn under each
outstanding Letter of Credit, assuming compliance with all conditions for
drawing.

     

    “Agreement”
means this Credit and Security Agreement.

     

    “Authenticated”
means (a) to have signed; or (b) to have executed or to have otherwise adopted a
symbol, or have encrypted or similarly processed a Record in whole or in part,
with the present intent of the authenticating Person to identify the Person and
adopt or accept a Record.

     

    “Book Net
Worth” means the aggregate of the Owners’ equity in Company, determined in
accordance with GAAP.

     

     “Borrowing
Base” is defined in Section 1.2(a).

    


    
      “Borrowing
Base Reserve” means, as of any date of determination, an amount or a percent of
a specified category or item that Wells Fargo establishes in its sole discretion
from time to time to reduce availability under the Borrowing Base (a) to reflect
events, conditions, contingencies or risks which affect the assets, business or
prospects of Company, or the Collateral or its value, or the enforceability,
perfection or priority of Wells Fargo’s Security Interest in the Collateral, as
the term “Collateral” is defined in this Agreement, or (b) to reflect Wells
Fargo’s judgment that any collateral report or financial information relating to
Company and furnished to Wells Fargo may be incomplete, inaccurate or misleading
in any material respect.

    

    


    "Business
Day" means a day on which the Federal Reserve Bank of New York is open for
business.

    


     “Capital
Expenditures” means for a period, any expenditure of money during such period
for the purchase or construction of assets, or for improvements or additions to
such assets, which are capitalized on Company’s balance sheet.

    


    “Cash
Equivalents” means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or any agency or any State
thereof having maturities of not more than one (1) year from the date of
acquisition; (b) commercial paper maturing no more than one (1) year after
its creation and having the highest rating from either Standard & Poor’s
Ratings Group or Moody’s Investors Service, Inc., (c) Wells Fargo certificates
of deposit maturing no more than one (1) year after issue; and (d) money market
funds at least ninety-five percent (95%) of the assets of which constitute Cash
Equivalents of the kinds described in clauses (a) through (c) of this
definition.


    
      
         


      

      
        A-1

        
          

        

      

      
         


      

    

     

    “CEO” is
defined in Section 7.4(a).

    


    
      “Change
of Control” means the occurrence of any of the following
events:

    

     

    
      	
              (a)

            	
              Any
      Person or “group” (as such term is used in Sections 13(d) and 14(d) of the
      Securities Exchange Act of 1934),who does not have an ownership interest
      in Company on the date of the initial Advance, is or becomes the
      “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the
      Securities Exchange Act of 1934, except that any such Person, entity or
      group will be deemed to have “beneficial ownership” of all securities that
      such Person, entity or group has the right to acquire, whether such right
      is exercisable immediately or only after the passage of time), directly or
      indirectly, of more than fifteen (15%) of the voting power of all classes
      of ownership of Company;

            


    

     

    
      	
              (b)

            	
              During
      any consecutive two-year period, individuals who at the beginning of such
      period constituted the board of Directors of Company (together with any
      new Directors whose election to such board of Directors, or whose
      nomination for election by the Owners of Company, was approved by a vote
      of two thirds of the Directors then still in office who were either
      Directors at the beginning of such period or whose election or nomination
      for election was previously so approved) cease for any reason to
      constitute a majority of the board of Directors of Company then in
      office.

            


    

    


    “Collateral”
means all of Company’s Accounts, chattel paper and electronic chattel paper,
deposit accounts, documents, Equipment, General Intangibles, goods, instruments,
Inventory, Investment Property, letter-of-credit rights, letters of credit, all
sums on deposit in any Collection Account, and any items in any Lockbox;
together with (a) all substitutions and replacements for and products of
such property; (b) in the case of all goods, all accessions; (c) all
accessories, attachments, parts, Equipment and repairs now or subsequently
attached or affixed to or used in connection with any goods; (d) all
warehouse receipts, bills of lading and other documents of title that cover such
goods now or in the future; (e) all collateral subject to the Lien of any
of the Security Documents; (f) any money, or other assets of Company that
come into the possession, custody, or control of Wells Fargo now or in the
future; (g) Proceeds of any of the above Collateral; (h) books and records
of Company, including all mail or e-mail addressed to Company; and (i) all of
the above Collateral, whether now owned or existing or acquired now or in the
future or in which Company has rights now or in the future.

     

    “Collection
Account” means “Collection Account” as defined in the Master Agreement for
Treasury Management Services and related Lockbox and Collection Account Service
Description or Collection Account Service Description, whichever is applicable.
..

    


    “Compliance
Certificate” is defined in Section 5.1(a) and is in the form of Exhibit
E.

     

    “Commercial
Letter of Credit Agreement” means an agreement governing the issuance of
documentary letters of credit entered into between Company as applicant and
Wells Fargo as issuer.


    
      
         


      

      
        A-2

        
          

        

      

      
         


      

    


    “Constituent
Documents” means with respect to any Person, as applicable, that Person’s
certificate of incorporation, articles of incorporation, by-laws, certificate of
formation, articles of organization, limited liability company agreement,
management agreement, operating agreement, shareholder agreement, partnership
agreement or similar document or agreement governing such Person’s existence,
organization or management or concerning disposition of ownership interests of
such Person or voting rights among such Person’s owners.

     

    “Copyright
Security Agreement” means each Copyright Security Agreement entered into between
Company and Wells Fargo.

     

    “Debt”
means of a Person as of a given date, all items of indebtedness or liability
which in accordance with GAAP would be included in determining total liabilities
as shown on the liabilities side of a balance sheet for such Person and shall
also include the aggregate payments required to be made by such Person at any
time under any lease that is considered a capitalized lease under
GAAP.

    


    “Debt
Service Coverage Ratio” means (a) the sum of (i) Funds from Operations
and (ii) Interest Expense minus (iii) unfinanced Capital Expenditures
divided by (b) the sum of (i) Current Maturities of Long Term Debt and
(ii) Interest Expense.

     

    “Default
Period” is defined in Section 1.5(c).

     

    “Default
Rate” is defined in Section 1.5(c).

    


    “Dilution”
means, as of any date of determination, a percentage, based upon the prior
twelve months, which is the result of dividing (a) actual bad debt write-downs,
discounts, advertising allowances, credits, and any other items with respect to
the Accounts determined to be dilutive by Wells Fargo in its sole discretion
during this period, by (b) Company’s net sales during such period (excluding
extraordinary items) plus the amount of clause (a).

     

    “Director”
means a director if Company is a corporation, or a governor or manager if
Company is a limited liability company.

     

    “Earnings
Before Taxes” means pretax earnings from operations, excluding extraordinary
gains, but including extraordinary losses.

    


    “Electronic
Record” means a Record that is created, generated, sent, communicated, received,
or stored by electronic means, but does not include any
Record that is sent, communicated, or received by fax.

    


    “Eligible
Accounts” means all unpaid Accounts of Company arising from the sale or lease of
goods or the performance of services, net of any credits, but excluding any
Accounts having any of the following characteristics:

     

    
      	
              (a)

            	
              That
      portion of Accounts unpaid 90 days or more after the invoice
      date;

            


    

     

    
      	
              (b)

            	
              That
      portion of Accounts related to goods or services with respect to which
      Company has received notice of a claim or dispute, which are subject to a
      claim of offset or a contra account, or which reflect a reasonable reserve
      for warranty claims or returns;

            


    

     

    
      
         


      

      
        A-3

        
          

        

      

      
         


      

    


    
      	
              (c)

            	
              That
      portion of Accounts not yet earned by the final delivery of goods or that
      portion of Accounts not yet earned by the final rendition of services by
      Company to the account debtor, including with respect to both goods and
      services, progress billings, bill and hold sales, sales constituting
      deferred revenue, and that portion of Accounts for which an invoice has
      not been sent to the applicable account
debtor;

            


    

     

    
      	
              (d)

            	
              Accounts
      constituting (i) Proceeds of copyrightable material unless such
      copyrightable material shall have been registered with the United States
      Copyright Office, or (ii) Proceeds of patentable inventions unless such
      patentable inventions have been registered with the United States Patent
      and Trademark Office;

            


    

     

    
      	
              (e)

            	
              Accounts
      owed by any unit of government, whether foreign or domestic (except that
      there shall be included in Eligible Accounts that portion of Accounts owed
      by such units of government for which Company has provided evidence
      satisfactory to Wells Fargo that (i) Wells Fargo’s Security Interest
      constitutes a perfected first priority Lien in such Accounts, and
      (ii) such Accounts may be enforced by Wells Fargo directly against
      such unit of government under all applicable
  laws);

            


    

     

    
      	
              (f)

            	
              Accounts
      denominated in any currency other than United States
    Dollars;

            


    

    


    
      	
              (g)

            	
              Accounts
      owed by an account debtor located outside the United States or Canada
      which are not (i) backed by a bank letter of credit naming Wells
      Fargo as beneficiary or assigned to Wells Fargo, in Wells Fargo’s
      possession or control, and with respect to which a control agreement
      concerning the letter-of-credit rights is in effect, and acceptable to
      Wells Fargo in all respects, in its sole discretion, or (ii) covered
      by a foreign receivables insurance policy acceptable to Wells Fargo in its
      sole discretion;

            


    

     

    
      	
              (h)

            	
              Accounts
      owed by an account debtor who is insolvent or is the subject of bankruptcy
      proceedings or who has gone out of
business;

            


    

     

    
      	
              (i)

            	
              Accounts
      owed by an Owner, Subsidiary, Affiliate, Officer or employee of
      Company;

            


    

     

    
      	
              (j)

            	
              Accounts
      not subject to the Security Interest or which are subject to any Lien in
      favor of any Person other than Wells
Fargo;

            


    

     

    
      	
              (k)

            	
              That
      portion of Accounts that has been restructured, extended, amended or
      modified;

            


    

     

    
      	
              (l)

            	
              That
      portion of Accounts that constitutes advertising, finance charges, service
      charges or sales or excise taxes, or that arises from the sales of
      warranties, or which represent COD sales or credit card
    sales;

            


    

     

    
      	
              (m)

            	
              Accounts
      owed by an account debtor, regardless of whether otherwise eligible, to
      the extent that the aggregate balance of such Accounts exceeds 15% of the
      aggregate amount of all Accounts;

            


    

     

    
      	
              (n)

            	
              Accounts
      owed by an account debtor, regardless of whether otherwise eligible, if
      25% or more of the total amount of Accounts due from such debtor is
      ineligible under clauses (a), (b), or (k) above;
  and

            


    

     

    
      	
              (o)

            	
              Accounts,
      or portions of Accounts, otherwise deemed ineligible by Wells Fargo in its
      sole discretion.

            


    


    
      
         


      

      
        A-4

        
          

        

      

      
         


      

    

    


    “Environmental
Law” means any federal, state, local or other governmental statute, regulation,
law or ordinance dealing with the protection of human health and the
environment.

     

    “Equipment”
shall have the meaning given it under the Uniform Commercial Code in effect in
the state whose laws govern this Agreement.

    


    “ERISA”
means the Employee Retirement Income Security Act of 1974, as amended from time
to time.

     

    “ERISA
Affiliate” means any trade or business (whether or not incorporated) that is a
member of a group which includes Company and which is treated as a single
employer under Section 414 of the IRC.

    


    “Event of
Default” is defined in Section 6.1.

     

    “Floating
Rate” is defined in Section 1.5(a).

    


    “Floating
Rate Advance” means an Advance bearing interest at the Floating
Rate.

    


    “GAAP”
means generally accepted accounting principles, applied on a basis consistent
with the accounting practices applied in the financial statements described on
Exhibit D.

     

    “General
Intangibles” shall have the meaning given it under the UCC.

    


    “Guarantor means any other Person
now or in the future guaranteeing any Indebtedness through the issuance of a
Guaranty.

     

    “Guaranty”
means an unconditional continuing guaranty executed by a Guarantor in favor of
Wells Fargo (if more than one, the “Guaranties”).

     

    “Hazardous
Substances” means pollutants, contaminants, hazardous substances, hazardous
wastes, petroleum and fractions thereof, and all other chemicals, wastes,
substances and materials listed in, regulated by or identified in any
Environmental Law.

     

    "Indebtedness"
is used in its most comprehensive sense and means any debts, obligations and
liabilities of Company to Wells Fargo, whether incurred in the past, present or
future, whether voluntary or involuntary, and however arising, and whether due
or not due, absolute or contingent, liquidated or unliquidated, determined or
undetermined, and including without limitation all obligations arising under any
swap, derivative, foreign exchange, hedge, deposit, treasury management or
similar transaction or arrangement however described or defined that Company may
enter into at any time with Wells Fargo or with Wells Fargo Merchant Services,
L.L.C., whether or not Company may be liable individually or jointly with
others, or whether recovery upon such Indebtedness may subsequently become
unenforceable.

     

    “Indemnified
Liabilities” is defined in Section 7.8.

     

    “Indemnitees”
is defined in Section 7.8.

     

    “Infringement”
or “Infringing” when used with respect to Intellectual Property Rights means any
infringement or other violation of Intellectual Property Rights.

     

    
      
         


      

      
        A-5

        
          

        

      

      
         


      

    


    “Intellectual
Property Rights” means all actual or prospective rights arising in connection
with any intellectual property or other proprietary rights, including all rights
arising in connection with copyrights, patents, service marks, trade dress,
trade secrets, trademarks, trade names or mask works.

     

    “Interest
Expense” means for a fiscal year-to-date period, Company’s total gross interest
expense during such period (excluding interest income), and shall in any event
include (a) interest expensed (whether or not paid) on all Debt,
(b) the amortization of debt discounts, (c) the amortization of all
fees payable in connection with the incurrence of Debt to the extent included in
interest expense, and (d) the portion of any capitalized lease obligation
allocable to interest expense.

     

    “Interest
Payment Date” is defined in Section 1.7(a).

    


    “Inventory”
shall have the meaning given it under the UCC.

    


    “Investment
Property” shall have the meaning given it under the UCC.

    


    “L/C
Amount” means the sum of (a) the Aggregate Face Amount of any outstanding
Letters of Credit, plus (b) the amount of each Obligation of Reimbursement
that either remains unreimbursed or has not been paid through an Advance on the
Line of Credit.

     

    “L/C
Application” means an application for the issuance of standby or documentary
Letters of Credit pursuant to the terms of a Standby Letter of Credit Agreement
or Commercial Letter of Credit Agreement, in form acceptable to Wells
Fargo.

    


    “Letter
of Credit” and “Letters of Credit” are each defined in Section
1.9(a).

    


    “Licensed
Intellectual Property” is defined in Exhibit D.

     

    “Lien”
means any security interest, mortgage, deed of trust, pledge, lien, charge,
encumbrance, title retention agreement or analogous instrument or device,
including the interest of each lessor under any capitalized lease and the
interest of any bondsman under any payment or performance bond, in, of or on any
assets or properties of a Person, whether now owned or subsequently acquired and
whether arising by agreement or operation of law.

     

    “Line
Activation Period” is defined in Section 3.3.

     

    “Line of
Credit” is defined in the Recitals.

     

    “Loan
Documents” means this Agreement, the Revolving Note, the Master Agreement for
Treasury Management Services, each Standby Letter of Credit Agreement, each
Commercial Letter of Credit Agreement, any L/C Applications, and the Security
Documents, together with every other agreement, note, document, contract or
instrument to which Company now or in the future may be a party and which may be
required by Wells Fargo in connection with, or as a condition to, the execution
of this Agreement.  Any documents or other agreements entered into
between Company and Wells Fargo that relate to any swap, derivative, foreign
exchange, hedge, or similar product or transaction, or which are entered into
with an operating division of Wells Fargo other than Wells Fargo Business
Credit, shall not be included in this definition.

     

    
      
         


      

      
        A-6

        
          

        

      

      
         


      

    


    “Loan
Manager” means the treasury management service defined in the Master Agreement
for Treasury Management Services and related Loan Manager Service
Description.

     

    “Lockbox”
means “Lockbox” as defined in the Master Agreement for Treasury Management
Services and related Lockbox and Collection Account Service
Description.

     

    “Master
Agreement for Treasury Management Services” means the Master Agreement for
Treasury Management Services, the related Acceptance of Services, and the
Service Description governing each treasury management service used by
Company.

     

    “Material
Adverse Effect” means any of the following:

     

    
      	
              (a)

            	
              A
      material adverse effect on the business, operations, results of
      operations, prospects, assets, liabilities or financial condition of
      Company;

            


    

     

    
      	
              (b)

            	
              A
      material adverse effect on the ability of Company to perform its
      obligations under the Loan Documents, or any other document or agreement
      related to this Agreement;

            


    

     

    
      	
              (c)

            	
              A
      material adverse effect on the ability of Wells Fargo to enforce the
      Indebtedness or to realize the intended benefits of the Security
      Documents, including a material adverse effect on the validity or
      enforceability of any Loan Document or of any rights against any
      Guarantor, or on the status, existence, perfection, priority (subject to
      Permitted Liens) or enforceability of any Lien securing payment or
      performance of the Indebtedness; or

            


    

     

    
      	
              (d)

            	
              Any
      claim against Company or threat of litigation which if determined
      adversely to Company would cause Company to be liable to pay an amount
      exceeding $1,000,000. or would result in the occurrence of an event
      described in clauses (a), (b) and (c)
  above.

            


    

     

    “Maturity
Date” is defined in Section 1.1(b).

     

    “Maximum
Line Amount” is defined in Section 1.1(a).

     

    “Minimum
Interest Charge” is defined in Section 1.5(b).

     

    “Multiemployer
Plan” means a multiemployer plan (as defined in Section 4001(a)(3) of ERISA) to
which Company or any ERISA Affiliate contributes or is obligated to
contribute.

     

    “Net
Income” means fiscal year-to-date after-tax net income from continuing
operations, including extraordinary losses but excluding extraordinary gains,
all as determined in accordance with GAAP.

    


    “Obligation
of Reimbursement” is defined in Section 1.9(b).

     

    “OFAC” is
defined in Section 5.12(b).

     

    “Officer”
means with respect to Company, an officer if Company is a corporation, a manager
if Company is a limited liability company, or a partner if Company is a
partnership.

    


    “Operating
Account” is defined in Section 1.3(a), and maintained in accordance with the
terms of Wells Fargo’s Commercial Account Agreement in effect for demand deposit
accounts.


    
      
         


      

      
        A-7

        
          

        

      

      
         


      

    

    


    "Overadvance"
means the amount, if any, by which the unpaid principal amount of the Revolving
Note , plus the L/C Amount, is in excess of the then-existing Borrowing
Base.

    


    “Owned
Intellectual Property” is defined in Exhibit D.

     

    “Owner”
means with respect to Company, each Person having legal or beneficial title to
an ownership interest in Company or a right to acquire such an
interest.

     

    “Patent
and Trademark Security Agreement” means each Patent and Trademark Security
Agreement entered into between Company and Wells Fargo.

     

    “Pension
Plan” means a pension plan (as defined in Section 3(2) of ERISA) maintained for
employees of Company or any ERISA Affiliate and covered by Title IV of
ERISA.

     

    “Permitted
Lien” and “Permitted Liens” are defined in Section 5.3(a).

     

    “Person”
means any individual, corporation, partnership, joint venture, limited liability
company, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision of a governmental
entity.

     

    “Plan”
means an employee benefit plan (as defined in Section 3(3) of ERISA) maintained
for employees of Company or any ERISA Affiliate.

     

    “Premises”
is defined in Section 2.4(a).

     

    “Prime
Rate” means at any time the rate of interest most recently announced by Wells
Fargo at its principal office as its Prime Rate, with the understanding that the
Prime Rate is one of Wells Fargo's base rates, and serves as the basis upon
which effective rates of interest are calculated for those loans making
reference to it, and is evidenced by its recording in such internal publication
or publications as Wells Fargo may designate.  Each change in the rate
of interest shall become effective on the date each Prime Rate change is
announced by Wells Fargo.

     

    “Proceeds”
shall have the meaning given it under the UCC.

    


    “Record”
means information that is inscribed on a tangible medium or that is stored in an
electronic or other medium and is retrievable in perceivable form, and includes
all information that is required to be reported by Company to Wells Fargo
pursuant to Section 5.1.

    


    “Reportable
Event” means a reportable event (as defined in Section 4043 of ERISA), other
than an event for which the 30-day notice requirement under ERISA has been
waived in regulations issued by the Pension Benefit Guaranty
Corporation.

    


    “Revolving
Note” is defined in Section 1.1(d).

     

    “Security
Documents” means this Agreement, the Copyright Security Agreement, the Patent
and Trademark Security Agreement and any other document delivered to Wells Fargo
from time to time to secure the Indebtedness.

     

    “Security
Interest” is defined in Section 2.1.

     

    
      
         


      

      
        A-8

        
          

        

      

      
         


      

    


    “Special
Account” means a specified cash collateral account maintained with Wells Fargo
or another financial institution acceptable to Wells Fargo in connection with
each undrawn Letter of Credit issued by Wells Fargo, as more fully described in
Section 1.10.

     

    “Standby
Letter of Credit Agreement” means an agreement governing the issuance of standby
letters of credit by Wells Fargo entered into between Company as applicant and
Wells Fargo as issuer.

     

    “Subordinated
Creditor” means any Person in the future subordinating indebtedness of Company
held by that Person to the payment of the Indebtedness.

     

     “Subordination
Agreement” means a subordination agreement executed by a Subordinated Creditor
in favor of Wells Fargo (if more than one, the “Subordination
Agreements”.

     

    “Subsidiary”
means any Person of which more than 50% of the outstanding ownership interests
having general voting power under ordinary circumstances to elect a majority of
the board of directors or the equivalent of such Person, irrespective of whether
or not at the time ownership interests of any other class or classes shall have
or might have voting power by reason of the happening of any contingency, is at
the time directly or indirectly owned by Company, by Company and one or more
other Subsidiaries, or by one or more other Subsidiaries.

     

    “Termination
Date” is defined in Section 1.1(b).

     

    “UCC”
means the Uniform Commercial Code in effect in the state designated in this
Agreement as the state whose laws shall govern this Agreement, or in any other
state whose laws are held to govern this Agreement or any portion of this
Agreement.

    


    “Unused
Amount” is defined in Section 1.6(b).

    


    “Wells
Fargo” means Wells Fargo Bank, National Association in its broadest and most
comprehensive sense as a legal entity, and is not limited in its meaning to the
Wells Fargo Business Credit operating division, or to any other operating
division of Wells Fargo.

     

    
      
         


      

      
        A-9

        
          

        

      

      
         


      

    


    Exhibit
B to Credit and Security Agreement

    


    PREMISES

     

    The
Premises referred to in the Credit and Security Agreement are as
follows:

     

     

    3788
Fabian Way, Palo Alto, CA.

    3961 East
Bayshore Road, Palo Alto, CA.

     


    
      
         


      

      
        B-1

        
          

        

      

      
         


      

    


    Exhibit
C to Credit and Security Agreement

    


    CONDITIONS
PRECEDENT

     

    Wells
Fargo’s obligation to make an initial Advance shall be subject to the condition
that Wells Fargo shall have received the following, executed and in form and
content satisfactory to Wells Fargo.  The following descriptions are
limited descriptions for reference purposes only and should not be construed as
limiting in any way the subject matter that Wells Fargo requires each document
to address.

     

    A.        
   Loan Documents to be Executed by Company:

     

    (1)           The
Revolving Note.

     

    
      	
              (2)

            	
              The
      Credit and Security Agreement.

            


    

     

    
      	
              (3)

            	
              The
      Master Agreement for Treasury Management Services, the Acceptance of
      Services, and the related Service Description for each deposit or treasury
      management related product or service that Company will subscribe to,
      including without limitation the Loan Manager Service Description and the
      Lockbox and Collection Account Service
  Description.

            


    

     

    (4)           The
Copyright Security Agreement.

    


    (5)           The
Patent and Trademark Security Agreement.

    


    
      	
              (6)

            	
              A
      Standby Letter of Credit Agreement and the Commercial Letter of Credit
      Agreement, and a separate L/C Application for each Letter of Credit that
      Company has requested that Wells Fargo
issue.

            


    

     

    
      	
              B.

            	
              Loan
      Documents to be Executed by Third
Parties:

            


    

     

    
      	
              (1)

            	
              A
      Landlord’s Disclaimer and
      Consent to each lease entered into by Company and that Landlord
      with respect to the Premises, pursuant to which the Landlord waives its
      Lien in any goods or other Inventory of Company located on the Premises,
      provided that the Company shall have up to 45 days after the date hereof
      to provide the same to Wells Fargo.

            


    

    


    
      	
              (2)

            	
              Certificates
      of Insurance required under this Agreement, with all hazard insurance
      containing a lender’s loss payable endorsement in Wells Fargo’s favor and
      with all liability insurance naming Wells Fargo as additional
      insured.

            


    

    


    
      	
              (3)

            	
              An
      Acknowledgement and Waiver of Liens executed by Bekaert Specialty Film in
      form acceptable to Wells Fargo, provided that the Company shall have up to
      45 days after the date hereof to provide the same to Wells
      Fargo.

            


    

    
      	
               
      

            	 


    

    
      	
              C.

            	
              Documents
      Related to the Premises

            


    

     

    
      	
              (1)

            	
              Any
      leases pursuant to which Company is leasing the Premises from a
      lessor.

            


    

     

    
      
         


      

      
        C-1

        
          

        

      

      
         


      

    


    
      	
              (2)

            	
              Every
      bailment or consignment pursuant to which any property of Company is in
      the possession of a third Person such as a consignee or subcontractor,
      together with, in the case of any goods held by such Person for resale,
      UCC financing statements sufficient to protect Company’s and Wells Fargo’s
      interests in such goods.

            


    

     

    
      	
              D.

            	
              Federal
      Tax, State Tax, Judgment, UCC and Intellectual Property Lien
      Searches

            


    

     

    
      	
              (1)

            	
              Current
      searches of Company in appropriate filing offices showing that (i) no
      Liens have been filed and remain in effect against Company and Collateral
      except Permitted Liens or Liens held by Persons who have agreed in an
      Authenticated Record that upon receipt of proceeds of the initial
      Advances, they will satisfy, release or terminate such Liens in a manner
      satisfactory to Wells Fargo, and (ii) Wells Fargo has filed all UCC
      financing statements necessary to perfect the Security Interest, to the
      extent the Security Interest is capable of being perfected by
      filing.

            


    

     

    
      	
              (2)

            	
              Current
      searches of Third Persons in appropriate filing offices with respect to
      any of the Collateral that is in the possession of a Person other than
      Company that is held for resale, showing that (i) UCC financing
      statements sufficient to protect Company’s and Wells Fargo’s interests in
      such Collateral have been filed, and (ii) no other secured party has
      filed a financing statement against such Person and covering property
      similar to Company’s, other than Company, or if there exists any such
      secured party, evidence that each such party has received notice from
      Company and Wells Fargo sufficient to protect Company’s and Wells Fargo’s
      interests in Company’s goods from any claim by such secured party.
      

            


    

     

    
      	
              E.

            	
              Constituent
      Documents:

            


    

     

    
      	
              (1)

            	
              The
      Certificate of Authority of Company, which shall include as part of the
      Certificate or as exhibits to the Certificate, (i) the Resolution of
      Company’s Directors and, if required, Owners, authorizing the execution,
      delivery and performance of those Loan Documents and other documents or
      agreements described in or related to this Agreement to which Company is a
      party, (ii) an Incumbency Certificate containing the signatures of
      Company’s Officers or agents authorized to execute and deliver those
      instruments, agreements and certificates referenced in (i) above, as well
      as Advance requests, on Company’s behalf, (iii) Company’s Constituent
      Documents, (iv) a current Certificate of Good Standing or Certificate of
      Status issued by the secretary of state or other appropriate authority for
      Company’s state of organization, certifying that Company is in good
      standing and in compliance with all applicable organizational requirements
      of the state of organization, and (v) a Secretary’s Certificate of
      Company’s secretary or assistant secretary certifying that the Certificate
      of Authority of Company is true, correct and
  complete.

            


    

     

    
      	
              (2)

            	
              Evidence
      that Company is licensed or qualified to transact business in all
      jurisdictions where the character of the property owned or leased or the
      nature of the business transacted by it makes such licensing or
      qualification necessary.

            


    

     

    
      	
              (3)

            	
              An
      Officer’s Certificate of an appropriate Officer of Company confirming, in
      his or her personal capacity, the representations and warranties set forth
      in this Agreement.

            


    

     

    
      	
              (4)

            	
              A
      Customer Identification Information Form and such other forms and
      verification as Wells Fargo may need to comply with the U.S.A. Patriot
      Act.

            


    

     

    
      
         


      

      
        C-2

        
          

        

      

      
         


      

    


    
      	
              F.

            	
              [intentionally
      omitted]

            


    

     

    
      	
              G. 

            	
              Miscellaneous
      Matters or Documents:

            


    

     

    
      	
              (1)

            	
              Payment
      of fees and reimbursable costs and expenses due under this Agreement
      through the date of initial Advance or issuance of a Letter of Credit,
      including all legal expenses incurred through the date of the closing of
      this Agreement.

            


    

     

    
      	
              (2)

            	
              Evidence
      that after making the initial Advance and satisfying all obligations owed
      to Company’s prior lender and all trade payables older than 60 days from
      invoice date, book overdrafts and closing costs, the availability under
      the Line of Credit is not less than
$1,500,000.

            


    

     

    
      	
              (3)

            	
              Any
      documents or other agreements entered into by Company and Wells Fargo that
      relate to any swap, derivative, foreign exchange, hedge, deposit, treasury
      management or similar product or transaction extended to Company by Wells
      Fargo not already provided pursuant to the requirements of (A)-(F)
      above.

            


    

     

    
      	
              (4)

            	
              Receipt
      by Wells Fargo of Company’s monthly financial projections for its 2008
      fiscal year, in form and substance satisfactory to Wells Fargo, and no
      material deviation in Company’s actual performance compared to said
      projections.

            


    

     

    
      	
              (5)

            	
              Company’s
      customer contracts, purchase orders and supply contracts shall be
      satisfactory to Wells Fargo.

            


    

     

    
      	
              (6)

            	
              Such
      other documents as Wells Fargo in its sole discretion may
      require.

            


    

     

    
      
         


      

      
        C-3

        
          

        

      

      
         


      

    


    Exhibit
D to Credit and Security Agreement

     

    REPRESENTATIONS AND
WARRANTIES

     

    Company
represents and warrants to Wells Fargo as follows:

     

    
      	
              (a)

            	
              Existence and Power;
      Name; Chief Executive Office; Inventory and Equipment Locations; Federal
      Employer Identification Number and Organizational Identification
      Number.  Company
      is a corporation, organized, validly existing and in good standing under
      the laws of the State of Delaware and is licensed or qualified to transact
      business in all jurisdictions where the character of the property owned or
      leased or the nature of the business transacted by it makes such licensing
      or qualification necessary.  Company has all requisite power and
      authority to conduct its business, to own its properties and to execute
      and deliver, and to perform all of its obligations under, those Loan
      Documents and any other documents or agreements that it has entered into
      with Wells Fargo related to this Agreement.  During its
      existence, Company has done business solely under the names set forth
      below in addition to its correct legal name.  Company’s chief
      executive office and principal place of business is located at the address
      set forth below, and all of Company’s records relating to its business or
      the Collateral are kept at that location.  All Inventory and
      Equipment is located at that location or at one of the other locations set
      forth below.  Company’s name, Federal Employer Identification
      Number and Organization Identification Number are correctly set forth at
      the end of the Agreement next to Company’s
  signature.

            


    

     

    
      	
              Trade
      Names

            
	
               

              XIR, XUV, Triangle Design,
      Superglass, Heat Mirror, California Series, Solis, ETCH-A-FLEX and
      Southwall

            


    

    


    
      	
              Chief
      Executive Office / Principal Place of Business

            
	
               

              3788
      Fabian Way, Palo Alto, CA 94303

            


    

    


    
      	
              Other
      Inventory and Equipment Locations

            
	
               

              3961
      East Bayshore Rd, Palo Alto, CA (Southwall Technologies)

               

              1D-10900
      Southwallstrasse, Großroshrsdorf, Germany (Southwall Europe)

               

              4540
      Viewridge Ave, San Diego, CA (Bekaert Specialty Film)

               

              347
      Business Park Drive, Sun Prairie, WI (Crown
  Operations)

            


    

     

    
      
         


      

      
        D-1

        
          

        

      

      
         


      

    

    


    
      	
              (b)

            	
              Capitalization.  The
      Capitalization Chart below constitutes a correct and complete list of all
      ownership interests equal to or greater than 5% of Company and all rights
      to acquire ownership interests, including the record holder, number of
      interests and percentage interests on a fully diluted basis, and the
      Organizational Chart below shows the ownership structure of all
      Subsidiaries of Company.

            


    

     

    
      	 	Capitalization
      Chart	 	 	 	 
	 	 	 	 	 	 


    

    
      	 	Holder	Type
      of Rights/Stock	No. of Shares	%
      Interest (on a 	 
	 	 	 	(after exercise
    of	fully diluted 	 
	 	 	 	 all rights to
      	basis)	 
	 	 	 	acquire
shares)	 	 
	 	 	 	 	 	 
	 	Needham
      & 	Common
    stock	14,582,112	48.3%	 
	 	Affiliates	beneficially
      owned*	 	 	 
	 	 	 	 	 	 
	 	Dolphin
    Direct	Common
    stock	6,258,062	21.38%	 
	 	Equity	beneficially
      owned	 	 	 
	 	Partners	 	 	 	 
	 	 	 	 	 	 
	 	 	*Per proxy dated
      April 	 	 	 
	 	 	2008	 	 	 
	 	 	 	 	 	 


    

     

    
      	
              Organizational
      Chart

            
	
               

              Attached
      hereto as Exhibit 1

               

            


    

    


    
      	
              (c)

            	
              Authorization of
      Borrowing; No Conflict as to Law or Agreements.  The
      execution, delivery and performance by Company of the Loan Documents and
      any other documents or agreements described in or related to this
      Agreement, and all borrowing under the Line of Credit have been authorized
      and do not (i) require the consent or approval of Company’s Owners;
      (ii) require the authorization, consent or approval by, or
      registration, declaration or filing with, or notice to, any governmental
      agency or instrumentality, whether domestic or foreign, or any other
      Person, except to the extent obtained, accomplished or given prior to the
      date of this Agreement; (iii) violate any provision of any law, rule
      or regulation (including Regulation X of the Board of Governors of
      the Federal Reserve System) or of any order, writ, injunction or decree
      presently in effect having applicability to Company or of Company’s
      Constituent Documents; (iv) result in a breach of or constitute a
      default or event of default under any indenture or loan or credit
      agreement or any other material agreement, lease or instrument to which
      Company is a party or by which it or its properties may be bound or
      affected; or (v) result in, or require, the creation or imposition of
      any Lien (other than the Security Interest) upon or with respect to any of
      the properties now owned or subsequently acquired by
    Company.

            


    

     


    
      
         


      

      
        D-2

        
          

        

      

      
         


      

    


    
      	
              (d)

            	
              Legal
      Agreements.  This
      Agreement, the other Loan Documents, and any other document or agreement
      described in or related to this Agreement, will constitute the legal,
      valid and binding obligations of Company, enforceable against Company in
      accordance with their respective
terms.

            


    

     

    
      	
              (e)

            	
              Subsidiaries.  Except
      as disclosed below, Company has no
Subsidiaries.

            


    

     

    
      	
              Subsidiaries

               

            
	
               

              Southwall
      Europe GmbH,

               

              Southwall
      IG Holdings, Inc.  Company represents and warrants that the
      assets of Southwall IG Holdings, Inc. consist solely of its interest in
      Southwall Insulating Glass, LLC and certain fixed assets leased to
      Southwall Insulating Glass, LLC.

               

              Southwall
      Insulating Glass, LLC

            


    

    


    
      	
              (f)

            	
              Financial Condition;
      No Adverse Change.  Company
      has furnished to Wells Fargo its audited financial statements for its
      fiscal year ended
      December 31, 2007 and unaudited financial statements for the
      fiscal-year-to-date period ended March 31, 2008 and
      those statements fairly present Company’s financial condition as of those
      dates and the results of Company’s operations and cash flows for the
      periods then ended and were prepared in accordance with
      GAAP.  Since the date of the most recent financial statements,
      there has been no Material Adverse Effect on in Company’s business,
      properties or condition (financial or
  otherwise).

            


    

     

    
      	
              (g)

            	
              Litigation.  There
      are no actions, suits or proceedings pending or, to Company’s knowledge,
      threatened against or affecting Company or any of its Affiliates or the
      properties of Company or any of its Affiliates before any court or
      governmental department, commission, board, bureau, agency or
      instrumentality, domestic or foreign, which, if determined adversely to
      Company or any of its Affiliates, would result in a final judgment or
      judgments against Company or any of its Affiliates in an amount in excess
      of $100,000, apart from those matters specifically disclosed
      below.

            


    

     

    
      	
              Litigation
      Matters in Excess of $100,000

            
	
               

              None

               

            


    

    


    
      	
              (h)

            	
              Intellectual Property
      Rights.

            


    

     

    (i)       
    Owned Intellectual
Property.  Set forth below is a complete list of all patents,
applications for patents, trademarks, applications to register trademarks,
service marks, applications to register service marks, mask works, trade dress
and copyrights for which Company is the owner of record (the “Owned Intellectual
Property”).  Except as set forth below, (A) Company owns the Owned
Intellectual Property free and clear of all restrictions (including covenants
not to sue any Person), court orders, injunctions, decrees, writs or Liens,
whether by agreement memorialized in a Record Authenticated by Company or
otherwise, (B) no Person other than Company owns or has been granted any right
in the Owned Intellectual Property, (C) all Owned Intellectual Property is
valid, subsisting and enforceable, and (D) Company has taken all commercially
reasonable action necessary to maintain and protect the Owned Intellectual
Property.


    
      
         


      

      
        D-3

        
          

        

      

      
         


      

    

     

    (ii)           Agreements with Employees
and Contractors.  Company has entered into a legally
enforceable agreement with each Person that is an employee or subcontractor
obligating that Person to assign to Company, without additional compensation,
any Intellectual Property Rights created, discovered or invented by that Person
in the course of that Person’s employment or engagement with Company (except to
the extent prohibited by law), and further obligating that Person to cooperate
with Company, without additional compensation, to secure and enforce the
Intellectual Property Rights on behalf of Company, unless the job description of
the Person is such that it is not reasonably foreseeable that the employee or
subcontractor will create, discover, or invent Intellectual Property
Rights.

     

    (iii)           Intellectual Property Rights
Licensed from Others.  Set forth below is a complete list of
all agreements under which Company has licensed Intellectual Property Rights
from another Person (“Licensed Intellectual Property”) other than readily
available, non-negotiated licenses of computer software and other intellectual
property used solely for performing accounting, word processing and similar
administrative tasks (“Off-the-shelf Software”) and a summary of any ongoing
payments Company is obligated to make with respect thereto.  Except as
set forth below or in any other Record, copies of which have been given to Wells
Fargo, Company’s licenses to use the Licensed Intellectual Property are free and
clear of all restrictions, Liens, court orders, injunctions, decrees, or writs,
whether by agreed to in a Record Authenticated by Company or
otherwise.  Except as disclosed below, Company is not contractually
obligated to make royalty payments of a material nature, or pay fees to any
owner of, licensor of, or other claimant to, any Intellectual Property
Rights.

     

    (iv)           Other Intellectual Property
Needed for Business.  Except for Off-the-shelf Software and as
disclosed below, the Owned Intellectual Property and the Licensed Intellectual
Property constitute all Intellectual Property Rights used or necessary to
conduct Company’s business as it is presently conducted or as Company reasonably
foresees conducting it.

     

    (v)           Infringement.  Except
as disclosed below, Company has no knowledge of, and has not received notice
either orally or in a Record alleging, any Infringement of another Person’s
Intellectual Property Rights (including any claim set forth in a Record that
Company must license or refrain from using the Intellectual Property Rights of
any Person) nor, to Company’s knowledge, is there any threatened claim or any
reasonable basis for any such claim.

     

    
      
        
        

      

      
        D-4

        
          

        

      

      
        
        

      

       

    

    
      	
              Intellectual Property
      Disclosures

               

            
	
               

              On
      March 3, 2005, the European Patent Office allowed a European patent owned
      by Pilkington Automotive GmBH entitled "Method for producing a laminated
      glass pane free of optical obstruction caused by warping, use of a
      particular carrier film for the production of the laminated glass pane and
      carrier films particularly suitable for the method of use." This European
      patent covers certain laminated films and methods of using them, which may
      prevent Company from producing certain films designed for the automotive
      markets.   Company has appealed the European Patent Office
      decision, and anticipates a decision in June 2008.  Company
      represents and warrants that a decision in such appeal adverse to the
      Company will not have a material adverse effect on the
      Company.

               

               

            


    

    


    
      	
              (i)

            	
              Taxes.  Company
      and its Affiliates have paid or caused to be paid to the proper
      authorities when due all federal, state and local taxes required to be
      withheld by each of them.  Company and its Affiliates have filed
      all federal, state and local tax returns which to the knowledge of the
      Officers of Company or any Affiliate, as the case may be, are required to
      be filed, and Company and its Affiliates have paid or caused to be paid to
      the respective taxing authorities all taxes as shown on these returns or
      on any assessment received by any of them to the extent such taxes have
      become due.

            


    

     

    
      	
              (j)

            	
              Titles and
      Liens.  Company
      has good and absolute title to all Collateral free and clear of all Liens
      other than Permitted Liens.  No financing statement naming
      Company as debtor is on file in any office except to perfect only
      Permitted Liens.

            


    

     

    
      	
              (k)

            	
              No Defaults.  Company
      is in compliance with all provisions of all agreements, instruments,
      decrees and orders to which it is a party or by which it or its property
      is bound or affected, the breach or default of which could have a Material
      Adverse Effect on Company’s financial condition, properties or operations
      .

            


    

     

    
      	
              (l)

            	
              Submissions to
      Wells
      Fargo.  All financial and other information provided to
      Wells Fargo by or on behalf of Company in connection with Company’s
      request for the credit facilities contemplated hereby is (i) true and
      correct in all material respects, (ii) does not omit any material
      fact that would cause such information to be misleading, and (iii) as
      to projections, valuations or proforma financial statements, present a
      good faith opinion as to such projections, valuations and proforma
      condition and results.

            


    

     

    
      	
              (m)

            	
              Financing
      Statements.  Company
      has previously authorized the filing of financing statements sufficient
      when filed to perfect the Security Interest and other Liens created by the
      Security Documents.  When such financing statements are filed,
      Wells Fargo will have a valid and perfected security interest in all
      Collateral capable of being perfected by the filing of financing
      statements.  None of the Collateral is or will become a fixture
      on real estate, unless a sufficient fixture filing has been filed with
      respect to such Collateral.

            


    

     

    
      	
              (n)

            	
              Rights to
      Payment.  Each
      right to payment and each instrument, document, chattel paper and other
      agreement constituting or evidencing Collateral is (or, in the case of all
      future Collateral, will be when arising or issued) the valid, genuine and
      legally enforceable
      obligation, subject to no defense, setoff or counterclaim of the account
      debtor or other obligor named in that
  instrument.

            


    

     

    
      
         


      

      
        D-5

        
          

        

      

      
         


      

    

     

    (o)           Employee Benefit
Plans.

     

    
      
        
          (i)    Maintenance and
Contributions to Plans.  Except as disclosed below, neither
Company nor any ERISA Affiliate (A) maintains or has maintained any Pension
Plan, (B) contributes or has contributed to any Multiemployer Plan, or (C)
provides or has provided post-retirement medical or insurance benefits to
employees or former employees (other than benefits required under Section 601 of
ERISA, Section 4980B of the IRC, or applicable state
law).

        

      

    

     

    
      (ii)  
    Knowledge of Plan
Noncompliance with Applicable Law.  Except as disclosed below,
neither Company nor any ERISA Affiliate has (A) knowledge that Company or the
ERISA Affiliate is not in full compliance with the requirements of ERISA, the
IRC, or applicable state law with respect to any Plan, (B) knowledge that a
Reportable Event occurred or continues to exist in connection with any Pension
Plan, or (C) sponsored a Plan that it intends to maintain as qualified under the
IRC that is not so qualified, and no fact or circumstance exists which may have
an adverse effect on such Plan’s tax-qualified status.

    

     

    
      (iii)   Funding Deficiencies and
Other Liabilities.  Neither Company nor any ERISA Affiliate has
liability for any (A) accumulated funding deficiency (as defined in Section
302 of ERISA and Section 412 of the IRC) under any Plan, whether or not waived,
(B) withdrawal, partial withdrawal, reorganization or other event under any
Multiemployer Plan under Section 4201 or 4243 of ERISA, or (C) event or
circumstance which could result in financial obligation to the Pension Benefit
Guaranty Corporation, the Internal Revenue Service, the Department of Labor or
any participant in connection with any Plan (other than routine claims for
benefits under the Plan).

    

     

    
      	
              Employee
      Benefit Plans

               

            
	
               

              Southwall
      Technoliges Inc. 401k Plan

               

              The
      2007 Long Term Incentive Plan

               

            


    

    


    (p)           Environmental
Matters.

     

    
      (i)    Hazardous Substances on
Premises.  Except as disclosed below, there are not present in,
on or under the Premises any Hazardous Substances in such form or quantity as to
create any material liability or obligation for either Company or Wells Fargo
under the common law of any jurisdiction or under any Environmental Law, and no
Hazardous Substances have ever been stored, buried, spilled, leaked, discharged,
emitted or released in, on or under the Premises in such a way as to create a
material liability. 

    


    
      
         


      

      
        D-6

        
          

        

      

      
         


      

    


    (ii)           
Disposal of Hazardous
Substances.  Except as disclosed below, Company has not
disposed of Hazardous Substances in such a manner as to create any material
liability under any Environmental Law.

     

    
      (iii)          
Claims and Proceedings with
Respect to Environmental Law Compliance. Except as disclosed below, there
have not existed in the past, nor are there any threatened or impending
requests, claims, notices, investigations, demands, administrative proceedings,
hearings or litigation relating in any way to the Premises or Company, alleging
material liability under, violation of, or noncompliance with any Environmental
Law or any license, permit or other authorization issued pursuant
thereto.  

    

     

    
      (iv)           Compliance with
Environmental Law; Permits and Authorizations.  Except as
disclosed below, Company (A) conducts its business at all times in compliance
with applicable Environmental Law, (B) possesses valid licenses, permits and
other authorizations required under applicable Environmental Law for the lawful
and efficient operation of its business, none of which are scheduled to expire,
or withdrawal, or material limitation within the next 12 months, and (C) has not
been denied insurance on grounds related to potential environmental
liability.  

    

     

    
      (v)    Status of
Premises.  Except as disclosed below, the Premises are not and
never have been listed on the National Priorities List, the Comprehensive
Environmental Response, Compensation and Liability Information System or any
similar federal, state or local list, schedule, log, inventory or
database.

    

     

    
      (vi)          
Environmental Audits,
Reports, Permits and Licenses.  Company has delivered to Wells
Fargo all environmental assessments, audits, reports, permits, licenses and
other documents describing or relating in any way to the Premises or Company’s
businesses.

    

     

    
      	
              Environmental
      Matters

               

            
	
               

              None

               

            


    


    
      
         


      

      
        D-7

        
          

        

      

      
         


      

    


    Exhibit
E to Credit and Security Agreement

    


    COMPLIANCE
CERTIFICATE

     

    
      	
              To: 

            	
              Wells
      Fargo Bank, National Association

            


    

    
      	
              Date: 

            	
              [___________________,
      200__]

            


    

    
      	
              Subject: 

            	
              Financial
      Statements

            


    

     

    In
accordance with our Credit and Security Agreement dated May 19, 2008 (as amended from
time to time, the “Credit Agreement”), attached are the financial statements of
Southwall Technologies
Inc. (the “Company”) dated [_______________, 200__] (the
“Reporting Date”) and the year-to-date period then ended (the “Current
Financials”).  All terms used in this certificate have the meanings
given in the Credit Agreement.

     

    A.         
  Preparation and
Accuracy of Financial Statements.  I certify that the Current
Financials have been prepared in accordance with GAAP, subject to year-end audit
adjustments, and fairly present Company’s financial condition as of the
Reporting Date.

     

    B.         
  Name of Company;
Merger and Consolidation.  I certify that:

     

    (Check
one)

     

    
      	
            	
              o 
      

            	
              Company
      has not, since the date of the Credit Agreement, changed its name or
      jurisdiction of organization, nor has it consolidated or merged with
      another Person.

            


    

     

    
      	
            	
              o

            	
              Company
      has, since the date of the Credit Agreement, either changed its name or
      jurisdiction of organization, or both, or has consolidated or merged with
      another Person, which change, consolidation or merger:  was consented
      to in advance by Wells Fargo in an Authenticated Record, and/or  is
      more fully described in the statement of facts attached to this
      Certificate.

            


    

     

    C.        
   Events of
Default.  I certify that:

     

    (Check
one)

     

    
      	
            	
              o

            	
              I
      have no knowledge of the occurrence of an Event of Default under the
      Credit Agreement, except as previously reported to Wells Fargo in a
      Record.

            


    

     

    
      	
            	
              o

            	
              I
      have knowledge of an Event of Default under the Credit Agreement not
      previously reported to Wells Fargo in a Record, as more fully described in
      the statement of facts attached to this Certificate, and further, I
      acknowledge that Wells Fargo may under the terms of the Credit Agreement
      impose the Default Rate at any time during the resulting Default
      Period.

            


    

     

    D.         
  Litigation
Matters.  I certify that:

     

    (Check
one)

     

    
      	
            	
              o

            	
              I
      have no knowledge of any material adverse change to the litigation
      exposure of Company or any of its Affiliates or of any
      Guarantor.

            


    

     

    
      
         


      

      
        E-1

        
          

        

      

      
         


      

    


    
      	
            	
              o

            	
              I
      have knowledge of material adverse changes to the litigation exposure of
      Company or any of its Affiliates or of any Guarantor not previously
      disclosed in Exhibit D, as more fully described in the statement of facts
      attached to this Certificate.

            


    

     

    E.        
    Financial
Covenants.  I further certify that:

     

    (Check
and complete each of the following)

     

    1.           
 Minimum Book Net
Worth.  Pursuant to Section 5.2(a) of the Credit Agreement, as
of the Reporting Date, Company’s Book Net Worth was [_$____________],
which o
satisfies  o does not satisfy the
requirement that such amount be not less than the amount set forth below on the
Reporting Date:

     

    
      	
              End of
      Month

            	
              Minimum Book Net
      Worth

            
	
              April,
      2008

            	
              $18,500,000

            
	
              May,
      2008

            	
              $19,250,000

            
	
              June,
      2008

            	
              $20,000,000

            
	
              July,
      2008

            	
              $20,400,000

            
	
              August,
      2008

            	
              $20,800,000

            
	
              September,
      2008

            	
              $21,000,000

            
	
              October,
      2008

            	
              $21,500,000

            
	
              November,
      2008

            	
              $22,000,000

            
	
              December,
      2008 and each month thereafter

            	
              $21,500,000

            


    

     

     

    2.          
  Minimum Net
Income.  Pursuant to Section 5.2(b) of the Credit Agreement, as
of the Reporting Date, Company’s Net Income was [_$__________], which
 satisfies  does not satisfy the requirement that Net Income be not
less than the
amount set forth for each such period:

     

    
      	
              Period

            	
              Minimum Net
      Income

            
	
              January
      1, 2008 Through June 30, 2008

            	
              $2,500,000

            
	
              January
      1, 2008 Through September 30, 2008

            	
              $3,300,000

            
	
              January
      1, 2008 Through December 31, 2008

            	
              $4,000,000

            


    


    
      
         


      

      
        E-2

        
          

        

      

      
         


      

    


    3.           
Capital
Expenditures.  Pursuant to Section 5.2(c) of the Credit
Agreement, for the year-to-date period ending on the Reporting Date, Company has
expended or contracted to expend during the fiscal year ended [_______________, 200___,_]
for non-financed Capital [_$___________________] in the
aggregate, which  o satisfies o does not satisfy
the requirement that such expenditures not exceed $2,000,000 in the aggregate
during such year.

     

    Attached
are statements of all relevant facts and computations in reasonable detail
sufficient to evidence Company’s compliance with the financial covenants
referred to above, which computations were made in accordance with
GAAP.

     

    
    

     

    
      	 	 	 Southwall Technologies
      Inc.	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	By:	 	 
	 	 	 	Its Chief Accounting
      Officer	 


    

                                                        

    
      
         


      

      
        E-3

        
          

        

      

      
         


      

    


    


     

    Exhibit
F to Credit and Security Agreement

    


    PERMITTED
LIENS

     

    Jurisdiction—California

     

    
      	
              Filing
      Date

            	
              File
      No.

            	
              Creditor

            	
              Collateral

            
	
              10/25/99

            	
              9930661180

            	
              Matrix
      Funding Corporation

            	
              Specific
      Equip.

            
	
              10/25/99

            	
              9930661182

            	
              Matrix
      Funding Corporation

            	
              Leased
      Equip.

            
	
              03/13/00

            	
              0007560767

            	
              Matrix
      Funding Corporation

            	
              Leased
      Equip.

            
	
              10/08/02

            	
              0228360154

            	
              US
      Bancorp

            	
              Specific
      Equip.

            
	
              10/05/05

            	
              057043961590

            	
              Wells
      Fargo Financial Leasing, Inc.

            	
              Specific
      Equip

            


    

     

     

    Jurisdiction—Delaware

     

    
      	
              Filing
      Date

            	
              File
      No.

            	
              Creditor

            	
              Collateral

            
	
              04/25/02

            	
              21202799

            	
              IBM
      Credit Corporation

            	
              Leased
      Equip.

            
	
              05/08/02

            	
              21338718

            	
              IBM
      Credit Corporation

            	
              Leased
      Equip.

            
	
              07/26/02

            	
              21997927

            	
              IBM
      Credit Corporation

            	
              Leased
      Equip.

            
	
              08/28/02

            	
              22225310

            	
              IBM
      Credit Corporation

            	
              Leased
      Equip.

            
	
              05/02/05

            	
              51338780

            	
              Crown
      Credit Company

            	
              Specific
      Equip.

            
	
              06/07/05

            	
              51740209

            	
              Matrix
      Funding Corporation

            	
              Leased
      Equip.

            
	
              06/07/05

            	
              51740373

            	
              Matrix
      Funding Corporation

            	
              Leased
      Equip.

            
	
              01/20/06

            	
              60244236

            	
              Dell
      Financial Services, LP

            	
              Equipment
      financed by Dell

            


    

    


     

    INDEBTEDNESS

     

    
      	
              Creditor

            	
              Current Principal
      Amt.

            	
              Maturity
      Date

            	
              Monthly
      Payment

               

            	
              Collateral

            
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      


    

    [To
be completed by Company]

     

    
      
        
        

      

      
        F-1

        
          

        

      

      
        
        

      

    

     

    GUARANTIES

     

    NONE

     

     

    F-2