Exhibit
10.111


 


 


M A T R I X

F U N D I N G  C O R P O R A T I O N


 


6975 Union Park Center,
Second Floor

Midvale, Utah 84047


 


MASTER LEASE AGREEMENT
NO. R0825


 


This Master Lease
Agreement is made this 19th day of July, 1999 between MATRIX FUNDING CORPORATION,
with its principal office at 6975 Union Park Center, Second Floor, Midvale, UT
84047 (the “Lessor”), and SOUTHWALL TECHNOLOGIES, INC., with its principal
office at 1029 Corporation Way, Palo Alto, CA 94303 (the “Lessee”).


 


1.             LEASE:


 


Lessor agrees to lease to Lessee, and Lessee agrees to
lease from Lessor, the property (together with all attachments, replacements,
parts, substitutions, additions, repairs, accessions and accessories,
incorporated therein and/or affixed thereto) (collectively, the “Property”)
described in any Lease Schedule (“Schedule”) executed and delivered by Lessor
and Lessee in connection with this Master Lease Agreement.  Each Schedule shall incorporate by reference
the terms and conditions of this Master Lease Agreement, and together with the
Acceptance Certificate (as defined herein) and Master Progress Funding
Agreement, if applicable, shall constitute a separate “Lease”.  In the event of conflict between the
provisions of this Master Lease Agreement and any Schedule, the provisions of
the Schedule shall govern.


 


2.             ADDITIONAL
DEFINITIONS:


 


(a)           Except
as otherwise provided in Section 6(a) hereof, “Acceptance Date” means, as to
the Property designated on any Schedule, the date Lessee accepts the Property
as set forth in any acceptance certificate signed by the Lessee which is
acceptable to Lessor (the “Acceptance Certificate”).  If Lessee fails to sign and deliver an Acceptance Certificate,
then except as otherwise provided in Section 6(a) hereof, the Acceptance Date
shall be a date determined by Lessor which shall be no sooner than the date
Lessee receives substantially all of the Property.


 


(b)           “Commencement
Date” means, as to the Property designated on any Schedule, where the
Acceptance Date for such Schedule falls on the first day of a calendar quarter,
that date, and, in any other case, the first day of the calendar quarter
following the calendar quarter in which such Acceptance Date falls.


 


3.             TERM
OF LEASE:


 


The term of any Lease, as to all Property designated
on the applicable Schedule, shall commence on the Acceptance Date for such
Property, and shall continue for an “Initial Period” ending that number of
months from the Commencement Date as specified in the Schedule.  Thereafter, Lessee shall have options to
purchase or return the Property or to extend the Lease, all as provided in
Section 18(m) of this Agreement.


 


4.             RENT
AND PAYMENT:


 


Lessee shall pay as rent
for use of the Property, aggregate rentals equal to the sum of all the Monthly
Rentals (defined in the Schedule) and other payments due under the Lease for
the entire Initial Period.  The Monthly
Rental shall begin on the Acceptance Date and shall be due and payable by
Lessee in advance on the first day of each month throughout the Initial
Period.  If the Acceptance Date does not
fall on the first day of a calendar quarter, then the first rental payment
shall be calculated by multiplying the number of days from and including the
Acceptance Date to the Commencement Date by a daily rental equal to one
thirtieth (1/30) of the Monthly Rental, and shall be due and payable on the
Acceptance Date.  Lessee shall pay all
rentals to Lessor, or its assigns, at Lessor’s address set forth above (or as
otherwise directed in writing by Lessor, or its assigns), without notice or
demand.  LESSEE SHALL NOT ABATE, SET OFF
OR DEDUCT ANY AMOUNT OR DAMAGES FROM OR REDUCE ANY MONTHLY RENTAL OR OTHER
PAYMENT DUE FOR ANY REASON.  THIS 


 

















 


LEASE IS NON-CANCELABLE FOR THE ENTIRE TERM OF THE INITIAL PERIOD AND
ANY EXTENSION PERIODS.


 


If any rental or other payment due under any Lease
shall be unpaid after its due date, Lessee will pay on demand, as a late
charge, but not as interest, the greater of twenty–five dollars ($25) or
five percent (5%) of any such unpaid amount but in no event to exceed maximum
lawful charges.  If late charges are
assessed by a lending institution due to any late payment by Lessee, Lessee
agrees to pay such late charges or to reimburse Lessor for their payment.


 


5.             TAXES:


 


Lessee shall pay to Lessor when due all taxes, fees,
assessments and charges paid, payable or required to be collected by Lessor,
however designated, which are levied or based on the Monthly Rental or other
payment due under the Lease, or on the possession, use, operation, lease,
rental, sale, purchase, control or value of the Property, including without
limitation, registration and license fees and assessments, state and local
privilege or excise taxes, documentary stamp taxes or assessments, sales and
use taxes, personal and other property taxes, and taxes or charges based on
gross revenue, but excluding taxes based on Lessor’s net income (collectively,
“taxes”).  Lessor shall invoice Lessee
for all taxes in advance of their payment due date, and Lessee shall promptly remit
to Lessor all taxes upon receipt of an invoice from Lessor.  Lessee shall pay all penalties and interest
resulting from its failure to timely remit all taxes to Lessor when invoiced by
Lessor.  Lessor shall file all required
sales and use tax and personal property tax returns and reports concerning the
Property with all applicable governmental agencies.


 


6.             USE;
ALTERATIONS AND ATTACHMENTS:


 


(a)           After
Lessee receives and inspects any Property and is satisfied that the Property is
satisfactory, Lessee shall execute and deliver to Lessor an Acceptance
Certificate in form provided by Lessor; provided, however, that Lessee’s
failure to execute and deliver an Acceptance Certificate for any Property shall
not affect the validity and enforceability of the Lease with respect to the
Property.  If Lessee has signed and
delivered a Master Progress Funding Agreement, Lessor may, in its sole
discretion, at any time by written notice to Lessee, declare all prior
Authorizations signed in connection with the Master Progress Funding Agreement
to be and constitute the “Acceptance Certificate” for all purposes under the
Lease, and the Acceptance Date of the Lease shall be the date determined by
Lessor in its sole discretion which shall not be earlier than the date of the
last Authorization.


 


(b)           Lessee
shall at all times keep the Property in its sole possession and control.  The Property shall not be moved from the
location stated in the Schedule without the prior written consent of Lessor.


 


(c)           Lessee
shall cause the Property to be installed, used, operated and, at the
termination of the Lease, removed (i) in accordance with any applicable
manufacturer’s manuals or instructions; (ii) by competent and duly qualified
personnel only; and

(iii) in accordance with applicable governmental regulations.


 


(d)           Lessee
may not make alterations or attachments to the Property without first obtaining
the written consent of Lessor.  Any such
alterations or attachments shall be made at Lessee’s expense and shall not
interfere with the normal and satisfactory operation or maintenance of the
Property.  The manufacturer may
incorporate engineering changes or make temporary alterations to the Property
upon request of Lessee.  Unless Lessor
shall otherwise agree in writing, all such alterations and attachments shall be
and become the property of Lessor upon their attachment to the Property or, at
the option of Lessor, shall be removed by Lessee at the termination of the
Lease as to such Property and the Property restored at Lessee’s expense to its
original condition, reasonable wear and tear only excepted.


 


(e)           The
Property is and shall remain personal property during the term of the Lease
notwithstanding that any portion thereof may in any manner become affixed,
attached to or located on real property or any building or improvement thereon.  Lessee shall not permit the Property to
become an accession to other goods or a fixture to or part of any real
property.  Lessee will obtain and
deliver to Lessor a waiver of liens, in form satisfactory to Lessor, from all
persons not a party hereto who might secure an interest, lien or other claim in
the Property.


 


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(f)            In
the event the Property includes software (which Lessee agrees shall include all
documentation, later versions, updates, upgrades, and modifications) (herein
“Software”), the following shall apply: (i) Lessee shall possess and use the
Software in accordance with the terms and conditions of any license agreement
(“License”) entered into with the owner/vendor of such Software and shall not
breach the License (at Lessor’s request, Lessee shall provide a complete copy
of the License to Lessor); (ii) Lessee agrees that Lessor has an interest in
the License and Software due to its payment of the price thereof and is an
assignee or third–party beneficiary of the License; (iii) as due
consideration for Lessor’s payment of the price of the License and Software and
for providing the Software to Lessee at a lease rate (as opposed to a debt
rate), Lessee agrees that Lessor is leasing (and not financing) the Software to
Lessee; (iv) except for the original price paid by Lessor, Lessee shall, at its
own expense, pay promptly when due all servicing fees, maintenance fees, update
and upgrade costs, modification costs, and all other costs and expenses relating
to the License and Software and to maintain the License in effect during the
term of the Lease; and (v) the Software shall be deemed Property for all
purposes under the Lease.


 


(g)           Lessee
shall comply with all applicable laws, regulations, requirements, rules and
orders, all manufacturer’s instructions and warranty requirements, and with the
conditions and requirements of all policies of insurance with respect to the
Property and the Lease.


 


(h)           The
Property is leased solely for commercial or business purposes.


 


7.             MAINTENANCE
AND REPAIRS; RETURN OF PROPERTY:


 


(a)           During
the continuance of each Lease, Lessee shall, at its expense, and in accordance
with all manufacturer maintenance specifications, (i) keep the Property in good
repair, condition and working order; (ii) make all necessary adjustments,
repairs and replacements; (iii) furnish all required parts, mechanisms, devices
and servicing; and (iv) not use or permit the Property to be used for any
purpose for which, in the opinion of the manufacturer, the Property is not
designed or reasonably suitable.  Such
parts, mechanisms and devices shall immediately become a part of the Property
for all purposes hereunder and title thereto shall vest in Lessor.  If the manufacturer does not provide
maintenance specifications, Lessee shall perform all maintenance in accordance
with industry standards for like Property.


 


(b)           During
the continuance of each Lease, Lessee shall, at its own expense, enter into and
maintain in force a contract with the manufacturer or other qualified
maintenance organization satisfactory to Lessor for maintenance of each item of
Property.  Such contract as to each item
shall commence upon the Acceptance Date. 
Lessee shall furnish Lessor with a copy of such contract upon demand.


 


(c)           Lessee
shall pay all shipping and delivery charges and other expenses incurred in
connection with the Property.  Upon
default, or at the expiration or earlier termination of any Lease, Lessee
shall, at its own expense, assemble, prepare for shipment and promptly return
the Property to Lessor at the location within the Continental United States
designated by Lessor.  Upon such return,
the Property shall be in the same operating order, repair, condition and
appearance as on the Acceptance Date, except for reasonable wear and tear from
proper use thereof, and shall include all engineering changes theretofore
prescribed by the manufacturer.  Lessee
shall provide maintenance certificates or qualification letters and/or arrange
for and pay all costs which are necessary for the manufacturer to accept the
Property under contract maintenance at its then standard rates
(“recertification”).  The term of the
Lease shall continue upon the same terms and conditions until such recertification
has been obtained.  With regard to
Software, at the expiration or earlier termination of any Lease, or upon demand
by Lessor upon the occurrence of an Event of Default under the Lease, Lessee
shall (i) delete from its systems all Software then installed, (ii) destroy all
copies or duplicates of the Software which were not returned to Lessor, and
(iii) cease using the Software altogether. 
Upon its receipt from Lessee, Lessor shall be responsible to return the
Software to the owner/vendor/licensor so that Lessee shall not be in breach of any
software license.


 


8.             OWNERSHIP
AND INSPECTION:


 


(a)           The
Property shall at all times be the property of Lessor or its assigns, and
Lessee shall have no right, title or interest therein except as to the use
thereof subject to the terms and conditions of the Lease.  For purposes of the foregoing, Lessee
transfers to Lessor all right, title and interest (including all ownership
interest) which Lessee may have in and to the Property.  Lessor may affix (or require Lessee to
affix) tags, decals or plates to 


 


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the Property indicating Lessor’s ownership, and Lessee shall not permit
their removal or concealment.  Lessee
shall not permit the name of any person or entity other than Lessor or its
assigns to be placed on the Property as a designation that might be interpreted
as a claim of ownership or security interest.


 


(b)           LESSEE
SHALL KEEP THE PROPERTY AND LESSEE’S INTEREST UNDER ANY LEASE FREE AND CLEAR OF
ALL LIENS AND ENCUMBRANCES, EXCEPT THOSE PERMITTED IN WRITING BY LESSOR OR ITS
ASSIGNS.


 


(c)           Lessor,
its assigns and their agents shall have free access to the Property at all
reasonable times during normal business hours for the purpose of inspecting the
Property and for any other purpose contemplated in the Lease.


 


(d)           Lessee
shall immediately notify Lessor in writing of all details concerning any damage
or loss to the Property, including without limitation, any damage or loss
arising from the alleged or apparent improper manufacture, functioning or
operation of the Property.


 


9.             WARRANTIES:


 


(a)           Lessee
acknowledges that Lessor is not the manufacturer of the Property nor the
manufacturer’s agent nor a dealer therein. 
The Property is of a size, design, capacity, description and manufacture
selected by the Lessee.  Lessee is
satisfied that the Property is suitable and fit for its purposes.  LESSEE AGREES THAT LESSOR HAS NOT MADE AND
DOES NOT MAKE ANY WARRANTY OR REPRESENTATION WHATSOEVER, EXPRESS OR IMPLIED, AS
TO THE PROPERTY, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OR REPRESENTATION
AS TO: (i) THE DESCRIPTION, CONDITION, DESIGN, QUALITY OR PERFORMANCE OF THE
PROPERTY OR QUALITY OR CAPACITY OF MATERIALS OR WORKMANSHIP IN THE PROPERTY;
(ii) ITS MERCHANTABILITY OR FITNESS OR SUITABILITY FOR A PARTICULAR PURPOSE
WHETHER OR NOT DISCLOSED TO LESSOR; AND (iii) DELIVERY OF THE PROPERTY FREE OF
THE RIGHTFUL CLAIM OF ANY PERSON BY WAY OF INFRINGEMENT OR THE LIKE.  LESSOR EXPRESSLY DISCLAIMS ALL SUCH
WARRANTIES.  If the Software is not
properly installed, does not function as represented or warranted by original
licensor, or is unsatisfactory for any reason, Lessee shall make any claim on
account thereof solely against original licensor and shall nevertheless pay all
sums payable under the Lease, Lessee hereby waiving the right to make any such
claims, against Lessor.  Lessor shall
not be liable to Lessee for any loss, damage or expense of any kind or nature
caused, directly or indirectly, by the Property or the use, possession or maintenance
thereof, or the repair, service or adjustment thereof, or by any delay or
failure to provide any such maintenance, repair, service or adjustment, or by
any interruption of service or loss of use thereof (including without
limitation, Lessee’s use of or right to use any Software) or for any loss of
business howsoever caused.


 


(b)           NOTWITHSTANDING
ANYTHING TO THE CONTRARY CONTAINED IN THE LEASE, LESSOR SHALL NOT, UNDER ANY
CIRCUMSTANCES, BE LIABLE TO LESSEE OR ANY THIRD PARTY, FOR CONSEQUENTIAL,
INCIDENTAL, SPECIAL OR EXEMPLARY DAMAGES ARISING OUT OF OR RELATED TO THE
TRANSACTION CONTEMPLATED HEREUNDER, WHETHER IN AN ACTION BASED ON CONTRACT,
TORT (INCLUDING NEGLIGENCE OR STRICT LIABILITY) OR ANY OTHER LEGAL THEORY,
INCLUDING WITHOUT LIMITATION, LOSS OF ANTICIPATED PROFITS, OR BENEFITS OF USE
OR LOSS OF BUSINESS, EVEN IF LESSOR IS APPRISED OF THE LIKELIHOOD OF SUCH
DAMAGES OCCURRING.


 


IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT EACH AND
EVERY PROVISION OF ANY LEASE WHICH PROVIDES FOR A LIMITATION OF LIABILITY,
DISCLAIMER OF WARRANTIES OR EXCLUSION OF DAMAGES, IS INTENDED BY THE PARTIES TO
BE SEVERABLE FROM ANY OTHER PROVISION AND IS A SEPARABLE AND INDEPENDENT
ELEMENT OF RISK ALLOCATION AND IS INTENDED TO BE ENFORCED AS SUCH.


 


(c)           Lessor
assigns to Lessee all assignable warranties on the Property, including without
limitation any warranties described in Lessor’s purchase contract, which
assignment shall be effective only (i) during the Initial Period and any
extensions thereof, and (ii) so long as no Event of Default exists.


 


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10.           NET
LEASE; LESSEE’S OBLIGATIONS ABSOLUTE AND UNCONDITIONAL:


 


This Agreement is a “net lease” and, as between Lessor
and Lessee, Lessee shall be responsible for and shall indemnify Lessor against,
all costs, expenses and claims of every nature whatsoever arising out of or in
connection with or related to the Lease or the Property.


 


Lessee agrees that its obligation to pay Monthly
Rental and other obligations under the Lease shall be irrevocable, independent,
absolute and unconditional and shall not be subject to any abatement,
reduction, recoupment, defense, offset or counterclaim otherwise available to
Lessee; nor, except as otherwise expressly provided herein or as agreed to by
Lessor in writing, shall this Agreement terminate for any reason whatsoever
prior to the end of the Initial Period.


 


11.           ASSIGNMENT
BY LESSOR:


 


Lessor may assign or transfer its rights and interests
in the Lease and Property to another party (“Lessor’s Assignee”) either
outright or as security for loans.  Upon
notice of any such assignment and instructions from Lessor, Lessee shall pay
its Monthly Rental and other payments and perform its other obligations under
the Lease to the Lessor’s Assignee (or to another party designated by Lessor’s
Assignee).  Upon any such sale or
assignment, LESSEE’S OBLIGATIONS TO LESSOR’S ASSIGNEE UNDER THE ASSIGNED
SCHEDULE SHALL BE ABSOLUTE AND UNCONDITIONAL AND LESSEE WILL NOT ASSERT AGAINST
LESSOR’S ASSIGNEE ANY CLAIM, DEFENSE, OFFSET OR COUNTERCLAIM WHICH LESSEE MIGHT
HAVE AGAINST LESSOR.  Lessor’s Assignee
shall have all of the rights but none of the obligations of Lessor under the
assigned Lease, and after such assignment Lessor shall continue to be
responsible for all of Lessor’s obligations under the Lease.


 


Upon any such assignment, Lessee agrees to execute and
deliver to Lessor: (i) estoppel certificates, acknowledgments of assignment and
other documents requested by Lessor which acknowledge the assignment and affirm
provisions of the Lease, and (ii) UCC–1 financing statements or
precautionary filings as requested.


 


Only one executed counterpart of any Schedule shall be
marked “Original”; any other executed counterparts shall be marked “Duplicate
Original” or “Counterpart”.  No security
interest in any Schedule may be created through the transfer and possession of
any counterpart other than the “Original”.


 


12.           RISK
OF LOSS ON LESSEE:


 


From the earlier of the date the supplier ships the
Property to Lessee or the date Lessor confirms Lessee’s purchase order or contract
to supplier until the date the Property is returned to Lessor as provided in
the Lease, Lessee hereby assumes and shall bear all risk of loss for theft,
damage or destruction to the Property, howsoever caused.  NO SUCH LOSS OR DAMAGE SHALL IMPAIR ANY
OBLIGATION OF LESSEE UNDER THIS LEASE WHICH SHALL CONTINUE IN FULL FORCE AND
EFFECT.


 


In the event of damage or loss to the Property (or any
part thereof) and irrespective of payment from any insurance coverage
maintained by Lessee, but applying full credit therefore, Lessee shall at the
option of Lessor, (a) place the Property in good repair, condition and working
order; or (b) replace the Property (or any part thereof) with like property of
equal or greater value, in good repair, condition and working order and
transfer clear title to such replacement property to Lessor whereupon such
replacement property shall be deemed the Property for all purposes under the
Lease; or (c) pay to Lessor the total rent due and owing at the time of such
payment plus an amount calculated by Lessor which is equal to the Casualty Loss
Value specified in the Casualty Loss Schedule attached to the applicable
Schedule.


 


13.           INSURANCE:


 


Lessee shall obtain and maintain for the entire term
of this Lease, at its own expense (as primary insurance for Lessor and Lessee),
property damage and liability insurance and insurance against loss or damage to
the Property including without limitation loss by fire (including so–called
extended coverage), theft, collision and such other risks 


 


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of loss as are customarily insured against on the type of Property
leased under any Lease and by businesses in which Lessee is engaged, in such
amounts, in such form and with such insurers as shall be satisfactory to
Lessor; provided, however, that the amount of insurance against loss or damage
to the Property shall be equal to or greater than the Casualty Loss Value of
such items of Property as specified in the Casualty Loss Schedule attached to
the Schedule.  Each insurance policy
will name Lessee as insured and Lessor and its assignees as additional insureds
and loss payees thereof as their interests may appear, shall contain cross–liability
endorsements and shall contain a clause requiring the insurer to give Lessor
and its assignees at least 30 days prior written notice of any material
alteration in the terms of such policy or of the cancellation thereof.  Lessee shall furnish to Lessor a certificate
of insurance or other evidence satisfactory to Lessor that such insurance
coverage is in effect; provided, however, that Lessor shall be under no duty
either to ascertain the existence of or to examine such insurance policy or to
advise Lessee in the event such insurance coverage shall not comply with the requirements
hereof.  All insurance covering loss or
damage to the Property shall contain a breach of warranty clause satisfactory
to Lessor.


 


14.           INDEMNIFICATION:


 


Except for the gross negligence or willful misconduct
of Lessor, Lessee shall indemnify and hold Lessor harmless from and against any
and all claims, (including without limitation negligence, tort and strict
liability), damages, judgments, suits and legal proceedings, and any and all
costs and expenses in connection therewith (including attorney’s fees incurred
by Lessor either in enforcing this indemnity or in defending against such
claims), arising out of or in any manner connected with or resulting from the
Lease or the Property, including, without limitation the manufacture, purchase,
financing, ownership, rejection, non–delivery, transportation, delivery,
possession, use, operation, maintenance, condition, lease, return, storage or
disposition thereof; including without limitation (a) claims for injury to or
death of persons and for damage to property; (b) claims relating to patent,
copyright, or trademark infringement, (c) claims relating to latent or other
defects in the Property whether or not discoverable by Lessor and (d) claims
for wrongful, negligent or improper act or misuse by Lessor.  Lessee agrees to give Lessor prompt notice
of any such claim or liability.  For
purposes of this paragraph and any Lease, the term “Lessor” shall include
Lessor, its successors and assigns, shareholders, directors, officers,
representatives and agents, and the provisions of this paragraph shall survive
expiration of any Lease with respect to events occurring prior thereto.


 


Upon request of Lessor, Lessee shall assume the
defense of all demands, claims, or actions, suits and all proceedings against
Lessor for which indemnity is provided and shall allow Lessor to participate in
the defense thereof.  Lessor shall be
subrogated to all rights of Lessee for any matter which Lessor has assumed
obligation hereunder, and may settle any such demand, claim, or action without
Lessee’s prior consent, and without prejudice to Lessor’s right to
indemnification hereunder.


 


15.           EVENTS
OF DEFAULT:


 


An “Event of Default” shall occur under any Lease if
Lessee:


 


(a)           fails
to pay any Monthly Rental or other payment required under the Lease when the
same becomes due and payable and such failure continues for ten (10) days after
its due date;


 


(b)           attempts
to or does, remove, sell, assign, transfer, encumber, sublet or part with
possession of any one or more items of the Property or any interest under any
Lease, except as expressly permitted herein, or permits a judgment or other
claim to become a lien upon any or all of Lessee’s assets or upon the Property;


 


(c)           permits
any item of Property to become subject to any levy, seizure, attachment,
assignment or execution; or Lessee abandons any item of Property;


 


(d)           or
any guarantor, fails to observe or perform any of its covenants and obligations
required to be observed or performed under the Lease and such failure continues
uncured for ten (10) days after occurrence thereof, except that the ten (10)
day cure period shall not apply and an Event of Default shall occur immediately
upon Lessee’s failure to maintain insurance;


 


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(e)           or
any guarantor, breaches any of its representations and warranties made under
any Lease, or if any such representations or warranties shall be false or
misleading in any material respect;


 


(f)            or
any guarantor, shall (i) be adjudicated insolvent or a bankrupt, or cease, be
unable, or admit in writing its inability, to pay its debts as they mature, or
make a general assignment for the benefit of creditors or enter into any
composition or arrangement with creditors; (ii) apply for or consent to the
appointment of a receiver, trustee or liquidator of it or of a substantial part
of its property, or authorize such application or consent, or proceedings
seeking such appointment shall be instituted against it without such
authorization, consent or application and shall continue undismissed for a
period of 60 days; (iii) authorize or file a voluntary petition in bankruptcy
or apply for or consent to the application of any bankruptcy, reorganization in
bankruptcy, arrangement, readjustment of debt, insolvency, dissolution, moratorium
or other similar law of any jurisdiction, or authorize such application or
consent; or proceedings to such end shall be instituted against it without such
authorization, application or consent and such proceeding instituted against it
shall continue undismissed for a period of 60 days;


 


(g)           or
any guarantor, shall suffer an adverse change in its financial condition after
the date hereof as determined by Lessor in its sole discretion, or there shall
occur a substantial change in ownership of the outstanding stock of Lessee or a
substantial change in control of its board of directors;


 


(h)           shall
be in default under any other Schedule or agreement executed with Lessor; or
shall fail to sign and deliver to Lessor any document requested by Lessor in
connection with any Lease or shall fail to do any thing determined by Lessor to
be necessary or desirable to effectuate the transaction contemplated by the
Lease or to protect Lessor’s rights and interests in the Lease and Property; or
shall fail to provide financial statements to Lessor as provided in Section
18(g) hereof.


 


(i)            breach
by Lessee of any license or other agreement for Software.


 


16.           REMEDIES:


 


Upon the occurrence of any Event of Default and at any
time thereafter, Lessor may, with or without giving notice to Lessee and with
or without canceling the Lease, do any one or more of the following:


 


(a)           enforce
this Agreement according to its terms;


 


(b)           advance
funds on Lessee’s behalf to cure the Event of Default, whereupon Lessee shall
immediately reimburse Lessor therefor, together with late charges accrued
thereon;


 


(c)           refuse
to deliver the Property to Lessee;


 


(d)           upon
notice to Lessee, cancel this Master Lease Agreement and any or all Schedules
executed pursuant thereto;


 


(e)           if
Lessor determines, in its sole discretion, not to take possession of the
Property, Lessor shall continue to be the owner of the Property and may, but is
not obligated to, dispose of the Property by sale or otherwise, all of which
determinations may be made by Lessor in its sole discretion and for its own
account;


 


(f)            declare
immediately due and payable all amounts due or to become due hereunder for the
full term of the Lease (including any renewal or purchase options which Lessee
has contracted to pay);


 


(g)           with
or without terminating the Lease, recover the Casualty Loss Value of the
Property as of the rent payment date immediately preceding the date of default
together with all costs and expenses incurred by Lessor in the repossession,
recovery, storage, repair, sale, re–lease or other disposition of the
Property, including without limitation, reasonable attorneys’ fees and costs
incurred in connection therewith or otherwise resulting or arising from
Lessee’s default, and any indemnity if then determinable, plus interest on all
of the above until paid (before and after judgment) at the lesser of the rate
of eighteen percent (18%) per annum or the highest rate permitted by law
(collectively, “Lessor’s Damages”);


 


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(h)           without
notice to Lessee, repossess the Property wherever found, with or without legal
process, and for this purpose Lessor and/or its agents or assigns may enter
upon any premises of or under the control or jurisdiction of Lessee or any
agent of Lessee, without liability for suit, action or other proceeding by
Lessee (any damages occasioned by such repossession being hereby expressly
waived by Lessee) and remove the Property therefrom; Lessee further agrees on
demand, to assemble the Property and make it available to Lessor at a place to
be designated by Lessor;


 


(i)            in
its sole discretion, re–lease or sell any or all of the Property at a
public or private sale on such terms and notice as Lessor shall deem reasonable
(such sale may, at Lessor’s sole option, be conducted at Lessee’s premises),
and recover from Lessee liquidated damages for the loss of a bargain and not as
a penalty an amount equal to the Lessor’s Damages;


 


(j)            if
Lessee breaches any of its obligations under Section 7(c) of this Agreement
with regard to Software, Lessee shall be liable to Lessor for additional
damages in an amount equal to the original price paid by Lessor for the
Software, and in addition, at Lessor’s option, Lessor shall be entitled to
injunctive relief;


 


(k)           exercise
any other right or remedy which may be available to it under the Uniform
Commercial Code or any other applicable law;


 


(l)            a
cancellation hereunder shall occur only upon notice by Lessor and only as to
such items of Property as Lessor specifically elects to cancel and this Lease
shall continue in full force and effect as to the remaining items, if any.


 


(m)          by
notice to Lessee, declare any license agreement with respect to Software
terminated, in which event the right and license of Lessee to use the Software
shall immediately terminate, and Lessee shall thereupon cease all use of the
Software and return all copies thereof to Lessor or original licensor; (ii)
have access to and disable the Software by any means deemed necessary by
Lessor, for which purposes Lessee hereby expressly consents to such access and
disablement, promises to take no action that would prevent or interfere with
Lessor’s ability to perform such access and disablement, and waives and
releases any and all claims that it has or might otherwise have for any and all
losses, damages, expenses, or other detriment that it might suffer as a result
of such access and disablement; and (iii) Lessee agrees that the detriment
which Lessor will suffer as a result of a breach by Lessee of the obligations
contained in the Lease cannot be adequately compensated by monetary damages,
and therefore Lessor shall be entitled to injunctive and other equitable relief
to enforce the provisions of this paragraph 16(m).  LESSEE AGREES THAT LESSOR SHALL HAVE NO DUTY TO MITIGATE LESSOR’S
DAMAGES UNDER ANY LEASE BY TAKING LEGAL ACTION TO RECOVER THE SOFTWARE FROM
LESSEE OR ANY THIRD PARTY, OR TO DISPOSE OF THE SOFTWARE BY SALE, RE–LEASE
OR OTHERWISE.


 


In the event Lessor in good faith believes the
Property to be in danger of misuse, abuse or confiscation or to be in any other
way threatened; or believes in good faith that the Property is no longer
sufficient or has declined or may decline in value; or believes in good faith
for any other reason that the prospect of payment or performance has become
impaired, Lessor shall have the right, in its sole discretion, to either
require additional collateral or declare the entire indebtedness under any
Lease immediately due and payable.


 


Lessor may exercise any and all rights and remedies
available at law or in equity, including those available under the Uniform
Commercial Code.  The rights and
remedies afforded Lessor hereunder shall not be deemed to be exclusive, but
shall be in addition to any rights or remedies provided by law.  Lessor’s failure promptly to enforce any
right or remedy hereunder shall not operate as a waiver of such right or
remedy, and Lessor’s waiver of any default shall not constitute a waiver of any
subsequent or other default.  Lessor may
accept late payments or partial payments of amounts due under the Lease and may
delay enforcing any of Lessor’s rights or remedies hereunder without losing or
waiving any of Lessor’s rights or remedies under the Lease.


 


8

















 


17.           LESSEE’S
REPRESENTATIONS AND WARRANTIES:


 


Lessee represents and warrants as follows:


 


(a)           If
Lessee is a corporation, duly organized and validly existing in good standing
under the laws of the jurisdiction of its incorporation, duly qualified to do
business in each jurisdiction where any Property is, or is to be located, and
has full corporate power and authority to hold property under lease and to
enter into and perform its obligations under any Lease; the execution, delivery
and performance by Lessee of any Lease has been duly authorized by all
necessary corporate action on the part of Lessee, and is not inconsistent with
its Articles of Incorporation or By–Laws or other governing instruments;


 


(b)           If
Lessee is a partnership, duly organized by written partnership agreement and
validly existing in accordance with the laws of the jurisdiction of its
organization, duly qualified to do business in each jurisdiction where the
Property is, or is to be located, and has full power and authority to hold
property under lease and to enter into and perform its obligations under any
Lease; the execution, delivery and performance by Lessee of any Lease has been
duly authorized by all necessary action on the part of the Lessee, and is not
inconsistent with its partnership agreement or other governing
instruments.  Upon request, Lessee will
deliver to Lessor certified copies of its partnership agreement and other
governing instruments and original certificate of partners and other
instruments deemed necessary or desirable by Lessor.  To the extent required by applicable law, Lessee has filed and
published its fictitious business name certificate;


 


(c)           The
execution, delivery and performance by Lessee of any Lease does not violate any
law or governmental rule, regulation, or order applicable to Lessee, does not
and will not contravene any provision, or constitute a default under any
indenture, mortgage, contract, or other instrument to which it is bound and,
upon execution and delivery of each Lease, will constitute a legal, valid and
binding agreement of Lessee, enforceable in accordance with its terms;


 


(d)           No
action, including any permits or consents, in respect of or by any state,
federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by Lessee of any Lease;


 


(e)           All
computer hardware and software that is utilized by Lessee in the operation of
its businesses is and will be

“Year 2000 Compliant” in that it is and will be capable of accepting,
processing and printing date data between and within the twentieth and
twenty-first centuries, and neither the performance nor functionality of any
computer hardware or software is affected by dates prior to, during, or after
the Year 2000.  Upon request, Lessee
shall provide written assurances to Lessor that its hardware and software are
“Year 2000 Compliant”.


 


18.           GENERAL:


 


(a)           Entire
Agreement. Each Schedule shall incorporate the terms and conditions of this
Master Lease Agreement and, together with the Acceptance Certificate (as
defined herein) and Master Progress Funding Agreement (and Authorizations
thereunder), if applicable, and any amendments to any of the foregoing
documents, shall supersede all prior agreements and constitute the entire
understanding and agreement between the Lessor and Lessee with regard to the
subject matter hereof and thereof, and there is no understanding or agreement,
oral or written, which is not set forth herein or therein.


 


(b)           Time
Is of the Essence; Provisions Severable. Time is of the essence with
respect to any Lease.  The provisions
contained in any agreement shall be deemed to be independent and
severable.  The invalidity or partial
invalidity of any one provision or portion of the Lease under the laws of any
jurisdiction shall not affect the validity or enforceability of any other
provisions of the Lease.  The captions
and headings set forth herein are for convenience of reference only and shall
not define or limit any of the terms hereof.


 


(c)           Notices.
Notices or demands required to be given hereunder shall be in writing and
addressed to the other party at the address herein or such other address
provided by written notice hereunder and shall be effective (i) upon the next
business day if sent by guaranteed overnight express service (such as Federal
Express);


 


9

















 


(ii) on the same day if personally delivered; or (iii) three days after
mailing if sent by certified or registered U.S. mail, postage prepaid.


 


(d)           Governing
Law; Waiver of Trial by Jury. THIS LEASE SHALL IN ALL RESPECTS BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF UTAH, INCLUDING
ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.  LESSEE AGREES TO SUBMIT TO THE JURISDICTION
OF THE STATE AND/OR FEDERAL COURTS IN THE STATE OF UTAH IN ALL MATTERS RELATING
TO THE LEASE, THE PROPERTY AND THE CONDUCT OF THE RELATIONSHIP BETWEEN LESSOR
AND LESSEE.  THIS LEASE WAS EXECUTED IN
THE STATE OF UTAH (BY THE LESSOR HAVING COUNTERSIGNED IT IN UTAH) AND IS TO BE
PERFORMED IN THE STATE OF UTAH (BY REASON OF ONE OR MORE PAYMENTS REQUIRED TO
BE MADE TO LESSOR IN UTAH).  LESSOR AND
LESSEE HEREBY WAIVE THE RIGHT TO TRIAL BY JURY OF ANY MATTERS ARISING OUT OF
THE LEASE OR PROPERTY OR THE CONDUCT OF THE RELATIONSHIP BETWEEN LESSOR AND
LESSEE.


 


(e)           Binding
Effect; Survivability. The provisions of each Lease shall inure to the
benefit of and shall bind Lessor and Lessee and their respective permitted
successors and assigns.  All
representations, warranties, covenants and indemnities of Lessee made or agreed
to in the Lease or in any certificates delivered in connection therewith shall
survive the expiration, termination or cancellation of the Lease for any
reason.


 


(f)            Further
Assurances; Financing Statements. Lessee will cooperate with Lessor in protecting
Lessor’s interests in the Property, the Lease and the amounts due under the
Lease, including, without limitation, the execution and delivery of Uniform
Commercial Code statements and filings, patent and copyright registration
documents with respect to proprietary Software (if applicable), and other
documents requested by Lessor.  Lessee
shall pay all costs of filing any financing, continuation or termination
statements with respect to the Property and Lease, including without
limitation, any intangibles tax, documentary stamp tax or other similar tax or
charge relating thereto and of all UCC or other lien searches deemed necessary
or advisable by Lessor.  Lessee will do
whatever may be necessary or advisable to have a statement of the interest of Lessor
in the Property noted on any certificate of title relating to the Property and
will deposit said certificate with Lessor. 
Lessee will execute and deliver to Lessor such other documents and
written assurances and take such further action as Lessor may request to more
fully carry out the implementation, effectuation, confirmation and perfection
of the Lease and any rights of Lessor thereunder.  Lessee grants to Lessor a security interest in all deposits and
other property transferred or pledged to Lessor to secure the payment and
performance of all of Lessee’s obligations under the Lease.


 


(g)           Financial
Statements. Lessee shall provide to Lessor a copy of its annual audited
financial statements within 90 days after its fiscal year end, and a copy of
its quarterly unaudited financial statements within 45 days after the end of
each fiscal quarter.


 


(h)           Security
Interest. In the event a court of competent jurisdiction or other governing
authority shall determine that the Lease is not a “true lease” or is a lease
intended as security or that Lessor (or its assigns) does not hold legal title
to or is not the owner of the Property, then the Lease shall be deemed to be a
security agreement with Lessee, as debtor, having granted to Lessor, as secured
party, a security interest in the Property effective the date of the Lease, and
the Property shall secure all duties and obligations of Lessee under any Lease
or other agreement with Lessor.  As
security for the performance by Lessee of its duties and obligations under any
Lease, Lessee hereby grants to Lessor a security interest in all of Lessee’s
rights under any license agreement related to any Software, including, without
limitation, all of its rights with respect to the Software.  With regard to any security interest created
hereunder in any of the Property, Lessee consents and agrees that Lessor shall
have all of the rights, privileges and remedies of a secured party under the
Utah Uniform Commercial Code.


 


(i)            Change
in Lessee’s Name or Address. Lessee shall not change its name or address
from that set forth above, unless it shall have given Lessor or its assigns no
less than 30 days’ prior written notice.


 


(j)            Covenant
of Quiet Possession. Lessor agrees that so long as no Event of Default has
occurred and is continuing, Lessee shall be entitled to quietly possess the
Property subject to and in accordance with the terms and conditions of this
Agreement.


 


10

















 


(k)           Lessor’s
Right to Perform for Lessee. If Lessee fails to perform or comply with any
of its agreements contained herein, Lessor may perform or comply with such
agreements and the amount of any payments and expenses of Lessor incurred in
connection with such performance or compliance (including attorneys’ fees),
together with interest thereon at the lesser of the rate of eighteen percent
(18%) per annum, or the highest rate permitted by law shall be deemed
additional rent payable by Lessee upon demand.


 


(l)            Attorneys’
Fees. Lessee shall reimburse Lessor for all charges, costs, expenses and
attorneys’ fees incurred by Lessor (a) in defending or protecting its interest
in the Property; (b) in the execution, delivery, administration, amendment and
enforcement of the Lease or the collection of any rent or other payments due
under the Lease; and (c) in any lawsuit or other legal or arbitration/mediation
proceeding to which the Lease gives rise, including without limitation, actions
in tort.


 


(m)          Lessee’s
Options at End of Initial Period. At the end of the Initial Period of any
Lease, or upon any expiration of any renewal or extension thereof as provided
for in option (2) herein or otherwise, Lessee shall, provided at least one
hundred eighty (180) days prior written notice is received by Lessor from
Lessee via certified mail, do one of the following: (1) purchase the Property
for a price to be determined by Lessor and Lessee, (2) extend the Lease for
twelve (12) additional months at the rate specified on the respective Schedule,
or (3) return the Property to Lessor at Lessee’s expense to a destination
within the continental United States specified by Lessor and terminate the
Schedule; provided, however, that for option (3) to apply, all accrued but
unpaid late charges, interest, taxes, penalties, and any and all other sums due
and owing under the Schedule must first be paid in full, the provisions of
Sections 6(c) and (d) and 7(c) hereof must be specifically complied with, and
Lessee must enter into a new Schedule with Lessor to lease Property which
replaces the Property listed on the old Schedule.  With respect to options (1) and (3), each party shall have the
right in its absolute and sole discretion to accept or reject any terms of
purchase or of any new Schedule, as applicable.  In the event Lessor and Lessee have not agreed to either option
(1) or (3) by the end of the Initial Period or any renewal or extension period
then in effect, or if Lessee fails to give written notice of its option via
certified mail at least one hundred eighty (180) days prior to the termination of
the Initial Period or any renewal or extension period then in effect, then
option (2) shall apply at the end of the Initial Period or any renewal or
extension period then in effect.


 


(n)           Amendment
and Modification. The Lease may not be amended or modified except by a
writing signed by a duly authorized representative of each party, but no such
amendment or modification needs further consideration to be binding.  Notwithstanding the foregoing, Lessee
authorizes Lessor to amend any Schedule to identify more accurately the
Property (including, without limitation, supplying serial numbers or other
identifying data), and such amendment shall be binding on Lessor and Lessee
unless Lessee objects thereto within 10 days after receiving notice of the
amendment from Lessor.


 


(o)           Joint
and Several Liability. In the event two or more parties sign the Agreement
as Lessee, each party shall be jointly and severally liable for all Lessee
representations, warranties, and obligations (including without limitation,
payment obligations) under this Agreement or under any Schedule or other
document executed in connection herewith.


 


19.           WAIVERS:


 


To the extent permitted by applicable law, Lessee
hereby waives any and all rights and remedies conferred upon a Lessee by
Sections 2A–508 through 2A–522 of the Uniform Commercial Code,
including but not limited to Lessee’s rights to: (i) cancel the Lease; (ii)
repudiate the Lease; (iii) reject the Property; (iv) revoke acceptance of the
Property; (v) recover damages from Lessor for any breaches or warranty or for
any other reason; (vi) claim, grant or permit a security interest in the
Property in Lessee’s possession or control for any reason; (vii) deduct all or
any part of any claimed damages resulting from Lessor’s default, if any, under
the Lease; (viii) “cover” by making any purchase or lease of or contract to
purchase or lease Property in substitution for those due from Lessor; (ix)
recover any general, special, incidental or consequential damages, for any
reason whatsoever; and (x) commence legal action against Lessor for specific
performance, replevin, detinue, sequestration, claim and deliver or the like
for any Property identified to the Lease. 
To the extent permitted by applicable law, Lessee also hereby waives any
rights now or hereafter conferred by statute or otherwise which may require
Lessor to sell, lease or otherwise use any Property in mitigation of Lessor’s
damages as set forth in Section 16 hereof or which may otherwise limit or
modify any of Lessor’s rights or remedies in that section.


 


11

















 


No waiver or modification by Lessor of any of the
terms and conditions hereof shall be effective unless in writing signed by an
officer of Lessor.


 


20.           ASSIGNMENT
BY LESSEE:


 


LESSEE MAY NOT ASSIGN THIS AGREEMENT OR ANY OF ITS
RIGHTS HEREUNDER OR SUBLEASE THE PROPERTY WITHOUT THE PRIOR WRITTEN CONSENT OF
LESSOR WHICH WILL NOT BE UNREASONABLY WITHHELD.  NO PERMITTED ASSIGNMENT OR SUBLEASE SHALL RELIEVE LESSEE OF ANY
OF ITS OBLIGATIONS HEREUNDER.


 


BY INITIALING THIS SECTION, LESSEE ACKNOWLEDGES THAT
IT HAS READ THE ABOVE PARAGRAPHS UNDER SECTIONS 18, 19 AND 20, AND FULLY
UNDERSTANDS THEIR CONTENT AND AGREES TO THEIR PROVISIONS.


 


	
   

  	
  Initialed

  	
  /s/ Finley

  



 


21.           POWER
OF ATTORNEY.  LESSEE HEREBY AUTHORIZES
AND APPOINTS LESSOR AND LESSOR’S AGENTS AND ASSIGNS AS LESSEE’S ATTORNEY–IN–FACT
TO COMPLETE, EXECUTE, FILE AND AMEND ON LESSEE’S BEHALF UCC FINANCING
STATEMENTS, PRECAUTIONARY OR OTHERWISE, IN CONNECTION WITH THE PROPERTY AND
LEASE AND TO CONFORM THE DESCRIPTION OF THE PROPERTY (INCLUDING SERIAL NUMBERS)
IN ANY SUCH FINANCING STATEMENTS OR OTHER DOCUMENTATION.


 


IN WITNESS WHEREOF, Lessor and Lessee have executed this Agreement on
the day and year first above written.


 


	
  LESSOR:

  	
  LESSEE:

  
	
   

  	
   

  
	
  MATRIX FUNDING CORPORATION

  	
  SOUTHWALL TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
  BY:

  	
  /s/ Kay Paul

  	
   

  	
  BY:

  	
  /s/  Bill R.
  Finley

  	
   

  
	
   

  	
   

  
	
  TITLE: 

  	
  Assistant Vice President

  	
  TITLE:

  	
  Vice President and CFO

  
	
   

  	
   

  	
  Bill R. Finley

  
								



 


 


12























LEASE SCHEDULE NO. 1


dated July 19, 1999 (the “Schedule”)


 


to MASTER LEASE AGREEMENT
NO. R0825 dated July 19, 1999 (the “Master Lease”) between MATRIX FUNDING
CORPORATION as Lessor and SOUTHWALL TECHNOLOGIES, INC. as Lessee.


 


This Schedule incorporates by reference the terms and
conditions of the Master Lease, Exhibit A (the “Property Description”) and
Exhibit B (the “Casualty Loss Schedule”), and constitutes a separate “Lease”
between Lessor and Lessee. All capitalized terms used herein but not defined herein
shall have the same meanings ascribed to them in the Master Lease.


 


1.                                       Property:  (1) PM7 Microwave Plasma Enhanced Chemical Vapor Deposited
Optical Coating System and (1) Telephone System to be more fully described on
an Exhibit A, together with all other property hereafter purchased or paid for
by Lessor pursuant to that Master Progress Funding Agreement dated July 19,
1999, between Lessor and Lessee, which relates to the Schedule between Lessor
and Lessee, (including without limitation, all authorizations signed in
connection with said Master Progress Funding Agreement which relate to the
Schedule), and any and all additions, enhancements and replacements thereto.


 


The Property subject to
this Schedule shall be more fully and completely described in an Acceptance
Certificate which shall later be executed by Lessee in connection with this
Schedule. Upon Lessee’s execution thereof, this Schedule shall be automatically
amended to include herein as property leased hereunder all Property described
in said Acceptance Certificate.


 


2.                                       Property Location:  8175 S. Hardy, Tempe, AZ 85284 and 3961 East
Bayshore, Palo Alto, CA 94303.  Upon
Lessee’s later execution of an Acceptance Certificate in connection with this
Schedule, this Schedule shall be automatically amended to include the
additional locations, if any, specified in said Acceptance Certificate.


 


3.             Acceptance Date: As specified in the Acceptance
Certificate


 


4.             Initial Period: 
Thirty-six (36) months from Commencement Date


 


5.             Monthly Rental: $89,670,00, plus applicable sales tax


 


6.             Deposit: $89,670.00 applied to the last Monthly Rental,
plus applicable sales tax


 


7.             Total Cost Not To Exceed: $3,000,000.00


 


8.             Lease Rate Factor: .02989


 


9.                                       Floating Lease  Rate Factor:  The Lease Rate Factor of .02989 shall increase .00005992 for
every five (05) basis point increase in Forty-eight (36) month U.S. Treasury
Notes as 


 

















 


 


                                                of the Acceptance Date of the Property
(the “Revised Lease Rate Factor”), at which time the final Monthly Rental under
this Schedule shall be adjusted by multiplying the Total Cost, indicated in
Section 7, by the Revised Lease Rate Factor. 
The Forty-eight (36) month U.S. Treasury Note yield used as the basis
for the derivation of the Revised Lease Rate Factor herein is 5.5%.


 


10.                                 Additional Event of Default: Lessor as
Secured Party, and Lessee, as Debtor, have entered into a Security Agreement
dated July 19, 1999, pursuant to which Lessee has granted to Lessor a security
interest in personal property (“Collateral” as described in the Security
Agreement) to secure Lessee’s obligations under this Schedule. Lessee’s breach
of any of its representatives, warranties, covenants and agreements under the
Security Agreement shall constitute an additional Event of Default under
Section 16 of the Master Lease.  Upon
the occurrence of an Event of Default specified above, Lessor shall be entitled
to exercise all of its rights and remedies under Section 16 of the Master Lease
and under the Security Agreement, including without limitation as an additional
remedy, foreclosure of Lessor’s security interest in the Collateral as provided
under the Security Agreement.


 


11.                                 Representation of Lessee: Lessor and
Lessee agree that this Schedule constitutes a “finance lease” under the Uniform
Commercial Code - Article 2A, in that (a) Lessee has selected the Property in
its sole discretion, (b) Lessor has acquired the Property solely for purposes
of leasing such Property under this Schedule, and (c) Lessee has received a
copy of the contract evidencing Lessor’s purchase of the Property.


 


12.                                 Financial Covenants; Holdback of Portion
of the Cost of the Property: Lessee represents, warrants and covenants with
Lessor that based upon Lessee’s audited financial statements for the period
ended December 31, 1999, Lessee shall be in compliance with the following
“Financial Covenants:” (1) the Quick Ratio shall not be less than .70:1; (2)
Tangible Net Worth shall not be less than $23,000,000.00; (3) the Long-Term
Debt to Tangible Net Worth ratio shall not be greater than 1.35:1; the Net
Income for the fiscal year ended December 31, 1999 shall not be less than
$500,000.00; and the Debt Service Coverage ratio (defined as total Earnings
Before Interest, Taxes, Depreciation and Amortization divided by the sum of (i)
the Current Portion of Long Term Debt, (ii) Interest Expense, and (iii)
Projected Debt Service to Lessor (defined as the sum of one year’s Monthly
Rental Payments owed to Lessor)) shall not be less than 125%.


 


Notwithstanding any
agreement or obligation of Lessor to pay the full cost of the Property to the
contrary, Lessor shall be entitled to holdback $1,000,000.00 (the “Retention
Amount”) from the $3,000,000.00 total Property cost until Lessor shall receive
the audited financial statements of Lessee for the period ended December 31,
1999, and shall determine, in Lessor’s reasonable discretion, that based upon
such financial statements, the Financial Covenants have been met; whereupon,
provided no Event of Default has occurred and is continuing under the Lease,
Lessor shall disburse to Lessee the Retention Amount. In the event that Lessor
shall determine, in its reasonable discretion, that based upon Lessee’s audited
financial statements for the period ended December 31, 1999, any one or more of
the Financial Covenants have not been met, 


 


 

















 


 


Lessor shall not be
obligated to disburse the Retention Amount. If Lessee fails to meet the
Financial Covenants based upon its audited financial statements for the period
ended December 31, 1999, Lessor agrees to review Lessee’s financial statements
for each subsequent quarter after December 31, 1999.  If Lessor determines, in its reasonable discretion, that based
upon Lessee’s financial statements for any subsequent quarter (annualized, as
necessary, for comparative purposes), Lessee has met the Financial Covenants,
then, provided no Event of Default has occurred and is continuing under the
Lease, Lessor shall disburse to Lessee the Retention Amount.  The Retention Amount shall bear interest at
4%, which, provided no Event of Default has occurred and is continuing under
the Lease, shall be paid quarterly to Lessee.


 


Lessee agrees and
covenants with Lessor that (a) Lessee shall pay to each vendor, on its due
date, the purchase price of all Property not paid by Lessor from the initial
funding (exclusive of the Retention Amount), and (b) notwithstanding Lessor’s
holdback of the Retention Amount upon the terms and conditions specified
herein, Lessee shall remit to Lessor on its due date, each Monthly Rental
Payment required under this Schedule.


 


	
   

  	
  LESSOR:

  	
  LESSEE:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  MATRIX FUNDING CORPORATION

  	
  SOUTHWALL TECHNOLOGIES, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  BY:

  	
   

  	
  BY:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  TITLE:

  	
  Assistant Vice Present

  	
  TITLE:

  	
   

  



 

















 


 


EXHIBIT B


 


CASUALTY LOSS
SCHEDULE


DATED JULY 19,
1999


TO


LEASE SCHEDULE NO.
1


DATED JULY 19,
1999


TO


MASTER LEASE
AGREEMENT NO. R0825


 


 


The Casualty Loss Value for each  item of Property shall be determined by
multiplying the original cost of such item to Lessor by the stipulated loss
percentage indicated below which corresponds to the  month of the Lease after commencement in
which the last  Monthly
Rental payment was made.  The dollar
amount shown below represents the Casualty Loss Value which would apply if all
of the Property were lost or destroyed.


 


 


	
  AFTER PAYMENT NUMBER

  	
   

  	
  TOTAL CASUALTY LOSS VALUE

  	
   

  	
  CASUALTY LOSS PERCENTAGE

  	
   

  	
  AFTER PAYMENT NUMBER

  	
   

  	
  TOTAL CASUALTY LOSS VALUE

  	
   

  	
  CASUALTY LOSS PERCENTAGE

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  0

  	
   

  	
  $3,900,000

  	
   

  	
  130.00

  	
  %

  	
  19

  	
   

  	
  $2,379,942

  	
   

  	
  79.33

  	
  %

  
	
  1

  	
   

  	
  $3,835,727

  	
   

  	
  127.86

  	
  %

  	
  20

  	
   

  	
  $2,293,961

  	
   

  	
  76.47

  	
  %

  
	
  2

  	
   

  	
  $3,755,199

  	
   

  	
  125.17

  	
  %

  	
  21

  	
   

  	
  $2,217,769

  	
   

  	
  73.93

  	
  %

  
	
  3

  	
   

  	
  $3,674,479

  	
   

  	
  122.48

  	
  %

  	
  22

  	
   

  	
  $2,130,612

  	
   

  	
  71.02

  	
  %

  
	
  4

  	
   

  	
  $3,593,567

  	
   

  	
  119.79

  	
  %

  	
  23

  	
   

  	
  $2,043,357

  	
   

  	
  68.11

  	
  %

  
	
  5

  	
   

  	
  $3,512,462

  	
   

  	
  117.08

  	
  %

  	
  24

  	
   

  	
  $1,956,003

  	
   

  	
  65.20

  	
  %

  
	
  6

  	
   

  	
  $3,458,270

  	
   

  	
  115.28

  	
  %

  	
  25

  	
   

  	
  $1,868,550

  	
   

  	
  62.29

  	
  %

  
	
  7

  	
   

  	
  $3,375,401

  	
   

  	
  112.51

  	
  %

  	
  26

  	
   

  	
  $1,780,998

  	
   

  	
  59.37

  	
  %

  
	
  8

  	
   

  	
  $3,292,370

  	
   

  	
  109.75

  	
  %

  	
  27

  	
   

  	
  $1,693,347

  	
   

  	
  56.44

  	
  %

  
	
  9

  	
   

  	
  $3,209,175

  	
   

  	
  106.97

  	
  %

  	
  28

  	
   

  	
  $1,605,596

  	
   

  	
  53.52

  	
  %

  
	
  10

  	
   

  	
  $3,125,817

  	
   

  	
  104.19

  	
  %

  	
  29

  	
   

  	
  $1,521,392

  	
   

  	
  50.71

  	
  %

  
	
  11

  	
   

  	
  $3,042,294

  	
   

  	
  101.41

  	
  %

  	
  30

  	
   

  	
  $1,432,812

  	
   

  	
  47.76

  	
  %

  
	
  12

  	
   

  	
  $2,958,608

  	
   

  	
  98.62

  	
  %

  	
  31

  	
   

  	
  $1,344,169

  	
   

  	
  44.81

  	
  %

  
	
  13

  	
   

  	
  $2,874,756

  	
   

  	
  95.83

  	
  %

  	
  32

  	
   

  	
  $1,255,463

  	
   

  	
  41.83

  	
  %

  
	
  14

  	
   

  	
  $2,807,855

  	
   

  	
  93.60

  	
  %

  	
  33

  	
   

  	
  $1,166,692

  	
   

  	
  38.89

  	
  %

  
	
  15

  	
   

  	
  $2,722,537

  	
   

  	
  90.75

  	
  %

  	
  34

  	
   

  	
  $1,077,859

  	
   

  	
  35.93

  	
  %

  
	
  16

  	
   

  	
  $2,637,087

  	
   

  	
  87.90

  	
  %

  	
  35

  	
   

  	
  $988,961

  	
   

  	
  32.97

  	
  %

  
	
  17

  	
   

  	
  $2,551,505

  	
   

  	
  85.05

  	
  %

  	
  36

  	
   

  	
  $900,000

  	
   

  	
  30.00

  	
  %

  
	
  18

  	
   

  	
  $2,465,790

  	
   

  	
  82.19

  	
  %

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


 


	
  LESSOR:

  	
  LESSEE:

  
	
  MATRIX FUNDING CORPORATION

  	
  SOUTHWALL TECHNOLOGIES,
  INC.

  
	
   

  	
   

  	
   

  	
   

  
	
  BY:

  	
   

  	
  BY:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ITS: 

  	
  Assistant Vice President

  	
  ITS:

  	
  Assistant Vice President

  



 

















 


 


SECURITY AGREEMENT


(Personal
Property)


 


THIS SECURITY AGREEMENT is made this 19th day of July,
1999, between Southwall Technologies, Inc., having its principal place of
business at 1029 Corporation Way, Palo Alto, CA 94303 (“Debtor”) and Matrix
Funding Corporation, having its principal place of business at 6975 Union Park
Center Second Floor, Midvale, UT 84047 (“Secured Party”).


 


1.             Background.  Secured Party, as lessor, and Debtor, as
lessee, have entered into Lease Schedule No. 1 dated July 19, 1999 (“Schedule”)
to Master Lease Agreement No. R0825, dated July 19, 1999 (“Master Lease”).  Debtor will execute and deliver to Secured
Party an “Acceptance Certificate” certifying it has accepted the leased
property for all purposes under the Schedule. 
The Master Lease, the Schedule and the Acceptance Certificate, together
with all amendments, riders and supplements thereto, are referred to herein
collectively as the “Lease”.


 


As a condition to its execution and performance of the
Lease, Secured Party requires Debtor to grant a security interest in the
“Collateral” described herein to secure Debtor’s payment and performance of all
of its obligations under the Lease.


 


2.             Grant
of Security Interest.  For valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Debtor hereby grants to the Secured Party a security interest in the
“Collateral” described in Section 3 to secure all of Debtor’s obligations
(including without limitation all payment obligations) under the Lease and all
other obligations and liabilities of Debtor to the Secured Party for which the
Debtor is now or may become liable in any manner, whether such obligations
arise under the Lease or otherwise, and whether primary or secondary, direct or
indirect, contingent or absolute, and howsoever arising, including without
limitation, all costs and expenses incurred in connection with the Lease or in
the protection or maintenance of the Collateral or in the enforcement of this
Security Agreement, including without limitation, court costs and attorneys’
fees.


 


3.             Collateral.  The
property serving as “Collateral” and subject to the above security interest is
as follows:


 


                All
property described in Exhibit A attached hereto, together with all attachments,
replacements, parts, substitutions, additions, repairs, accessions and
accessories incorporated therein or affixed thereto, and all proceeds
(including insurance proceeds) of the foregoing.


 


4.             Representations
Warranties and Covenants.  Debtor
represents, warrants and covenants with Secured Party as follows:


 


                a.             Title.  Debtor is the absolute owner of the Collateral with full right
and interest therein, all of which is free and clear of any and all liens,
claims and encumbrances.  Debtor has
full power and authority to grant a security interest in the Collateral and
agrees to defend its title and ownership of the Collateral against all other
persons who may claim an interest in it.


 

















 


 


                b.             No Other Security Interests.  Debtor warrants that there are no security
interests (including filed financing statements), liens, claims or other
encumbrances against the Collateral other than as specified herein or created
hereby. Debtor agrees that during the course of this Agreement and as long as
any Debtor obligations under the Lease remain outstanding, (i) Debtor will not
grant or permit a security interest in the Collateral other than the security
interest created hereunder, and (ii) Debtor will keep the Collateral free from
any and all liens, claims and
encumbrances.


 


                c.             No Sale or Disposition of Collateral. 
Debtor will not assign, transfer, discount, sell, offer for sale, or
otherwise dispose of the Collateral or any interest therein without the prior
written consent of the Secured Party.


 


                d.             Unlawful Uses of Collateral.  Debtor will not use or permit any person to
use the Collateral in a manner prohibited by law, or in violation of any policy
of insurance, or in any manner inconsistent with the interest of the Secured
Party.


 


                e.             Care of Collateral.  Debtor agrees to maintain the Collateral in
at least as good order and condition as it is at the time of execution and
delivery of this Security Agreement, and Debtor agrees to take all steps
necessary or advisable to preserve the Collateral and to prevent the Collateral
from being misused, wasted or destroyed.


 


                f.              Taxes.  Debtor agrees to pay promptly when due all taxes and assessments
on or with respect to the Collateral. Should Debtor fail to do so, the Secured
Party may at its option (although it is not required to do so) pay or discharge
the same.  Any such payment shall become
an obligation of Debtor secured by the Collateral.


 


                g.             Insurance.  Debtor agrees to maintain in force casualty and  liability insurance with
regard to the Collateral in amounts and with insurers acceptable to Secured
Party. Debtor will cause Secured Party to be shown as co-insured and loss payee
on all such policies of insurance. 
Should Debtor fail to maintain insurance as required above, the Secured
Party may at its option (although it is not required to do so) obtain and pay
such insurance.  Any such payment shall
become an obligation of Debtor secured by the Collateral.


 


                h.             Lease.  Debtor shall be liable under this Security Agreement for all of
its obligations under the Lease, and the terms and conditions of the Lease are
incorporated by reference into this Agreement. 
Breach of any of Debtor’s obligations under the Lease shall constitute a
breach of this Agreement.


 


                i.              Corporate Authority.  Debtor warrants that it is duly organized
and validly existing under the laws of the state of its incorporation; it is
qualified and in good standing in all jurisdictions in which it is doing
business; and that the execution and performance of this Security Agreement is
within the Debtor’s corporate powers, has been duly authorized, and is not in
contravention of any law or regulation or the Debtor’s articles of
incorporation, bylaws or other governing instruments, or any agreement or
undertaking of which Debtor is a party or by which it is bound.


 

















 


 


                5.             Financing, Statements and Other
Documents.  Debtor agrees to execute one
or more financing statements with regard to the Collateral in form acceptable
to the Secured Party who is authorized to file the financing statement(s) in
any jurisdiction deemed necessary or advisable to perfect the Secured Party’s
security interest in the Collateral. Debtor expressly agrees to sign such
financing statements on request of the Secured Party, and Debtor authorizes and
appoints the Secured Party as its attorney in fact to sign any such statements
in its stead with full power of substitution.


 


                Debtor
agrees to cooperate fully with the Secured Party in executing additional
instruments, documents, financing statements, amendments to financing
statements, and the like as may be deemed necessary or advisable by the Secured
Party in order to maintain and continue the security interest and lien created
or permitted by this Security Agreement.


 


                Debtor
agrees that a copy or other reproduction of this Security Agreement or
financing statement is sufficient as a financing statement under this Security
Agreement.


 


6.             Inspection of the Property.


 


                Upon
receipt of written notice, Debtor agrees to the inspection of the Collateral
from time to time by the Secured Party, its agents and assigns, as the Secured
Party may deem necessary or advisable in the protection of its interests under
this Security Agreement.


 


7.             Default.  Each of
the following shall constitute an “Event of Default” under this Security
Agreement:


 


                a.             Nonpayment.  Any failure of the Debtor to pay Lessor or
its assigns when due any obligation under the Lease or other instrument and
such failure shall continue uncured for ten (10) days after written notice is
given to Debtor.


 


                b.             Nonperformance.  Any failure of the Debtor to perform or
observe fully and in a timely and satisfactory manner any obligation under the
Lease or this Security Agreement.


 


                c.             Representations and Warranties That
Prove False.  Any representation or
warranty made by Debtor under the Lease or this Security Agreement is false or
materially misleading.


 


                d.             Bankruptcy
and Insolvency.  Debtor becomes
insolvent or is subject to any proceeding under applicable bankruptcy or
insolvency laws (whether voluntary or involuntary), including without
limitation, an assignment for the benefit of creditors; or Debtor has its property
(or part of it) placed under the custody of a receiver or trustee.


 


                e.             Unauthorized Use of Collateral or
Proceeds.  Any assignment, sale,
discount, transfer, creation of an encumbrance against or use of the Collateral
or its proceeds except as authorized in this Security Agreement,


 

















 


 


                f.              Breach of Security Agreement.  Debtor’s breach of any representation,
warranty, covenant or agreement contained in this Security Agreement.


 


8.             Remedies.
             Upon the occurrence of an
Event of Default under this Security Agreement, the Secured Party shall have
the following rights and remedies, which are immediately available to the
Secured Party:


 


                a.             All of Secured Party’s rights and
remedies under the Lease;


 


                b.             All rights and remedies provided in
this Security Agreement;


 


                c.             All rights and remedies provided at
law or in equity, including without limitation those provided to secured
parties under Article 9 of the Uniform Commercial Code (“UCC”);


 


                Among
the rights and remedies mentioned above are specifically included:


 


                x.             Right to Take Possession of the
Collateral.  The Secured Party shall
have the right to take possession of the Collateral. Debtor will cooperate
fully with the Secured Party, including without limitation assembling and
delivering the Collateral to the Secured Party at a location designated by the
Secured Party.


 


                y.             Right to Dispose of
Collateral.  The Secured Party shall
have the right to dispose of the Collateral by public or private proceeding and
may do so by way of one or more contracts. Such sale or other disposition of
the Collateral may be made as a unit or in parcels and at any time and place
and on any terms provided only that the disposition effected is commercially
reasonable. Any actions so taken shall be considered commercially reasonable if
made in the good faith exercise of the Secured Party’s reasonable business
judgment in the matter.


 


                z.             Enforcement Costs and Attorneys’
Fees.  Debtor shall be liable for and
shall pay to Secured Party all of Secured Party’s costs and expenses incurred
in enforcing its rights and remedies under this Security Agreement in effect
with regard to the Collateral, including without limitation its court costs and
attorney’s fees.


 


                Secured
Party’s remedies under this Security Agreement shall be cumulative, and Secured
Party shall not be obligated to exercise any remedy before any other remedy,
nor shall Secured Party be precluded from exercising any remedy because it has
not first exercised any other remedy.


 


9.             Assignment.  Secured Party may assign or transfer the
whole or any part of its security interest in the Collateral created hereunder.
Any transferee shall be vested with all of the rights, remedies and powers of
the Secured Party under this Security Agreement.


 


l0.            Term.  This Security Agreement is a continuing
agreement, and all rights, remedies and powers of the Secured Party hereunder
shall apply to all past, present, and future obligations of Debtor under the
Lease, notwithstanding the bankruptcy, dissolution or insolvency of Debtor, and
shall continue in full force and effect until all obligations of Debtor under
the Lease have 


 

















 


 


been paid, performed and satisfied in full,  notwithstanding any
termination of the Lease.  The power of
sale and other rights and remedies granted to the Secured Party hereunder may
be exercised even though any remedies of the Secured Party under the Lease may
be barred for whatever reason.


 


11.           Choice
of Law: Jurisdiction; Waiver of Jury Trial. 
This Agreement shall be governed by and construed in accordance with the
laws of the State of Utah in all save perfection of the security interest as
required by the Uniform Commercial Code, and at Secured Party’s option,
jurisdiction of any dispute shall be in the Utah state or federal courts.  Debtor consents to such jurisdiction.  BOTH PARTIES HERETO WAIVE THE RIGHT TO JURY
TRIAL.


 


12.           Severability.  In the event that any provision of this
Security Agreement is found to be unenforceable in any legal proceeding, the
remaining provisions shall remain in full force and effect.


 


                IN
WITNESS WHEREOF, the parties have entered into this Agreement as of the day and
year first above written.


 


	
  DEBTOR:

  	
   

  	
  SECURED PARTY:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SOUTHWALL TECHNOLOGIES, INC.

  	
   

  	
  MATRIX FUNDING CORPORATION

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  
						



 

















 


Exhibit A


 


Personal Property


 


 


Southwall Technologies,
Inc.


Master Lease Agreement
No. R0825


Lease Schedule No. 1


 


	
  QTY

  	
   

  	
  DESCRIPTION

  	
   

  	
  SERIAL NO.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  PM1 Sputter Web
  Coater System located at 3961 E. Bayshore, Palo Alto, CA 94303

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TF Depo Mach #1-HMA

  	
   

  	
   

  
	
   

  	
   

  	
  PM-1 Mox Proc
  Automation

  	
   

  	
   

  
	
   

  	
   

  	
  Polychromr
  Hexatrom PM1

  	
   

  	
   

  
	
   

  	
   

  	
  PM 1 gas
  plumbing

  	
   

  	
   

  
	
   

  	
   

  	
  Standard
  Minichambers PM-1 upgrade

  	
   

  	
   

  
	
   

  	
   

  	
  Hexatrom
  Installation PM1

  	
   

  	
   

  
	
   

  	
   

  	
  Poly Hex
  Development PM 1

  	
   

  	
   

  
	
   

  	
   

  	
  PM-1 Chill
  upgrade

  	
   

  	
   

  
	
   

  	
   

  	
  Std source
  feedthrus (3), Utilities feedthru (1)

  	
   

  	
   

  
	
   

  	
   

  	
  .M 1 power supply &
  dr sys and

  Replacement of
  PM-1 water manifolds

  	
   

  	
   

  
	
   

  	
   

  	
  Vacuum air
  cleaning System for PM-1

  	
   

  	
   

  
	
   

  	
   

  	
  Cathode Loader
  attached to forklift

  	
   

  	
   

  
	
   

  	
   

  	
  Standard Cathode
  source (assembly 1 of 3)

  	
   

  	
   

  
	
   

  	
   

  	
  Standard Cathode
  source (assembly 2 of 3

  	
   

  	
   

  
	
   

  	
   

  	
  Standard Cathode
  source (assembly 3 of 3)

  	
   

  	
   

  
	
   

  	
   

  	
  Conductivity
  Measure System

  	
   

  	
   

  
	
   

  	
   

  	
  Viewport &
  decking addition

  	
   

  	
   

  
	
   

  	
   

  	
  Optical fibers
  on PM-1

  	
   

  	
   

  
	
   

  	
   

  	
  PM-1 Cathode
  cart mod

  	
   

  	
   

  
	
   

  	
   

  	
  PM1 Chiller
  upgrade

  	
   

  	
   

  
	
   

  	
   

  	
  Computer Console

  	
   

  	
   

  
	
   

  	
   

  	
  PM-1 Steel Gas
  Manifolds

  	
   

  	
   

  
	
   

  	
   

  	
  PM1 Marker
  Cathode

  	
   

  	
   

  
	
   

  	
   

  	
  Diffusion pump
  halo baffles PM-1 upgrade

  	
   

  	
   

  
	
   

  	
   

  	
  Strip chart
  recorders

  	
   

  	
   

  
	
   

  	
   

  	
  In-vessell door
  roller guidance system

  	
   

  	
   

  
	
   

  	
   

  	
  Computer console
  installation

  	
   

  	
   

  
	
   

  	
   

  	
  PM #1 window

  	
   

  	
   

  
	
   

  	
   

  	
  PMI Hollow
  mandrels with square ends

  	
   

  	
   

  
	
   

  	
   

  	
  Shields PM-1
  upgrade

  	
   

  	
   

  
	
   

  	
   

  	
  Vac exhaust
  precipitator

  	
   

  	
   

  
	
   

  	
   

  	
  Reactive oxide
  hardware

  	
   

  	
   

  



 


 

















 


 


	
   

  	
   

  	
  PM1 cover for
  mechanical pump

  	
   

  	
   

  
	
   

  	
   

  	
  PM 1 crane hoist

  	
   

  	
   

  
	
   

  	
   

  	
  Contour drum map
  document

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Retro-fit

  	
   

  	
   

  
	
   

  	
   

  	
  Preliminary
  engineering

  	
   

  	
   

  
	
   

  	
   

  	
  AC Cathodes

  	
   

  	
   

  
	
   

  	
   

  	
  Cathode Mounting
  Hardware

  	
   

  	
   

  
	
   

  	
   

  	
  Minichamber/shielding

  	
   

  	
   

  
	
   

  	
   

  	
  Power supplies

  	
   

  	
   

  
	
   

  	
   

  	
  Electromechanical
  Web Drive Upgrade

  	
   

  	
   

  
	
   

  	
   

  	
  PLC Process
  Control Upgrade

  	
   

  	
   

  
	
   

  	
   

  	
  Hexatrom
  relocation/Delcom install

  	
   

  	
   

  
	
   

  	
   

  	
  System Utility
  Upgrades

  	
   

  	
   

  
	
   

  	
   

  	
  Outside
  Contractor Installations

  	
   

  	
   

  
	
   

  	
   

  	
  Project
  Management

  	
   

  	
   

  
	
   

  	
   

  	
  Contingency

  	
   

  	
   

  



 


 


 

















 


 


AMENDMENT NO. 1


to


LEASE SCHEDULE NO.
1


to


MASTER LEASE
AGREEMENT NO. R0825


 


                Reference
is made to Lease Schedule No. 1 (the “Schedule”) to Master Lease Agreement No.
R0825 dated July 19, 1999 (the “Master Lease”), by and between MATRIX FUNDING
CORPORATION (the “Lessor”) and SOUTHWALL TECHNOLOGIES, INC. (the
“Lessee”).  The Schedule as it
incorporates the terms and conditions of the Master Lease is referred to herein
as the “Lease”.  Pursuant to the Lease,
Lessor has agreed to purchase and lease to Lessee property specified in the
Lease.  All capitalized terms used
herein but not defined herein shall have the same meanings ascribed to them in
the Lease.


 


                The
Schedule as originally signed was based upon a Total Cost Not to Exceed
$3,000,000.00.  The revised Total Cost
as of the date hereof for the items of Property listed on the attached Exhibit
A is $2,990,236.62.  Based upon the
decreased Property cost and a more specific description and location of the
Property, the Schedule is hereby amended retroactive to July 19, 1999 by
deleting Sections 1, 2, 5, 6, 7, 8 and 10 of the Schedule and replacing them
with the following:


 


Section 1.             Property:         (1) PM7 and (1) Telephone System as more fully described on
the


attached Exhibit A
of one (1) page, which by reference becomes a part hereof.


 


Section 2.                                        Property Location: 8175 S. Hardy, Tempe, AZ 85284
(PM7)


                                                                                              1029
Corporation Way, Palo Alto, CA 94303 (Telephone System)


 


Section 5.             Monthly Rental: $93,391.07, plus
applicable sales tax


 


Section 6.             Deposit: $93,391.07, plus
applicable sales tax


 


Section 7.             Total Cost: $2,990,236.62


 


Section 8.             Lease Rate Factor: .031232


 


Section 10.                                Additional Event of Default Lessor as Secured Party,
and Lessee, as Debtor, have entered into a Security Agreement dated July 19,
1999, pursuant to which Lessee has granted to Lessor a security interest in
personal property (“Collateral” as described in the Security Agreement) to
secure Lessee’s obligations under this Schedule. Lessee’s breach of any of its
representatives, warranties, covenants and agreements under the Security
Agreement shall constitute an additional Event of Default under Section 15 of
the Master Lease.  Upon the occurrence
of an Event of Default specified above, Lessor shall be entitled to exercise
all of its rights and remedies under Section 15 of the Master Lease and under
the Security Agreement, 


 

















 


 


including without
limitation as an additional remedy, foreclosure of Lessor’s security interest
in the Collateral as provided under the Security Agreement.


 


The following shall be added as Section 1-3 of the
Schedule:


 


Section 13.                                    For purposes of
this Lease Schedule No. 1 only, in paragraph 2(b) of the Master Lease, The
phrase “calendar quarter” shall be deleted wherever it appears and replaced
with the  word “month”. In line 4 of
Section 4 the phrase “calendar quarter” shall be deleted and  replaced with the phrase “the month”. In lines
5, 6 and 7 of Section 4 the phrase “calculated by multiplying the number of
days from and including the Acceptance Date to the Commencement Date by daily
rental equal to one thirtieth (1/30) of the Monthly  Rental” shall be deleted and replaced with “a pro rata portion of
the Monthly Rental,  calculated on a
30-day basis for the period between the Acceptance Date and the Commencement
Date.”


 


All other terms and conditions of the Lease shall
continue in full force and effect without change.


 


Dated: May 1, 2000


 


	
  Lessor:

  	
   

  	
   

  	
  Lessee:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MATRIX FUNDING CORPORATION

  	
   

  	
  SOUTHWALL TECHNOLOGIES, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Its:  

  	
  Assistant Vice President

  	
   

  	
  Its:

  	
   

  



 


 

















 


 


CASUALTY LOSS
SCHEDULE


DATED MAY 1, 2000


TO


LEASE SCHEDULE N0.
1


DATED JULY 19,
1999, AS AMENDED


TO


MASTER LEASE
AGREEMENT NO. R0825


 


Upon execution below by the Lessee and Lessor, this
Casualty Loss Schedule shall replace and supercede the original Casualty Loss
Schedule previously executed, which shall from and after the date hereof become
null and void.


 


The Casualty Loss Value for each item of Property
shall be determined by multiplying the original cost of such item to Lessor by
the stipulated loss percentage indicated below which corresponds to the month
of the Lease after commencement in which the last Monthly Rental payment was
made. The dollar amount shown below represents the Casualty Loss Value which
would apply if all of the Property were lost or destroyed.


 


	
  AFTER PAYMENT NUMBER

  	
   

  	
  TOTAL CASUALTY LOSS VALUE

  	
   

  	
   

  CASUALTY LOSS PERCENTAGE

  	
   

  	
   

  AFTER PAYMENT NUMBER

  	
   

  	
  TOTAL CASUALTY LOSS VALUE

  	
   

  	
  CASUALTY LOSS PERCENTAGE

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  0

  	
   

  	
  $3,887,308

  	
   

  	
  130,00

  	
  %

  	
  19

  	
   

  	
  $2,393,635

  	
   

  	
  80.05

  	
  %

  
	
  1

  	
   

  	
  $3,825,230

  	
   

  	
  127.92

  	
  %

  	
  20

  	
   

  	
  $2,307,806

  	
   

  	
  77.18

  	
  %

  
	
  2

  	
   

  	
  $3,747,111

  	
   

  	
  125.31

  	
  %

  	
  21

  	
   

  	
  $2,231,570

  	
   

  	
  74.63

  	
  %

  
	
  3

  	
   

  	
  $3,668,680

  	
   

  	
  122.69

  	
  %

  	
  22

  	
   

  	
  $2,144,299

  	
   

  	
  71.71

  	
  %

  
	
  4

  	
   

  	
  $3,589,936

  	
   

  	
  120.06

  	
  %

  	
  23

  	
   

  	
  $2,056,788

  	
   

  	
  68.78

  	
  %

  
	
  5

  	
   

  	
  $3,510,877

  	
   

  	
  117.41

  	
  %

  	
  24

  	
   

  	
  $1,969,038

  	
   

  	
  65.85

  	
  %

  
	
  6

  	
   

  	
  $3,458,177

  	
   

  	
  115.65

  	
  %

  	
  25

  	
   

  	
  $1,881,047

  	
   

  	
  62.91

  	
  %

  
	
  7

  	
   

  	
  $3,377,152

  	
   

  	
  112.94

  	
  %

  	
  26

  	
   

  	
  $1,792,814

  	
   

  	
  59.96

  	
  %

  
	
  8

  	
   

  	
  $3,295,837

  	
   

  	
  110.22

  	
  %

  	
  27

  	
   

  	
  $1,704,340

  	
   

  	
  57.00

  	
  %

  
	
  9

  	
   

  	
  $3,214,231

  	
   

  	
  107.49

  	
  %

  	
  28

  	
   

  	
  $1,615,623

  	
   

  	
  54.03

  	
  %

  
	
  10

  	
   

  	
  $3,132,333

  	
   

  	
  104.75

  	
  %

  	
  29

  	
   

  	
  $1,530,299

  	
   

  	
  51.18

  	
  %

  
	
  11

  	
   

  	
  $3,050,142

  	
   

  	
  102.00

  	
  %

  	
  30

  	
   

  	
  $1,440,467

  	
   

  	
  48.17

  	
  %

  
	
  12

  	
   

  	
  $2,967,658

  	
   

  	
  99.24

  	
  %

  	
  31

  	
   

  	
  $1,350,427

  	
   

  	
  45.16

  	
  %

  
	
  13

  	
   

  	
  $2,884,878

  	
   

  	
  96.48

  	
  %

  	
  32

  	
   

  	
  $1,260,176

  	
   

  	
  42.14

  	
  %

  
	
  14

  	
   

  	
  $2,818,745

  	
   

  	
  94.26

  	
  %

  	
  33

  	
   

  	
  $1,169,716

  	
   

  	
  39.12

  	
  %

  
	
  15

  	
   

  	
  $2,734,258

  	
   

  	
  91.44

  	
  %

  	
  34

  	
   

  	
  $1,079,045

  	
   

  	
  36.09

  	
  %

  
	
  16

  	
   

  	
  $2,649,505

  	
   

  	
  88.61

  	
  %

  	
  35

  	
   

  	
  $988,164

  	
   

  	
  33.05

  	
  %

  
	
  17

  	
   

  	
  $2,564,484

  	
   

  	
  85.76

  	
  %

  	
  36

  	
   

  	
  $897,071

  	
   

  	
  30.00

  	
  %

  
	
  18

  	
   

  	
  $2,479,194

  	
   

  	
  82.91

  	
  %

  	
  and thereafter

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


 


	
  LESSOR:

  	
   

  	
   

  	
  LESSEE:

  	
   

  
	
  MATRIX
  FUNDING CORPORATION

  	
   

  	
  Southwall Technologies, Inc.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BY:

  	
   

  	
   

  	
  BY:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ITS:  

  	
  Assistant Vice President

  	
   

  	
  ITS:

  	
   

  



 


 

















 


 


ACCEPTANCE
CERTIFICATE


 


TO


 


LEASE SCHEDULE NO.
1,


 


as amended by
Amendment No. 1 thereto,


 


to


 


Master Lease Agreement
No. R0825 dated July 19, 1999, (the “Lease”) between MATRIX FUNDING CORPORATION, (the “Lessor”), and
SOUTHWALL TECANOLOGIES, INC., (the “Lessee”).


 


1.             Condition of the Property:


 


The Lessee certifies that
all items of Property described in Paragraph 4 have been delivered to the
location indicated in Paragraph 2, have been examined, tested, and determined
by Lessee to be ready for use, and are hereby accepted as items of Property for
all purposes under the Lease, all on the date indicated in Paragraph 3.


 


2.             Location of Property:                  8175
S. Hardy, Tempe, AZ 85284 (PM7)


                                                                        1029
Corporation Way, Palo Alto, 94303 (Telephone System)


 


3.             Acceptance Date: May 1, 2000


 


4.                                        Description
of Property: PM7 Microwave Plasma Enhanced Chemical Vapor Deposited Optical
Coating System and Telephone System more fully described on the attached
Exhibit A, which by reference becomes a part hereof.


 


LESSEE:


 


SOUTHWALL
TECHNOLOGIES, INC.


 


 


	
  BY:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  TITLE:

  	
   

  	
   

  



 


 

















 


Exhibit A


 


	
  QTY

  	
   

  	
  DESCRIPTION

  	
   

  	
  SERIAL #

  	
   

  	
  PER UNIT COST

  	
   

  	
  INVOICE TOTAL

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Location: 8175
  S. Hardy, Tempe, A2 85284

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1

  	
   

  	
  PM7 Microwave
  Plasma Enhanced Chemical Vapor Deposit Optical Coating System

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Purchase of
  Sputter Web Coater Type A 500 B4 Z6

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $673,750.00

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Refurbishing of
  the above

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $2,116,300.00

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Shipping Charges

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $65,036.67

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Location: 1029
  Corporation Way, Palo Alto, CA 94303

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Pac West
  Telecomm Inc.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Invoice No.
  70324

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  System 2000
  Telephone System

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $135,149.95

  
	
  12

  	
   

  	
  Superset 4016
  Dark Grey

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12

  	
   

  	
  Superset 4025
  Dark Grey

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7

  	
   

  	
  Superset 4150
  Dark Grey

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2

  	
   

  	
  Dataset 2103

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3

  	
   

  	
  Peripheral Node
  (AC)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Total

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $2,990,236.82

  



 


 

















 


 


LEASE SCHEDULE NO. 2


dated October 14, 1999 (the
“Schedule”)


 


to
MASTER LEASE AGREEMENT N0. R0825 dated July 19, 1999 (the “Master Lease”)
between MATRIX FUNDING CORPORATION as Lessor and SOUTHWALL TECHNOLOGIES, INC. as
Lessee.


 


This Schedule incorporates by reference the terms and
conditions of the Master Lease, Exhibit A (the “Property Description”) and
Exhibit B (the “Casualty Loss Schedule”), and constitutes a separate “Lease”
between Lessor and Lessee. All capitalized terms used herein but not defined
herein shall have the same meanings ascribed to them in the Master Lease.


 


1.                                       Property: (1) PM6 Multi Layer Vacuum
Metalizer Sputter Web Coating System, together with all other property
hereafter purchased or paid for by Lessor pursuant to that Master Progress
Funding Agreement dated July 19, 1999, between Lessor and Lessee, which relates
to the Schedule between Lessor and Lessee, (including without limitation, all
authorizations signed in connection with said Master Progress Funding Agreement
which relate to the Schedule), and any and all additions, enhancements and
replacements thereto.


 


2.                                       Property Location: 8175 S. Hardy, Tempe,
AZ 85284


 


3.                                       Acceptance Date: As specified in the
Acceptance Certificate (estimated to be October 22, 1999)


 


4.             Commencement Date: January 1, 2000


 


5.             Initial Period: Twenty-four (24) months from
Commencement Date


 


6.             Monthly Rental: $145,000.00, plus applicable sales tax


 


7.             Deposit: $145,000.00 applied to the last Monthly Rental,
plus applicable sales tax


 


8.             Total Cost To Be Funded by Lessor: $3,600,000.00


 


9.             Lease Rate Factor: .040278


 


10.                                 Interim Service Charges: Notwithstanding
anything to the contrary contained in the Master Lease, for purposes of this
Schedule only, Lessee shall irrevocably pay to Lessor a per diem charge equal
to $10,400.00, plus applicable sales tax, for the period beginning with
Lessor’s initial funding (herein estimated to be October 22, 1999) through and
including December 31, 1999.


 


11.                                 Additional Event of Default: Lessor as
Secured Party, and Lessee as Debtor, have entered into a Security Agreement
dated October 14, 1999, pursuant to which Lessee has granted to Lessor a
security interest in personal property as described in the Security Agreement 


 

















 


 


(“Collateral”) to secure
Lessee’s obligations under this Schedule. Lessee’s breach of any of its
representations, warranties, covenants and agreements under the Security
Agreement shall constitute an additional Event of Default under Section 15 of
the Master Lease. Upon the occurrence of an Event of Default under the Lease,
which may include the Event of Default specified above, Lessor shall be entitled
to exercise all of its rights and remedies under the Master Lease and under the
Security Agreement, including without limitation as an additional remedy,
foreclosure of Lessor’s security interest in the Collateral as provided under
the Security Agreement.


 


12.                                 Letter of Credit; Additional Event of
Default: Lessee shall cause a commercial bank acceptable to Lessor to issue to
Lessor an irrevocable standby letter of credit (“credit”) in the amount of
$500,000.00 in form acceptable to Lessor. The credit shall not expire before
January 1, 2002. The credit is given to secure all of Lessee’s obligations and
agreements under the Lease.


 


In addition to the Events
of Default set forth in Section 15 of the Master Lease, each of the following
shall constitute an additional Event of Default under the Lease: (i) failure of
Lessee to provide the credit as specified above or (ii) Lessor’s knowledge or
receipt of notification that the credit will not continue in effect according
to its terms for the entire Initial Period of the Lease, and extended period,
if applicable. Upon the occurrence of an Event of Default under the Lease,
which may include without limitation, an additional Event of Default specified
above, Lessor shall be entitled to exercise any of its rights or remedies under
the Lease, including without limitation as an additional remedy, the right to
draw down the credit and use the proceeds therefrom to satisfy Lessor’s
remedies under the Lease.


 


Lessee shall be
responsible for the payment of all fees associated with said credit.


 


13.                                 Representation of Lessee: Lessor and
Lessee agree that this Schedule constitutes a “finance lease” under the Uniform
Commercial Code - Article 2A, in that (a) Lessee has selected the Property in
its sole discretion, (b) Lessor has acquired the Property solely for purposes
of leasing such property under this Schedule, and (c) Lessee has received a
copy of the contract evidencing Lessor’s purchase of the Property.


 


	
   

  	
  LESSOR:

  	
   

  	
   

  	
  LESSEE:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  MATRIX FUNDING CORPORATION

  	
   

  	
  SOUTHWALL TECHNOLOGIES, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  BY:

  	
   

  	
   

  	
  BY:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  TITLE:

  	
   

  	
   

  	
  TITLE:

  	
   

  



 

















 


EXHIBIT B


 


CASUALTY LOSS
SCHEDULE


DATED OCTOBER
14,1999


 


TO


LEASE SCHEDULE NO.
2


DATED OCTOBER
14,1999


TO


MASTER LEASE
AGREEMENT NO. R0825


 


The Casualty Loss Value for each item of Property
shall be determined by multiplying the original cost of such item to Lessor by
the stipulated loss percentage indicated below which corresponds to the month
of the Lease after commencement in which the last Monthly Rental payment was
made. The dollar amount shown below represents the Casualty Loss Value which
would apply if all of the Property were lost or destroyed.


 


	
  AFTER PAYMENT NUMBER

  	
   

  	
  TOTAL CASUALTY LOSS VALUE

  	
   

  	
  CASUALTY LOSS PERCENTAGE

  	
   

  	
  AFTER PAYMENT NUMBER

  	
   

  	
  TOTAL CASUALTY LOSS VALUE

  	
   

  	
  CASUALTY LOSS PERCENTAGE

  
	
  0

  	
   

  	
  $4,680,000

  	
   

  	
  130.00%

  	
   

  	
  13

  	
   

  	
  $2,725,008

  	
   

  	
  75.69%

  
	
  1

  	
   

  	
  $4,539,643

  	
   

  	
  126.10%

  	
   

  	
  14

  	
   

  	
  $2,581,749

  	
   

  	
  71.72%

  
	
  2

  	
   

  	
  $4,386,078

  	
   

  	
  121.84%

  	
   

  	
  15

  	
   

  	
  $2,429,727

  	
   

  	
  67.49%

  
	
  3

  	
   

  	
  54,232,804

  	
   

  	
  117.58%

  	
   

  	
  16

  	
   

  	
  $2,278,118

  	
   

  	
  63.28%

  
	
  4

  	
   

  	
  $4,079,818

  	
   

  	
  113.33%

  	
   

  	
  17

  	
   

  	
  $2,126,922

  	
   

  	
  59.08%

  
	
  5

  	
   

  	
  $3,927,121

  	
   

  	
  109.09%

  	
   

  	
  18

  	
   

  	
  $1,976,137

  	
   

  	
  54.89%

  
	
  6

  	
   

  	
  $3,793,766

  	
   

  	
  105.38%

  	
   

  	
  19

  	
   

  	
  $1,825,762

  	
   

  	
  50.72%

  
	
  7

  	
   

  	
  $3,640,028

  	
   

  	
  101.11%

  	
   

  	
  20

  	
   

  	
  $1,675,796

  	
   

  	
  46.55%

  
	
  8

  	
   

  	
  $3,486,645

  	
   

  	
  96.85%

  	
   

  	
  21

  	
   

  	
  $1,527,970

  	
   

  	
  42.44%

  
	
  9

  	
   

  	
  $3,333,614

  	
   

  	
  92.60%

  	
   

  	
  22

  	
   

  	
  $1,378,177

  	
   

  	
  38.28%

  
	
  10

  	
   

  	
  $3,180,936

  	
   

  	
  88.36%

  	
   

  	
  23

  	
   

  	
  $1,228,854

  	
   

  	
  34.13%

  
	
  11

  	
   

  	
  $3,028,609

  	
   

  	
  84.13%

  	
   

  	
  24

  	
   

  	
  $1,080,000

  	
   

  	
  30.00%

  
	
  12

  	
   

  	
  $2,876,634

  	
   

  	
  79.91%

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


 


	
  LESSOR:

  	
   

  	
   

  	
  LESSEE:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MATRIX FUNDING CORPORATION

  	
   

  	
   

  	
  SOUTHWALL TECHNOLOGIES, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BY:

  	
   

  	
   

  	
  BY:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TITLE:

  	
  Assistant Vice Present

  	
   

  	
  TITLE:

  	
   

  



 


 


 

















 


 


SECURITY AGREEMENT


(Personal
Property)


 


 


THIS SECURITY AGREEMENT is made this 14th day of
October, 1999, between Southwall Technologies, Inc., having its principal place
of business at 1029 Corporation Way, Palo Alto, CA 94303 (“Debtor”) and Matrix
Funding Corporation, having its principal place of business at 5975 Union Park
Center Second Floor, Midvale, UT 84047 (“Secured Party”).


 


1.             Background.
Secured Party, as lessor, and Debtor, as lessee, have entered into Lease
Schedule No. 2 dated October 14, 1999 (‘‘Schedule”) to Master Lease Agreement
No. R0825, dated July 19, 1999 (“Master Lease”). Debtor will execute and
deliver to Secured Party an “Acceptance Certificate” certifying it has accepted
the leased property for all purposes under the Schedule. The Master Lease, the
Schedule and the Acceptance Certificate, together with all amendments, riders
and supplements thereto, are referred to herein collectively as the “Lease”.


 


As a condition to its execution and performance of the
Lease, Secured Party requires Debtor to grant a security interest in the
“Collateral” described herein to secure Debtor’s payment and performance of all
of its obligations under the Lease.


 


2.             Grant
of Security Interest. For valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, Debtor hereby grants to the Secured Party a
security interest in the “Collateral” described in Section 3 to secure all of
Debtor’s obligations (including without limitation all payment obligations)
under the Lease and all other obligations and liabilities of Debtor to the
Secured Party for which the Debtor is now or may become liable in any manner,
whether such obligations arise under the Lease or otherwise, and whether
primary or secondary, direct or indirect, contingent or absolute, and howsoever
arising, including without limitation, all costs and expenses incurred in
connection with the Lease or in the protection or maintenance of the Collateral
or in the enforcement of this Security Agreement, including without limitation,
court costs and attorneys’ fees.


 


3.             Collateral.
The property serving as “Collateral” and subject to the above security interest
is as follows:


 


                All
property described in Exhibit A attached hereto, together with all attachments,
replacements, parts, substitutions, additions, repairs, accessions and
accessories incorporated therein or affixed thereto, and all proceeds
(including insurance proceeds) of the foregoing.


 


4.             Representations.
Warranties and Covenants. Debtor represents, warrants and covenants with
Secured Party as follows:


 


                a.             Title. Debtor is the
absolute owner of the Collateral with full right and interest therein, all of
which is free and clear of any and all liens, claims and encumbrances. Debtor
has full power and authority to grant a security interest in the Collateral and
agrees to defend its title and ownership of the Collateral against all other
persons who may claim an interest in it.


 

















 


 


                b.             No Other Security Interests.
Debtor warrants that there are no security interests (including filed financing
statements), liens, claims or other encumbrances against the Collateral other
than as specified herein or created hereby. Debtor agrees that during the
course of this Agreement and as long as any Debtor obligations under the Lease
remain outstanding, (i) Debtor will not grant or permit a security interest in
the Collateral other than the security interest created hereunder, and (ii)
Debtor will keep the Collateral free from any and all liens, claims and
encumbrances.


 


                c.             No Sale or Disposition of
Collateral. Debtor will not assign, transfer, discount, sell, offer for
sale, or otherwise dispose of the Collateral or any interest therein without
the prior written consent of the Secured Party.


 


                d.             Unlawful Uses of Collateral.
Debtor will not use or permit any person to use the Collateral in a manner
prohibited by law, or in violation of any policy of insurance, or in any manner
inconsistent with the interest of the Secured Party.


 


                e.             Care of Collateral. Debtor
agrees to maintain the Collateral in at least as good order and condition as it
is at the time of execution and delivery of this Security Agreement, and Debtor
agrees to take all steps necessary or advisable to preserve the Collateral and
to prevent the Collateral from being misused, wasted or destroyed.


 


                f.              Taxes. Debtor agrees to pay
promptly when due all taxes and assessments on or with respect to the
Collateral. Should Debtor fail to do so, the Secured Party may at its option
(although it is not required to do so) pay or discharge the same. Any such
payment shall become an obligation of Debtor secured by the Collateral.


 


                g.             Insurance. Debtor agrees to
maintain in force casualty and liability insurance with regard to the
Collateral in amounts and with insurers acceptable to Secured Party. Debtor
will cause Secured Party to be shown as co-insured and loss payee on all such
policies of insurance. Should Debtor fail to maintain insurance as required
above, the Secured Party may at its option (although it is not required to do
so) obtain and pay such insurance. Any such payment shall become an obligation
of Debtor secured by the Collateral.


 


                h.             Lease. Debtor shall be
liable under this Security Agreement for all of its obligations under the
Lease, and the terms and conditions of the Lease are incorporated by reference
into this Agreement. Breach of any of Debtor’s obligations under the Lease
shall constitute a breach of this Agreement.


 


                i.              Corporate Authority. Debtor
warrants that it is duly organized and validly existing under the laws of the
state of its incorporation; it is qualified and in good standing in all
jurisdictions in which it is doing business; and that the execution and
performance of this Security Agreement is within the Debtor’s corporate powers,
has been duly authorized, and is not in contravention of any law or regulation
or the Debtor’s articles of incorporation, bylaws or other governing
instruments, or any agreement or undertaking of which Debtor is a party or by
which it is bound.


 

















 


 


5.             Financing
Statements and Other Documents. Debtor agrees to execute one or more
financing statements with regard to the Collateral in form acceptable to the
Secured Party who is authorized to file the financing statement(s) in any
jurisdiction deemed necessary or advisable to perfect the Secured Party’s
security interest in the Collateral. Debtor expressly agrees to sign such
financing statements on request of the Secured Party, and Debtor authorizes and
appoints the Secured Party as its attorney in fact to sign any such statements in
its stead with full power of substitution.


 


                Debtor
agrees to cooperate fully with the Secured Party in executing additional
instruments, documents, financing statements, amendments to financing
statements, and the like as may be deemed necessary or advisable by the Secured
Party in order to maintain and continue the security interest and lien created
or permitted by this Security Agreement.


 


                Debtor
agrees that a copy or other reproduction of this Security Agreement or
financing statement is sufficient as a financing statement under this Security
Agreement.


 


6.            Inspection of the Property.


 


                Upon
receipt of written notice, Debtor agrees to the inspection of the Collateral
from time to time by the Secured Party, its agents and assigns; as the Secured
Party may deem necessary or advisable in the protection of its interests under
this Security Agreement.


 


7.             Default. Each of the following shall constitute
an “Event of Default” under this Security


Agreement:


 


                a.
Nonpayment. Any failure of the Debtor to pay Lessor or its assigns when
due any obligation under the Lease or other instrument and such failure shall
continue uncured for ten (10) days after written notice is given to Debtor.


 


                b.             Nonperformance. Any failure
of the Debtor to perform or observe fully and in a timely and satisfactory
manner any obligation under the Lease or this Security Agreement.


 


                c.             Representations and Warranties
That Prove False. Any representation or warranty made by Debtor under the
Lease or this Security Agreement is false or materially misleading.


 


                d.             Bankruptcy and Insolvency.
Debtor becomes insolvent or is subject to any proceeding under applicable
bankruptcy or insolvency laws (whether voluntary or involuntary), including
without limitation, an assignment for the benefit of creditors; or Debtor has
its property (or part of it) placed under the custody of a receiver or trustee.


 


                e.             Unauthorized Use of Collateral
or Proceeds. Any assignment, sale, discount, transfer, creation of an
encumbrance against or use of the Collateral or its proceeds except as
authorized in this Security Agreement.


 


                f.              Breach
of Security Agreement. Debtor’s breach of any representation, warranty,
covenant or agreement contained in this Security Agreement.


 

















 


 


8.             Remedies.
Upon the occurrence of an Event of Default under this Security Agreement, the
Secured Party shall have the following rights and remedies, which are
immediately available to the Secured Party: .


 


                a.             All of Secured Party’s rights and
remedies under the Lease;


 


                b.             All rights and remedies provided in
this Security Agreement;


 


                c.             All rights and remedies provided at
law or in equity, including without limitation those provided to secured
parties under Article 9 of the Uniform Commercial Code (“UCC”);


 


                Among
the rights and remedies mentioned above are specifically included:


 


                x.             Right to Take Possession of the
Collateral. The Secured Party shall have the right to take possession of
the Collateral. Debtor will cooperate fully with the Secured Party, including
without limitation assembling and delivering the Collateral to the Secured
Party at a location designated by the Secured Party.


 


                y.             Right to Dispose of Collateral.
The Secured Party shall have the right to dispose of the Collateral by public
or private proceeding and may do so by way of one or more contracts. Such sale
or other disposition of the Collateral may be made as a unit or in parcels and
at any time and place and on any terms provided only that the disposition
effected is commercially reasonable. Any actions so taken shall be considered
commercially reasonable if made in the good faith exercise of the Secured
Party’s reasonable business judgment in the matter.


 


                z.             Enforcement Costs and Attorneys’
Fees. Debtor shall be liable for and shall pay to Secured Party all of
Secured Party’s costs and expenses incurred in enforcing its rights and
remedies under this Security Agreement in effect with regard to the Collateral,
including without limitation its court costs and attorney’s fees.


 


                Secured
Party’s remedies under this Security Agreement shall be cumulative, and Secured
Party shall not be obligated to exercise any remedy before any other remedy,
nor shall Secured Party be precluded from exercising any remedy because it has
not first exercised any other remedy.


 


9.             Assignment.
Secured Party may assign or transfer the whole or any part of its security
interest in the Collateral created hereunder. Any transferee shall be vested
with all of the rights, remedies and powers of the Secured Party under this
Security Agreement.


 


10.           Term.
This Security Agreement is a continuing agreement, and all rights, remedies and
powers of the Secured Party hereunder shall apply to all past, present, and
future obligations of Debtor under the Lease, notwithstanding the bankruptcy,
dissolution or insolvency of Debtor, and shall continue in full force and
effect until all obligations of Debtor under the Lease have been paid,
performed and satisfied in fill, notwithstanding any termination of the Lease.
The power of sale and other rights and remedies granted to the Secured Party
hereunder may be 


 

















 


 


exercised even though any remedies of the Secured
Party under the Lease may be barred for whatever reason.


 


11.           Choice
of Law: Jurisdiction: Waiver of Jury Trial. This Agreement shall be
governed by and construed in accordance with the laws of the State of Utah in
all save perfection of the security interest as required by the Uniform
Commercial Code, and at Secured Party’s option, jurisdiction of any dispute
shall be in the Utah state or federal courts. Debtor consents to such
jurisdiction. BOTH PARTIES HERETO WAIVE THE RIGHT TO JURY TRIAL.


 


12.          Severability. In the event that
any provision of this Security Agreement is found to be


unenforceable in any
legal proceeding, the remaining provisions shall remain in full force and
effect.


 


                IN
WITNESS WHEREOF, the parties have entered into this Agreement as of the day and
year first above written.


 


	
  DEBTOR:

  	
   

  	
   

  	
  SECURED PARTY:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SOUTHWALL TECHNOLOGIES, INC.

  	
   

  	
  MATRIX FUNDING CORPORATION

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  



 

















 


 


Exhibit A


 


Personal Property


 


	
  Qty

  	
   

  	
  Description

  	
   

  	
  Serial No.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (1)

  	
   

  	
  PM2 Sputter Web Coater System (no serial number)
  located at 3961 E. Bayshore, Palo Alto, CA 94303