Exhibit 10.7

# SEVERANCE AGREEMENT

THIS
AGREEMENT is entered into as of July 26, 2002, by and between Applied Films Corporation, a
Colorado corporation, and Thomas Edman (the Executive).

WHEREAS,
the Executive currently serves as a key employee of the Company and his services and
knowledge are valuable to the Company in connection with the management of one or more of
the Companys principal operating facilities, departments or subsidiaries; and

WHEREAS,
the Board has determined that it is in the best interests of the Company and its
stockholders to secure the Executives continued services and to ensure the
Executives continued dedication and objectivity in the event of any threat or
occurrence of, or negotiation or other action that could lead to, or create the
possibility of, a Change in Control of the Company, without concern as to whether the
Executive might be hindered or distracted by personal uncertainties and risks created by
any such possible Change in Control, and to encourage the Executives full attention
and dedication to the Company, the Board has authorized the Company to enter into this
Agreement.

NOW,
THEREFORE, for and in consideration of the promises and the mutual covenants and
agreements herein contained, the Company and the Executive hereby agree as follows:

# Section 1. Term.

This
Agreement will commence on the Effective Date and shall continue in effect for three (3)
years from the Effective Date. However, at the end of such three (3) year period and, if
extended, at the end of each additional year thereafter, the term of this Agreement shall
be extended automatically for three (3) additional years, unless the Board delivers
written notice one hundred eighty (180) days prior to the end of such term, or extended
term, to the Executive, that this Agreement will not be extended. If the Board delivers
such written notice, this Agreement will terminate at the end of the term, or extended
term, then in progress. Notwithstanding the foregoing, no such action shall be taken by
the Board during any period of time when the Board has knowledge that any Person has taken
steps reasonably calculated to effect a Change in Control until, in the opinion of the
Board, such Person has abandoned or terminated its efforts to effect a Change in Control;
and provided further, that in no event shall this Agreement be terminated after a Change
in Control.

However,
in the event a Change in Control occurs during the original or any extended term, this
Agreement will remain in effect for the longer of: (i) twenty-four (24) months beyond the
month in which such Change in Control occurred; or (ii) until all obligations of the
Company hereunder have been fulfilled, and until all benefits required hereunder have been
paid to the Executive.

# Section 2. Definitions.

Whenever
used in this Agreement, the following terms shall have the meanings set forth below and,
when the meaning is intended, the initial letter of the word is capitalized.

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| | 2.1 |  | Base Salary means the salary of record paid to the Executive as annual salary,
excluding amounts received under incentive or other bonus plan, whether or not deferred.
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| | 2.2 |  | Beneficial Owner shall have the meaning ascribed to such term in Rule 13d-3 of
the General Rules and Regulations under the Exchange Act.
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| | 2.3 |  | Beneficiary
 means the persons or entities  designated  or deemed  designated  by the Executive
                  pursuant to Section 11.3.
| | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------

| | 2.4 |  | Board
means the Company's Board of Directors.
| | --- |  | -----------------------------------------------

| | 2.5 |  | Cause means: (a) the Executives willful and continued failure to
substantially perform his duties with the Company which do not differ, in any material
respect, from the Executives duties and responsibilities during the ninety (90) day
period immediately prior to a Change in Control (other than any such failure resulting
from Disability or occurring after issuance by the Executive of a Notice of Termination
for Good Reason), after a written demand for substantial performance is delivered to the
Executive that specifically identifies the manner in which the Company believes that the
Executive has willfully failed to substantially perform his duties, and after the
Executive has failed to resume substantial performance of his duties on a continuous basis
within fourteen (14) calendar days of receiving such demand; (b) the Executives
willfully engaging in conduct (other than conduct covered under (a) above) which is
demonstrably and materially injurious to the Company, monetarily or otherwise; or (c) the
Executives having been convicted of a felony. For purposes of this subparagraph, no
act, or failure to act, on the Executives part shall be deemed willful
unless done, or omitted to be done, by the Executive not in good faith and without
reasonable belief that the action or omission was in the best interests of the Company.
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2.6 |  | Change in Control means an occurrence of a nature with respect to the Company
that would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Exchange Act. Without limiting the inclusiveness of
the definition in the preceding sentence, a Change in Control shall be deemed to have
occurred as of the first day that any one or more of the following conditions is
satisfied:
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| |  | (a) |  | Any
Person is or becomes the Beneficial Owner, directly or indirectly, of
                    securities of the Company representing forty percent (40%) or more of
the                     combined voting power of the Companys then outstanding
securities; or
| |  | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (b) |  | At
any time a majority of the Companys Board of Directors is comprised of
                    other than Continuing Directors (for purposes of this section, the
term                     Continuing Director means a director who was either (i) first
elected or                     appointed as a director prior to the Effective Date of
this Agreement; or (ii)                     subsequently elected or appointed as a
director if such director was
| |  | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  |  |  | nominated                     or appointed by at least a
majority of the then Continuing Directors); or
| |  |  |  | -------------------------------------------------------------------------------------------------------

| |  | (c) |  | Any
of the following occur:
| |  | --- |  | ---------------------------

| |  |  | (i) |  | Any
merger or consolidation of the Company, other than a merger or consolidation           in
which the voting securities of the Company immediately prior to the merger or
          consolidation continue to represent (either by remaining outstanding or being
          converted into securities of the surviving entity) fifty percent (50%) or more
          of the combined voting power of the Company or surviving entity immediately
          after the merger of consolidation with another entity;
| |  |  | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | (ii) |  | Any
sale, exchange, lease, mortgage, pledge, transfer, or other disposition (in           a
single transaction or a series of related transactions) of assets or earning
          power aggregating more than fifty percent (50%) of the Companys assets or
          earning power on a consolidated basis. Earning power shall mean the
          average EBITDA of the Company for the previous three (3) full fiscal years.
| |  |  | ---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | (iii) |  | Any
liquidation or dissolution of the Company;
| |  |  | ----- |  | ----------------------------------------------

| |  |  | (iv) |  | Any
reorganization, reverse stock split, or recapitalization of the Company           which
would result in a Change in Control; or
| |  |  | ---- |  | -----------------------------------------------------------------------------------------------------------------------------------

| |  |  | (v) |  | Any
transaction or series of related transactions having, directly or           indirectly,
the same effect as any of the foregoing; or any agreement, contract,           or other
arrangement providing for any of the foregoing.
| |  |  | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2.7 |  | Code
means the United States Internal Revenue Code of 1986, as amended.
| | --- |  | -------------------------------------------------------------------------

| | 2.8 |  | Committee
 means the  Compensation  Committee of the Board or any other committee  appointed by
                  the Board to perform the functions of the Compensation Committee
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2.9 |  | Company
means Applied Films Corporation, or any successor thereto as provided in Section 10.
| | --- |  | ----------------------------------------------------------------------------------------------

| | 2.10 |  | Disability means
that, as a result of the Executives incapacity due to physical or mental illness,
the Executive shall have been absent from the full-time performance of his duties with
the Company for twelve (12) consecutive months and, within thirty (30) calendar days
after written notice of suspension due to Disability is given, the Executive shall not
have returned to the full-time performance of his duties.
| | ---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| | 2.11 |  | Earned Bonus means the executive bonus paid or payable to the Executive with
respect to any fiscal year of the Company.
| | ---- |  | -------------------------------------------------------------------------------------------------------------------------

| | 2.12 |  | Effective
Date means the date of this Agreement set forth above.
| | ---- |  | ------------------------------------------------------------------

| | 2.13 |  | Effective
Date of Termination means (i) the date on which a Qualifying Termination occurs
which triggers the payment of Severance Benefits under this Agreement, (ii) if the
Executive dies, the date of his death, (iii) if the Executive becomes disabled, the date
of his Disability, or (iv) if the Executives termination of employment is not a
Qualifying Termination and not because of his death or Disability, the date specified in
a written notice given pursuant to Section 11.1 prior to termination specifying the
effective date of such termination.
| | ---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2.14 |  | Exchange
Act means the United States Securities Exchange Act of 1934, as amended.
| | ---- |  | -----------------------------------------------------------------------------------

| | 2.15 |  | Good
Reason shall mean, without the Executives express written consent, the
occurrence of any one or more of the following:
| | ---- |  | ------------------------------------------------------------------------------------------------------------------------------

| |  | (a) |  | The
assignment of the Executive to duties materially inconsistent with the
                    Executives authorities, duties, responsibilities, and status
(including                     offices, titles, and reporting requirements) as an
employee of the Company, or a                     reduction or alteration in the nature
or status of the Executives                     authorities, duties, or
responsibilities from those in effect during the                     immediately
preceding fiscal year other than changes substantially all of which
                    are beneficial to the Executive and which are accompanied by a
material and                     commensurate increase in compensation;
| |  | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (b) |  | The
Companys requiring the Executive to be based at a location which is
                    fifty (50) miles farther from the facility which is the Executives
                    principal business office than such distance at the time of the
Change in                     Control, except for required travel on the Companys
business to an extent                     substantially consistent with the Executives
business obligations in                     effect in the fiscal year preceding the
Change in Control;
| |  | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (c) |  | A
reduction by the Company in the Executives Base Salary or a reduction in
                    the target incentive cash bonus formula not agreed to by a majority
of the                     participants in the cash bonus plan, in either case as in
effect on the                     Effective Date or as the same shall be increased from
time to time;
| |  | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (d) |  | A
material reduction in the Executives level of participation in any of
                    the Companys short- and/or long-term incentive compensation
plans, or                     employee benefit or retirement plans, policies, practices,
or arrangements in                     which the Executive participates as of the
Effective Date; provided, however,                     that reductions in the levels of
participation in any such plans shall not be                     deemed to be Good
Reason if the Executives reduced level of                     participation
in each such program remains substantially consistent with
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| |  |  |  | the
                    average level of participation of other Executives who have positions
                    commensurate with the Executives position;
| |  |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (e) |  | A
successor to the Company refuses or fails to assume and agree to perform this
                    Agreement, as contemplated in Section 10;
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| |  | (f) |  | Any
termination of Executives employment by the Company that is not
                    effected pursuant to a Notice of Termination; or
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| |  | (g) |  | Any
other reason determined in the solediscretion of the Board to be a
                    Good Reason.
| |  | --- |  | ---------------------------------------------------------------------------------------------------------

| |  |  | The existence
of Good Reason shall not be affected by the Executives incapacity due to physical
or mental illness. The Executives continued employment shall not constitute a
waiver of the Executives rights with respect to any circumstance constituting Good
Reason.
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2.16 |  | Notice
of Termination has the meaning set forth in Section 3.7.
| | ---- |  | -----------------------------------------------------------------

| | 2.17 |  | Person shall have the meaning ascribed to such term in Section 3(a)(9) of the
Exchange Act and used in Sections 13(d) and 14(d) thereof, including a group
as provided in Section 13(d).
| | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2.18 |  | Qualifying Termination means any of the events described in Section 3.2, the
occurrence of which triggers the payment of Severance Benefits under this Agreement.
| | ---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2.19 |  | Severance
Benefits means the payment of severance compensation as provided in Section 3.3.
| | ---- |  | --------------------------------------------------------------------------------------------

# Section 3. Severance
Benefits.

3.1
 Right To Severance Benefits. The Executive shall be entitled to receive from
the Company Severance Benefits, as described in Section 3.3, if there has been a Change
in Control and if, within the six (6) month period prior to the effective date of a
Change in Control and after the Board became aware that any Person was seeking to effect
a Change of Control, or within twenty-four (24) months following the effective date of a
Change in Control, the Executives employment with the Company shall end for any
reason specified in Section 3.2.

The
Executive shall not be entitled to receive Severance Benefits if he is terminated for
Cause, or if his employment with the Company ends due to death or Disability or due to a
voluntary termination of employment by the Executive without Good Reason.

3.2
 Qualifying Termination. The occurrence of any one or more of the following
events within the six (6) month period prior to the effective date of a Change in Controland
after the Board became aware that any Person was seeking to effect a Change of Control,
or within twenty-four (24) months following the effective date of a Change in Control
shall trigger the payment of Severance Benefits to the Executive under this Agreement:

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| |  | (a) |  | An
involuntary termination of the Executives employment by the Company for
               reasons other than Cause;
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| |  | (b) |  | A
voluntary termination by the Executive for Good Reason; or
| |  | --- |  | ------------------------------------------------------------

| |  | (c) |  | The
Company or any successor company breaches any of the provisions of this
               Agreement.
| |  | --- |  | -----------------------------------------------------------------------------------------------------

3.3
 Description Of Severance Benefits. If the Executive becomes entitled to
receive Severance Benefits, as provided in Sections 3.1 and 3.2, the Company shall pay to
the Executive and provide him with the following:

| |  | (a) |  | A
lump sum cash amount equal to: (i) one and one-half times the highest rate of
               the Executives annualized Base Salary rate in effect within the
three (3)                yearsup to and including the Effective Date of
Termination, plus (ii)                one and one-half times the Executives average
Earned Bonus over the two                (2) full fiscal years prior to the Change in
Control; if the Executive has not                been eligible for an Earned Bonus for
two (2) fiscal years, such average Earned                bonus shall be deemed to be the
Executives target bonus for the current                fiscal year multiplied by
the decimal equivalent of the average percentage of                target bonus paid to
the Companys Executive Management Team in the last                two (2) fiscal
years; if the Executive has been eligible for an Earned Bonus for                the last
full fiscal year but not for the last two (2) full fiscal years, such
               Average Earned Bonus shall be the average of (i) the Executives
actual                Earned Bonus for the last full fiscal year, and (ii) the Executives
target                bonus for the current fiscal year multiplied by the decimal
equivalent of the                average percentage of target bonus paid to the Companys
Executive                Management Team in the penultimate full fiscal year prior to the
Change in                Control; provided, that any amount to be paid pursuant to this
Section 3.3(a)                shall be reduced by any other amount of severance relating
to salary or bonus                continuation to be received by the Executive upon
termination of employment of                the Executive under any salary or bonus
continuation guideline, plan, agreement,                policy or arrangement of the
Company and any severance payments the Company is                required to make
pursuant to the requirements of any United States or foreign                law or
regulation.
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| |  | (b) |  | A
lump sum cash amount equal to the sum of (i) the Executives unpaid Base
               Salary and accrued vacation pay through the Effective Date of Termination,
(ii)                the Executives average Earned Bonus over the two (2) full
fiscal years                prior to the Change in Control, multiplied by a fraction, the
numerator of which                is the number of days completed in the then-existing
fiscal year through the                Effective Date of Termination, and the denominator
of which is three hundred                sixty-five (365) less any Earned Bonus already
paid to the Executive with                respect to such fiscal year; if the Executive
has not been eligible for an                Earned Bonus for two (2) fiscal years, such
average Earned bonus shall be deemed                to be the Executives target
bonus for the current fiscal year multiplied                by the decimal equivalent of
the average percentage of target bonus paid to the                Companys
Executive Management Team in the last two (2) fiscal years; if                the
Executive has been eligible for an
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| |  |  |  | Earned Bonus for the last full fiscal
               year but not for the last two (2) full fiscal years, such Average Earned
Bonus                shall be the average of (i) the Executives actual Earned Bonus
for the                last full fiscal year, and (ii) the Executives target bonus
for the                current fiscal year multiplied by the decimal equivalent of the
average                percentage of target bonus paid to the Companys Executive
Management Team                in the penultimate full fiscal year prior to the Change in
Control; (iii) any                Earned Bonus for the previous fiscal year which has not
yet been paid, and (iv)                any compensation previously deferred by the
Executive other than pursuant to any                deferred stock plan or any tax
qualified plan (together with any interest and                earnings thereon), in each
case to the extent not previously paid.
| |  |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (c) |  | A
continuation of the welfare benefits of health care, life and accidental death
               and dismemberment, and disability insurance coverage for eighteen (18)
months                after the Effective Date of Termination. These benefits shall be
provided to the                Executive at the same premium cost, and at the same
coverage level, as in effect                as of the Executives Effective Date of
Termination. If, however, the                premium cost and/or level of coverage shall
change for all employees of the                Company, the cost and/or coverage level,
likewise, shall change for each                Executive in a corresponding manner. The
continuation of these welfare benefits                shall be discontinued prior to the
end of the eighteen (18) month period or the                date on which the Executive
has available substantially similar benefits from a                subsequent employer,
as determined by the Committee. For purposes of this                section, the
Executive shall be deemed to be on paid leave of absence during                such
eighteen (18) month period.
| |  | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (d) |  | To
the extent not previously paid or provided, the Company shall timely pay or
               provide to the Executive any other amounts or benefits required to be paid
or                provided or which the Executive is eligible to receive under any plan,
program,                policy or practice or contract or agreement of the Company and
its affiliated                companies through the Effective Date of Termination, and
the payments received                and the time period over which benefits are payable
under Section 3.3(a) shall                be included for determining participation
eligibility, vesting and the amount of                any benefit.
| |  | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

3.4
 Vesting of Options. Upon a Change in Control, all unvested options to
purchase Company stock held by the Executive shall become fully vested immediately.

3.5
 Termination For Disability. Following a Change in Control, if the Executives
employment is terminated due to Disability, the Executive shall receive his Base Salary
through the Effective Date of Termination, at which point in time the Executives
benefits shall be determined in accordance with the Companys disability, insurance,
and other applicable plans and programs then in effect.

3.6
 Termination For Death. Following a Change in Control, if the Executives
employment is terminated by reason of his death, the Executive shall receive his Base
Salary through the Effective Date of Termination, at which point in time the Executives
benefits shall be determined in accordance with the Companys survivors
benefits, insurance, and other applicable plans and programs of the Company then in
effect.

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3.7
 Termination For Cause, Or Other Than For Good Reason. Following a Change in
Control, if the Executives employment is terminated either: (a) by the Company for
Cause; or (b) by the Executive other than for death or Disability and other than for Good
Reason, the Company shall pay the Executive his full Base Salary and accrued vacation
through the Effective Date of Termination, at the rate then in effect, plus all other
amounts to which the Executive is entitled under any compensation plans of the Company,
at the time such payments are due, and the Company shall have no further obligations to
the Executive under this Agreement.

3.8
 Notice Of Termination. Any termination by the Company for Cause or by the
Executive for Good Reason shall be communicated by a Notice of Termination. For purposes
of this Agreement, a Notice of Termination shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon, and
shall set forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executives employment under the provision so
indicated.

# Section 4. Form and
Timing of Severance Benefits.

4.1
 Form And Timing Of Severance Benefits. The Severance Benefits described in
Sections 3.3(a), 3.3(b), and 3.3(d) shall be paid in cash to the Executive in a single
lump sum as soon as practicable following the Effective Date of Termination, but in no
event beyond thirty (30) days from such date.

4.2
 Withholding Of Taxes. The Company shall be entitled to withhold from any
amounts payable under this Agreement all taxes which are legally required to be withheld
(including, without limitation, any United States federal taxes and any other state,
city, or local taxes or foreign taxes), and are actually paid to such governmental
authority by the Company.

# Section 5. Excise Tax
Equalization Payment.

5.1
 Excise Tax Equalization Payment. If the Executive becomes entitled to
Severance Benefits or any other payment or benefit under this Agreement, or under any
other agreement with or plan of the Company (in the aggregate, the Total Payments),
if all or any part of the Total Payments will be subject to the tax (the Excise Tax)
imposed by Section 4999 of the Code (or any similar tax that may hereafter be imposed),
the Company shall pay to the Executive in cash an additional amount (the Gross-Up
Payment) in such amount such that after payment by the Executive of any federal,
state, and local income tax, penalties, interest, and Excise Tax upon the Gross-Up
Payment provided for by this Section 5.1 (including FICA and FUTA), the Executive retains
an amount of the Gross-Up Payment equal to the Excise Tax upon the Total Payments. Such
payment shall be made by the Company to the Executive as soon as practical following the
Effective Date of Termination, but in no event beyond thirty (30) days from such date.

5.2
 Tax Computation. For purposes of determining whether any of the Total
Payments will be subject to the Excise Tax and the amounts of such Excise Tax:

| |  | (a) |  | Any
other payments or benefits received or to be received by the Executive in
               connection with a Change in Control of the Company or the Executives
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| |  |  |  | termination of employment (whether pursuant to the terms of this Agreement
or                any other plan, arrangement, or agreement with the Company, or with any
Person                whose actions result in a Change in Control of the Company or any
Person                affiliated with the Company or such Persons) shall be treated as
parachute                payments within the meaning of Section 280G(b) (2)
of the Code, and all                excess parachute payments within the
meaning of Section 280G(b) (1)                shall be treated as subject to the Excise
Tax, unless in the opinion of tax                counsel as supported by the Companys
independent auditors and acceptable                to the Executive, such other payments
or benefits (in whole or in part) do not                constitute parachute payments, or
unless such excess parachute payments (in                whole or in part) represent
reasonable compensation for services actually                rendered within the meaning
of Section 280G(b) (4) of the Code in excess of the                base amount within the
meaning of Section 280G(b) (3) of the Code, or are                otherwise not subject
to the Excise Tax;
| |  |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (b) |  | The
amount of the Total Payments which shall be treated as subject to the Excise
               Tax shall be equal to the lesser of: (i) the total amount of the Total
Payments;                or (ii) the amount of excess parachute payments within the
meaning of Section                280G(b) (1) (after applying clause (a) above); and
| |  | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (c) |  | The
value of any noncash benefits or any deferred payment or benefit shall be
               determined by the Companys independent auditors in accordance with
the                principles of Sections 280G(d) (3) and (4) of the Code.
| |  | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

For
purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed
to pay federal income taxes at the highest marginal rate of federal income taxation in the
calendar year in which the Gross-Up Payment is to be made, and to pay state and local
income taxes at the highest marginal rate of taxation in the state and locality of the
Executives residence on the Effective Date of Termination, net of the maximum
reduction in federal income taxes which could be obtained from deduction of such state and
local taxes.

5.3
 Subsequent Recalculation. If the Internal Revenue Service adjusts the
computation of the Company under Section 5.2 so that the Executive did not receive the
intended net benefit, the Company shall reimburse the Executive for the full amount
necessary to make the Executive whole, including a market rate of interest, as determined
by the Committee.

# Section 6. The
Companys Payment Obligations.

The
Companys obligation to make the payments and the arrangements provided for herein
shall be absolute and unconditional, and shall not be affected by any circumstances,
including, without limitation, any offset, counterclaim, recoupment, defense, or other
right which the Company may have against the Executive or anyone else, except that
the Company shall have the right to set off any indebtedness of the Executive to the
Company for borrowed money which indebtedness is represented by a promissory note. All
amounts payable by the Company hereunder shall be paid without notice or demand. Each and
every payment made hereunder by the Company shall be final, and the Company shall not seek
to recover all or any part of such payment from the Executive or from whomsoever may be
entitled thereto, for any reasons whatsoever.

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The
Executive shall not be obligated to seek other employment in mitigation of the amounts
payable or arrangements made under any provision of this Agreement, and the obtaining of
any such other employment shall in no event effect any reduction of the Companys
obligations to make the payments and arrangements required to be made under this
Agreement, except to the extent provided in Section 3.3(c).

# Section 7. Legal
Remedies.

7.1
 Payment Of Legal Fees. To the extent permitted by law, the Company shall
reimburse the Executive forall legal fees, costs of litigation, prejudgment
interest, and other expenses incurred in good faith by the Executive as a result of the
Companys refusal to provide the Severance Benefits to which the Executive becomes
entitled under this Agreement, or as a result of the Companys contesting the
validity, enforceability, or interpretation of this Agreement, or as a result of any
conflict between the parties pertaining to this Agreement, if the Executive prevails with
respect to any one material issue of dispute in connection with such legal action.

7.2
 Arbitration. The Executive shall have the right and option to elect (in lieu
of litigation) to have any dispute or controversy arising under or in connection with
this Agreement settled by arbitration, conducted before a panel of three (3) arbitrators
sitting in a location selected by the Executive within fifty (50) miles from the location
of his employment with the Company, in accordance with the rules of the American
Arbitration Association then in effect.

Judgment
may be entered on the award of the arbitrator in any court having proper jurisdiction.
All expenses of the arbitratorsshall be borne by the Company. If the Executive
prevails with respect to any one material issue of dispute in connection with such
arbitration,the Company shall pay to the Executive the fees and expenses of the
counsel for the Executive incurred with respect to the arbitration.

# Section 8. Outplacement
Assistance.

Following
a Qualifying Termination (as described in Section 3.2), the Executive shall be reimbursed
by the Company for the costs of all outplacement services obtained by the Executive
within the two (2) year period after the Effective Date of Termination; provided,
however, that the total reimbursement shall be limited to an amount equal to the lesser
of fifteen percent (15%) of the Executives Base Salary, or Twenty-Five Thousand and
No/100 Dollars ($25,000).

# Section 9. Obligations
of the Executive.

9.1
 Limitation on Executives Voluntary Termination. The Executive agrees
that if any Person attempts a Change in Control, he shall not voluntarily leave the
employ of the Company without a Good Reason specified in Section 2.15(b), (c) or 2.15(d),
(a) until such attempted Change in Control terminates or (b) if a Change in Control shall
occur, until ninety (90) days following such Change in Control. For purposes of clause
(a) of the preceding sentence, Good Reason shall be determined as if a Change in Control
had occurred when such attempted Change in Control became known to the Board.

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9.2
 Confidential Information and Non-Solicitation.

| |  | (a) |  | The
Executive acknowledges that, as an employee of the Company, he will be           making
use of, acquiring and adding to confidential information of a special and
          unique nature and value relating to the Company and its strategic plan and
          financial operations. The Executive further recognizes and acknowledges that
all           confidential information is the exclusive property of the Company, is
material           and confidential, and is critical to the successful conduct of the
business of           the Company. Accordingly, the Executive covenants and agrees that
he will use           confidential information for the benefit of the Company only and
shall not at           any time, directly or indirectly, during the term of this
Agreement or           thereafter divulge, reveal or communicate any confidential
information to any           person, firm, corporation or entity whatsoever, or use any
confidential           information for his own benefit or for the benefit of others. The
Executive also           agrees not to engage in any business involving the production or
design of any           products that are similar to any of the principal products of the
Company (as           determined on the Effective Date of Termination), directly or
indirectly,           whether as an employee, proprietor, partner, shareholder,
consultant or           otherwise, for one (1) year after the Effective Date of
Termination. The           Executive also agrees not to hire or solicit for hire,
directly or indirectly,           any employee on the payroll of the Company for any
third party during the term           of this Agreement and for one (1) year after the
Date of Termination without the           prior written consent of the Company. In no
event shall an asserted violation of           the provisions of this Section 9.2
constitute a basis for deferring or           withholding any amounts otherwise payable
to the Executive under this Agreement.
| |  | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (b) |  | Any
termination of the Executives employment or of this Agreement shall           have
no effect on the continuing operation of this Section 9.2.
| |  | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (c) |  | The
Executive acknowledges and agrees that the Company will have no adequate           remedy
at law, and could be irreparably harmed, if the Executive breaches or           threatens
to breach any of the provisions of this Section 9.2. The Executive           agrees that
the Company shall be entitled to equitable and/or injunctive relief           to prevent
any breach or threatened breach of this Section 9.2, and to specific
          performance of each of the terms hereof in addition to any other legal or
          equitable remedies that the Company may have. The Executive further agrees that
          he shall not, in any equity proceeding relating to the enforcement of the terms
          of this Section 9.2, raise the defense that the Company has an adequate remedy
          at law.
| |  | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# Section 10. Successors
and Assignment.

10.1
 Successors To The Company.

| |  | (a) |  | This
Agreement shall not be terminated by any merger or consolidation of the           Company
whether the Company is or is not the surviving or resulting corporation           or as a
result of any transfer of all or substantially all of the assets of the
          Company. In the event of any such merger, consolidation or transfer of assets,
          the provisions of this Agreement shall be binding upon the surviving or
          resulting corporation or the person or entity to which such assets are
          transferred.
| |  | --- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | (b) |  | The
Company agrees that concurrently with any merger, consolidation or transfer           of
assets referred to in Section 10.1(a), it will cause any successor or
          transferee unconditionally to assume, by written instrument delivered to the
          Executive (or his Beneficiary
| |  | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  |  |  | or estate), all of the obligations of the Company
          hereunder. Failure of the Company to obtain such assumption prior to the
          effectiveness of any such merger, consolidation or transfer of assets shall be
a           breach of this Agreement and shall entitle the Executive to compensation and
          other benefits from the Company in the same amount and on the same terms as the
          Executive would be entitled hereunder if the Executives employment were
          terminated following a Change in Control voluntarily for Good Reason. For
          purposes of implementing the foregoing, the date on which any such merger,
          consolidation or transfer becomes effective shall be deemed the Effective Date
          of Termination.
| |  |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.2 |  | Assignment
By The Executive. This Agreement shall inure to the benefit of and be enforceable by
the Executives personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees, and legatees. If the Executive dies while any
amount would still be payable to him hereunder had he continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to the Executives Beneficiary. If the Executive has not named a
Beneficiary, then such amounts shall be paid to the Executives devisee, legatee, or
other designee, or if there is no such designee, to the Executives estate.
| | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# Section 11 Miscellaneous.

11.1.
        Notices. For purposes of this
Agreement, all notices, including without           limitation, a Notice of Termination,
and other communications required or           permitted hereunder shall be in writing
and shall be deemed to have been duly           given when delivered or five (5) days
after deposit in the United States mail,           certified and return receipt
requested, postage prepaid, addressed (1) if to the           Executive, to 4376 Park
Court, Boulder, Colorado 80301, and if to the Company,           to 9586 I-25 Frontage
Rd., Longmont, Colorado 80534, attention Chairman of the           Board, with a copy to
the Secretary, or (2) to such other address as either           party may have furnished
to the other in writing in accordance herewith, except           that notices of change
of address shall be effective only upon receipt.

11.2.
        Employment Status. Except as may
be provided under any other agreement           between the Executive and the Company,
the employment of the Executive by the           Company is at will, and may
be terminated by either the Company or           the Executive at any time, subject to
applicable law and subject to the           respective obligations of the Company and the
Executive under the terms of this           Agreement.

11.3.
        Beneficiaries. The Executive may
designate one or more persons or           entities as the primary and/or contingent
Beneficiaries of any Severance           Benefits owing to the Executive under this
Agreement. Such designation must be           in the form of a signed writing acceptable
to the Committee. The Executive may           make or change such designations at any
time.

11.4.
        Severability. In the event any
provision of this Agreement shall be held           illegal or invalid for any reason,
the illegality or invalidity shall not affect           the remaining parts of the
Agreement, and the Agreement shall be construed and           enforced as if the illegal
or invalid provision had not been included. Further,           the captions of this
Agreement are not part of the provisions hereof and shall           have no force and
effect.

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11.5.
        Modification. No provision of this
Agreement may be modified, waived, or           discharged unless such modification,
waiver, or discharge is agreed to in           writing and signed by the Executive and by
an authorized member of the           Committee, or by the respective parties legal
representatives and           successors.

11.6.
        Applicable Law. To the extent not
preempted by the laws of the United           States, the laws of the state of Colorado
shall be the controlling law in all           matters relating to this Agreement.

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

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