Document:

EXHIBIT
10.105

 

	
   

  	
   

  	
  Securities Pool Contract

  
	
   

  	
   

  	
   

  
	
  Borrower:

  	
   

  	
  Southwall Europe GmbH

  
	
   

  	
   

  	
  01897 Großröhrsdorf

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  - hereinafter called the “firm”-

  
	
   

  	
   

  	
   

  
	
  Party providing security:

  	
   

  	
  1. Southwall Europe GmbH

  
	
   

  	
   

  	
  01897 Großröhrsdorf

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2. Southwall Technologies Inc., Palo Alto, USA

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  - hereinafter
  altogether called “the third parties providing security” and each of them
  called “one third party providing security”

  
	
   

  	
   

  	
   

  
	
  Credit institute:

  	
   

  	
  1. Deutsche Bank AG

  
	
   

  	
   

  	
  Filiale Dresden

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  - hereinafter also called “pool leader”

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2. IKB Deutsche Industriebank AG

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  - hereinafter
  altogether called the “banks”, each of them called the “bank” as a
  partnership under the Civil Code

  

 

Between the firm, the
third party providing security and the banks the following shall be agreed:

 

§ 1

 

Credits

 

(1)                        The banks
have business connections with the firm and when this contract was concluded,
they granted it the following credit lines:

 

	
  Deutsche Bank AG

  	
   

  
	
  long-term loan 

  	
  DM 6,000,000.00

  
	
   

  	
   

  
	
  IKB Deutsche Industriebank AG

  	
   

  
	
  long-term loan

  	
  DM 7,500,000.00

  

 

(2)        As far as stipulated by the credit
agreement, the cash credits may also be made use

 

 

of as a guaranty,
discount, acceptance and Eurocredit.  It
is also possible to make use of the cash line by Eurocredits in this way from
the foreign banking subsidiaries.  The
agreements made between the banks concerning the pool securities shall also
apply to the borrowing from foreign banking subsidiaries provided that their
rights and duties will be protected by the respective bank on a trust basis.

 

(3)        The firm shall be entitled to make use
of its credit line and credits independently. 
Each bank shall be entitled to its claims based on the credits promised
by it, alone and directly.

 

§ 2

 

Securities

 

(1)                        The firm
provided the following securities to the pool leader or will provide the
mentioned securities immediately:

 

1.                             first
land charge amounting to DM 7,470,000.00 including an annual interest rate of
15% and a non-recurrent collateral performance of 5% on the company premises in
Großröhrsdorf (Sachsen)

registered in the land register of Amtsgericht (Local
Court) of Kamenz for Großröhrsdorf, sheet no. 2015 and 1758

 

2.                             secondary
land charge amounting to DM 6,030,000.00 including an annual interest rate of
15% and non-recurrent collateral performance of 5% on the company premises in
Großröhrsdorf (Sachsen)

registered in the land register of Amtsgericht (Local
Court) of Kamenz for Großröhrsdorf, sheet no. 2015 and 1758

 

3.                             transfer
by way of security of the machinery and plants purchased by von Ardenne
Anlagentechnik GmbH

pursuant to the security agreement dated

 

(2)                        The third
party/ies providing security provided the following securities to the banks or
will provide the mentioned securities immediately:

 

Guaranty amounting to DM 3,000,000.00 of Southwall
Technologies Inc., Palo Alto, USA, dated

 

(3)                        In favor
of the pool leader and each individual bank the third party providing security
will provide the following accessory securities on the basis of equal priority
and at the same time:

 

2

 

not applicable

 

(4)                        In case
one bank will obtain further securities from the firm for one of the credits or
credit lines set forth in § 1 (1), they are included in the pool contract.

 

(5)                        In case
one bank grants additional credits to the firm and obtains additional
securities from it for them, they are included in the pool contract when they
are given.  The realization proceeds
shall be used, as a matter of priority, for the repayment of these additional
credits.

 

(6)                        The firm
shall undertake to provide securities to any third parties only after it has
notified the banks of this.  This does
not apply to extended customary title retentions of suppliers and the mortgage
and security provided on the basis of the General Bank Conditions of the credit
institutes.

 

§ 3

 

Purpose of security

 

(1)                        The
securities included in this pool contract shall serve as collateral of all
existing, future and contingent claims which the banks, including all their
domestic and foreign branch offices, on the basis of the respective bank
business relations as well as the foreign banking subsidiaries on the basis of
the granting of credits pursuant to § 1 (1, 2), are entitled to claim from the
firm.

 

(2)                        In case
the borrower assumed the liability for the liabilities of another customer of
the respective bank (for instance as a guarantor), the respective security will
only secure the debt resulting from the assumption of the liability from its
due date on and only if the firm is also the party providing security at the
same time.

 

§ 4

 

Reassignment/release of securities

 

(1)                        After all
claims secured pursuant to § 3 were satisfied, the banks must reassign the
securities included in this pool contract to the firm or the respective third
party providing security in case they did not make use of them.  This does not apply if the banks are
obligated to assign the securities or any possible surplus proceeds to a third
party (such as a guarantor who has satisfied one or several banks).

 

(2)                        When
requested the banks shall be obligated already before to release pool
securities at their option fully or partially if and in so far as the
realizable value of the pool securities does not only exceed temporarily

 

3

 

110%

 

of the claims pursuant to § 3.  The realizable value of the securities shall
be determined according to the regulations of the individual security
agreements or, if no express agreement on this was made, it results from the
type of the respective security.

 

(3)                        The
stipulations included in the various security agreements concerning the limits
for cover and release obligations shall be modified and amended by the
aforementioned regulations for the period of this pool contract.

 

§ 5

 

Trust relation/securities administration

 

(1)                        The pool
leader shall hold the securities included in this contract in trust for the
other banks on the basis of equal priority. 
The accessory rights (mortgages, guaranties) set forth in § 2 (1)
sentence 1 and § 2 (3) as pool securities shall be administrated and realized
by the pool leader also on behalf of the other banks.

 

(2)                        The pool
leader shall send to the other banks, on request, copies of the contracts of
the securities held by it to enable them to check them on their own
responsibility.  Any objections shall be
raised by the other banks immediately against the pool leader in order to make
it possible that a regulation by common consent amongst the banks will be
reached.

 

(3)                        The banks
shall authorize the pool leader to make and receive any statements required for
the provision, administration and realization of the securities also on their
behalf as well as to take all required and useful actions.  The pool leader shall be exempted from the
limitations of § 181 Civil Code for all measures taken by it on the basis of
this contract.

 

(4)                        The full
or partial release of securities shall be subject to the consent of all
banks.  Within the framework of a
release obligation pursuant to § 4 (2) this consent shall only be required for
the selection of the securities to be released.

 

(5)                        The pool
leader will transfer the securities administration to another trustee only with
the consent of the other banks.  The
respective trustee shall be exempted from the limitations of § 181 Civil Code.

 

(6)                        In case
any securities are held by a bank other than the pool leader, the
aforementioned regulations shall apply analogously.  In addition, the pool leader shall be entitled, however not
obligated to, to exercise all control and administration rights ensuing from
the security contracts.

 

4

 

§ 6

 

Realization

 

(1)                        The pool
leader shall realize the securities specified in § 2 on its own behalf,
however, for the account of the banks. 
Unless securities are held by the pool leader, these securities shall be
realized, in consultation with the pool leader, by the respective holding bank
for the account of the banks.

 

(2)                        Concerning
the issue as to whether or when the securities shall be realized, the banks
shall decide amongst themselves and by common consent.  In urgent cases the pool leader shall decide
on it alone, freely after a due assessment of the circumstances; in this case
the pool leader shall immediately inform the other banks on the measures taken.

 

(3)                        The pool
leader and the banks shall consider the realization conditions included in the
various security contracts.

 

§ 7

 

Payment of the balance

 

(1)                        The firm
shall make use of the banks equally, if possible, at the ratio of the credit
lines set forth in § 1 (1).

 

(2)                        As regards
the case of the realization pursuant to § 6, the banks shall undertake, as a
binding order of the firm and also among themselves, to update their credit
claims not exceeding the cash credit lines pursuant to § 1 (1) by the
respective balances such that for all banks a credit use will develop according
to the proportion of the mentioned cash credit lines.  The various banks must set off their potential credit balance on
non-earmarked accounts against their credit claims ranging between the cash
credit lines specified in § 1 (1). 
Charges based on debit and cheque returns to be included shall be
allocated to the claims that are eligible to be taken into account within the
framework of the payment of the balance. 
This does not apply if and in so far as the cash credit line set forth
in § 1 (1) will be exceeded by this.

 

(3)                        In case a
mixed cash line was granted, any bill discounts charged on it will only be
taken into account for the payment of the balance if a deficiency was proven;
letters of credit and sureties as far as payments were made amongst them.

 

(4)                        The
valuation date for the payment of the balance shall be the achievement of a
resolution on the taking of realization measures pursuant to § 6 (2) sentence 1
or, in urgent cases, the earliest receipt of the notification of the pool
leader of the taking of realization measures at one of the other banks pursuant
to § 6 (2) sentence 2.

 

5

 

(5)                        In case
the basis of calculation changes after the payment of the balance was made
(such as the clearing of the credit balance or payments from sureties), the
balances shall be balanced again.

 

(6)                        In case
the payment of the balance cannot be made with effect towards the firm or any
third party for legal grounds, the banks shall be obligated to bring about a
respective result internally.

 

§ 8

 

Distribution of proceeds

 

(1)
                     The
proceeds from the realization of securities shall be distributed according to
the following rank order:

 

(a)                        to
pay the costs, eventual taxes and other expenses accruing from the
administration and realization of the securities as well as the payment of the
pool leader (§ 9);

(b)                       to
redeem the claims of the bank based on their granting of the credit pursuant to
§ 1 (1), on the basis of equal priority in proportion to the borrowing after
the payment of the balance pursuant to § 7, where only those claims of the
calculation of the distribution key shall be used as a basis which do not
exceed the credit lines set forth in § 1 (1);

(c)                        to
redeem the claims of the banks the credit line of which was exceeded pursuant
to § 1 (1), on the basis of equal priority in proportion to the exceeding;

(d)                     to
redeem the claims of the banks arising from additional credits, on the basis of
equal priority in proportion to the additional borrowing as far as they were
not returned from the realization proceeds of the securities provided for them
separately (§ 2 (5) );

(e)                      to
meet the other claims of the banks based on the business bank relations, on the
basis of equal priority in proportion to the other claims.

 

(2)
                     Discount
credits shall only be regarded as being made use of if a deficiency was proven;
sureties, acceptance credits and letters of credit if the payment was made
amongst them.

 

(3)
                     In
case the amount of the claims to be taken into account was not yet fixed at the
moment when the proceeds will be distributed, they will not be considered for
the moment when the share relations in the realization proceeds will be
determined. Only when these amounts will be finally fixed, will the share
relation be finally calculated.  Any
eventual changes of the proceeds allocated to the various parties to the
contract resulting from this or from additional payments of the balance made
pursuant to § 7 (5), must be balanced amongst themselves — even if payments were already made.

 

(4)                        The banks
shall be entitled amongst themselves to change the distribution key at any
time.

 

(5)                        Any
potential proceeds not needed any more shall be paid to the firm or the
respective third party providing security, unless the banks are obligated to
transfer these proceeds to a third party that has satisfied one or several
banks (such as a guarantor).

 

6

 

§ 9

 

Costs, taxes, remuneration

 

(1)                        All costs
and taxes accruing to the pool leader or each bank holding a security, from
this securities pool contract, in particular in connection with the
administration and eventual realization of the securities, shall be chargeable
to the firm.  In addition, the pool
leader shall be entitled to receive a payment from the firm for its performance
of the functions based on this contract

 

amounting to                     0.2 % of the year end of
the valuing credits of the previous year pursuant to § 1 (1) of this contract

 

This remuneration            shall be paid in advance until
15.01. of the respective year, at the latest.

 

(2)                        If the
costs and taxes will not be paid by the firm, they will be borne by the banks
in proportion to the credit lines set forth in § 1 (1).

 

§ 10

 

Notification

 

(1)                        The pool
leader shall notify the other banks, justly and conveniently, of the state of
the handling.  The banks shall provide
to it any information required for this.

 

(2)                        The banks
shall inform each other if any facts will become known that could strongly
endanger the return of the credits specified in § 1.

 

(3)                        Each bank
shall be obligated, when requested by the other banks, to give information to
the other banks on its claims against the firm and the securities as far as it
concerns this contract and its handling.

 

(4)                        The firm
and the third parties providing security shall in so far exempt the banks from
the bank secrecy.

 

§ 11

 

Deferment and termination

 

(1)                        This pool
contract shall be concluded for an indefinite period.

 

7

 

(2)                        Each bank
shall be entitled to terminate the contract by the end of a calendar year by
observing three months‘ notice where for the observance of the period the
receipt of the notice of termination by the pool leader shall be decisive.  If the pool leader terminates, the receipt
of the notice of termination by one of the other banks shall be decisive for
the observance of the period. When the termination takes effect, the respective
bank will leave this pool contract.  It
will be continued among the other banks.

 

(3)                        In case of
a termination according to par.2 the distribution of the securities shall be
reserved to special agreements among the banks.  The firm and each third party providing security shall be
obligated to contribute to a transfer of securities as far as this is required
by law.  When requested by just one of
the banks, a payment of the balance must be made when the terminating bank will
leave, where the terminating bank itself must be involved, pursuant to the
regulation set forth in § 7.

 

(4)                        The firm
and the third party providing security may only terminate this contract if all
obligations based on the credits specified in § 1 were met.

 

§ 12

 

Place of performance, jurisdiction and applicable law

 

(1)                        It shall
be agreed that Dresden will be the place of performance and jurisdiction for
all obligations arising from this contract.

 

(2)                        This
contract shall be governed by the law of the Federal Republic of Germany.

 

§ 13

 

Modifications and amendments to this contract

 

Any modifications and amendments to this contract shall be in writing
to come into effect.  The same shall
apply to the waiver of this formal requirement.  Any collateral agreements were not concluded.

 

§ 14

 

Severability

 

If one or several of the provisions of this contract will prove to be
invalid or unfeasible, the validity of the other provisions will not be
affected by this.  The parties to the
contract will replace any invalid or unfeasible provisions by a regulation that
meets the economically desired effect and comes as close as possible to the
content of the provision to be replaced. 
This shall apply analogously if any gaps requiring an amendment will
appear.

 

8

 

	
  Dresden, 08.18.1999

  	
   

  	
  Signature.

  
	
   

  	
   

  	
   

  
	
  Place, date

  	
   

  	
  (Deutsche Bank AG Filiale Dresden)

  
	
   

  	
   

  	
   

  
	
  Berlin, 8.9.99

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
  Place, date

  	
   

  	
  (IKB Deutsche Industriebank AG)

  
	
   

  	
   

  	
   

  
	
  Dresden, August 4, 1999

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
  Place, date

  	
   

  	
  (Southwall Europe GmbH)

  
	
   

  	
   

  	
  Managing director

  
	
   

  	
   

  	
   

  
	
  Dresden, August 4, 1999

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
  Place, date

  	
   

  	
  (Southwall Technologies Inc., Palo Alto, USA)

  
	
   

  	
   

  	
  Vice President and CFO

  

 

9Exhibit
10.106

 

Loan Contract

within the framework of the

KfW-Beteiligungsfond Ost (117)
program

(Participation fund (East) of the
Reconstruction Loan Corporation)

 

Between

 

Deutsche Bank
Aktiengesellschaft

Filiale Dresden

Glacisstraße 2

01099 Dresden

 

-               hereinafter called 
“Bank”

 

and

 

Southwall Technologies Inc.

 

1029 Corporation Way

Palo Alto, CA, 94303

 

-               hereinafter called “participation grantor”

 

the following loan contract is
concluded:

 

§ 1          Granting
of a loan

 

(1)                                  The
Bank grants to the participation grantor an earmarked loan amounting to DM
2,442,000.00 (in words:  two million
four hundred forty two thousand Deutsche Mark).

 

(2)                                  As
far as the loan is concerned, it will be made available to the Bank by the
Kreditanstalt für Wiederaufbau (Reconstruction Loan Corporation) (hereinafter
called “KfW”) within the KfW-Beteiligungsfond (Ost) program.

 

(3)                                  Besides
the general Bank conditions as amended, the terms and conditions for the KfW
participation programs, as amended in 12/98, for bank transmission shall apply
to the loan contract, where both form an integral part of this contract, as
well as the following terms and conditions:

 

§ 2                               Earmarking

 

(1)                                  The
loan shall be exclusively used for a 100% financing of a participation to be
taken over by the participation grantor amounting to DM 2,442,000.00 in
Southwall Europe GmbH, 01897 Großröhrsdorf (hereinafter called  “participation taker”).

 

(2)                                  The
participation grantor undertakes to guarantee that the funds the participation
taker receives by taking over the participation will only be used for the
strengthening of his own equity basis in order to guarantee the co-financing of
the following measures in Großröhrsdorf, Stadt, Kreis Kamenz.

 

	
  Machinery/equipment/facilities

  	
  DM

  	
   

  	
  23,100,000.00

  	
   

  
	
  Industrial construction costs

  	
  DM

  	
   

  	
  15,200,000.00

  	
   

  
	
  Total
  investment acc. to promise of credit of KfW to Bank:

  	
  DM

  	
   

  	
  38,300,000.00

  	
   

  

 

 

 

The total financing
shall be made as follows:

 

	
  Participation

  	
   

  	
  DM

  	
   

  	
  2,442,000.00

  	
   

  
	
  Participation of VMP Venture
  Management

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Partners GmbH

  	
   

  	
  DM

  	
   

  	
  858,000.00

  	
   

  
	
  Investment grant/allowance

  	
   

  	
  DM

  	
   

  	
  13,404,000.00

  	
   

  
	
  EKE

  	
   

  	
  DM

  	
   

  	
  4,890,000.00

  	
   

  
	
  Other long-term outside
  funds

  	
   

  	
  DM

  	
   

  	
  13,500,000.00

  	
   

  
	
  Own funds

  	
   

  	
  DM

  	
   

  	
  3,206,000.00

  	
   

  
	
  Total financing

  	
   

  	
  DM

  	
   

  	
  38,300,000.00

  	
   

  

 

The participation grantor shall monitor the earmarked
use of the funds and he shall prove it vis-a-vis the Bank and the KfW on the
enclosed forms immediately after the completion of the project.

The participation
grantor shall keep the records on the monitoring of the earmarked use of the
participation funds.

 

(3)                                  The
Bank shall be notified immediately if the amount of the participation, the
investment project or its financing will be changed.

 

(4)                                  The
KfW reserved the right for the KfW participation programs, as amended in 12/98,
for bank transmission to reduce the loan to the Bank on a pro rata basis if the
participation will not be effected to the amount planned or if the
participation relations will change. 
Also the Bank reserves the right for such cases to reduce the loan to
the participation grantor.

 

(5)                                  If
the reduction concerns amounts already paid, the Bank must immediately repay
the reduced amounts to the KfW.  The
participation grantor undertakes to pay the corresponding amounts to the Bank.

 

§ 3          Payment

 

(1)                                  The
loan shall be paid in an amount of 100% and its full amount shall be
transferred to the participation taker. 
The net loan amount shall be DM 2,442,000.00.

 

(2)                                  Prior
to payment the signed subsidy declaration for the KfW-Beteiligungsfond, the
articles of association of the participation taker as well as the enclosed
side-letter shall be submitted to the KfW.

 

(3)                                  The
loan will be made available as soon as the Bank will have received the
refinancing funds from the KfW.  It is
known to the participation grantor that the Bank can only call for the
refinancing funds when the paying in will be due according to the participation
agreement and the Bank will have transferred a copy of the signed participation
agreement to the KfW.

 

(4)                                  If,
after payment, it should be the case that the conditions required to call for
the payment of the loan do not fully exist, the amounts concerned shall be
immediately repaid to the Bank which, in turn, undertakes to repay the amounts
to the KfW.  The concerned amounts can only
be called for again if the requirements required to call for the payment will
be met.

 

(5)                                  The
KfW may refuse the payment of the loan funds if the payment requirements are
not met or if there are any other reasons allowing to call in the loan.  If the Bank should not receive the
refinancing funds from the KfW, for any reason, it shall be released from the
obligation to pay the loan.

 

(6)                                  From
July 8, 1999 a credit commission of 0.25% p.m. shall be paid, quarterly
afterwards, on loan proceeds not yet paid out at the request of the KfW.

 

2

 

(7)                                  The
time of calling ends on June 8, 2000. 
If the loan will not be called for until this date and if, on the
punctual prior application of the KfW, the extension of the time of calling
will not be approved, the Bank will not be bound to this contract any longer.

 

(8)                                  The
entering of this loan shall be made via the special account 5390745 30 made out
to Southwall Technologies Inc., Palo Alto.

 

§ 4          Payment
of interests

 

(1)                                  An
interest of 5.75% p.a. shall be paid on the loan; the obligation to pay
interest shall begin with the day following the payment by the KfW (transfer
day) on which the loan will be paid out pursuant to § 3 subsection (2) and it
shall end with the day on which the KfW receives the redemption rate.  The interests shall become due quarterly
afterwards by March 31, June 30, September 30 and December 30 of each year.

 

(2)                                  In
order to meet the requirements of the KfW concerning the dates the Bank will
charge the account 5390745 00, made out to Southwall Technologies Inc., Palo
Alto, with the due amounts in time.

 

§ 5          Repayment

 

(1)                                  The
loan shall be repaid in one amount on June 30, 2009.  Early repayments shall only be allowed with the prior consent of
the Bank and the KfW.

 

§ 6          Payment
before due date

 

The loan shall be repaid immediately if the Bank is
obligated to repayment vis-à-vis the KfW or if the participation for repayment
will be terminated.  Repayments of the
loan before the due date shall only be permissible with the consent of the Bank
— except due to a
complete or partial termination of the participation by the participation
taker.  The Bank shall be entitled to
charge a compensation for payment before the due date in case of an
approval-requiring loan repayment before the due date.

 

§ 7          Compensation
for default

 

In case the
participation grantor did not make the due payments (for instance, interests)
to the Bank in time, the Bank may charge a compensation for the arrears
amounting to 3% p.a. of the current basic interest rate (as the following
interest rate of the discount rate pursuant to the Transitory law concerning
the discount rate).

In case the delay
takes more than one month, the Bank may terminate the whole credit for
immediate repayment.

 

§ 8          Assignment/security

 

(1)                                  It
is known to the participation grantor that the Bank assigns the claims for the
repayment of the loan including all ancillary claims to the KfW, where the Bank
remains entitled to collect the assigned claims within the framework of its
orderly conduct of affairs.

 

(2)                                  By
a special declaration the participation grantor shall assign, as a security for
this credit, each and all claims and rights resulting from the participation — as far as they are financed from
this loan — including all
ancillary rights (however, not the share as such) to the Bank, irrespective of
the fact whether they have already accrued or will come to accrual.  The participation taker must confirm this
assignment by a separate declaration.

 

3

 

(3)                                  The
participation grantor is not entitled to ask for any security to be provided to
him for the participation without the prior consent of the KfW unless it will
be a guarantee or any other comparable security provided by the shareholders or
their family members and which serve as a correction of fraudulent transfer of
assets or limitation of liability resulting from the firm’s structure of the
participation taker.  If admissible
securities will be ordered pursuant to this subparagraph they shall be assigned
to the Bank.

 

(4)                                  As
an additional security for the share of the loan provided under the liability
of the Bank the following shall be used or provided — according to a separate agreement also on the purpose of the
security -:

 

Pledging of securities

 

(5)           The joint liability
of securities on the basis of the general bank conditions and/or special
agreements shall remain unaffected.

 

§ 9          Interest
surcharge

 

(1)                                The
interest rate to be paid by the participation grantor pursuant to § 4
sub-section (1) shall be increased retrospectively, in the case of § 14
sub-section (1) (a) or (b) from the time of payment on, in the case of § 14
sub-section (1) (c), (e) or (f) from the day of the event being the reason for
the termination, by 3 % p.a., however, at least to 2 % p.a. of the current
basic interest rate (as the following interest rate of the discount rate
pursuant to the transitory law concerning the discount rate).  The interests are due upon the first request
of the Bank.

 

(2)                                  The
aforementioned surcharge shall also be charged if the participation grantor
does not use the provided funds immediately for the fixed purpose, if he does
not give them back immediately in case there is no possibility to use them or
if he fails to inform the Bank about a necessary cut, i.e. from the day of the
failure to comply with this duty.

 

§ 10        Release
from liability

 

(1)                                Pursuant
to the promise of credit made by KfW to the Bank, the Bank shall be released
from the liability for the loan by 50% with consideration to no.2., 7.
sub-section (1) to (7), requirements for the KfW-Beteiligungsfond (Ost) for
Bank transmission.

 

(2)                                  The
participation grantor is not released from liability.  The Bank will assert the outstanding claim against the
participation grantor and transfer the share of the proceeds exceeding its
liability share to the KfW.

 

(3)                                Supplementing
no. 7 (8), Requirements for the KfW-Beteiligungsfond (Ost) for Bank
transmissions as amended in 12/98, the participation grantor shall undertake to
pay the agreed interests in its full amount.

 

(4)                                The
participation grantor undertakes to immediately notify the Bank of the receipt
of any refluxes he receives after the due date of the loan and to distribute it
to the Bank.

 

§ 11        Obligation
to notify

 

(1)                                  The
participation grantor undertakes to annually submit to the Bank for
transmission to the KfW a copy of his annual statement of accounts (balance
sheet as well as profit and loss account), if the participation grantor is no
private person, as well as the one of the participation taker including the
necessary explanations.  In case there
is a delay of the preparation of the annual statement of accounts the
preliminary figures shall be submitted first. 
The participation grantor shall immediately inform the Bank about any
important events concerning him or

 

4

 

participation taker, in particular, about any changes
of the amount of the participation, the shareholders’ and participation
conditions.  As regards the
participation taker this shall also apply to the taking over and disposal of
participation in other enterprises as well as for the conclusion, annulment and
amendment of shareholders’ agreements, for the sale of the participation taker
as a whole or of parts of the participation taker.

 

(2)                                  The
Bank - and after agreement with it, also the KfW — shall be entitled to check the use of the earmarked credit at
any time at the participation grantor, to audit the business records and the
books of the participation grantor to this end and to inform themselves about
his state of affairs, where the KfW shall also be entitled to order an auditor
to carry out the audits at the Bank and at the participation grantor at the
expenses of the participation grantor.

The participation grantor must guarantee that the
aforementioned rights to audit concerning the refinanced participation of the
KfW and the Bank must also be allowed towards the participation taker.

As regards the
right of the Federal Audit Office to audit pursuant to § 91, Federal Budgetary
Regulations, the participation grantor must guarantee that all documents will
be made available to him from the participation taker which the Federal Audit
Office considers to be necessary.

 

§ 12        Participation
agreement

 

(1)                                  The
participation grantor shall undertake to explicitly refer to the
KfW-Beteiligungsfond (Ost) program in the agreement to be concluded between
himself and the participation taker.

 

(2)                                The
participation grantor shall undertake to conclude the participation agreement
such that it corresponds to the provisions of this loan contract and to the
requirements for the KfW-participation program for bank transmission.

 

(3)                                A
participation payment usual in the market must be agreed between the
participation grantor and the participation taker.  An appropriate part of the participation payment shall be agreed
with the participation taker depending on the profit.

 

(4)                                In
the participation agreement it shall be agreed that the participation taker may
terminate the participation fully or partially at any time by giving 12 months’
notice.  When the participation
relationship will be terminated the capital provided to the participation taker
by the participation grantor on the basis of this contract shall be repaid to
the participation grantor in one amount according to the terminated share.

 

(5)                                The
participation grantor shall undertake to agree his claim to repayment of the
capital provided to the participation taker in the contract such that he would
rank after the other corporate creditors in case of composition proceedings or
bankruptcy, however, before the claims of the shareholder(s) and his/their
relatives.

 

(6)                                In
the participation agreement the participation grantor will reserve the right to
make dependent on his prior approval any legal transactions and legal acts
going beyond the level of the usual business operation and which may have
significant effects on the financial and earning situation of the participation
taker.

He will reserve the right to terminate the
participation agreement for cause, in particular, for the causes stipulated in
§ 14 sub-section (1) (b), (c) or (g), before the agreed date.  He shall notify the Bank of this termination
immediately.

 

(7)                                In
the participation agreement it shall be agreed that the Bank and the KfW shall
have the right to check the use of the earmarked credit at any time, to audit
the business records and the books of the participation taker and to inform
themselves about his state of affairs.

 

(8)                                Prior
to the payment of the loan funds a copy of the signed participation agreement
shall be submitted to the Bank for transmission to the KfW.  The agreement shall not give rise to
complaint.

 

5

 

(9)           Any amendments of
the participation agreement shall be subject to the written consent of the KfW.

 

§ 13        Modifications
requiring approval

 

(1)                                The
participation grantor shall obtain the prior approval of the KfW via the Bank,
if he wants to reduce or terminate the participation before the repayment date
stipulated in the promise of credit.

 

(2)                                Any
claims arising form this loan contract cannot be assigned or pledged except
with the approval of the KfW.  The same
applies to claims arising from the participation agreement; the participation
grantor shall agree this with the participation taker in an appropriate way.

 

§ 14        Right
of the Bank to terminate

 

(1)                                The
Bank shall be entitled to terminate the loan for cause at any time and to
require the immediate repayment of the loan proceeds including accrued
interest, in particular, if

 

(a)           the
participation grantor acquired the loan wrongfully or if it was not used
according to its purpose.

 

(b)                               the
requirements of the taking over of the participation were not met or if the
funds from the participation were not used according to its purpose.

 

(c)                                the
requirements for the granting of the loan or the taking over of the
participation have changed or were cancelled later (for instance by selling the
firm or parts of the firm of the participation taker, change of the property or
participation relations) as well as in all cases in which the participation
relationship is terminated.

 

(d)                               the
participation grantor gave wrong information on his financial situation, or if
it deteriorated considerably or if there is a considerable damage to his
financial position or if there are any other exceptional circumstances that
endanger, delay or make impossible the fulfillment of the obligations of the
participation grantor arising from this loan contract.

 

(e)           the
participation grantor neglects any other important duty taken over in this
contract;

 

(f)                                    a
condition arises that would give the participation grantor the right to
terminate in exceptional cases.  For
this case the Bank will reserve the right to terminate also if the
participation grantor will not make use of his right to terminate.

 

(g)           with
regard to the property of the participation taker, his assignee or successor

 

1.             wrong
information was given;

 

2.                                       insolvency
proceedings (such as bankruptcy or execution proceedings) are instituted or
were rejected for lack of assets

 

3.                                       judicial
insolvency proceedings or other official proceedings were instituted resulting
in the exclusion of an individual execution;

 

4.                                       a
settlement out of court (settlement granting the debtor a respite in order to
avoid bankruptcy, quota settlement or composition in winding up proceedings)
was reached to which all or a group of comparable creditors agreed;

 

6

 

5.             an
execution did not result in a full satisfaction because of the repayment of the
participation;

 

6.                                       the
economic situation is so unfavorable that the participation taker stopped his
payments fully or to a considerable extent;

 

(2)                                  If
the loan becomes due pursuant to sub-section (1) of this section or becomes due
before the agreed date pursuant to § 6, the participation grantor must pay to
the bank at their request the amount that corresponds to the interests, that — setting off the interest income of
the Bank in case of interim reinvestment of the credit amount — would have to be paid on the credit
from the day of the actual repayment until the day of the final due date.  The participation grantor shall also bear
any other costs related to the termination.

 

(3)           The provision of § 7
(compensation for default) shall apply accordingly.

 

(4)                                The
Bank is at liberty to exercise the rights being due to them on the basis of
this section; the non-use of these rights does not constitute a waiver of the
right.

 

(5)                                If
the Bank makes use of its right to terminate pursuant to subsection (1), the
participation grantor must terminate the participation without notice if it is
admissible pursuant to § 12 subsection (6) sentence 2.

 

§ 15        Miscellaneous

 

Any potential
royalties by the participation taker to the participation grantor may only be
paid after the approval of KfW.

 

§ 16        Place
of performance, jurisdiction

 

Place of
performance and jurisdiction shall be Leipzig.

 

§ 17        Final
clause

 

(1)                                In
case several provisions of this contract should become legally invalid or
unenforceable, fully or partially, the validity of the other provisions remains
unaffected of this.  In this case, the
parties to the contract will amend the contract correspondingly.

 

(2)                                  All
amendments and modifications to this contract as well as all declarations and
information given between the parties to this contract on the basis of this
contract shall be made in writing.

 

7

 

The participation
grantor is requested to declare his consent to this loan contract by signing it
with legally binding effect and return the enclosed copies of this letter.

 

	
   

  	
   

  	
  Deutsche Bank AG

  	
   

  
	
   

  	
   

  	
  Filiale Dresden

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Dresden, June 14, 1999

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Sig./Gogolinki

  	
  Peter Riedel

  
					

 

I hereby consent to
all parts of the terms and conditions stipulated in this contract

 

	
   

  	
   

  	
  Southwall Technologies Inc.

  
	
   

  	
   

  	
   

  
	
  Dresden, August 4, 1999

  	
   

  	
   

  
	
   

  	
   

  	
  Sig. Billy R. Finley

  
	
   

  	
   

  	
  Vice President and CFO

  

 

	
  Annexes:

  	
   

  	
  1. “Conditions for the KfW
  participation programs for bank transmission”

  
	
   

  	
   

  	
  2.  Form “Use of funds”

  
	
   

  	
   

  	
  3.  Contract concerning the assignment of claims

  
	
   

  	
   

  	
  4.  Approval of assignment

  

 

 

8

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