2003 10-K Exhibit 10.137.2





Exhibit 10.137.2 (26)

Second AMENDMENT TO FORBEARANCE AGREEMENT

This Second Amendment To Forbearance Agreement
("Amendment") is entered into on this 20th day of February 2004, at
Cupertino, California, by and between the following parties: PACIFIC BUSINESS
FUNDING, a division of GREATER BAY BANK N.A. (and formerly a division of
Cupertino National Bank), ("PBF"), and SOUTHWALL TECHNOLOGIES INC., a
Delaware corporation ("STI").

RECITALS




	On or about December 18, 2003, PBF and STI entered into a
certain written Forbearance Agreement (hereinafter "Forbearance
Agreement") with respect to certain extensions of credit described therein.
Among other things, the Forbearance Agreement described and was conditioned upon
the occurrence of certain events set forth in a written Investment Agreement
entered into by STI with Needham & Company and other parties.  Said
Investment Agreement is referred to in the Forbearance Agreement as the
"Investment Agreement."  


	STI and the other parties to the Investment Agreement
have agreed to certain amendments and changes to the Investment Agreement and
concurrently with the execution of this Amendment are entering into a written
agreement entitled Amended and Restated Investment Agreement (the "Restated
Investment Agreement").  STI has requested that PBF to further amend the
Forbearance Agreement to reflect the Restated Investment Agreement.  On or about
January 30, 2004, the parties hereto amended the Forbearance Agreement in
writing by that certain written First Amendment To Forbearance Agreement, which
among other things deleted the term "Investment Agreement" from the
Forbearance Agreement and replaced it with the term "Restated Investment
Agreement."


	The purpose of this Amendment is to amend the Forbearance
Agreement, as previously amended, as PBF deems appropriate in connection with
the Restated Investment Agreement. 

NOW THEREFORE, IN CONSIDERATION of the foregoing Recitals and
the terms and conditions and agreements contained herein, the parties hereby
agree as follows:

AGREEMENT




	Definitions.
Capitalized terms not otherwise defined in this Amendment shall have the
meanings set forth in the Forbearance Agreement and the Factoring
Documents.


	Acknowledgment.  STI
acknowledges the truth and accuracy of each of the facts and legal relations
contained in the Recitals to this Amendment. 


	Amendments To Forbearance
Agreement.  The Forbearance Agreement is hereby amended as follows:




	Sections 5.4 and 5.5 of the Forbearance Agreement are
deleted and replaced with the following:

"5.4     STI shall, on or before February 23, 2004, have
closed and received all funds to be delivered to STI pursuant to the
"Convertible Debt" investment described in Article II of the Restated
Investment Agreement;

5.5[Intentionally omitted];"


	The term "Restated Investment Agreement" as
used in the Forbearance Agreement as amended shall mean that certain Amended and
Restated Investment Agreement entered into by STI and other parties on or about
February 20, 2004.


	Section 11.7 is deleted and replaced with the
following:

"11.7An Event of Default under the Restated
Investment Agreement or any agreement executed in connection therewith,
including without limitation the Convertible Notes (as defined in the Restated
Investment Agreement) to be executed and delivered pursuant to Article II of the
Restated Investment Agreement."


	The following section 11.9 is added to the Forbearance
Agreement:

"11.9Failure of Bank of America, N.A., Portfolio
Financial Servicing Company and Lehman Brothers to execute and deliver to PBF a
subordination agreement, in a form acceptable to PBF, on or before March 5, 2004
subordinating said parties' security interest and obligations with respect to
Southwall to the security interest and obligations of PBF with respect to
Southwall.


	Terms And Conditions Of
Forbearance Agreement.  Except as expressly amended in section 3 above,
all terms and conditions in the Forbearance Agreement as amended and the
Factoring Documents, as the same were expressly amended in the Forbearance
Agreement, remain in full force and effect as set forth therein.


	Warranty and Release.  In
connection with this Amendment, STI hereby agrees as follows:



	STI warrants and represents that to the extent STI makes
any payments hereunder or the under the Forbearance Agreement or Factoring
Documents, at the time of each such payment, STI is fully authorized to make
such payment.  


	STI warrants and represents to PBF that to the best of
its knowledge or information, it has and has had no claims, causes of action,
demands, costs, losses or actions of any nature against PBF, whether the same
have been or might have been asserted as a claim, cross-claim, counter-claim or
cause of action in any tribunal.


	For and in consideration of PBF's agreement set forth
herein, STI hereby releases and forever discharges PBF, its affiliates, and
their respective officers, directors, employees, shareholders, attorneys, agents
and representatives, individually and collectively, from any and all matters
arising out of the business relationships which have existed to the date hereof
between PBF and STI, including any and all past, present or future claims,
actions, causes of action, obligations, costs or demands, known or unknown,
whether or not any such claim, action, cause of action, obligation, cost, lost
or demand has been, or might have been, asserted as a claim, cross-claim,
counter-claim or cause of action in any tribunal.


	STI warrants and represents that it has not assigned or
transferred or purported to assign or transfer to any other person or entity any
claim or matter released herein and that no other person has any interest
therein of any nature.  In the event that STI shall have assigned or
transferred, or purported to assign or transfer, or any other person shall claim
an interest in any claim or other matter herein released, then the releasing
party or parties shall indemnify PBF and hold it harmless from and against any
and all losses, costs, claims or expenses, including but not limited to all
costs related to the defense of any action, including reasonable attorneys'
fees, based upon or arising out of or incurred as a result of any such claim,
assignment or transfer.


	STI understands and acknowledges that if any claims or
other matters herein released existed, such would be disputed by PBF.  No action
taken by the parties to this Amendment, or any of them, either previously or in
connection with this Amendment shall be deemed or construed to be (a) an
admission to the truth or falsity of any claims made; or (b) an acknowledgment
or admission by PBF of any fault or liability whatsoever to any other party or
to any third party.


	STI hereby relinquishes and waives all rights conferred
upon it by the provisions of Section 1542 of the California Civil Code (or any
like provision of federal or state law), which reads as follows:

A General Release does not extend to claims which the
creditor does not know or suspect to exist in his favor at the time of executing
the release, which if known by him must have materially affected his settlement
with the debtor.

STI hereby acknowledges that it is aware that it or its
attorneys might hereafter discover facts different from or in addition to those
which it or its attorneys now know or believe to be true with respect to any of
the matters herein released, including that no such claims presently exist, and
STI agrees that this instrument shall remain in effect as a full and complete
release notwithstanding any such different or additional facts. 


	No Waiver of Default.  By
entering into this Amendment, PBF waives none of the Defaults or any other
default under the Factoring Documents nor its right to collect all obligations
currently owing under either the Factoring Documents.


	Governing Law.  This
Amendment shall be interpreted and governed by California law without giving
effect to principles of conflicts of law, and the parties agree that the venue
for any lawsuit relating to this Amendment, the Forbearance Agreement or the
Factoring Documents shall be the State or Federal courts situated in the County
of Santa Clara, California.  THE PARTIES ACKNOWLEDGE AND AGREE THAT IN ANY SUCH
LAWSUIT, THEY EACH WAIVE THE RIGHT TO TRIAL BY JURY AND THAT THIS WAIVER IS A
MATERIAL INDUCEMENT TO THE OTHER PARTY TO ENTER INTO THIS
AMENDMENT.


	Successors.  The parties
hereto expressly agree and covenant that this Amendment shall inure to the
benefit of and be binding upon their respective representatives, successors,
trustees and assigns.  With the exception of the foregoing, this Amendment is
not for the benefit of any other parties apart from PBF and STI.


	Entire Agreement.  This
Amendment contains the entire agreement between the parties pertaining to the
subject matter herein, and supersedes any and all prior and/or contemporaneous
oral or written negotiations, agreements, representations, and understandings,
with respect to such subject matter.






	Consent.  PBF hereby
consents, to the extent such is required by any agreement between STI and PBF,
to the (i) amendments to the Investment Agreement effected by the Restated
Investment Agreement (ii) Mutual Release and Settlement Agreement dated February
_ 2004 by and among STI and Bank of America, N.A., Portfolio Financial Servicing
Company and Lehman Brothers and (iii) Second Amendment to Lease (3969-3975 E.
Bayshore Road-Building 1) between Judd Properties, LLC and STI, and the
transactions contemplated thereby and waives any default that would otherwise
result therefrom, and agrees that all references to the Investment Agreement in
any agreement between STI and PBF shall be deemed to refer to the Restated
Investment Agreement.


	Execution in Counterparts.  This Amendment may be
executed in an original or one or more counterparts, each of which shall
constitute a duplicate original.

IN WITNESS WHEREOF, this First Amendment to Forbearance
Agreement has been executed as of the date first above written.
PACIFIC BUSINESS FUNDING, 

a division of GREATER BAY BANK, N.A.


 

 

By:

Its:


 

SOUTHWALL TECHNOLOGIES INC.,

a Delaware corporation


 

 

By:

Its: