2003 10-K Exhibit 10.137.1





Exhibit 10.137.1

FIRST AMENDMENT TO FORBEARANCE AGREEMENT

This First Amendment To Forbearance Agreement
("Amendment") is entered into as of this 30th day of January 2004, at
Cupertino, California, between the following parties: PACIFIC BUSINESS FUNDING,
a division of CUPERTINO NATIONAL BANK ("PBF"), and SOUTHWALL
TECHNOLOGIES INC., a Delaware corporation ("STI").

RECITALS




	On 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 has requested that PBF amend the Forbearance
Agreement to extend the time for STI to close and receive all funds to be paid
to STI pursuant to the "Initial Equity" investment described in the
Investment Agreement.


	The purpose of this Amendment is to amend the Forbearance
Agreement as PBF deems appropriate in connection with STI's request.


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. 


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


Section 5.4 of the Forbearance Agreement is deleted and
replaced with the following:

"5.4     STI shall, on or before February 14, 2004, have
closed and received all funds to be paid to STI pursuant to the "Initial
Equity" investment described in Article II of the Investment
Agreement,"


	Consideration For
Amendment.  For and in consideration of PBF's agreement set forth herein,
upon execution of this Amendment, STI shall deliver to PBF a warrant in a form
acceptable to PBF for a term of five years for 35,000 shares of STI's common
stock with an exercise price of $0.01 per share, such warrant to be in a form
acceptable to PBF but substantially similar to the first warrant to be issued to
Needham & Company pursuant to the Investment Agreement.


	Terms And Conditions Of Forbearance Agreement.
Except as expressly amended in section 3 above, all terms and conditions in
the Forbearance Agreement 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.

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	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 CUPERTINO NATIONAL BANK


 

 

By:

Its:


 

SOUTHWALL TECHNOLOGIES INC.,

a Delaware corporation


 

 

By:

Its:Vice President, Corporate Controller