Q1 2004 10-Q Exhibit 10.136.1





Exhibit 10.136.1

FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT

                  DATED AS OF DECEMBER 18, 2003

This First Amendment to Loan and Security Agreement Dated
As Of December 18, 2003 ("Amendment") is made as of April 29, 2004 by and
between Pacific Business Funding, a division of Greater Bay Bank N.A. successor
to Cupertino National Bank ("PBF") and Southwall Technologies Inc., a Delaware
corporation ("Borrower") and amends that certain Loan and Security Agreement
dated as of December 18, 2003 (the "Agreement") by and between PBF and Borrower,
with respect to the following facts:

RECITALS




	PBF and Borrower entered into credit facilities
(collectively, the "Loan") pursuant to the terms of the Agreement. The Loan is
evidenced by the Agreement and that certain Secured Promissory Note dated
December 18, 2003 in the original principal amount of $3,000,000 (the "Note")
which has a maturity date of May 5, 2004 ("Maturity Date") and which as of April
29, 2004 had an unpaid principal balance owing of $2,978,473.71, together with
all accruing interest, fees, costs and expenses provided in the Loan Documents,
as defined below. 


	To secure Borrower's obligations to PBF, Borrower has
granted to PBF a security interest in certain of Borrowers assets ("Collateral")
pursuant to the Agreement and that certain Intellectual Property Security
Agreement dated as of May 16, 2003 (the "IP Security Agreement"), executed by
Borrower in favor of PBF (collectively, the "Security Agreement") and was
perfected by the filing of (i) a UCC-1 Financing Statement filed July 30, 2001
as file number 10820626 in the office of the Secretary of State of the state of
Delaware ("DE-UCC"), and (ii) an assignment document recorded January 17, 2001
at Reel No 011461 and Frame No. 0892, in the United States Patent and Trademark
Office ("PTO Recordation"). Pursuant to the Security Agreement, the DE-UCC and
the PTO Recordation, PBF has a valid, perfected lien of first priority upon the
Collateral. 


	This Amendment, the Agreement, the Note, the Security
Agreement, the DE-UCC, and the PTO Recordation together with any other documents
executed by or among the parties in connection with the Loan, and any and all
amendments and modifications thereto shall be collectively referred to as the
Loan Documents.


	Borrower requests that PBF extend the Maturity Date to
May 5, 2005. Borrower has assured PBF that Borrower shall perform in accordance
with this Amendment and the other Loan Documents. Although PBF is under no
obligation to do so, PBF is willing to extend the Maturity Date to May 5, 2005
on the terms and conditions set forth in the Agreement and this Amendment,
provided all security interests and liens under the Loan Documents shall
continue to exist and remain in full force and effect. 

AGREEMENT

NOW THEREFORE, in consideration of the foregoing and for
other valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:




	Definitions. Capitalized terms not otherwise
defined in this Amendment shall have the meaning set forth in the Loan
Documents.


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


	Amendment to Agreement. The Agreement is hereby
amended as follows.

3.1   The definition of Maturity Date set forth in Section 1.1
of the Agreement is deleted and replaced with the following:



" "Maturity Date" means May 5, 2005, unless this Agreement is
sooner terminated under the provisions hereof."



	Payments. Borrower shall pay the following sums to
PBF in good funds:

4.1   All payments (including without limitation interest
payments) due or that may come due under the terms of the Agreement, the Note or
other Loan Documents should be paid in accordance therewith;

4.2   On execution of this Amendment to PBF, a $10,000 facility
fee.

4.3   On or before May 31, 2004, PBF's reasonable attorneys
fees and any other reasonable costs incurred as of the date hereof and in the
future through said date in connection with this Amendment. 





	Release of Claims.

5.1    No Known Claims Against PBF. Borrower warrants and
represents to PBF that, to Borrower's knowledge, 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.

5.2    Release By Borrower. For and in consideration of
PBF's agreement set forth herein, Borrower hereby releases and forever
discharges PBF, its affiliates, officers, directors, employees, shareholders,
attorneys, agents and representatives, individually and collectively, of and
from any and all matters arising out of any business, legal, or lending
relationships that have existed prior to the date hereof between Borrower and
PBF and 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.

5.3    No Prior Assignment of Released Claims. Each of
the parties 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 releasing party 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 shall
indemnify the released party 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.

5.4    No Admission of Liability. Borrower understands
and acknowledges that if any claims or other matters herein released existed,
such would be disputed by PBF. No action taken by PBF, either previously or in
connection with this Agreement, 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.

5.5    Waiver of California Civil Code   1542. Each
of the parties 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.




Each of the parties hereby acknowledges 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
agrees that this instrument shall remain in effect as a full and complete
release notwithstanding any such different or additional facts. Each of the
parties hereby covenants that this Agreement shall inure to the benefit of and
be binding upon its administrators, representatives, successors, trustees and
assigns.





	Terms and Conditions of Agreement. Borrower
further acknowledges that the Loan Documents are binding and enforceable
according to their terms, and that PBF has no obligation to extend the Maturity
Date. Borrower agrees that, except as expressly amended herein, all the terms
and conditions of the Loan Documents remain in full force and effect, including
without limitation the grants of security interests therein. Borrower confirms
that the terms of the Agreement and the IP Security Agreement govern the
security interest granted to PBF in the Collateral and the Collateral secures
all debts of Borrower to PBF. Borrower hereby acknowledges and reiterates its
authorization to PBF to file and record such Financing Statements and other
instruments as PBF may deem necessary or desirable from time to time to perfect
or continue the perfection of its security interest in the Collateral.


	Choice
of Law and Venue, Jury Trial Waiver. 

This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of California, without regard to
principles of conflicts of law. Each of Borrower and PBF hereby submits to the
exclusive jurisdiction of the state and Federal courts located in the County of
Santa Clara, State of California. BORROWER AND PBF EACH HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. 


	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 Borrower.


	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.


	Attorneys Fees.
Borrower shall reimburse PBF for all attorneys fees and expenses incurred in the
preparation or negotiation of this Amendment.


	Execution in Counterparts. This Amendment may be
executed in an original or one or more counterparts, each of which shall
constitute a duplicate original. Executed counterparts transmitted by
facsimile shall be effective as original signatures.

IN WITNESS WHEREOF, PBF and Borrower have executed this
Amendment as of the date set forth in the preamble. 


	
Southwall Technologies Inc., a Delaware corporation
	
Pacific Business Funding, a division of Greater Bay Bank
N.A.

	
By: /s/ Maury Austin

Name: MAURY AUSTIN

Title: Interim CFO 
	
By: /s/ Ron Ernst 

Name: RON ERNST 

Title: Senior Credit Officer




 

 

CONSENT

Needham & Company, Inc. (in the capacities set forth
below) hereby consents to this First Amendment To Loan And Security Agreement
Dated As Of December 18, 2003 and agrees that all terms and conditions of the
written agreements heretofore entered into between Needham & Company, Inc.
and PBF (including without limitation that certain Subordination Agreement dated
February 20, 2004 and that certain Pledge Agreement dated February 20, 2004)
remain in full force and effect.


	
 
	
Needham & Company, Inc., a corporation, For Itself and In
Its Capacity As Administrative Agent Of And For The Benefit Of The Convertible
Note Purchasers

	
 
	
By: /s/ Glen W. Albenese

	
 
	
Its: CFO