UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of Earliest Event Reported):  December
18, 2003

Southwall Technologies Inc.
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(Exact name of registrant as specified in its charter)

Delaware
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(State of incorporation or organization)

0-15930                                    94-2551470
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(Commission File Number)          (I.R.S. Employer
				        Identification No.)

3975 East Bayshore Road, Palo Alto, California  94303
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(Address of Principal Executive Office) (Zip Code)

Registrant's telephone number, including area code:
(650) 962-9111
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Item 5. 	Other Events.	
On December 19, 2003, Southwall Technologies Inc.
(`Southwall') issued a press release announcing that the previous day it had
entered into a new loan and security agreement with Pacific Business
Funding, a division of Cupertino National Bank, which is a
subsidiary of Greater Bay Bancorp (`PBF'), creating a $3,000,000 revolving line
of credit which will be guaranteed by Needham & Company, Inc. (`Needham').
Availability under the PBF line of credit is subject to the effectiveness of
Needham's guarantees.  Southwall also announced that it had entered into an
investment agreement with Needham, certain affiliates of Needham and Dolphin
Direct Equity Partners, L.P. (`Dolphin') governing the terms of Needham's
guarantees and providing for the potential future purchase by Needham, certain
affiliates of Needham and Dolphin of up to an aggregate of 4,500,000 shares of
Southwall's newly created Series A convertible preferred stock at a price of
$1.00 per share. 

Under the terms of the investment agreement, Needham will
issue the guarantees of Southwall's new line of credit facility in two separate
pieces of $2.25 million and $750,000, respectively, and Needham, certain
affiliates of Needham, and Dolphin will purchase the equity in two separate
tranches of $1.5 million and $3.0 million, respectively, following the
extensions of credit under the new facility. The new borrowings and the purchase
of each equity tranche are subject to certain conditions. These conditions
include, among other things, the receipt of concessions from creditors and
landlords, the completion of certain restructuring actions and the achievement
of cash flow break-even at quarterly revenue levels below those of third quarter
2003. There is no assurance that any of these conditions will be satisfied or
that any subsequent closings will occur.

On December 18, 2003, Needham executed a guarantee of up to
$2.25 million under the line of credit facility and received a warrant to
purchase 941,115 shares of Southwall's common stock, approximately 7.5% of
Southwall's total shares currently outstanding.  The warrant, exercisable for
$0.01 per share, will expire five years from its issuance.  Upon Needham's
guarantee of the remaining $750,000 under the line of credit, Needham will
receive an additional warrant to purchase 941,115 shares of common stock on the
same terms and conditions.  Southwall may draw down on the line of credit up to
the amount of Needham's guarantees only if Needham provides a joint instruction
and the other conditions to borrowing are met.

The investment agreement provides that, following the
extensions of credit described above, Needham, certain affiliates of Needham,
and Dolphin would agree to purchase from Southwall, and Southwall would agree to
sell to them, an aggregate of 1,500,000 shares of the Series A preferred stock
at a price of $1.00 per share, upon the completion, in the purchasers'
reasonable discretion, of certain restructuring measures.  The preferred stock
would be convertible on a one-for-one basis into Southwall common stock, have a
preference over the common stock in the event of a liquidation or winding up of
Southwall, and carry a cumulative dividend of 10% per annum along with other
protective and anti-dilution provisions.  The approval of the holders of the
Series A preferred stock will be required for Southwall to take certain actions,
including the consummation of any merger or sale of the company or all or
substantially all of its assets.  In connection with this purchase of
Southwall's preferred stock, the purchasers would receive additional five year
warrants to purchase a number of shares of Southwall's common stock equal to an
aggregate of 7.5% of the total shares outstanding, at a nominal exercise
price.

The investment agreement further provides that Needham,
certain affiliates of Needham, and Dolphin would agree to purchase from
Southwall, and Southwall would agree to sell to them, an additional 3,000,000
shares of the Series A preferred stock at a price of $1.00 per share upon
satisfaction, in the purchasers' reasonable discretion, of certain conditions.
These conditions include Southwall's having attained certain revenue levels for
the first quarter of 2004 from current business lines and the achieving of cash
flow break-even at quarterly revenue levels below third quarter 2003 levels.  In
connection with this second purchase of Southwall's preferred stock, the
purchasers would receive additional warrants to purchase a number of shares of
Southwall's common stock equal to an aggregate of 6% of the total shares
outstanding, at a nominal exercise price. Southwall granted certain registration
rights to Needham, certain affiliates of Needham, and Dolphin with respect to
the shares issuable upon exercise of the warrants or conversion of the preferred
stock.  

If all of the transactions contemplated by the investment
agreement are completed and if Needham and its affiliated entities were to
exercise all such warrants and convert all such shares of preferred stock, while
maintaining their current position of approximately 1,481,000 shares of common
stock, then the firm and its affiliated entities would own approximately
6,865,000 shares of Southwall common stock, or about 31% of the total shares
outstanding. Dolphin currently does not own any shares of common stock but upon
exercise of its warrants and conversion of its preferred stock would own
approximately 2,692,000 shares of Southwall common stock, or about 12% of the
total shares outstanding.

Under the investment agreement, Southwall is also required to
issue additional common stock warrants to Needham, certain affiliates of
Needham, and Dolphin to protect their ownership position if Southwall issues
debt or equity in connection with its restructuring efforts.  It is unlikely
that Southwall will have enough authorized shares of common stock to cover all
of the foregoing issuances and if that is the case, Southwall will be required
to hold a shareholder meeting to obtain the consent of its shareholders to
increase the number of authorized shares of its common stock.  There can be no
assurances that Southwall will not be sued by Needham, certain affiliates of
Needham, or Dolphin if it does not have enough authorized shares of common stock
to make the required issuances.
 
	The PBF loan and security agreement expires on May 5, 2004. In connection
with the line of credit, Southwall granted to PBF a lien upon and security
interest in, and right of set off with respect to all of Southwall's interest in
all accounts receivable, inventory, monies, remittances and fixed assets.
Southwall and PBF have also entered into a Forbearance Agreement in which PBF
has agreed to forbear until May 5, 2004 from pursuing its remedies pursuant to
certain defaults by Southwall under a factoring line of credit previously
entered into between the parties.  In exchange for the forbearance, Southwall
issued PBF a warrant to purchase 250,000 shares of common stock at an exercise
price of $0.01 per share.  The warrant will expire five years from its issuance.
Southwall granted certain registration rights to PBF with respect to the shares
issuable upon exercise of the warrant.

Item 7.		Financial Statements, Pro Forma Financial Information and
Exhibits.
	(c)	Exhibits





99.1	Press Release, dated December 19, 2003, issued by Southwall
Technologies Inc.
99.2	Investment Agreement, dated December 18, 2003, by and among Southwall
Technologies Inc.,  Needham & Company, Inc., Needham Capital Partners
III, L.P., Needham Capital Partners IIIA, L.P., Needham Capital Partners III
(Bermuda), L.P., and Dolphin Direct Equity Partners, LP.
99.3	Registration Rights Agreement, dated December 18, 2003, by and among
Southwall Technologies Inc.,  Pacific Business Funding, Needham & Company,
Inc., Needham Capital Partners III, L.P., Needham Capital Partners IIIA,
L.P., Needham Capital Partners III (Bermuda), L.P., and Dolphin Direct Equity
Partners, LP.
99.4	Certificate of Designation, Preferences and Rights of Series A 10%
Cumulative Preferred Stock of Southwall Technologies Inc. filed with the
Secretary of State of Delaware on December 18, 2003.
99.5	Form of Warrant to purchase shares of Southwall's common stock.
99.6	Loan and Security Agreement, dated December 18, 2003, between
Southwall Technologies Inc. and Pacific Business Funding. 
99.7	Forbearance Agreement, dated December 18, 2003, between Southwall
Technologies Inc. and Pacific Business Funding.

 
 
 
 




SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly
authorized.

							SOUTHWALL TECHNOLOGIES INC.

Date: December 22, 2003				By: /s/ Thomas G.
Hood____________
















Thomas G. Hood
President and Chief Executive Officer

 
 
EXHIBIT INDEX

Exhibit No.	Description













99.1	Press Release, dated December 19, 2003, issued by Southwall
Technologies Inc.
99.2	Investment Agreement, dated December 18, 2003, by and among Southwall
Technologies Inc.,  Needham & Company, Inc., Needham Capital Partners
III, L.P., Needham Capital Partners IIIA, L.P., Needham Capital Partners III
(Bermuda), L.P., and Dolphin Direct Equity Partners, LP.
99.3	Registration Rights Agreement, dated December 18, 2003, by and among
Southwall Technologies Inc.,  Pacific Business Funding, Needham & Company,
Inc., Needham Capital Partners III, L.P., Needham Capital Partners IIIA,
L.P., Needham Capital Partners III (Bermuda), L.P., and Dolphin Direct Equity
Partners, LP.
99.4	Certificate of Designation, Preferences and Rights of Series A 10%
Cumulative Preferred Stock of Southwall Technologies Inc. filed with the
Secretary of State of Delaware on December 18, 2003.
99.5	Form of Warrant to purchase shares of Southwall's common stock.
99.6	Loan and Security Agreement, dated December 18, 2003, between
Southwall Technologies Inc. and Pacific Business Funding. 
99.7	Forbearance Agreement, dated December 18, 2003, between Southwall
Technologies Inc. and Pacific Business Funding.