EXHIBIT 10.23
LOAN MODIFICATION AGREEMENT
This LOAN MODIFICATION AGREEMENT is entered into as of March 9, 2001, by
and between SILICON VALLEY BANK, a California-chartered bank with its principal
place of business at 0000 Xxxxxx Xxxxx, Xxxxx Xxxxx, XX 00000 and with a loan
production office located at One Xxxxxx Executive Park, Suite 200, 0000
Xxxxxxxxxx Xxxxxx, Xxxxxx, XX 00000, doing business under the name "Silicon
Valley East" ("Bank"), and NETSCOUT SYSTEMS, INC., a Delaware corporation with
its principal place of business at 0 Xxxxxxxxxx Xxxx Xxxxx, Xxxxxxxx, XX 00000
("Borrower").
RECITALS
Borrower has borrowed money from Bank pursuant to certain Existing Loan
Documents, as defined below. In consideration of certain financial
accommodations from Bank, and Borrower's continuing obligations under the
Existing Loan Documents, Borrower and Bank agree as follows:
AGREEMENT
1. DESCRIPTION OF EXISTING INDEBTEDNESS. Among other indebtedness which
may be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to,
among other documents, an Amended and Restated Loan and Security Agreement dated
as of March 12, 1998, between Borrower and Bank, as amended by Loan Modification
Agreements dated as of March 11, 1999, March 10, 2000 and June 27, 2000,
providing for a revolving credit facility up to a maximum principal amount of
FIVE MILLION AND NO/100THS DOLLARS ($5,000,000), as such Loan and Security
Agreement may be further amended from time to time (the "Loan Agreement").
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred
to as the "Indebtedness."
2. DESCRIPTION OF COLLATERAL. Repayment of the Indebtedness is secured
pursuant to the Loan Agreement. Hereinafter, the Loan Agreement, together with
all other documents securing payment of the Indebtedness, shall be referred to
as the "Existing Loan Documents."
3. DESCRIPTION OF CHANGES IN TERMS.
3.1 MODIFICATIONS TO DEFINITIONS. Section 13.1 of the Loan Agreement is
hereby amended by substituting the following definitions for those set forth
therein for the same terms:
"COMMITTED REVOLVING LINE" means an Advance up to $10,000,000.
"REVOLVING MATURITY DATE" means March 9, 2002.
3.2 MODIFICATIONS TO PROFITABILITY COVENANT. Section 6.7(ii) of the Loan
Agreement is hereby replaced in its entirety with the following:
(ii) PROFITABILITY. Borrower shall not suffer a net loss greater than (i)
$3,000,000 in the fiscal quarter ending March 31, 2001 and (ii)
$2,500,000 in each of the fiscal quarters ending June 30, 2001, September
30, 2001 and December 31, 2001.
4. WAIVER OF PRIOR DEFAULT. Bank hereby waives Borrower's violation of
the Profitability Covenant set forth in section 6.7(ii) of the Loan Agreement,
prior to the effectiveness of this Loan Modification Agreement, for the period
ending December 31, 2000.
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5. FEES. Borrower shall pay to Bank a loan renewal fee of TWENTY-FIVE
THOUSAND DOLLARS ($25,000) as well as any out-of-pocket expenses incurred by the
Bank through the date hereof, including reasonable attorneys' fees and expenses,
and after the date hereof, all Bank Expenses, including reasonable attorneys'
fees and expenses, as and when they become due.
6. CONDITIONS TO FURTHER ADVANCES. The obligation of Bank to make further
advances to Borrower under this line is subject to the condition precedent that
Bank shall have received, in form and substance satisfactory to Bank, the
following:
(i) this Loan Modification Agreement duly executed by Borrower;
(ii) payment of the fees and Bank Expenses then due specified in
Section 5 hereof;
(iii) such other documents, and completion of such other matters, as
Bank may reasonably deem necessary or appropriate.
7. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described in this Loan Modification
Agreement.
8. NO DEFENSES OF BORROWER. Borrower agrees that as of this date, it has
no defenses against any of the obligations to pay any amounts under the
Indebtedness.
9. CONTINUING VALIDITY. Borrower understands and agrees that (i) in
modifying the Existing Loan Documents, Bank is relying upon Borrower's
representations, warranties and agreements, as set forth in the Existing Loan
Documents, (ii) except as expressly modified pursuant to this Loan Modification
Agreement (including the effects of Section 7 hereof), the Existing Loan
Documents remain unchanged and in full force and effect, (iii) Bank's agreement
to modify the Existing Loan Documents pursuant to this Loan Modification
Agreement shall in no way obligate Bank to make any future modifications to the
Existing Loan Documents, (iv) it is the intention of Bank and Borrower to retain
as liable parties all makers and endorsers of the Existing Loan Documents,
unless a party is expressly released by Bank in writing, (v) no maker, endorser
or guarantor will be released by virtue of this Loan Modification Agreement, and
(vi) the terms of this Section 9 apply not only to this Loan Modification
Agreement but also to all subsequent loan modification agreements, if any.
10. EFFECTIVENESS. This Agreement shall become effective only when it
shall have been executed by Borrower and Bank (provided, however, in no event
shall this Agreement become effective until signed by an officer of Bank in
California).
IN WITNESS WHEREOF, the parties hereto have caused this Loan Modification
Agreement to be executed as a sealed instrument as of the date first set forth
above.
"Borrower": NETSCOUT SYSTEMS, INC. "Bank": SILICON VALLEY BANK, doing
business as SILICON VALLEY EAST
By: /s/ Xxxx Xxxxxxxxxx By: /s/ [illegible signature]
--------------------------------- ------------------------------------
Xxxx Xxxxxxxxxx, VP - Finance
SILICON VALLEY BANK
By: /s/ Xxxxxx Xxxxxx
------------------------------------
Title: Loan Admin--Team Leader
---------------------------------
(Signed in Santa Xxxxx County, California)
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EXHIBIT D FOLLOWS
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EXHIBIT D
COMPLIANCE CERTIFICATE
Borrower: NetScout Systems, Inc. Bank: Silicon Valley Bank
0 Xxxxxxxxxx Xxxx Xxxxx 0000 Xxxxxx Xxxxx
Xxxxxxxx, XX 00000 Xxxxx Xxxxx, XX 00000
The undersigned authorized officer of NETSCOUT SYSTEMS, INC. hereby
certifies that in accordance with the terms and conditions of the Loan and
Security Agreement dated as of March 12, 1998 between Borrower and Bank, as may
be amended from time to time (the "Agreement"), (i) Borrower is in complete
compliance for the period ending ___________ of all required conditions and
terms except as noted below and (ii) all representations and warranties of
Borrower stated in the Agreement are true, accurate and complete in all material
respects as of the date hereof. Attached herewith are the required documents
supporting the above certification. The Officer further certifies that these are
prepared in accordance with Generally Accepted Accounting Principals (GAAP) and
are consistent from one period to the next except as explained in an
accompanying letter or footnotes. The Officer further expressly acknowledges
Borrower may not request any borrowings at any time or date of determination
that Borrower is not in compliance with any of the terms of the Agreement, and
that such compliance is determined not just at the date this certificate is
delivered.
Please indicate compliance status by circling Yes/No under "Complies"
column:
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
Interim financial statements and CC Quarterly within 45 days Yes No
Annual (CPA Audited) and XX XXX within 120 days Yes No
Borrowing Base Certificate and A/R Agings Monthly within 30 days, if borrowing, Yes No
otherwise quarterly within 45 days
Collateral Audit Annually if direct borrowing exceeds Yes No
$500,000
FINANCIAL COVENANTS REQUIRED ACTUAL COMPLIES
------------------- -------- ------ --------
MAINTAIN ON A QUARTERLY BASIS:
Minimum Quick Ratio 1.5:1.0 __________:1.0 Yes No
Maximum Net Loss - FQE 3/31/01 ($3,000,000) $_____________ Yes No
Maximum Net Loss - FQE 6/30/01, 9/30/01 and
12/31/01 ($2,500,000) $_____________ Yes No
Comments Regarding Exceptions:
Sincerely,
----------------------------------- ---------------------------------------
Signature BANK USE ONLY
Received by:
--------------------------
----------------------------------- Date:
TITLE ---------------------------------
Reviewed by:
--------------------------
----------------------------------- Compliance Status: Yes No
DATE --- ---
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