EXHIBIT 10.8
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of March 11, 1999,
by and between Netscout Systems, Inc. ("Borrower") and Silicon Valley Bank
("Bank"), a California chartered bank doing business as Silicon Valley East.
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 March 12,
1998, as may be amended from time to time, (the "Loan Agreement'). The Loan
Agreement provided for, among other things, a Committed Revolving Line in the
original principal amount of Three Million Dollars ($3,000,000). Defined terms
used but not otherwise defined herein shall have the same meanings as in the
Loan Agreement.
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the "Indebtedness."
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness is
secured by the Collateral as described in the Loan Agreement.
Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the Indebtedness shall be
referred to as the "Security Documents". Hereinafter, the Security Documents,
together with all other documents evidencing or securing the Indebtedness shall
be referred to as the "Existing Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS
A. MODIFICATION(S) TO LOAN AGREEMENT
1. The dollar amount referenced in Section 2.1.2 entitled "Letters of
Credit" is hereby increased from $1,000,000 to $2,000,000.
2. The dollar amount referenced in Section 2.1.3 entitled "Cash
Management Services Sublimit" is hereby increased from $100,000 to
$200,000.
3. Section 6.2 entitled "Financial Statements, Reports, Certificates"
is hereby amended to read as follows:
6.2 Financial Statements, Reports, Certificates.
(a) Borrower will deliver to Bank: (i) as soon as available, but
no later than 45 days after the last day of each quarter, a
company prepared consolidated balance sheet and income statement
covering Borrower's consolidated operations during the period, in
a form acceptable to Bank
and certified by a Responsible Officer, (ii) as soon as
available, but no later than 120 days after the end of Borrower's
fiscal year, audited consolidated financial statements prepared
under GAAP, consistently applied, together with an unqualified
opinion on the financial statements from an independent certified
public accounting firm acceptable to Bank; (iii) (upon Borrower's
successful initial public offering) within 5 days of filing,
copies of all statements, reports and notices made available to
Borrower's security holders or to any holders of Subordinated
Debt and all reports on Form 10-K, 10-Q and 8-K filed with the
Securities and Exchange Commission; (iv) a prompt report of any
legal actions pending or threatened against Borrower or any
Subsidiary that could result in damages or costs to Borrower or
any Subsidiary of $100,000 or more; and (v) budgets, sales
projections, operating plans or other financial information Bank
requests.
(b) Within 30 days after the last day of each month (or 45 days
after the last day of each quarter if no outstanding Advances
exist), Borrower will deliver to Bank a Borrowing Base
Certificate signed by a Responsible Officer with aged listings of
accounts receivable.
(c) Within 45 days after the last day of each quarter, Borrower
will deliver to Bank with the quarterly financial statements a
Compliance Certificate signed by a Responsible Officer.
(d) If outstanding Advances exceed $500,000, Bank has the right
to audit Borrower's Collateral at Borrower's expense, but the
audits will be conducted no more often than once every year
unless an Event of Default has occurred and is continuing.
4. Borrower shall maintain the financial covenants as stated in Section
6.7 entitled "Financial Covenants" on a quarterly (rather than a
monthly/quarterly) basis.
5. The following terms as defined in Section 13.1 entitled
"Definitions" are hereby amended to read as follows:
"Committed Revolving Line" means an Advance up to $5,000,000.
"Revolving Maturity Date" means March 10, 2000.
6. The Collateral as described in Exhibit "A" to the Loan Agreement is
hereby amended to the Collateral described in Exhibit "A" to this
Loan Modification Agreement.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.
5. PAYMENT OF LOAN FEE. Borrower shall pay to Bank a fee in the amount of Ten
Thousand Dollars ($10,000) (the "Loan Fee") plus all out-of-pocket expenses.
6. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
below) agrees that, as of the date hereof, it has no defenses against the
obligations to pay any amounts under the Indebtedness.
7. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing below)
understands and agrees that in modifying the existing Indebtedness, Bank is
relying upon Borrower's representations, warranties, and agreements, as set
forth in the Existing Loan Documents. Except as expressly modified pursuant to
this Loan Modification Agreement, the terms of the Existing Loan Documents
remain unchanged and in full force and effect. Bank's agreement to modifications
to the existing Indebtedness pursuant to this Loan Modification Agreement in no
way shall obligate Bank to make any future modifications to the Indebtedness.
Nothing in this Loan Modification Agreement shall constitute a satisfaction of
the Indebtedness. It is the intention of Bank and Borrower to retain as liable
parties all makers and endorsers of Existing Loan Documents, unless the party is
expressly released by Bank in writing. No maker, endorser, or guarantor will be
released by virtue of this Loan Modification Agreement. The terms of this
paragraph apply not only to, this Loan Modification Agreement, but also to all
subsequent loan modification agreements.
8 JURISDICTION/VENUE. Borrower accepts for itself and in connection with its
properties, unconditionally, the non-exclusive jurisdiction of any state or
federal court of competent jurisdiction in the Commonwealth of Massachusetts in
any action, suit or proceeding of any kind against it which arises out of or by
reason of this Loan Modification Agreement; provided, however, that if for any
reason Bank cannot avail itself of the courts of the Commonwealth of
Massachusetts, then venue shall lie in Santa Xxxxx County, California.
9. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective
only when it shall have been executed by Borrower and Bank (provided, however,
in no event shall this Loan Modification Agreement become effective until signed
by an officer of Bank in California).
10. CONDITIONS. The effectiveness of this Loan Modification Agreement is
conditioned upon Borrowers payment of the Loan Fee.
This Loan Modification Agreement is executed as of the date first
written above.
BORROWER: BANK:
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NETSCOUT SYSTEMS, INC. SILICON VALLEY BANK doing business as
SILICON VALLEY EAST
By: /s/ Xxxxxxx X. Xxxxxxx By: /s/ Xxxx Pasculani
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Name: Xxxxxxx X. Xxxxxxx Name: Xxxx Pasculani
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Title: VP Finance & Administration Title: SVP
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SILICON VALLEY BANK
By: /s/ Xxxxxxxx X. Xxxxxxxx
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Name: Xxxxxxxx X. Xxxxxxxx
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Title: Asst. Vice Pres.
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(to be signed in Santa Xxxxx
County, California)
EXHIBIT A
The Collateral consists of all of Borrower's right, title and interest
in and to the following:
All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above;
All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower; and
All Borrower's Books relating to the foregoing and any and all claims, rights
and interests in any of the above and all substitutions for, additions and
accessions to and proceeds thereof.
COMPLIANCE CERTIFICATE
TO: Silicon Valley East
00 Xxxxxxx Xx., Xxx. 000
Xxxxxxxxx, XX 00000
FROM: NETSCOUT SYSTEMS, INC.
The undersigned authorized officer of NETSCOUT SYSTEMS, INC.
("Borrower") certifies that under the terms and conditions of the Amended and
Restated Loan and Security Agreement between Borrower and Bank (the
"Agreement"), (i) Borrower is in complete compliance for the period ending
________________ with all required covenants except as noted below and (ii) all
representations and warranties in the Agreement are true and correct in all
material respects on this date. Attached are the required documents supporting
the certification. The Officer certifies that these are prepared in accordance
with Generally Accepted Accounting Principles (GAAP) consistently applied from
one period to the next except as explained in an accompanying letter or
footnotes. The Officer acknowledges that no borrowings may be requested at any
time or date of determination that Borrower is not in compliance with any of the
terms of the Agreement, and that 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
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Monthly financial statements + CC Quarterly within 45 days Yes No
Annual (Audited) FYE within 120 days Yes No
A/R Agings + BBC Monthly within 30 days* Yes No
*Or quarterly within 45 days if there are no outstanding Advances.
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Maintain on a Quarterly Basis:
Minimum Quick Ratio (Adjusted) 1.50 : 1.00 ____ : 1.00 Yes No
Minimum Quarterly Profitability $250,000 $_________ Yes No
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COMMENTS REGARDING EXCEPTIONS: See Attached. BANK USE ONLY
Received by:
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AUTHORIZED SIGNER
Sincerely,
Date:
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NETSCOUT SYSTEMS, INC. Verified:
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AUTHORIZED SIGNER
Date:
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SIGNATURE
Compliance Status: Yes No
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