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Exhibit 10.20    
    


 
 

SECOND LOAN MODIFICATION AGREEMENT    
    


        This Loan Modification Agreement is entered into as of May 14, 2003 by and between WITNESS
SYSTEMS, INC., a Delaware corporation ("Borrower"), whose address is 300 Colonial Center Parkway, Roswell, Georgia 30076, and SILICON VALLEY
BANK ("Lender"), a California-chartered bank with a principal place of business at 3003 Tasman Drive, Santa Clara, CA 95054 and with a loan production office located at 3343
Peachtree Road, Suite 312, Atlanta, GA 30326. 


        WHEREAS,
among other indebtedness which may be owing by Borrower to Lender, Borrower is indebted to Lender pursuant to, among other documents, a Loan and Security Agreement, dated
April 3, 2002, as may be amended from time to time, in the original principal amount of Fifteen Million Dollars ($15,000,000) (the "Loan Agreement"; the Loan Agreement together with all other
documents evidencing or securing the indebtedness shall be referred to as the "Existing Loan Documents"); 



        WHEREAS,
the Loan Agreement provides for, among other things, a Committed Line in the original principal amount of Fifteen Million Dollars ($15,000,000) (hereinafter, all indebtedness
owing by Borrower to Lender shall be referred to as the "Indebtedness"); 


        WHEREAS,
pursuant to the Loan Agreement, Borrower agreed, among other things, to comply with certain covenants set forth therein, including certain financial covenants; and 


        WHEREAS,
Borrower has requested that Lender waive certain financial covenants, and Lender is willing to do so, subject to the terms and conditions set forth herein, including the
amendment to the Loan Agreement set forth herein. 


        NOW,
THEREFORE, in consideration of the foregoing premises, and other good and valuable consideration, the receipt and legal sufficiency of which is hereby acknowledged, the parties
hereto hereby agree as follows: 


        1.    DEFINITIONS.    All capitalized terms used herein and not otherwise defined shall have the meanings given to
such terms in the Loan Agreement. 


        2.    WAIVER OF COVENANT VIOLATION.    In reliance upon the representations, warranties, agreements and covenants of
Borrower set forth herein and in the Loan Agreement, as amended hereby, Lender herby waives any Event of Default arising solely out of Borrower's failure to have as of March 31, 2003 the
Consolidated Tangible Net Worth required by Section 6.7(ii) of the Loan Agreement. 


        3.    MODIFICATIONS TO LOAN AGREEMENT.    



        3.1   The
Loan Agreement is amended by deleting Section 2.2 in its entirety and by substituting therefor a new  Section 2.2 to read as follows: 



        If
Borrower's Obligations under Section 2.1.1, 2.1.2 and 2.1.3 exceed the lesser of either (i) the Committed Revolving Line or (ii) the Borrowing Base, Borrower
shall upon notice from Bank, immediately pay such excess or secure such excess with a pledge of cash maintained at Bank. 




        3.2   The
Loan Agreement is amended by deleting paragraph (ii) of Section 6.7 in its entirety and by substituting
therefor a new paragraph (ii) to read as follows: 



        (ii)   Consolidated Tangible Net Worth. A Consolidated Tangible Net Worth of at least the sum of (a) $20,000,000, plus
(b) seventy-five percent of net income (without subtracting any losses) earned in each fiscal quarter from and after March 31, 2003, plus (c) fifty percent 




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(50%)
of the net cash proceeds from any equity issued from and after May 14, 2003 by Borrower, calculated after subtracting any cash consideration received from such issuance which is used to
finance an acquisition; provided, however, at any time that the Quick Ratio is less than 2.0 to 1.0, this covenant will be tested on a monthly basis. 




        3.3   The
Loan Agreement is hereby amended by deleting Exhibit D thereof in its entirety and substituting therefor a new  Exhibit D in the
form attached hereto. 




        4.    CONSISTENT CHANGES.    The Existing Loan Documents are hereby amended wherever necessary to reflect the changes
described above. 


        5.    NO DEFENSES OF BORROWER.    Borrower agrees that it has no defenses against the obligations to pay any amounts
under the Indebtedness. 


        6.    CONTINUING VALIDITY.    Borrower understands and agrees that in modifying the existing Indebtedness, Lender 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. Lender's agreement to modifications to the existing Indebtedness pursuant to this Loan Modification Agreement in no way
shall obligate Lender 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
Lender and Borrower to retain as liable parties all makers and endorsers of Existing Loan Documents, unless the party is expressly released by Lender 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. 


        7.    LIMITATION.    This Loan Modification Agreement is limited to the matters expressly set forth above and shall
not be deemed to waive or modify any other term of the Loan Agreement or Loan Documents, each of which is hereby ratified and reaffirmed, or to consent to any subsequent failure of Borrower to comply
with any term or provision of the Loan Agreement or the Loan Documents, each of which shall remain in full force and effect. 


        8.    CONDITIONS.    The effectiveness of this Loan Modification Agreement is conditioned upon Borrower's execution
and delivery of this Loan Modification Agreement and such other instruments, documents and agreements as Lender or its counsel shall request. 


[signatures appear on following page] 


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        This
Loan Modification Agreement is executed as of the date first written above. 



	 	 	LENDER:
	
 	
 	
SILICON VALLEY BANK:
	

 	
 	
By:	

 
	 	 	 	

	 	 	Name:	 
	 	 	 	

	 	 	Title:	 
	 	 	 	

	 	 	BORROWER:
	
 	
 	
WITNESS SYSTEMS, INC.
	

 	
 	
By:	

 
	 	 	 	

	 	 	Name:	 
	 	 	 	

	 	 	Title:	 
	 	 	 	





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EXHIBIT D

COMPLIANCE CERTIFICATE  



	TO:	 	SILICON VALLEY BANK

3003 Tasman Drive

Santa Clara, CA 95054
	

FROM:	
 	

Witness Systems, Inc.





        The
undersigned authorized officer of Witness Systems, Inc. ("Borrower") certifies that under the terms and conditions of the 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

	Quarterly financial statements + CC	 	Quarterly within 45 days

(Monthly if QR below 2.0:1.0)	 	 	 	  

Yes No
	Annual (Audited)	 	FYE within 90 days	 	 	 	Yes No
	10-K & 10Q	 	Within 5 days of filing	 	 	 	Yes No
	A/R Agings	 	Monthly within 30 days

(if Advances outstanding)	 	 	 	 

Yes No
	A/R Audit	 	Annual	 	 	 	Yes No
	Borrowing Base Certificate	 	Monthly within 30 days

(if Advances outstanding)	 	 	 	Yes No
	Financial Covenant
 
	 	Required
 
	 	Actual
	 	Complies

	Maintain on a quarterly Basis or monthly if QR below 2.0:1.0:	 	 	 	 	 	 
	 	Minimum Quick Ratio	 	1.50:1.00	 	        :1.00	 	Yes No
	 	Minimum Tangible Net Worth	 	$20,000,000,

Plus 75% of Net Income,

Plus 50% of Net Cash Equity	 	$	 	Yes No





        Have
there been updates to Borrower's intellectual property, if appropriate?            Yes / No 


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Comments Regarding Exceptions: See Attached. 



	 	 	BANK USE ONLY
	Sincerely,	 	Received by:	 	 
	 	 	 	 	
AUTHORIZED SIGNER
	
 SIGNATURE	 	Date:	 	 
	 	 	 	 	

	 	 	 	 	Verified:
	 	 	 	 	
AUTHORIZED SIGNER
	
 TITLE	 	Date:	 	 
	 	 	 	 	

	
 DATE:	 	Compliance Status:                        Yes No






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Exhibit 10.20


SECOND LOAN MODIFICATION AGREEMENT