T/R SYSTEMS INC
LOAN MODIFICATION AGREEMENT
<DOCUMENT>
<TYPE>EX-10.20
<SEQUENCE>3
<FILENAME>g65942ex10-20.txt
<DESCRIPTION>LOAN MODIFICATION AGREEMENT
<TEXT>

<PAGE>   1
                                                                   EXHIBIT 10.20


                           LOAN MODIFICATION AGREEMENT

         This Loan Modification Agreement is entered into as of October 11,
2000, by and between T/R Systems, Inc. (the "Borrower") and Silicon Valley Bank
a California chartered bank doing business in Massachusetts as Silicon Valley
East ("Bank").

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, a Promissory Note and Loan and Security Agreement dated October 17,
1997, as amended (collectively, the "Loan Agreement"). The Loan Agreement
provided for, among other things, a Committed Revolving Line in the original
principal amount of One Million Dollars ($1,000,000). The Loan Agreement was
modified, pursuant to, among other documents, a Fourth Loan Modification
Agreement pursuant to which, among other things, the Committed Revolving Line
was increased to 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. 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 following term under Section 1.1 entitled
                           "Definitions" is hereby amended to read as follows:

                           "Committed Revolving Maturity Date" is October 14,
                           2001.

                           Sub-section (3) of the defined term "Eligible Foreign
                           Accounts" set forth in Section 1.1 entitled
                           "Definitions" is hereby amended in part to provide
                           for Accounts owing from Minolta Co., LTD., Ricoh
                           Company, LTD. and Hitachi Koki Imaging Systems, Ikon
                           Office Solutions Inc., Toshiba America Business
                           Solutions, Inc., and the subsidiaries of each
                           company, and other accounts approved by Bank on a
                           case by case basis.

                  2.       Subsection (a) of Section 2.3 entitled "Interest
                           Rates, Payments, and Calculations" is hereby amended
                           as follows:

                           Interest Rate. Except as set forth in Section 2.3(b),
                           any Credit Extensions shall bear interest, on the
                           average daily balance thereof, at a per annum rate
                           equal to .25 of one percentage point above the Prime
                           Rate.

                  3.            Sub-sections (a), (b), and (g) of Section 6.3
                           entitled "Financial Statements, Reports,
                           Certificates" is hereby amended to read as follows:

                           (a)      as soon as available, but in any event
                           within 45 days after the end of each quarter, a
                           company prepared consolidated balance sheet and
                           income statement covering Borrower's consolidated
                           operations during such period, in a form and
                           certified by an officer of Borrower reasonably
                           acceptable to Bank.

<PAGE>   2

                           (b)      as soon as available, but in any event with
                           90 days after the end of Borrower's fiscal year,
                           audited consolidated financial statements of Borrower
                           prepared in accordance with GAAP consistently
                           applied, together with an unqualified opinion on such
                           financial statements of an independent certified
                           public accounting firm reasonably acceptable to Bank.

                           (g)      within 45 days after the last day of each
                           quarter, with the quarterly financial statements, a
                           Compliance Certificate signed by a Responsible
                           Officer.

                  3.            Sub-section (ii) of Section 6.3 entitled
                           "Financial Statements, Reports, Certificates" is
                           hereby amended to read as follows:

                           At such times as Credit Extensions are outstanding or
                           prior to a Credit Extension if no Credit Extensions
                           are outstanding, Bank shall have the right from time
                           to time to audit Borrower's Accounts at Borrower's
                           expense, provided that such audits will be conducted
                           no more often than every 12 months unless an Event of
                           Default has occurred or is continuing.

                  4.            Section 6.8 entitled "Quick Ratio" is hereby
                           amended to read as follows:

                           Borrower shall maintain, as of the last day of each
                           calendar quarter, a ratio of Quick Assets to Current
                           Liabilities less deferred revenues of at least 2.00
                           to 1.00.

                  5.            Section 6.9 entitled "Tangible Net Worth" is
                           hereby amended to read as follows:

                           Borrower shall maintain as of the last day of each
                           calendar quarter, a Tangible Net Worth of not less
                           than $15,000,000.

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 Bank a fee in the amount of
Three Thousand Seven Hundred and Fifty Dollars ($3,750.00) ("Loan Fee"). Upon
Borrower requesting a Credit Extension in excess of $1,500,000, Borrower shall
pay Bank an additional fee in the amount of Three Thousand Seven Hundred and
Fifty Dollars ($3,750.00) (the "Increase Fee").

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.       CONDITIONS. The effectiveness of this Loan Modification Agreement is
conditioned upon payment of the Loan Fee.

<PAGE>   3

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

BANK:                                      BORROWER:

SILICON VALLEY BANK                        T/R SYSTEMS, INC.


By:  /s/ Tom Vertin                        By:  /s/ Lyle W. Newkirk
   ----------------------------------         ---------------------------------
Name:    Tom Vertin                        Name:    Lyle W. Newkirk
     --------------------------------           -------------------------------
Title:   Executive Vice President          Title: Senior Vice President and CFO
      -------------------------------             -----------------------------

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