EXHIBIT 10.P
AMENDMENT NO. 8 TO THE LOAN AND SECURITY AGREEMENT
AMENDMENT NO. 8 to the Loan and Security Agreement dated as of May 15,
2001 ("Amendment No. 8") by and between NAPCO SECURITY SYSTEMS, INC., a New York
corporation having a place of business at 000 Xxxxxxx Xxxxxx, Xxxxxxxxxx, Xxx
Xxxx 00000 (the "Debtor") and HSBC BANK USA F/K/A MARINE MIDLAND BANK, having a
place of business at 000 Xxxxx Xxxxxx Xxxx, Xxxxxxxx, Xxx Xxxx 00000 (the
"Secured Party").
W I T N E S S E T H :
WHEREAS, as of May 12, 1997, Debtor and Secured Party had entered into a
certain loan and security agreement, as amended by amendment no. 1 to the loan
and security agreement dated as of May 28, 1998, as amended by amendment no. 2
to the loan and security agreement dated as of June 30, 1999, as amended by
amendment no. 3 to the loan and security agreement dated as of February 9, 2000,
as amended by amendment no.4 to the loan and security agreement dated as of July
27, 2000, as amended by amendment no. 5 to the loan and security agreement dated
as of September 22, 2000, as amended by amendment no. 6 to the loan and security
agreement dated as of November 22, 2000, as amended by amendment no. 7 to the
loan and security agreement dated as of February 14, 2001 as may be amended from
time to time (the "Agreement");
WHEREAS, the Debtor has requested that the Secured Party increase the
Borrowing Capacity, extend the Termination Date, and modify the Variable Rate
Option, and the Secured Party has agreed to do so, in the manner set forth
below, provided however, that, among other things, Debtor execute this Amendment
No. 8.
NOW, THEREFORE, in consideration of the mutual promises and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
parties hereto agree as follows:
1. The definition of "Borrowing Capacity" contained in Section 1.1.
of the Agreement is hereby amended to read in its entirety as follows:
BORROWING CAPACITY means, at the time of computation, $18,000,000.
2. The definition of "Consolidated Subsidiary" contained in Section
1.1. of the Agreement is hereby amended to read in its entirety as follows:
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CONSOLIDATED SUBSIDIARY means Alarm Lock Systems, Inc. ("Alarm"),
NAPCO Security Systems International, Inc. ("NAPCO International"),
NAPCO/Alarm Lock Grupo Internacional, S.A. ("NAPCO/Alarm Lock"),
Continental Instruments LLC, f/k/a Continental Instruments Systems,
LLC ("Continental Systems"), NAPCO Group Europe Limited ("NAPCO
Europe"), and any other corporation of which at least 50% of the
voting stock is owned by Debtor directly, or indirectly, through one
or more Consolidated Subsidiaries, and any other limited liability
company of which at least 50% of the membership interest is owned by
Debtor directly, or indirectly, through one or more Consolidated
Subsidiaries, and each of their respective successors and/or
assigns.
3. The definition of "Debt Service Coverage Ratio" contained in
Section 1.1. of the Agreement is hereby amended to read in its entirety as
follows:
DEBT SERVICE COVERAGE RATIO means earnings before interest, taxes,
depreciation and amortization, less distributions, all divided by
prior period current portion of long term debt plus interest
expense.
4. The definition of "Revolving Credit Note" or "Note" contained in
Section 1.1. of the Agreement is hereby amended to read in its entirety as
follows:
REVOLVING CREDIT NOTE or NOTE means, individually, jointly,
severally, and collectively, the revolving credit note #1 dated May
12, 1997, in the aggregate sum not to exceed $1,000,000, as modified
and reaffirmed as of the date hereof, as the same may be further
extended, amended, reaffirmed and/or otherwise modified from time to
time ("Note #1") and the revolving credit note # 2 dated May 12,
1997, in the original aggregate sum not to exceed $15,000,000, as
increased (so that such note is in the aggregate sum not to exceed
$17,000,000, otherwise modified and reaffirmed as of the date
hereof, as the same may be further extended, amended, reaffirmed
and/or otherwise modified from time to time("Note #2").
5. The definition of "Termination Date" contained in Section 1.1. of
the Agreement is hereby amended to read in its entirety as follows:
TERMINATION DATE shall mean the earlier to occur of (a) July 1,
2004, or, if such day shall not be a Business Day, the next
succeeding Business Day, or (b) upon the occurrence of an Event of
Default.
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6. The definition of "Transaction Documents" contained in Section
1.1. of the Agreement is hereby amended to read in its entirety as follows:
TRANSACTION DOCUMENTS means, individually, jointly, severally and
collectively, the Agreement (including all amendments to date,
including this Amendment No. 7) and all documents, instruments,
notes and agreements by Debtor, Continental Systems or any other
Third Party or any Responsible Party in favor of Secured Party,
whether in existence now or hereinafter created, executed and
delivered to Secured Party, as the same may be extended,
re-executed, modified or otherwise amended from time to time,
including, without limitation, the Term Loan Note, the Continental
Term Loan Note, the Note, collateral documents, letter of credit
agreements, notes, acceptance credit agreements, security
agreements, pledges, guaranties, mortgages, title insurance,
assignments, and subordination agreements required to be executed by
Debtor, Continental Systems any other Third Party, or any
Responsible Party pursuant hereto or in connection herewith, or in
connection with a letter of credit application and reimbursement
agreement, each dated as of May 12, 1997, as may be reaffirmed or
restated from time to time, a certain uncommitted trade line
established by Secured Party in favor of Debtor to provide for
commercial and standby letters of credit, evidenced by, among other
documents, a continuing letter of credit agreement, and a continuing
indemnity agreement, each dated as of May 12, 1997, as may be
re-executed, amended, extended or otherwise modified from time to
time, the Term Loan Note in the principal sum of $2,500,000.00, as
may be extended or otherwise modified from time to time, the Note,
the Continental Term Loan Note in the principal sum of $8,250,000,
that certain ISDA master agreement dated as of July 27, 2000 by and
between Continental Systems and Secured Party, inclusive of all
schedules thereto, as the same may be modified from time to time
(the "Master Agreement") and all such other mortgages, security
agreements, guaranties and other documents as may be executed and
delivered to Secured Party to evidence, guaranty and secure the
Continental Term Loan Note, and the obligations thereunder, as may
be extended or otherwise modified from time to time, and uncommitted
line of credit facility to be used by Debtor to finance certain
acquisitions, as may be executed and delivered to Secured Party from
time to time to evidence and secure the obligations under such
facilities pursuant to the terms that the Secured Party shall
request, and all other documents, agreements, reaffirmations,
certificates and resolutions related thereto, and amendments or
supplements thereto, all such other agreements, resolutions,
certificates, resolutions and opinion letters executed and/or issued
as a condition precedent to or in connection with the Agreement, the
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Term Loan Note, Note, the Continental Term Loan Note, and all such
other documents, agreements, and instruments delivered hereunder or
as a supplement or amendment thereto or as Secured Party may
reasonably require from time to time in order to evidence, guaranty
and/or secure any and all indebtedness of Debtor and/or Continental
Systems, as the case may be, to Secured Party or to create, perfect,
continue the perfection or protect the Secured Party's security
interest in the Collateral or any of the other collateral specified
in the other Transaction Documents.
7. The definition of "Variable Rate Option" contained in Section
1.1. of the Agreement is hereby amended to read in its entirety as follows:
VARIABLE RATE OPTION means a fluctuating annual rate equal to the
Prime Rate minus 1/4 of 1%.
8. The definition "EBIDTA" shall be added to Section 1.1. of the
Agreement and shall read as follows:
EBIDTA means earnings before interest, taxes, depreciation and
amortization.
9. The definition "Funded Debt" shall be added to Section 1.1. of
the Agreement and shall read as follows:
FUNDED DEBT means all interest bearing debt.
10. Section 7.3. of the Agreement is hereby amended in its entirety
to read as follows:
PROMISE TO PAY FEES. Debtor promises to pay to Secured Party
monthly, on the first day of each calendar month, an unused fee
equal to one quarter of one percent (.25%) of $18,000,000. less the
aggregate principal balance of all Advances outstanding during the
calendar month just ended under the Revolving Credit Facility.
11. Section 9.26. of the Agreement is hereby amended in its entirety
to read as follows:
(a) The Debtor and its Consolidated Subsidiaries shall
maintain, on a consolidated basis, a ratio of Total Liabilities to
Tangible Net Worth of not greater than (to be tested quarterly based
upon the financial statements required to be presented to Secured
Party pursuant to Section 9.1. hereof):
during the period commencing as of the date hereof through the
fiscal year ending June 30, 2001, and thereafter while any
Indebtedness remains outstanding, 1.50 to 1.
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(b) The Debtor and its Consolidated Subsidiaries shall
maintain, on a consolidated basis, a minimum Tangible Net Worth (to
be tested quarterly based upon the financial statements required to
be presented to Secured Party pursuant to Section 9.1. hereof) of
not less than:
(i) during the period commencing as of the date hereof through
June 29, 2001, $21,000,000, and
(ii) during the period commencing on June 30, 2001 through
June 29, 2002, $24,500,000, and
(iii) during the period commencing on June 30, 2002 through
June 29, 2003, $27,000,000, and
(iv) during the period commencing on June 30, 2003 through
June 29, 2004, and thereafter while any Indebtedness remains
outstanding, $30,000,000.
(c) At all times, Debtor and its Consolidated Subsidiaries
shall maintain, on a consolidated basis, a ratio of Current Assets
to Current Liabilities, to be tested each fiscal quarter end of each
fiscal year, based upon the financial statements required to be
presented to Secured Party pursuant to Section 9.1. hereof:
(i) of not less than 3.50 to 1 from the date hereof through
the fiscal year ending June 30, 2001, and
(ii) of not less than 3.75 to 1 from July 1, 2001 through the
fiscal year ending June 30, 2002, and
(iv) of not less than 4.00 to 1 from July 1, 2002 through the
fiscal year ending June 30, 2003, and thereafter while any
Indebtedness remains outstanding.
(d) Debtor and its Consolidated Subsidiaries shall maintain,
on a consolidated basis, a minimum Debt Service Coverage Ratio of
1.25 to 1, to be tested at the end of each fiscal year, based upon
the financial statements required to be presented to Secured Party
pursuant to Section 9.1. hereof.
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(e) At all times, Debtor and its Consolidated Subsidiaries
shall maintain, on a consolidated basis, a ratio of the aggregate of
cash plus total Receivables to Current Liabilities, to be tested
each fiscal quarter end of each fiscal year, based upon the
financial statements required to be presented to Secured Party
pursuant to Section 9.1. hereof:
from the date hereof through the fiscal year ending June
30, 2001, and thereafter while any Indebtedness remains
outstanding, of not less than 1.25 to 1.
(f) During any fiscal year, the Debtor and its Consolidated
Subsidiaries shall not cause Capital Expenditures of Debtor and its
Consolidated Subsidiaries to exceed, on a combined basis, $1,250,000
per fiscal year.
(g) The Debtor and its Consolidated Subsidiaries shall
maintain, on a consolidated basis, a ratio of Funded Debt to EBIDTA
(to be tested quarterly, on a rolling four quarter basis, based upon
the financial statements required to be presented to Secured Party
pursuant to Section 9.1 hereof):
(i) of not greater than 4.00 to 1 from the date hereof through
the period ending June 29, 2002, and
(ii) of not greater than 3.00 to 1 from June 30, 2002 through
the period ending June 29, 2003, and
(iii) of not greater than 2.00 to 1 from June 30, 2003 through
the period ending June 29, 2004, and thereafter while any
Indebtedness remains outstanding.
(h) At all times while any Indebtedness remains outstanding,
the Debtor and its Consolidated Subsidiaries shall maintain, on a
consolidated basis, not less than fifty (50%) of the value of all of
their identifiable assets (as disclosed in the 10K statement) in the
United States, to be tested annually, at each fiscal year end.
The above ratios of this Section 9.26. are being calculated assuming
that in the last year of the Agreement; and Advances under the
Revolving Credit Facility are viewed as long term debt, unless there
is an event of default which is continuing under the Revolving
Credit Facility.
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12. As an inducement to the Bank extending and modifying the Revolving
Credit Facility, and modifying the provisions of the Agreement and other
Transaction Documents pursuant to the terms hereof, Debtor represents and
warrants to Secured Party that, as of the date of execution of this Amendment
No. 8, (i) the representations and warranties set forth in Article 4 of the
Agreement and the representations and warranties of Debtor and any Third Party
set forth in the other Transaction Documents to which any is a party are true
and correct in all respects, (ii) no event has occurred and is continuing which
constitutes an "Event of Default" under any of the Transaction Documents (as
"Event of Default" is defined in each of those Transaction Documents"), (iii)
Debtor is in compliance with the covenants set forth in Articles 9 and 10 of the
Agreement, (iv) Debtor has paid the Commitment Fee of $36,000, (v) Debtor will
pay Secured Party's reasonable legal fees and disbursements thereof, and (vi)
Debtor will deliver such corporate resolutions and opinions of counsel as
Secured Party may reasonably request.
13. Debtor represents and warrants to Secured Party that there are no
offsets, defenses or counterclaims to the payment of the Indebtedness owing
Secured Party, including the Advances, and to the continuing general security
interest in the Collateral granted to Secured Party by Debtor as security for
payment of the Indebtedness, as fully described in the Agreement.
14. Except as modified herein, all other provisions of the Agreement and
the other Transaction Documents remain unmodified and are in full force and
effect.
15. Capitalized terms not otherwise defined herein shall have the meanings
ascribed to such terms in the Agreement.
16. This Amendment No. 8 shall be governed by the laws of the State of New
York.
IN WITNESS WHEREOF, the parties have executed this Amendment No. 8 to the
Loan and Security Agreement as of the day and year first above written.
HSBC BANK USA F/K/A MARINE MIDLAND BANK
By: /s/ Xxxxx Xxxxxxx
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Xxxxx Xxxxxxx, Vice President
NAPCO SECURITY SYSTEMS, INC.
By: /s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx, Senior Vice President
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XXXXX XX XXX XXXX )
) SS:
COUNTY OF SUFFOLK )
On this 15th day of May, 2001, before me, the undersigned, a Notary Public in
and for said State, personally came XXXXX XXXXXXX, personally known to me or
proved to me on the basis of satisfactory evidence to be the person, whose name
is subscribed to the within instrument and acknowledged to me that he executed
the same in his capacity and that by his signature on the instrument, the person
or entity upon behalf of which the person acted executed the instrument.
/s/
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Notary Public
STATE OF NEW YORK )
) SS:
COUNTY OF SUFFOLK )
On this 15th day of May, 2001, before me, the undersigned, a Notary Public in
and for said State, personally came XXXXX XXXXXX personally known to me or
proved to me on the basis of satisfactory evidence to be the person, whose name
is subscribed to the within instrument and acknowledged to me that he executed
the same in his capacity and that by his signature on the instrument, the person
or entity upon behalf of which the person acted executed the instrument.
/s/
-----------------------------------
Notary Public
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