1
EXHIBIT 10.M
AMENDMENT NO. 1 TO THE LOAN AND SECURITY AGREEMENT
AMENDMENT NO. 1 to the Loan and Security Agreement dated as of May 28,
1998 ("Amendment No. 1") 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 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 further amended from time to time (the
"Agreement");
WHEREAS, the Debtor has requested that the Secured Party advance the
sum of $2,500,000.00 pursuant to the terms of the Term Loan Note (as hereinafter
defined) 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. 1.
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 "Transaction Documents" contained in Section 1.1.
of the Agreement is hereby amended to read in its entirety as follows:
"Transaction Documents" shall mean, individually, jointly, severally
and collectively, the Agreement (including this Amendment No. 1) and
all documents, including, without limitation, the Term Loan 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, any Third Party, or any Responsible Party
pursuant hereto or in connection herewith, in connection with the
issuance of a certain standby letter of credit in the amount not to
exceed $2,500,000.00 by Secured Party in favor of Citibank, N.A., at
the request of and for the benefit of Debtor, the reimbursement
obligations being evidenced by a promissory note in the principal sum
not to exceed $2,500,000.00, and a letter of credit application and
reimbursement agreement, each dated as of May 12, 1997, and a certain
uncommitted trade line established by Marine 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, and the
Term Loan Note in the principal sum of $2,500,000.00,
E-1
2
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 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 and/or secure the
indebtedness of Debtor to Secured Party or to create, perfect, continue
the perfection or protect the Secured Party's security interest in the
Collateral.
2. The definition "Term Loan" shall be added to Section 1.1. of the
Agreement and shall read as follows:
"Term Loan" shall mean the $2,500,000.00 term loan made available to
Debtor to Secured Party pursuant to the Term Loan Note.
3. The definition of "Term Loan Note" shall be added to Section 1.1. of
the Agreement and shall read as follows:
"1998 Term Loan Note" shall mean the $2,500,000.00 note evidencing the
Term Loan executed by Debtor and delivered to Secured Party as of even
date hereof; Debtor has used or will use the proceeds of the Term Loan
Note to finance the purchase by Debtor of 889,576 shares of Debtor's
common stock, $.01 par value, owned by Xxxxxxx Xxxxxxxxx, pursuant to a
certain stock purchase agreement dated as of even date hereof by and
between Xxxxxxx Xxxxxxxxx and the Corporation (the "Stock Purchase
Agreement").
4. New Sections 4.26. and 4.27 are added as follows:
Section 4.26. Stock Purchase Agreement, etc.
Debtor has heretofore delivered to Secured Party true and
complete copies of the Stock Purchase Agreement, the promissory note in
the principal sum of $1,947,880.00, executed by Debtor in favor of
Xxxxxxx Xxxxxxxxx, and all other agreements and documents by and
between Debtor and Xxxxxxx Xxxxxxxxx or by Debtor in favor of Xxxxxxx
Xxxxxxxxx, including all amendments thereof. Debtor represents and
warrants to Secured Party that it has disclosed in writing all of the
terms of the purchase by Debtor of 889,576 shares of the Debtor's
common stock, $.01 par value, owned by Xxxxxxx Xxxxxxxxx, and any other
ancillary transactions by and between Debtor and Xxxxxxx Xxxxxxxxx in
connection therewith.
E-2
3
Section 4.27. Term Loan Note Proceeds
The proceeds of the Term Loan shall be used by Debtor to finance the
purchase by Debtor of 889,576 shares of Debtor's common stock, $.01 par
value, owned by Xxxxxxx Xxxxxxxxx, pursuant to the Stock Purchase
Agreement.
5. Section 9.26. of the Agreement shall be deleted in its entirety
replaced with the following:
9.26. FINANCIAL COVENANTS. The financial covenants to include
the following:
(a) 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.):
(i) during the period commencing as of the date hereof through
June 29, 1999, 1.35 to 1.0,
(ii) during the period commencing on June 30, 1999 through
June 29, 2000, 1.25 to 1, and
(iii) during the period commencing on June 30, 2000 through
June 29, 2001, and thereafter while any Indebtedness remains
outstanding, 1.10 to 1.
(b) Debtor and its Consolidated Subsidiaries shall maintain,
at fiscal year end June 30, 1998, on a consolidated basis, a
minimum Tangible Net Worth of not less than $25,400,000.00,
and at each fiscal year end thereafter, the required minimum
Tangible Net Worth shall increase by $1,000,000.00 per fiscal
year; 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.
hereinabove.
(c) At all times, Debtor and its Consolidated Subsidiaries
shall maintain, on a consolidated basis, a ratio of Current
Assets to Current Liabilities (i) of not less than 2.75 to 1
from the date hereof through June 29, 1998, (ii) of not less
than 3.00 to 1 from June 30, 1998 through June 29, 1999, (iii)
of not less than 3.25 to 1 from June 30, 1999 through June 29,
2000 and beyond, 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.
hereinabove.
X-0
0
(x) Xxxxxx 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.
hereinabove.
(e) At all times during the Loan Period, Debtor and its
Consolidated Subsidiaries shall maintain, on a consolidated
basis, a ratio of the aggregate of cash plus total Receivables
to Current Liabilities of not less than 1.25 to 1 from the
date hereof until all indebtedness owed to Secured Party is
paid in full, to be tested each fiscal quarter of each fiscal
year, based upon the financial statements required to be
presented to Secured Party pursuant to Section 9.1.
hereinabove.
The above ratios of this Section 9.26. are being calculated
assuming that in the last year of the Loan Agreement, the
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.
6. As an inducement to the Bank extending the Term Loan, and modifying
the provisions of the Agreement pursuant to the terms herein, Debtor represents
and warrants to Secured Party that, as of the date of execution of this
Amendment No. 1, (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), and
(iii) Debtor is in compliance with the covenants set forth in Articles 9 and 10
of the Agreement.
7. 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.
8. Except as modified herein, all other provisions of the Agreement and
the other Transaction Documents remain unmodified and are in full force and
effect.
18. This Amendment No. 1 shall be governed by the laws of the State of
New York.
E-4
5
IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 as of the day
and year first above written.
WITNESS: MARINE MIDLAND BANK
________________________ By: /s/ XXXXX X. XXXXXX
Xxxxx X. Xxxxxx
Vice President
WITNESS: NAPCO SECURITY SYSTEMS, INC.
_________________________ By: /s/ XXXXX XXXXXX
Xxxxx Xxxxxx
Senior Vice President
E-5
