EXHIBIT 26.2
February 6, 2009
Napco Security Technologies, Inc.
f/k/a Napco Security Systems, Inc.
000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxx Xxxx
Re: Amended and Restated Credit Agreement dated August 18, 2008
Ladies and Gentlemen:
We refer to the referenced agreement between you and the undersigned Lenders and
Administrative Agent as most recently amended by a Second Amendment and Waivers
dated as of January 29, 2009 (collectively, the "Credit Agreement"). Capitalized
terms used herein without definition have the meanings ascribed in the Credit
Agreement.
Section 8.1 (a) (i) of the Credit Agreement required maintenance of a ratio of
Consolidated Funded Debt to Consolidated EBITDA of not more than 3.5 to 1.0 for
the Trailing four quarter period which was not maintained as at December 31,
2008.
Section 8.1 (b) of the Credit Agreement required the Borrower and its
Consolidated Subsidiaries to maintain a minimum Debt Service Coverage Ratio of
at least 1.25 to 1.0 for the Trailing four quarter period which was not
maintained as at December 31, 2008.
Section 8.1 (c) of the Credit Agreement required the Borrower and its
Consolidated Subsidiaries to maintain a Modified Quick Ratio of at least 1.15 to
1.0 for the Trailing four quarter period which was not maintained as at December
31, 2008.
The Banks hereby waive non-compliance with the foregoing covenants for the
above-referenced period as follows:
(1) Section 8.1 (a) (i) of the Credit Agreement requiring the ratio of
Consolidated Funded Debt to Consolidated EBITDA to be no greater than 3.5 to 1.0
to the extent of non-compliance for the Trailing four quarter period ended
12/31/08 solely to the extent such ratio was 6.29 to 1.0 instead of the required
ratio (For purposes of calculating Consolidated EBITDA, the definition has been
expanded as follows: "Consolidated EBITDA": for any period of four consecutive
fiscal quarters, the sum of (i) Trailing Consolidated Net Income for such
period, plus non-recurring and non-cash losses (net of tax for such period)
minus non-recurring and non-cash gains (net of taxes for such period), (ii)
Trailing Consolidated Interest Expense for such period and (iii) the Trailing
amount of taxes, depreciation and amortization deducted from earnings in
determining such Consolidated Net Income. FOR PURPOSES OF THIS CALCULATION, THE
FIRST POST-ACQUISITION QUARTER OF MARKS CONSOLIDATED EBITDA FOR THE THREE MONTHS
ENDED DECEMBER 31, 2008 WILL BE ADDED TO THE PRE-ACQUISITION CONSOLIDATED EBITDA
OF MARKS FOR THE THREE QUARTERS ENDED JULY 31, 2008;
(2) Section 8.1 (b) of the Credit Agreement requiring the Debt Service
Coverage Ratio of the Borrower and its Consolidated Subsidiaries to be at least
1.25 to 1.0 to the extent of non compliance for the Trailing four quarter period
ended 12/31/08 solely to the extent such ratio was 1.08 to 1.0 instead of the
required ratio (For purposes of defining Consolidated Cash Flow, the definition
has been expanded as follows: "Consolidated Cash Flow": for any period of four
consecutive fiscal quarters, net income, plus, without duplication, depreciation
plus amortization of intangibles, minus capital expenditures, plus non-recurring
and non-cash losses (net of tax) minus non-recurring and non-cash gains (net of
taxes), in each case, of the Borrower and its Consolidated Subsidiaries with all
accounting terms defined in accordance with GAAP, based upon receipt of the
quarterly and/or annual financial statements. For the avoidance of doubt,
non-recurring and non-cash losses must occur together to be added to the
equation, and non-recurring and non-cash gains must occur together to be
subtracted from the equation. FOR PURPOSES OF THIS CALCULATION, THE FIRST
POST-ACQUISITION QUARTER OF MARKS CONSOLIDATED CASH FLOW FOR THE THREE MONTHS
ENDED DECEMBER 31, 2008 WILL BE ADDED TO THE PRE-ACQUISITION CONSOLIDATED CASH
FLOW OF MARKS FOR THE THREE QUARTERS ENDED JULY 31, 2008); and
(3) Section 8.1 (c) of the Credit Agreement requiring the Modified Quick
Ratio of the Borrower and its Consolidated Subsidiaries to be at least 1.15 to
1.0 to the extent of non compliance for the Trailing Four Quarter period ended
12/31/08 solely to the extent such ratio was 1.06 to 1.0 instead of the required
ratio.
The waivers described above are effective only in this instance for the
purpose given, are limited to the circumstances and conditions set forth herein,
and shall not be deemed to be a continuing or further waiver of these or any
other covenants, terms or provisions of the Credit Agreement. The waivers
described above will expire by their terms on March 15, 2009 unless reaffirmed
on or prior to such date by the Required Lenders. No waiver of any single breach
or default under the Credit Agreement shall be deemed to be a waiver of any
other breach or default thereunder. It is understood that all covenants, terms
and conditions of the Credit Agreement remain unmodified and in full force and
effect.
In consideration of the grant of the above waivers, Borrower agrees that
effective as of the date hereof the definitions of "Consolidated EBITDA",
"Consolidated Cash Flow" and "LIBOR Rate" set forth in the Credit Agreement are
modified to read as follows:
"Consolidated EBITDA": for any period of four consecutive fiscal quarters,
the sum of (i) Trailing Consolidated Net Income for such period, plus
non-recurring and non-cash losses (net of tax for such period) minus
non-recurring and non-cash gains (net of taxes for such period), (ii)
Trailing Consolidated Interest Expense for such period and (iii) the
Trailing amount of taxes, depreciation and amortization deducted from
earnings in determining such Consolidated Net Income.) FOR PURPOSES OF THIS
CALCULATION, CONSOLIDATED EBITDA WILL INCLUDE MARKS CONSOLIDATED EBITDA
PRIOR TO THE ACQUISITION DATE TO THE EXTENT NECESSARY TO REFLECT A FULL 4
QUARTERS OF MARKS USA CONSOLIDATED EBITDA.
"Consolidated Cash Flow": for any period of four consecutive fiscal
quarters, net income, plus, without duplication, depreciation plus
amortization of intangibles, minus capital expenditures, plus non-recurring
and non-cash losses (net of tax) minus non-recurring and non-cash gains
(net of taxes), in each case, of the Borrower and its Consolidated
Subsidiaries with all accounting terms defined in accordance with GAAP,
based upon receipt of the quarterly and/or annual financial statements. For
the avoidance of doubt, non-recurring and non-cash losses must occur
together to be added to the equation, and non-recurring and non-cash gains
must occur together to be subtracted from the equation.FOR PURPOSES OF THIS
CALCULATION, CONSOLIDATED CASH FLOW WILL INCLUDE MARKS CONSOLIDATED CASH
FLOW PRIOR TO THE ACQUISITION DATE TO THE EXTENT NECESSARY TO REFLECT A
FULL 4 QUARTERS OF MARKS CONSOLIDATED CASH FLOW.
"LIBOR Rate": with respect to any Eurodollar Loan for any Interest
Period, the greater of (i) 2% per annum or (ii) the rate per annum (rounded
upward, if necessary, to the nearest 1/32 of one percent) as determined on
the basis of the offered rates for deposits in U.S. dollars, for a period
of time comparable to such Interest Period which appears on the Telerate
page 3750 as of 11:00 a.m. London time on the day that is two (2) London
Banking Days preceding the first day of such Eurodollar Loan; provided,
however, if the rate described above does not appear on the Telerate System
on any applicable interest determination date, the rate shall be the rate
(rounded upwards as described above, if necessary) for deposits in dollars
for a period substantially equal to the Interest Period on the Reuter Page
"LIBO" (or such other page as may replace the LIBO Page on that service for
the purpose of displaying such rates), as of 11:00 a.m. (London Time), on
the day that is two London Banking days prior to the beginning of such
Interest Period. "Banking Day" shall mean, in respect of any city, any date
on which commercial banks are open for business in that city.
Please indicate your consent and agreement to the amendment set forth in the
last paragraph above by signing and dating a copy of this letter.
Very truly yours,
CAPITAL ONE, N.A.
By: /s/XXXXXX XXXXXX
-----------------------------
Name: Xxxxxx Xxxxxx
Title: Senior Vice President
HSBC BANK USA, NATIONAL
ASSOCIATION, as Administrative
Agent and as a Lender
By: /s/XXXX XXXXX
-----------------------------
Name: Xxxx Xxxxx
Title: First Vice President
The Borrower and Guarantors under the Credit
Agreement acknowledge and consent to the
amendment of the definition of LIBOR Rate
set forth above.
Borrower:
NAPCO SECURITY TECHNOLOGIES, INC.
f/k/a Napco Security Systems, Inc.
By: /s/XXXXX X. XXXXXX
----------------------------
Xxxxx X. Xxxxxx
Senior Vice President of
Operations and Finance
Guarantors:
ALARM LOCK SYSTEMS, INC.
By: /s/XXXXX X. XXXXXX
--------------------------------
Name: Xxxxx X. Xxxxxx
Title: Senior Vice President
CONTINENTAL INSTRUMENTS, LLC
By: /s/XXXXX X. XXXXXX
--------------------------------
Name: Xxxxx X. Xxxxxx
Title : Manager
