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EXHIBIT 10.W
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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Xxxx 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/
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Notary Public
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