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EXHIBIT 10.Q
SIXTH AMENDMENT and WAIVER dated as of
March 31, 1995 to the CREDIT AGREEMENT
dated as of November 21, 1991 (as the same
has been amended by the Amendment and
Waiver dated as of August 27, 1993, the
Amendment and Waiver dated as of
September 14, 1993, the Amendment dated
as of December 7, 1993, the Fourth
Amendment Agreement dated as of July 27,
1994, the Fifth Amendment and Waiver
dated as of October 11, 1994 and as the
same may be further amended, supplemented
or modified from time to time in
accordance with its terms, the "Credit
Agreement), among NAPCO SECURITY SYSTEMS,
INC., a Delaware corporation (the
"Borrower"), the guarantors signatory
hereto (collectively, the "Guarantors"),
the lenders named in SCHEDULE 2.01 and
2.06 of the Credit Agreement
(collectively, the "Lenders") and
CHEMICAL BANK, as agent for the Lenders
(in such capacity, the "Agent").
WHEREAS, the Borrower and the Guarantors wish to amend and waive certain
provisions of the Credit Agreement;
WHEREAS, the Agent and the Lenders have consented to amend and waive the Credit
Agreement to reflect the requests herein set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual agreements
herein contained, the parties hereto agree as follows:
1. Waiver of Article VII. NEGATIVE COVENANTS. Section 7.10. Current
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Ratio.
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Compliance with Article VII. Section 7.10. of the Credit Agreement
is hereby waived for the interim six (6) months ended December 31,
1994 to permit the Current Ratio of the Borrower and its
Consolidated subsidiaries to be less than 1.99 to 1.0 provided,
however, such ratio was not less than 1.80 to 1.0 as of such interim
period end.
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2. Waiver of Article VII NEGATIVE COVENANTS. Section 7.14. Total
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Unsubordinated Liabilities to Tangible Net Worth Ratio.
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Compliance with Article VII. Section 7.14. of the Credit
Agreement is hereby waived for the interim six (6) months
ended December 31, 1994 to permit the ratio of Total
Unsubordinated Liabilities of the Borrower and its
Consolidated subsidiaries to Tangible Net Worth of the
Borrower and its Consolidated subsidiaries plus Consolidated
Subordinated Indebtedness to be greater than 1.05 to 1.0
provided, however; such ratio was not greater than 1.09 to
1.0.
3. Waiver of Article VII. NEGATIVE COVENANTS. Section 7.18. Debt
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Service Coverage Ratio.
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Compliance with Article VII. Section 7.18. of the Credit
Agreement is hereby waived for the interim six (6) months
ended December 31, 1994 to permit the Debt Service Coverage
Ratio of the Borrower and its Consolidated subsidiaries to
be less than 1.02 to 1.0 provided, however, such ratio was
not less than .824 to 1.0 as of such interim period end.
4. Waiver of Article VII NEGATIVE COVENANTS. Section 7.19.
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Inventory Reliance.
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Compliance with Article VII Section 7. 19. of the Credit
Agreement is hereby waived for the interim six (6) months
ended December 31, 1994 to permit the Inventory Reliance of
the Borrower and its Consolidated subsidiaries to be more
than 18% provided, however, the Inventory Reliance of the
Borrower and its Consolidated subsidiaries was not greater
than 34% as of such interim period end.
5. Amendment to Article VI AFFIRMATIVE COVENANTS. Section 6.05.
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Financial Statements. Reports. etc. (b).
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Article VI Section 6.05. (b) of the Credit Agreement is
hereby amended by (i) inserting the phase "(i)" immediately
preceding the word "within" contained in the first line
thereof and (ii) inserting the following phrase immediately
preceding the semi-colon at the end of such sub-section as
follows:
" and (ii) within forty-five (45) days after the end of each
calendar month, a Consolidated balance sheet and a
Consolidated income statement of the Borrower and its
Consolidated subsidiaries showing the financial condition of
the Borrower and its Consolidated subsidiaries as of the
close of the immediately preceding calendar month and
results of operations of the Borrower and Consolidated
subsidiaries for the immediately preceding
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calendar month, a Consolidated statement of shareholders'
equity of the Borrower and its Consolidated subsidiaries as
of the end of the immediately preceding calendar month and a
Consolidated statement of cash flow of the Borrower and its
Consolidated subsidiaries for the end of the immediately
preceding calendar month, all in reasonable detail and
setting forth in comparative form (commencing one (1) year
from the date of the Sixth Amendment and Waiver to this
Credit Agreement) the figures for the comparable month for
the previous calendar year, certified by the Financial
Officer of the Borrower as presenting fairly the financial
condition and results of operations of the Borrower and
subsidiaries and as having been prepared in accordance with
generally accepted accounting principles consistently
applied, in each case subject to normal year-end audit
adjustments".
6. Amendment to Article VI AFFIRMATIVE COVENANTS. Section 6.05.
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Financial Statements, Reports, etc.
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Article VI Section 6.05. of the Credit Agreement is hereby amended by
deleting in their entirety all sub-sections following sub-section "(i)"
contained therein and substituting therefor the following new
sub-sections "(j)", "(k)", "(l)" and "(m)":
"(j) as soon as practicable, copies of all budgets covering
non-construction costs, which as to their accuracy must be satisfactory
to the Agent;
(k) OTHER REPORTS. (a) As soon as available, but in no event later than
forty-five (45) days after the end of each fiscal quarter of the
Borrower (i) production output schedules and (ii) schedules of staffing
levels in the United States and the Dominican Republic, each in form,
substance and detail satisfactory to the Agent and (b) As soon as
available, but in no event later than forty-five (45) days after the end
of each calendar month (i) accounts receivable aging schedules of the
Borrower and its Consolidated subsidiaries, with separate sub-totals for
foreign and domestic accounts receivable and (ii) inventory designation
schedules of the Borrower and its Consolidated subsidiaries, designating
foreign and domestic inventory separately, each in form, substance and
detail satisfactory to the Agent.
(l) MONTHLY REPORTS. As soon as available but in no event later than ten
(10) days after the end of each month, a schedule of expenses (by type
and dollar amount) to be incurred in connection with the completion of
the Caribe Building (as defined in the Chemical/BNY Loan Agreement); and
(m) such other information as the Agent or any Lender may reasonably
request."
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7. Amendment to Article VI AFFIRMATIVE COVENANTS. Section 6.08.
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Maintaining Records: Access to Properties and Inspections.
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Article VI Section 6.08. of the Credit Agreement shall be amended by
adding the following phrase immediately to the end thereof as follows:
"In addition to the foregoing, commencing at such time as the Borrower
is no longer obligated to the Agent pursuant to the Chemical/BNY Loan
Agreement, the Agent shall be permitted to conduct a field examination
of the books, records, internal accounting and reporting procedures and
all assets of the Borrower and its subsidiaries once each calendar year,
the costs and expenses of which shall be paid for by the Borrower up to
an aggregate amount of $20,000 (with amounts in excess thereof paid for
by the Agent). Such field examination shall be performed by an
independent firm (the "Firm") designated by the Agent. The Agent will
provide the Borrower with a copy of the invoice rendered by the Firm in
connection with the completion of any field examination and the Agent
will request that the Firm provide in the invoice a time summary by area
and related billing rates charged. Should the Agent desire to conduct
more than one field examination during the course of a given calendar
year, the costs and expenses of such additional field examinations shall
be paid for by the Agent. The Agent agrees that any such field
examinations shall not be conducted (i) at any time during the
forty-five days immediately following the end of the first, second and
third fiscal quarters of any fiscal year of the Borrower nor (ii) at any
time during the ninety days immediately following the end of each fiscal
year of the Borrower."
8. Amendment to Article VII NEGATIVE COVENANTS. Section 7.04.
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Capital Expenditures.
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Article VII Section 7.04. of the Credit Agreement is hereby amended by
deleting in its entirety, for the period "Fiscal year ending June 30,
1995", the corresponding requirement set forth under the column heading
"MAXIMUM AMOUNT" and substituting therefor the following:
"$3,800,000, but not more than $2,500,000 in capital expenditures for the
Caribe Building (as defined in the Chemical/BNY Loan Agreement) and not
more than $1,300,000 for all other capital expenditures;"
9. Amendment to Article VII. NEGATIVE COVENANTS. Section 7.10.
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Current Ratio.
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Article VII Section 7.10. of the Credit Agreement is hereby amended by
deleting it in its entirety and by substituting therefor the following:
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"SECTION 7.10. CURRENT RATIO. Permit the Current Ratio of the Borrower
and its Consolidated subsidiaries (i) to be less than 1.99 to 1.00 from
July 1, 1994 until December 30, 1994, (ii) to be less than 1.70 to 1.00
at all times from December 31, 1994 until December 30, 1995, (iii) to be
less than 1.85 to 1.00 at all times from December 31, 1995 until June
29, 1996 and (iv) to be less than 2.25 to 1.00 at all times from June
30, 1996 and thereafter."
10. Amendment to Article VII NEGATIVE COVENANTS. Section 7.14. Total
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Unsubordinated Liabilities to Tangible Net Worth Ratio.
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Article VII Section 7.14. of the Credit Agreement is hereby amended by
deleting it in its entirety and substituting therefor the following:
"SECTION 7.14. TOTAL UNSUBORDINATED LIABILITIES TO TANGIBLE NET WORTH
RATIO.
Permit the ratio of (x) Total Unsubordinated Liabilities of the Borrower
and its Consolidated subsidiaries to (y) Tangible Net Worth of the
Borrower and its Consolidated subsidiaries plus Consolidated
Subordinated Indebtedness, (i) to be greater than 1.05 to 1.00 at any
time from July 1, 1994 until December 30, 1994, (ii) to be greater than
1.15 to 1.00 at any time from December 31, 1994 until September 29,
1995, (iii) to be greater than 1.10 to 1.00 at any time from September
30, 1995 until December 30, 1995 and (iv) to be greater than 1.00 to
1.00 at any time from December 31, 1995 and thereafter."
11. Amendment to Article VII. NEGATIVE COVENANTS. Section 7.18. Debt
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Service Coverage Ratio.
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Section 7. 18 of the Credit Agreement is hereby amended by deleting it
in its entirety and by substituting therefor the following:
"SECTION 7.18. DEBT SERVICE COVERAGE RATIO. Permit the Debt Service
Ratio of the Borrower and its Consolidated subsidiaries to be less
than:
(i) 1.02 to 1.00 at any time from July l, 1994 until December 30,
1994;
(ii) .824 to 1.00 at any time from December 31, 1994 until June 29,
1995;
(iii) .94 to 1.00 at any time from June 30, 1995 until June 29, 1996;
and
(iv) 1.00 to 1.00 at any time from June 30, 1996 and thereafter."
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12. Amendment to Article VII NEGATIVE COVENANTS. Section 7.19.
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Inventory Reliance.
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Section 7.19 of the Credit Agreement is hereby amended by deleting it in
its entirety and by substituting therefor the following:
"Section 7.19 INVENTORY RELIANCE. Permit the Inventory Reliance of the
Borrower and its Consolidated subsidiaries to be more than (i) 18% at
any time from July 1, 1994 until December 30, 1994, (ii) 37% at any
time from December 31, 1994 until June 29, 1995, (iii) 34% at any time
from June 30, 1995 until September 29, 1995, (iv) 32% at any time from
September 30, 1995 until December 30, 1995, (v) 30% at any time from
December 31, 1995 until March 30, 1996, (vi) 20% at any time from
March 31, 1996 until June 29, 1996 and (vii) 10% at any time from June
30, 1996 and thereafter."
13. Amendment to Article VII NEGATIVE COVENANTS.
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Article VII of the Credit Agreement is hereby amended by adding the
following new "SECTION 7.20 INVENTORY TURNOVER DAYS." as follows:
"SECTION 7.20. INVENTORY TURNOVER DAYS. In the case of the Borrower
and its Consolidated subsidiaries, permit the number of inventory
days in any Test Period, as defined below, to exceed the number of
days for the corresponding period set forth below (inventory days
shall mean (a) the Consolidated inventory of the Borrower and its
Consolidated subsidiaries as of the last day of such Test Period
divided by (b) the Consolidated cost of goods sold of the Borrower
and its Consolidated subsidiaries for such Test Period, times (c) the
number of days in such Test Period):
Period Number of Days
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March 31, 1995 - June 29, 1995 276
June 30, 1995 - September 29, 1995 258
September 30, 1995 - December 30, 1995 246
December 31, 1995 - March 30, 1996 238
March 31, 1996 - June 29, 1996 218
June 30, 1996 and thereafter 208
Test Period shall mean the immediately preceding four fiscal quarters
of the Borrower and its Consolidated subsidiaries ending on the date
the number of "Inventory Turnover Days" is calculated."
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This SIXTH AMENDMENT and WAIVER shall be construed and enforced in
accordance with the laws of the State of New York.
Except as expressly amended, waived or consented to hereby, the Credit
Agreement shall remain in full force and effect in accordance with the original
terms thereof.
This SIXTH AMENDMENT and WAIVER herein contained is limited specifically to the
matters set forth above and does not constitute directly or by implication an
amendment or waiver of any other provision of the Credit Agreement or any
default which may occur or may have occurred under the Credit Agreement.
The Borrower hereby represents and warrants that, after giving effect to this
SIXTH AMENDMENT and WAIVER, no Event of Default or Default exists under the
Credit Agreement or any other related document.
Please be advised that should there be a need for further amendments or waivers
with respect to these covenants or any other covenants, those requests shall be
evaluated by the Agent and the Lenders when formally requested, in writing, by
the Borrower and the Guarantors.
This SIXTH AMENDMENT and WAIVER may be executed in two or more
counterparts, each of which shall constitute an original, but all of which
when, taken together shall constitute but one SIXTH AMENDMENT and WAIVER. The
SIXTH AMENDMENT and WAIVER shall become effective when (i) duly executed
counterparts hereof which, when taken together, bear the signatures of each of
the parties hereto shall have been delivered to the Agent and (ii) the Agent
shall have received copies of executed waivers and amendments (as appropriate)
to (a) the Chemical/BNY Loan Agreement and (b) the Letter of Credit and Bond
Purchase Agreement dated as of April 1, 1985 between the Borrower and Chemical
Bank.
Capitalized terms used herein and not otherwise defined herein shall have the
same meanings as defined in the Credit Agreement.
IN WITNESS WHEREOF, the Borrower, the Guarantors and the Agent have caused this
SIXTH AMENDMENT and WAIVER to be duly executed by their duly authorized
officers, all as of the day and year first above written.
NAPCO SECURITY SYSTEMS, INC.
By: /s/ K. S. Buchel
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Name:
Title: V.P.
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Guarantors:
NAPCO SECURITY SYSTEMS
INTERNATIONAL INC.
UMI MANUFACTURING CORP.
RALTECH LOGIC, INC.
E.E. ELECTRONIC
COMPONENTS, INC.
ALARM LOCK SYSTEMS, INC.
DERRINGER SECURITY
SYSTEMS, INC.
By: /s/ K. S. Buchel
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Name:
Title: V.P.
CHEMICAL BANK, as Agent and Lender
By: /s/ Xxxxxx X. Xxxxx Xx.
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Name: Xxxxxx X. Xxxxx Xx.
Title: V.P.