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Exhibit 10.U
AMENDMENT NO. 4 TO THE LOAN AND SECURITY AGREEMENT
AMENDMENT NO. 4 to the Loan and Security Agreement dated as of July
27, 2000 ("Amendment No. 4") by and between NAPCO SECURITY SYSTEMS, INC., a New
York corporation having a place of business at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (the "Debtor") and HSBC BANK USA F/K/A MARINE MIDLAND BANK,
having a place of business at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
(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 may be amended from time to time (the "Agreement");
WHEREAS, the Debtor has requested that the Secured Party extend a
$8,250,000 term loan to Continental Instruments Systems, LLC ("Continental
Systems"), a wholly owned subsidiary of Debtor, in order that Continental
Systems may acquire all of the assets of Continental Instruments LLC ("Seller")
and partially fund a two-year earn-out payable to ▇▇▇▇ ▇▇▇▇▇ ("Owner") pursuant
to a certain asset purchase agreement dated as of July ___, 2000 [sic] by and
between Seller, with its sole place of business at ▇▇▇-▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Owner, residing at ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ and Debtor, which asset purchase agreement, and the
rights of Debtor thereunder, were duly assigned to Continental Instruments
Systems, LLC by assignment dated July 27, 2000("Asset Purchase Agreement"), 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. 4.
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 "Consolidated Subsidiary" contained in
Section 1.1. of the Agreement is hereby amended to read in its entirety as
follows:
CONSOLIDATED SUBSIDIARY means Alarm Lock
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Systems, Inc. ("Alarm"), NAPCO Security Systems International,
Inc. ("NAPCO International"), UMI Manufacturing Corp. ("UMI"),
E.E. Electronic Components Inc. ("E.E."), Derringer Security
Systems, Inc. ("Derringer"), Raltech Logic, Inc. ("Raltech"),
NAPCO/Alarm Lock Grupo Internacional, S.A. ("NAPCO/Alarm
Lock"), 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.
2. The definition "Continental Term Loan" shall be added to
Section 1.1. of the Agreement and shall read as follows:
CONTINENTAL TERM LOAN means the $8,250,000 term loan made
available to Continental Systems by Secured Party pursuant to
the Term Loan Note.
3. The definition "Continental Term Loan Note" shall be added to
Section 1.1. of the Agreement and shall read as follows:
CONTINENTAL TERM LOAN NOTE means the $8,250,000 note
evidencing the Continental Term Loan executed by Continental
Systems and delivered to Secured Party as of even date hereof,
as such note may be extended or otherwise modified from time
to time; Continental Systems has used or will use the proceeds
of the Continental Term Loan Note to acquire all of the assets
of Seller (as the term "Seller" is defined in the recital
paragraphs) and fund a two-year earn-out payable to Owner (as
the term "Owner" is defined in the recital paragraph
hereinabove) pursuant to the Asset Purchase Agreement (as the
term "Asset Purchase Agreement" is defined in the recital
paragraph hereinabove).
4. The definition of "Transaction Documents" contained in
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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 this Amendment No.
4 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, 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, 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., as may be extended or otherwise modified from
time to time, 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
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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 Term Loan 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.
4. Section 3.3. of the Agreement is hereby amended to read in its
entirety as follows:
3.3. INDEBTEDNESS SECURED. The Security Interest
secures payment of any and all indebtedness, and performance
of all obligations and agreements, of Debtor to Secured Party,
whether now existing or hereafter incurred or arising, of
every kind and character, primary or secondary, direct or
indirect, absolute or contingent, sole, joint or several, and
whether such indebtedness is from time to time reduced and
thereafter increased, or entirely extinguished and thereafter
reincurred, including, without limitation: (a) all Advances;
(b) all interest which accrues on any such indebtedness, until
payment of such indebtedness in full, including, without
limitation, all interest provided for under this Agreement;
(c) all other monies payable
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by Debtor, and all obligations and agreements of Debtor to
Secured Party, pursuant to the Transaction Documents; (d) all
debts owed, or to be owed, by Debtor to others which Secured
Party has obtained, or may obtain, by assignment or otherwise;
(e) all monies payable by any Third Party, and all obligations
and agreements of any Third Party to Secured Party, pursuant
to any of the Transaction Documents; (f) all monies due, and
to become due, pursuant to Section 7.3; and (g) all
obligations arising under that certain unlimited continuing
guaranty of Debtor to Secured Party dated July 27, 20000,
wherein Debtor unconditionally guaranteed the full and prompt
payment to Secured Party when due, whether by acceleration or
otherwise, of any and all indebtedness (as defined in such
guaranty) of Continental Systems to Secured Party, as such
guaranty may be modified, reaffirmed or otherwise amended from
time to time; and (h) the obligations of Continental Systems
in favor of Secured Party under the Master Agreement.
5. A new SECTION 5 shall be added to the Agreement, and shall be
read in its entirety as follows:
5. REPRESENTATIONS AND WARRANTIES. To induce Secured Party
to enter make the Continental Term Loan, as herein provided,
Debtor represents and warrants, to the best of its knowledge,
and, so long as any Indebtedness remains unpaid or this
Agreement remains in effect, shall be deemed continuously to
represent and warrant as follows:
5.1. CORPORATE EXISTENCE. Continental Systems is a
duly formed limited liability company, in good standing under
the laws of the state of New York and is duly licensed or
qualified to do business and in good standing in every state
in which the nature of its business or ownership of its
property requires such licensing or qualification.
5.2 CORPORATE CAPACITY. The execution, delivery and
performance of the Transaction Documents are within
Continental Instrument's corporate powers, have been duly
authorized
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by all necessary and appropriate membership consent, and are
not in contravention of any law or the terms of Debtor's
articles of organization or operating agreement or any
amendment thereto, or of any indenture, agreement,
undertaking, or other document to which Continental Systems is
a party or by which Debtor or any of Debtor's property is
bound or affected.
5.3. VALIDITY OF RECEIVABLES. With respect to each
Receivable owned or to be owned by Continental Systems: (a)
each copy of each invoice is a true and genuine copy of the
original invoice sent to the account debtor named therein and
accurately evidences the transaction from which the underlying
Receivable arose, and the date payment is due as stated on
each Invoice or computed based on the information set forth on
each such Invoice is correct; (b) all Chattel Paper, and all
promissory notes, drafts, trade acceptances, and other
instruments for the payment of money relating to or evidencing
each Receivable, and each endorsement thereon, are true and
genuine and in all respects what they purport to be, and are
the valid and binding obligation of all parties thereto, and
the date or dates stated on all such items as the date on
which payment in whole or in part is due is correct; (c) all
Inventory described in each Invoice has been delivered to the
Account Debtor named in such Invoice or placed for such
delivery in the possession of a carrier not owned or
controlled directly or indirectly by Continental Systems; (d)
all evidence of the delivery or shipment of Inventory is true
and genuine; (e) all services to be performed by Continental
Systems and/or the Seller, as the case may be, in connection
with each Receivable have been performed by Continental
Systems and/or the Seller, as the case may be; and (f) all
evidence of the performance of such services by Continental
Systems and/or the Seller, as the case may be, is true and
genuine.
5.4. INVENTORY. (a) All representations made by
Debtor and/or Continental Systems, as the case may be, to
Secured Party, and all
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documents and schedules given by Debtor and/or Continental
Systems, as the case may be, to Secured Party, relating to
the description, quantity, quality, condition, and valuation
of the Inventory owned by Continental Systems are true and
correct; (b) Inventory owned by Continental Systems is
located only at the following address of Continental Systems:
▇▇▇-▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or such
other place or places as approved in advance by Secured Party
in writing;(c) all Inventory of Continental Systems is insured
as required by Section 9.11 of the Agreement, pursuant to
policies in full compliance with the requirements of such
Section; and (d) all manufactured or produced Inventory of
Continental Systems has been produced by Continental Systems
and/or Seller in accordance with the Federal Fair Labor
Standards Act of 1938, as amended, and all rules, regulations
and orders promulgated thereunder.
5.5. TITLE TO COLLATERAL. (a) Continental Systems is
the owner of the Collateral free of all security interests,
liens, and other encumbrances, except the Security Interest;
(b) Continental Systems has the unconditional authority to
grant a security interest in all assets of Continental Systems
to Secured Party; and (c) assuming that all necessary Uniform
Commercial Code filings have been made and, if applicable,
assuming compliance with the Federal Assignment of Claims Act
of 1940, as amended, Secured Party has an enforceable first
lien on all collateral granted to Secured Party by Continental
Systems.
5.6. PLACE OF BUSINESS. (a) Continental Systems is
engaged in business operations which are in whole, or in part,
carried on at the following addresses: ▇▇▇-▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ and at no other address or addresses; (b)
Continental Systems' chief executive office is ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇; and (c) Continental's
records concerning the collateral are kept at the
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address specified at the beginning of this Agreement.
5.7. FINANCIAL CONDITION. Debtor has furnished to
Secured Party Seller's most current financial statements,
including, without limiting the foregoing, the most recent
interim statements of Seller, which statements represent
correctly and fairly the results of the operations and
transactions of Seller, as of the dates, and for the period
referred to, and have been prepared in accordance with GAAP
applied during each interval involved and from interval to
interval. Since the date of such financial statements, there
have not been any materially adverse changes in the financial
condition reflected in such financial statements, except as
disclosed in writing by Debtor to Secured Party.
5.8. TAXES. Except as disclosed in writing by Debtor
to Secured Party including Seller's financial statements
provided to Secured Party: (a) all federal and other tax
returns required to be filed by Seller have been filed, and
all taxes required by such returns have been paid; and (b)
neither Seller, Continental Systems nor Debtor has received
any notice from the Internal Revenue Service or any other
taxing authority proposing additional taxes.
5.9. LITIGATION. Except as disclosed in the Asset
Purchase Agreement, there are no actions, suits, proceedings,
or investigations pending or, to the knowledge of Debtor,
threatened against Seller or Continental Systems or any basis
therefor which, if adversely determined, would, in any case or
in the aggregate, materially adversely affect the property,
assets, financial condition, or business of Seller and/or
Continental Systems, as the case may be, or materially impair
the right or ability of Continental Systems to carry on its
operations substantially as conducted on the date of this
Agreement.
5.10. ERISA MATTERS. (a) No Pension Plan has been
terminated, or partially
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terminated, or is insolvent, or in reorganization, nor have
any proceedings been instituted to terminate or reorganize any
Pension Plan; (b) neither Seller nor Continental Systems, as
the case may be, has withdrawn from any Pension Plan in a
complete or partial withdrawal, nor has a condition occurred
which, if continued, would result in a complete or partial
withdrawal; (c) neither Seller nor Continental Systems, as the
case may be, has incurred any withdrawal liability, including,
without limitation, contingent withdrawal liability, to any
Pension Plan, pursuant to Title IV of ERISA; (d) neither
Seller nor Continental Systems, as the case may be, has
incurred any liability to the Pension Benefit Guaranty
Corporation other than for required insurance premiums which
have been paid when due; (e) no Reportable Event has occurred;
(f) no Pension Plan or other "employee pension benefit plan"
as defined in Section 3(2) of ERISA, to which Seller or
Continental Systems, as the case may be, is a party has an
"accumulated funding deficiency" (whether or not waived), as
defined in Section 302 of ERISA or in Section 412 of the
Internal Revenue Code; (g) the present value of all benefits
vested under any Pension Plan of Seller and/or Continental
Systems, as the case may be, does not exceed the value of the
assets of such Pension Plan allocable to such vested benefits;
(h) each Pension Plan and each other "employee benefit plan",
as defined in Section 3(3) of ERISA, to which Seller and/or
Continental Systems, as the case may be, is a party is in
substantial compliance with ERISA, and no such plan or any
administrator, trustee, or fiduciary thereof has engaged in a
prohibited transaction described in Section 406 of ERISA or in
Section 4975 of the Internal Revenue Code; (i) each Pension
Plan and each other "employee benefit plan" as defined in
Section 3(2) of ERISA, to which Seller and/or Continental
Systems, as the case may be, is a party has received a
favorable determination by the Internal Revenue Service with
respect to qualification under Section 401(a) of the Internal
Revenue Code; and (j) neither Seller nor Continental Systems,
as the case may be,
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has incurred any liability to a trustee or trust established
pursuant to Section 4049 of ERISA or to a trustee appointed
pursuant to Section 4042(b) or (c) of ERISA.
5.11. NO CONSENT OR FILING. No consent, license,
approval, or authorization of, or registration, declaration,
or filing with, any court, governmental body or authority, or
other person or entity is required in connection with the
valid execution, delivery, or performance of the Transaction
Documents on the part of Continental Systems or for the
conduct of Continental Instrument's business as now conducted
or as conducted by Seller, as the case may be, other than
filings and recordings to perfect security interests in or
liens on all assets of Continental Systems in favor of Secured
Party in connection with the Transaction Documents.
5.12. NO VIOLATIONS. Neither Seller nor Continental
Systems, as the case may be, is in violation of any term of
any other indenture, instrument, or agreement to which it is a
party or by which it or its property may be bound, resulting,
or which might reasonably be expected to result, in a material
and adverse effect upon its business or assets. Neither
Seller nor Continental Systems is in violation of any order,
writ, judgment, injunction, or decree of any court of
competent jurisdiction or of any statute, rule or regulation
of any governmental authority. The execution and delivery of
the Asset Purchase Agreement and consummation of the sale by
the Seller, as set forth therein and the performance of all of
the same, is, and will be, in compliance with the foregoing
and will not result in any violation thereof, or result in the
creation of any mortgage, lien, security interest, charge, or
encumbrance upon, any properties or assets except in favor of
Secured Party. There exists no fact or circumstance (whether
or not disclosed in the Transaction Documents or the Asset
Purchase Agreement) which materially adversely affects, or in
the future (so far as Debtor can now foresee) may materially
adversely affect, the condition,
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business, or operations of Continental Systems.
5.13. TRADEMARKS AND PATENTS. After the consummation
of the purchase described in the Asset Purchase Agreement,
Continental Systems shall possess all trademarks, trademark
rights, patents, patent rights, tradenames, tradename rights
and copyrights that are required to conduct its business as
now conducted without conflict with the rights or claimed
rights of others. A list of the foregoing is set forth in
Exhibit A attached hereto.
5.14. CONTINGENT LIABILITIES. To the best of
Debtor's knowledge, after due inquiry, there are no suretyship
agreements, guaranties, or other contingent liabilities of
Seller which are not disclosed by the financial statements
described in Section 5.7.
5.15. COMPLIANCE WITH LAWS. Seller and/or
Continental Systems, as the case may be, is in compliance with
all applicable laws, rules, regulations, and other legal
requirements with respect to its business and the use,
maintenance and operations of the real and personal property
owned or leased by it in the conduct of its business.
5.16. LICENSES, PERMITS, ETC. Each franchise, grant,
approval, authorization, license, permit, easement, consent,
certificate, and order of and registration, declaration, and
filing with, any court, governmental body or authority, or
other person or entity required for or in connection with the
conduct of Seller's and/or Continental Instrument's business
as now conducted by Seller is in full force and effect.
5.17. LABOR CONTRACTS. Neither Seller nor
Continental Systems is a party to any collective bargaining
agreement or to any existing or threatened labor dispute or
controversies.
5.18. LABOR MATTERS.
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(a) Neither Continental Systems, nor, to
the best of Debtor's knowledge, Seller is engaged in any
unfair labor practice. To the best of Debtor's knowledge,
after due inquiry, Continental Systems and/or Seller, as the
case may be, are in compliance in all material respects with
all applicable federal, state and local laws, regulations,
rules, orders or other requirements respecting terms and
conditions of employment, employment practices, and wages and
hours,
(b) No strike, walkout or similar
business interruption resulting from any labor dispute has
been suffered by Seller and/or Continental Systems, as the
case may be, during the last five years nor is any state of
facts known to Debtor which would indicate that such event or
circumstance is likely to occur in the next twelve months.
(c) There is no pending, or to the
knowledge of Debtor, threatened unfair labor practice
complaint against Seller or Continental Systems, as the case
may be, before the National Labor Relations Board.
(d) There is no strike, labor dispute,
slowdown or stoppage actually pending or, to the knowledge of
Debtor, threatened against Seller and/or Continental Systems,
as the case may be.
(e) No union representation question
exists respecting the employees, or any group of employees, of
Seller and/or Continental Systems, as the case may be.
(f) No grievance which might have a
material adverse effect on Seller and/or Continental Systems,
as the case may be, or the conduct of their business nor any
arbitration proceeding arising out of or under collective
bargaining agreements is pending, and no claims therefor
exist.
(g) No collective bargaining agreement
which is binding on Seller and/or Continental Systems, as the
case may be, will
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restrict Continental Systems from relocating or closing any
office, warehouse or any other facility presently being used
by Seller and/or Continental Systems, as the case may be.
(h) To Debtor's knowledge, neither
Seller nor Continental Systems has experienced any material
work stoppage or other material labor difficulty at any
office, warehouse or other facility.
(i) To Debtor's knowledge, there are no
claims, complaints or charges pending before any state or
federal agency concerning employment penalties with respect to
Seller and/or Continental Systems, including without
limitation, employment discrimination, retaliatory discharge
and wage and hour claims.
5.19. MATERIALITY. Notwithstanding
anything to the contrary contained in Section 5 hereof, no
representation or warranty contained in Section 5 shall be
deemed false or cause an Event of Default to the extent that
the falsity of such representation or warranty is not
material, would not have a material adverse effect on
Continental Systems and/or Seller, as the case may be, would
not cause an untrue statement of material fact, and/or would
not result in an omission to state a material fact in order to
make the statements contained herein not misleading, and/or
would not materially adversely affect the financial and/or
business condition of Seller and/or Continental Systems, as
the case may be.
6. 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):
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during the period commencing as of the date hereof
through the fiscal year ending June 30, 2000, and
thereafter while any Indebtedness remains
outstanding, 1.50 to 1.
(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 3.25 to 1 from the date hereof
through the fiscal year ending June 30, 2000, and
(ii) of not less than 3.50 to 1 from July 1, 2000
through the fiscal year ending June 30, 2001, and
(iii) of not less than 3.75 to 1 from July 1, 2001
through the fiscal year ending June 30, 2002, and
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(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.
"Debt Service Coverage Ratio" shall mean earnings before
interest, taxes, depreciation and amortization, less
distributions, all divided by prior period current portion of
long term debt plus interest expense.
(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 Section 9.1. hereof:
from the date hereof through the fiscal year
ending June 30, 2000, 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, $1,000,000 per fiscal year (excluding the
incurrence of the Continental Term Loan).
(g) At all times while any Indebtedness remains
outstanding, the Debtor and
its Consolidated Subsidiaries
maintain, on a consolidated
basis,
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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.
7. Section 10.16. of the Agreement is hereby amended to read in
its entirety as follows:
10.16. NEGATIVE PLEDGE. (a) Encumber or cause to encumber,
or cause NAPCO/Alarm Lock Grupo Internacional, S.A. f/k/a NSS
Caribe S.A. to encumber, the assets (personal property,
fixtures or real property) of NAPCO/Alarm Lock Grupo
Internacional, S.A. f/k/a NSS Caribe S.A; or (b) encumber or
cause to encumber the assets (personal property, fixtures or
real property) of NAPCO Group Europe Limited.
8. Section 4.17 of the Agreement shall be supplemented with the
following additional paragraphs:
Since May 12, 1997, Debtor and its Consolidated Subsidiaries
possess the following additional trademarks, trademark rights,
patents, patent rights, tradenames, tradename rights and
copyrights without conflict with the rights or claimed rights
of others. A list of the foregoing as set forth in Exhibit B
attached hereto.
To secure the Indebtedness, Debtor hereby grants to Secured
Party, and/or reaffirms its grant to Secured Party, a security
interest in, and a lien on, all trademarks, trademark rights,
patents, patent rights, tradenames, tradename rights and
copyrights owned by
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Debtor, wherever located and whether now owned or hereafter
acquired; all books, records, ledger cards, data processing
records, computer software, and other property at any time
evidencing or relating to such collateral; all parts,
accessories, attachments, special tools, additions,
replacements, substitutions and accessions to or for all of
the foregoing; and all proceeds and products of the all of the
foregoing in any form, including, without limitation, amounts
payable under any policies of insurance insuring the foregoing
against loss or damage, and all increases and profits received
from all of the foregoing.
9. Section 10.2. of the Agreement is hereby amended to read in
its entirety as follows:
10.2. BORROWED MONEY. Create, incur, assume, or suffer to
exist any liability for borrowed money, except to Secured
Party, except for permitted Capital Expenditures, and except
the obligations of Continental Systems in favor of Seller
pursuant to the terms of a certain $1,445,000 promissory note
by Continental Systems in favor of Seller dated July 27, 2000,
as adjusted pursuant thereto, an executed copy of which has
been delivered to Secured Party.
10. The following paragraphs shall be added to Section 11.1. of
the Agreement:
(r) Nonpayment of Continental Term Loan Note. Nonpayment
when due of any principal, interest, premium, fee, cost or
expense due under the Continental Term Loan Note, and such
nonpayment is not cured within ten (10) days after notice
thereof by Secured Party to Debtor.
(s) Mortgage Default. The occurrence of an Event of Default
under that certain collateral mortgage and security agreement
dated July 27, 2000, by Debtor in favor of Secured Party in
the principal sum of $3,200,000, as the same may be extended
or otherwise modified from time to time (the "Collateral
Mortgage"; and as used in this subparagraph (s), the term
"Event of Default"
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shall have the meaning set forth in the Collateral Mortgage).
11. As an inducement to the Bank extending the Continental Term
Loan, and modifying the provisions of the Agreement pursuant to the terms
hereof, Debtor represents and warrants to Secured Party that, as of the date of
execution of this Amendment No. 4, (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.
12. 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.
13. Except as modified herein, all other provisions of the
Agreement and the other Transaction Documents remain unmodified and are in full
force and effect.
14. Capitalized terms not otherwise defined herein shall have the
meanings ascribed to such terms in the Agreement.
15. This Amendment No. 4 shall be governed by the laws of the
State of New York.
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IN WITNESS WHEREOF, the parties have executed this Amendment No. 4 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/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇
Vice President
NAPCO SECURITY SYSTEMS, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
Senior Vice President
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