EXHIBIT 10.1
FORBEARANCE AGREEMENT -EXTENSION
--------------------------------
THIS AGREEMENT made as of November 12, 2008.
AMONG:
ROYAL BANK OF CANADA
(hereinafter referred to as the "BANK")
-and-
SENTRY TECHNOLOGY CANADA INC.
(hereinafter referred to as the "BORROWER")
-and-
SENTRY TECHNOLOGY CORPORATION
(hereinafter referred to as the "SENTRY")
- and -
CUSTOM SECURITY INDUSTRIES INC.
(hereinafter referred to as "CSI")
WHEREAS:
A. The Bank and the Borrower entered into a Forbearance Agreement made as of
the 29th day of May, 2008, a copy of which is attached hereto as Appendix "A"
("Forbearance Agreement").
B. By letter dated October 31, 2008, the Borrower has advised the Bank,
among other things, that it is making steady progress towards profitability,
will be implementing further expense cuts, and requires further time to attract
investment capital sufficient to repay the Indebtedness.
C. Accordingly, the Borrower has requested that the Bank extend the
Forbearance Period.
D. As an inducement to the Bank agreeing to extend the Forbearance Period,
the Borrower has agreed to enter into this Extension Agreement and to comply
with the terms and conditions contained in the Forbearance Agreement and
contained herein.
NOW THEREFORE in consideration of the acknowledgements, confirmations, covenants
and agreements contained herein, and other good and valuable consideration (the
receipt and sufficiency of which is hereby acknowledged by each of the Parties
hereto), each of the Parties hereto hereby agrees as follows:
-2-
1. All capitalized words and phrases not specifically defined herein shall
have the meaning as defined in the Forbearance Agreement.
2. Subsection 5.02(a) of the Forbearance Agreement is hereby amended by
deleting "October 31, 2008" and inserting "May 15, 2009".
3. Subsection 5.06(a) of the Forbearance Agreement is hereby amended by
deleting "the Bank's Prime Rate plus 3 and 1/4% per annum", and inserting
"the Bank's Prime Rate plus 3 and 3/4% per annum".
4. Section 5.06 of the Forbearance Agreement is hereby amended by adding:
"(b) the availability under Facility #1 of the Credit Facilities shall
be reduced to $3,000,000, effective immediately."
5. The Borrower shall pay to the Bank an extension fee in the sum of $5,000 in
consideration for the Bank's agreement to extend the Forbearance Period as
set out herein. Such extension fee shall be and is hereby deemed to form
part of the Indebtedness and secured by the Security. The Borrower
authorizes the Bank to debit the account it maintains with the Bank in the
foresaid sum immediately following the execution of this Extension
Agreement by the Borrower.
6. The Borrower and each of the Guarantors shall provide to the Consultant
access to the books and records of the Borrower and Sentry on or before
April 30, 2009 for the purpose of reviewing the financial performance of
the Borrower and Sentry, and in particular, it's most recent quarterly
results.
7. The following shall be added to Article 6 of the Forbearance Agreement:
"(w) Additional Financial Information: On or before December 15, 2008,
the Borrower and Sentry shall provide to the Bank and the Consultant their
sales backlog report and shipping schedules as at December 31, 2008, for
the upcoming quarter;
(x) Additional Financial Reporting and Cash Flow Projections: The Borrower
shall provide to the Bank, and the Guarantors shall ensure that the
Borrower provides to the Bank consolidated and unconsolidated (i) monthly
financial statements on the 30th day of each month for the previous month;
and (ii) monthly 3 way projections (balance sheet, income statement and
cash flow) for fiscal 2009 on a rolling, quarterly basis, to be provided
every month, commencing November 30, 2008 and on the last day of each month
thereafter."
8. The agreement of the Bank to extend the Forbearance Period as provided for
herein is conditional upon: (i) Brascan Technology Fund providing to the
Bank, by no later than November 21, 2008, with written confirmation that it
has agreed to extend the date for the repayment of the indebtedness owing
to it by the Borrower to July 30, 2009, in form and content satisfactory to
the Bank; (ii) the Borrower providing to the Bank, by no later than
November 21, 2008, with written confirmation, in form and content
satisfactory to the Bank, from Tradition Capital Bank, that the revolving
credit agreement made as of September 26, 2007 between Sentry and Tradition
has been extended to at least July 30,
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2009; and (iii) LaSalle Bank N.A. confirming the extension of its
irrevocable standby letter of credit number 6591288 in favour of the Bank
for the account of Xxxxxx Xxxxx, Xx. to July 30, 2009.
9. The Borrower and each of the Guarantors acknowledge that the disbursements
and legal fees incurred by it, as well as the fees of the Consultant
incurred by it, in the aggregate sum of $64,272.97, has been added to, and
continues to be deemed to form part of, the Indebtedness. In addition, the
most recent invoice of the Consultant shall be paid directly by the
Borrower, within 30 days of it having been received by the Borrower.
10. The Forbearance Agreement shall remain in full force and effect and
unamended, except as amended hereby.
IN WITNESS WHEREOF the parties hereto have executed this Extension Agreement
with effect as and from the date first above written.
ROYAL BANK OF CANADA
Per: /s/ Xxxxx Xxxxxxxx
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Authorized Signing Officer
SENTRY TECHNOLOGY CANADA INC.
Per: /s/ Xxxxx X. Xxxxxxx
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Authorized Signing Officer
Per: /s/ Xxxx Xxxxxx
----------------------------
Authorized Signing Officer
SENTRY TECHNOLOGY CORPORATION
Per: /s/ Xxxxx X. Xxxxxxx
----------------------------
Authorized Signing Officer
Per: /s/ Xxxx Xxxxxx
----------------------------
Authorized Signing Officer
CUSTOM SECURITY INDUSTRIES INC.
Per: /s/ Xxxxxx Xxxxxxx
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Authorized Signing Officer
Per:
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Authorized Signing Officer
