SECOND AMENDMENT AND THIRD WAIVER TO THE LOAN AND SECURITY AGREEMENT
Second Amendment and Third Waiver dated as of May 12, 1999 (this
"Amendment") to the Loan and Security Agreement, dated as of December 31, 1997
(as amended and modified, the "LOAN AGREEMENT"), among GENERAL ELECTRIC CAPITAL
CORPORATION, a New York corporation ("LENDER") and KNOGO NORTH AMERICA INC., a
Delaware corporation ("BORROWER"), and the other Credit Parties executing this
Amendment.
WITNESSETH :
WHEREAS, Borrower has requested that Lender waive the defaults arising
from the breach of "Minimum EBITDA" financial covenant and the "Minimum Net
Worth" financial covenant for the period ending March 31, 1999;
WHEREAS, Borrower has requested that Lender amend certain financial
covenants for Fiscal Year ending December 31, 1999;
WHEREAS, Lender is willing to waive such financial covenant defaults
and amend such financial covenants only on the terms and conditions set forth
herein;
WHEREAS, Borrower has also agreed not to make any cash dividend
payments with respect to the Series A Preferred Stock;
NOW, THEREFORE, in consideration of the premises, the covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties do hereby
agree that all capitalized terms used herein shall have the meanings ascribed
thereto in the Loan Agreement and do hereby further agree as follows:
STATEMENT OF TERMS
1. AMENDMENT TO LOAN AGREEMENT. Section 5(l) of the Loan Agreement is
amended in its entirety to provide as follows:
(l) MAKE OR PERMIT ANY RESTRICTED PAYMENT EXCEPT THAT DIVIDEND
PAYMENTS MAY BE MADE ON THE SERIES A PREFERRED STOCK IN
ACCORDANCE WITH THE TERMS SET FORTH IN THE CERTIFICATE OF
DESIGNATION FILED WITH THE SECRETARY OF STATE OF DELAWARE ON
FEBRUARY 12, 1997, PROVIDED, THAT, IF PAYMENTS ARE IN THE FORM
OF CASH (I) NO DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING
PRIOR TO AND AFTER GIVING EFFECT TO SUCH DIVIDEND PAYMENT AND
(II) AT THE TIME OF SUCH PAYMENT AND AFTER GIVING EFFECT
THERETO, THE FIXED CHARGE COVERAGE RATIO IS IN EXCESS OF 1.00
TO 1.00.
2. AMENDMENTS RELATING TO FINANCIAL COVENANTS. Schedule G of the Loan
Agreement is hereby amended as follows:
(a) Paragraph 1 is amended in its entirety to provide as follows:
1. MINIMUM EBITDA. SENTRY AND ITS SUBSIDIARIES ON A CONSOLIDATED
BASIS SHALL MAINTAIN AT THE END OF EACH FISCAL PERIOD SET FORTH
BELOW, AN EBITDA OF NOT LESS THAN THE AMOUNT SET FORTH OPPOSITE
SUCH FISCAL PERIOD BELOW:
Fiscal Period Minimum EBITDA
----------------------------------------------------------------------
January 1, 1999- June 30, 1999 $(1,000,000)
----------------------------------------------------------------------
January 1, 1999- September 30, 1999 $(200,000)
----------------------------------------------------------------------
(b) Paragraph 2 is amended in its entirety to provide as follows:
2. MINIMUM NET WORTH. SENTRY AND ITS SUBSIDIARIES ON A CONSOLIDATED
BASIS SHALL AT THE END OF EACH FISCAL PERIOD SET FORTH BELOW HAVE A
NET WORTH OF NOT LESS THAN THE AMOUNT SET OPPOSITE FISCAL PERIOD:
Fiscal Period Minimum Net Worth
----------------------------------------------------------------------
At June 30, 1999 $18,950,000
----------------------------------------------------------------------
At September 30, 1999 $18,976,000
----------------------------------------------------------------------
At December 31, 1999 $18,850,000
----------------------------------------------------------------------
(c) A new paragraph 3 is inserted following end of paragraph 2 and
provides as follows:
3. FIXED CHARGE COVERAGE RATIO. SENTRY AND ITS SUBSIDIARIES
SHALL MAINTAIN A FIXED CHARGE COVERAGE RATIO OF NOT LESS
THAN 1.00 TO 1.00 FOR THE FISCAL YEAR ENDING DECEMBER 31, 1999.
(d) The following defined terms are inserted in the appropriate
alphabetical order:
"FIXED CHARGE COVERAGE RATIO" SHALL MEAN, FOR ANY PERIOD, THE RATIO OF
THE FOLLOWING FOR SENTRY AND ITS SUBSIDIARIES ON A CONSOLIDATED BASIS
DETERMINED IN ACCORDANCE WITH GAAP: (A) EBITDA FOR SUCH PERIOD LESS
CAPITAL EXPENDITURES FOR SUCH PERIOD WHICH ARE NOT FINANCED THROUGH
THE INCURRENCE OF ANY INDEBTEDNESS (EXCLUDING THE REVOLVING CREDIT
LOAN) TO (B) THE SUM OF (I) INTEREST EXPENSE PAID OR ACCRUED IN
RESPECT OF ANY INDEBTEDNESS DURING SUCH PERIOD, PLUS (II) TAXES TO THE
EXTENT ACCRUED OR OTHERWISE PAYABLE WITH RESPECT TO SUCH PERIOD PLUS
(III) REGULARLY SCHEDULED PAYMENTS OF PRINCIPAL PAID OR THAT WERE
REQUIRED TO BE PAID ON FUNDED DEBT (EXCLUDING THE REVOLVING CREDIT
LOAN) DURING SUCH PERIOD, PLUS (IV) CASH DIVIDEND PAYMENTS MADE WITH
RESPECT TO SERIES A PREFERRED STOCK.
"FUNDED DEBT" SHALL MEAN, FOR ANY PERSON, ALL OF SUCH PERSON'S
INDEBTEDNESS WHICH BY THE TERMS OF THE AGREEMENT GOVERNING OR
INSTRUMENT EVIDENCING SUCH INDEBTEDNESS MATURES MORE THAN ONE YEAR
FROM, OR IS DIRECTLY OR INDIRECTLY RENEWABLE OR EXTENDIBLE AT THE
OPTION OF SUCH PERSON UNDER A REVOLVING CREDIT OR SIMILAR AGREEMENT
OBLIGATING THE LENDER OR LENDERS TO EXTEND CREDIT OVER A PERIOD OF
MORE THAN ONE YEAR FROM, THE DATE OF CREATION THEREOF, INCLUDING
CURRENT MATURITIES OF LONG-TERM DEBT, REVOLVING CREDIT, AND SHORT-TERM
DEBT EXTENDIBLE BEYOND ONE YEAR AT THE OPTION OF SUCH PERSON.
3. WAIVERS. Lender hereby waives the Events of Default arising solely
as a result of the breach of the minimum EBITDA covenant and breach of the
Minimum Net Worth covenant solely for the period ending March 31, 1999.
4. REPRESENTATIONS AND WARRANTIES. To induce Lender to enter into this
Amendment, each Credit Party hereto hereby warrants, represents and covenants to
Lender that: (a) each representation and warranty of the Credit Parties set
forth in the Loan Agreement is hereby restated and reaffirmed as true and
correct on and as of the date hereof after giving affect to this Amendment as if
such representation or warranty were made on and as of the date hereof (except
to the extent that any such representation or warranty expressly relates to a
prior specific date or period in which case it is true and correct as of such
prior date or period), and no Default or Event of Default has occurred and is
continuing as of this date under the Loan Agreement after giving effect to this
Amendment; and (b) each Credit Party hereto has the power and is duly authorized
to enter into, deliver and perform this Amendment, and this Amendment is the
legal, valid and binding obligation of such Credit Party enforceable against it
in accordance with its terms.
CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AMENDMENT. The
effectiveness of this Amendment is subject to the fulfillment of the following
conditions precedent:
(a) Lender shall have received one or more counterparts
of this Amendment duly executed and delivered by the
Credit Parties hereto;
(b) Any and all guarantors of the Obligations shall have
consented to the execution, delivery and performance
of this Amendment and all of the transactions
contemplated hereby by signing one or more
counterparts of this Amendment in the appropriate
space indicated below and returning same to Lender;
(c) Borrower shall have paid to Lender an Amendment Fee
of $2,500 and a Documentation fee of $1,000.
6. CONTINUING EFFECT OF LOAN AGREEMENT. Except as expressly amended
and modified hereby, the provisions of the Loan Agreement, and the Liens granted
thereunder, are and shall remain in full force and effect and the waiver set
forth herein shall be limited precisely as drafted and shall not constitute a
waiver of any other provisions of the Loan Agreement.
7. COUNTERPARTS. This Amendment may be executed in multiple
counterparts each of which shall be deemed to be an original and all of which
when taken together shall constitute one and the same instrument.
8. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN SUCH STATE WITHOUT REGARD TO THE PRINCIPLES
THEREOF REGARDING CONFLICTS OF LAWS.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered as of the day and year specified at the beginning
hereof.
KNOGO NORTH AMERICA INC.,
AS BORROWER
By: XXXXX X. XXXXX
-------------------------
(Conformed)
Name: Xxxxx X. Xxxxx
Title: V.P. - CFO
SENTRY TECHNOLOGY CORPORATION,
AS CREDIT PARTY
By: XXXXX X. XXXXX
-------------------------
(Conformed)
Name: Xxxxx X. Xxxxx
Title: V.P. - CFO
VIDEO SENTRY CORPORATION,
AS CREDIT PARTY
By: XXXXX X. XXXXX
--------------------------
(Conformed)
Name: Xxxxx X. Xxxxx
Title: V.P. - CFO
KNOGO CARIBE, INC.,
AS CREDIT PARTY
By: XXXXX X. XXXXX
--------------------------
(Conformed)
Name: Xxxxx X. Xxxxx
Title: Treasurer
GENERAL ELECTRIC CAPITAL CORPORATION,
AS LENDER
By: XXXXX X. XXXXXXXX
--------------------------
(Conformed)
Name: Xxxxx XxXxxxxx
Title: Duly Authorized Signatory
CONSENT OF GUARANTORS
Each of the undersigned guarantors does hereby consent to the
execution, delivery and performance of the within and foregoing Amendment and
confirms the continuing effect of such guarantor's guarantee of the Obligations
after giving effect to the foregoing Amendment.
IN WITNESS WHEREOF, each of the undersigned guarantors has executed
this Consent to Guarantors as of the day and year first above set forth.
GUARANTORS:
SENTRY TECHNOLOGY CORPORATION
By: X. X. XXXXXXXXX
-------------------------
(Conformed)
Name: X. X. Xxxxxxxxx
Title: President & CEO
VIDEO SENTRY CORPORATION
By: X. X. XXXXXXXXX
--------------------------
(Conformed)
Name: X. X. Xxxxxxxxx
Title: President
KNOGO CARIBE, INC.
By: X. X. XXXXXXXXX
--------------------------
(Conformed)
Name: X. X. Xxxxxxxxx
Title: President
