SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) MAY 13, 2005.
SENTRY TECHNOLOGY CORPORATION
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(Exact Name of Registrant as specified in charter)
Delaware 1-12727 96-11-3349733
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(State or other jurisdic- (Commission (IRS Employer
tion of incorporation) File Number) Identification No.)
1881 Lakeland Avenue, Ronkonkoma, New York 11779
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(Address of principal executive offices) (Zip Code)
631/ 739-2100
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Registrant's telephone number, including area code
N/A
[GRAPHIC OMITED]
(Former name or former address, if changed since last report.)
[GRAPHIC OMITED]
INFORMATION TO BE INCLUDED IN THIS REPORT
Item 2.03 - Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
On May 13, Sentry Technology Corporation (the "COMPANY") and certain of its
subsidiaries entered into a new secured credit facility with Royal Bank of
Canada for $4.5 million dollars (Canadian). Interest is payable at a rate of
Royal Bank of Canada prime, plus 1.25%. This new credit facility replaces the
Company's current revolving credit agreement in the United States and its
overdraft lending and term loan agreement in Canada.
Item 9.01. Financial Statements and Exhibits.
Exhibit 10.1 - Credit Facility Letter Agreement with Royal Bank of Canada dated
April 19, 2005
Exhibit 10.2 - Amendment to Credit Facility Letter Agreement dated May 12, 2005
Exhibit 10.3 - Postponement and Subordination Agreement dated May 12, 2005
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SENTRY TECHNOLOGY CORPORATION
By: /s/ Peter J. Mundy Date: May 18, 2005
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Peter J. Mundy
Vice President and Chief Financial Officer
EXHIBIT INDEX
10.1 Credit Facility Letter Agreement with Royal Bank of Canada dated April
19, 2005
10.2 Amendment to Credit Facility Letter Agreement dated May 12, 2005
10.3 Postponement and Subordination Agreement dated May 12, 2005
EXHIBIT 10.1
[GRAPHIC OMITED]
[GRAPHIC OMITED]
RBC ROYAL BANK
MARC J. DROUIN
Senior Account Manager
ROYAL BANK OF CANADA
Information Technology - GTA 260
East Beaver Creek Road, 2nd Floor
Richmond Hill, Ontario L4B 3M3
Tel : 905-764-4755
Fax : 905-764-4361
April 19, 2005
PRIVATE AND CONFIDENTIAL
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Sentry Technology Canada Inc.
c/o Sentry Technology Corporation
37 Voyager Court North
Mississauga, Ontario
M9W4Y2
ATTENTION: MR. PETER MURDOCH. PRESIDENT&CEO
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Dear Sirs/Mesdames:
We are pleased to offer the credit facilities described below (the "CREDIT
FACILITIES"), subject to the following terms and conditions.
DEFINITIONS AND SCHEDULES
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The attached schedules are incorporated into this agreement by reference.
Schedule "A" contains definitions of capitalized terms used and not otherwise
defined in this agreement. Unless otherwise provided, all dollar amounts are in
Canadian currency and accounting terms are to be interpreted in accordance with
GAAP.
BORROWER
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Sentry Technology Canada Inc. (the "BORROWER")
LENDER
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Royal Bank of Canada (the "BANK")
CREDIT FACILITIES
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Facility (1): $5,000,000 revolving term facility, by way of:
(a) RBP based loans ("RBP Loans");
(b) RBUSBR based loans in US currency ("RBUSBR LOANS");
(c) Letters of Credit in Canadian currency or US currency ("LCs");
(d) Letters of Guarantee in Canadian currency or US currency ("LGs").
Each use of the Credit Facilities is a "BORROWING" and all such usages
outstanding at any time are "BORROWINGS". Schedule "B" contains terms and
conditions applicable to Borrowings made otherwise than by way of RBP Loans or
RBUSBR Loans which must be complied with.
FEF CONTRACTS
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At the Borrower's request the Bank may enter into Foreign Exchange Forward
Contracts ("FEF Contracts") with the Borrower from time to time. The Bank makes
no commitment to enter into any FEF Contract and may at any time in its sole
discretion decline to enter into any FEF Contract. FEF Contracts will be
governed by the terms and conditions set forth in the FEF Contracts Schedule
attached hereto.
PURPOSE
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Facility (I)
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Finance general operating requirements.
AVAILABILITY
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Facility(I)
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The Borrower may borrow, convert, repay and reborrow up to the amount of this
revolving facility, provided:
(a) the aggregate Borrowings outstanding under this facility (including,
without limitation, all LCs and LGs) must not exceed at any time the
aggregate of the following, less Potential Prior-Ranking Claims
(the "BORROWING LIMIT"):
(i) 75% of Good Domestic Accounts Receivable; and
(ii) 65% of Good Foreign Accounts Receivable; and
(iii) 65% of Good Carrefour S.A. Accounts Receivable; and
(iv) 90% of EDC Accounts Receivable; and
(v) 75% of filed, cash refundable investment tax credits of the Borrower,
supported by a letter from the auditors or other documents satisfactory to the
Bank; and
(vi) to a maximum of $800,000, 30% of the lesser of cost or net realizable
value of Unencumbered Inventory;
(b) the aggregate Borrowings outstanding by way of the LCs and LGs must not
exceed $500,000 at any one time: and
(c) an Event of Default shall not have occurred and be continuing at the
time of any Borrowing.
REPAYMENT
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Facility (1)
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Borrowings under this facility are expected to revolve with operating
requirements.
Borrowings under this facility shall be repayable 364 days from the date of
acceptance of this agreement.
INTEREST RATES AND FEES
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Facility (1)
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RBP Loans: RBP plus 1.25% per annum.
RBUSBR Loans: RBUSBR plus 1.25% per annum.
LCs: fee to be quoted by the Bank at the time of issue of each LC.
LGs: fee to be quoted by the Bank at the time of issue of each LG, subject
to a minimum fee of $100 in the currency of issue.
Arrangement Fee
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An arrangement fee of $22,500 is payable by the Borrower, $10,000 of which has
already been paid by the Borrower and the remaining $12,500 is due upon
acceptance of this agreement. This fee is non-refundable and is deemed to be
earned by the Bank upon acceptance of this agreement, to compensate for time,
effort and expense incurred by the Bank in approving these facilities.
Administration Fee
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An administration fee of $400 per month, for revolving RBP Loans and RBUSBR
Loans and for margining advances against accounts receivable, inventory and
investment tax credits, under Facility (1) is payable monthly in arrears on such
date as the Bank may determine.
CALCULATION AND PAYMENT OF INTEREST AND FEES
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RBP Loans and RBUSBR Loans
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The Borrower shall pay interest on each RBP Loan and RBUSBR Loan monthly in
arrears, on the 26th day of each month or such other day as may be agreed to
between the Borrower and the Bank. Such interest will be calculated monthly and
will accrue daily on the basis of the actual number of days elapsed and a year
of 365 days. Interest on RBUSBR Loans shall be paid in US currency.
LC Fees
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The Borrower shall pay an LC fee on the date of any payment made by the Bank
pursuant to a drawing under any LC calculated on the amount drawn, based upon
the number of days the LC was outstanding and a year of 365 days. If the total
amount available under any LC has not been drawn prior to the expiry of such LC,
the Borrower shall pay an LC fee calculated on the
undrawn portion of such LC on the expiry date thereof, based upon the number of
days the LC was outstanding and a year of 365 days. Fees for LCs issued in US
currency shall be paid in US currency.
LG Fees
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The Borrower shall pay an LG fee on the date of issuance of any LG calculated on
the face amount of the LG issued and based on the number of days in the term
thereof and a year of 365 days. Fees for LGs issued in US currency shall be paid
in US currency.
Limit on Interest
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The Borrower shall not be obligated to pay any interest, fees or costs under or
in connection with this agreement in excess of what is permitted by law.
Overdue Payments
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Any amount that is not paid when due hereunder shall, unless interest is
otherwise payable in respect thereof in accordance with the terms of this
agreement or the instrument or contract governing same, bear interest until paid
at the rate of RBP plus 5% per annum or, in the case of an amount in US
currency, RBUSBR plus 5% per annum.
Equivalent Yearly Rates
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The annual rates of interest or fees to which the rates calculated in accordance
with this agreement are equivalent, are the rates so calculated multiplied by
the actual number of days in the calendar year in which such calculation is made
and divided by 365.
Time and Place of Payment
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Amounts payable by the Borrower hereunder shall be paid at the Branch of Account
in the applicable currency. Amounts due on a day other than a Business Day shall
be deemed to be due on the Business Day next following such day. Interest and
fees payable under this agreement are payable both before and after any or all
of default, maturity date, demand and judgement.
EXCHANGE RATE FLUCTUATIONS
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If, for any reason, the amount of Borrowings outstanding under any facility,
when converted to the Equivalent Amount in Canadian currency, exceeds the amount
available under such facility, the Borrower shall immediately repay such excess
or shall secure such excess to the satisfaction of the Bank.
EVIDENCE OF INDEBTEDNESS
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The Bank shall open and maintain at the Branch of Account accounts and records
evidencing the Borrowings made available to the Borrower by the Bank under this
agreement. The Bank shall record the principal amount of each Borrowing, the
payment of principal and interest and all other amounts becoming due to the Bank
under this agreement.
The Bank's accounts and records constitute, in the absence of manifest error,
conclusive evidence of the indebtedness of the Borrower to the Bank pursuant to
this agreement.
The Borrower authorizes and directs the Bank to automatically debit, by
mechanical, electronic or manual means, any bank account of the Borrower for all
amounts payable by the Borrower to the Bank pursuant to this agreement.
GENERAL ACCOUNTS
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The Borrower shall establish current accounts with the Bank in each of Canadian
currency and US currency (each a "GENERAL ACCOUNT") for the conduct of the
Borrower's day to day banking business. If the balance in a General Account:
(a) is a credit, the Bank may apply, at any time in its discretion, the amount
of such credit or part thereof, rounded to the nearest $10,000 in Canadian
currency or US currency, as applicable, as a repayment of Borrowings outstanding
by way of RBP Loans or RBUSBR Loans, as applicable, under Facility (1), or
(b) is a debit, the Bank may, subject to availability, make available a
Borrowing by way of an RBP Loan or RBUSBR Loan, as applicable, under Facility
(1) in an amount, rounded to the nearest $10,000 in Canadian currency or US
currency, as applicable, as is required to place the General Account at not less
than a zero balance.
CONDITIONS PRECEDENT
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The availability of any Borrowing is conditional upon the receipt of:
(a) a duly executed copy of this agreement;
(b) the security provided for herein, in form and substance satisfactory to the
Bank, registered as required to perfect and maintain the security created
thereby and such certificates, authorizations, resolutions and legal opinions as
the Bank may reasonably require; and
(c) such financial and other information or documents relating to the
Borrower or any Guarantor as the Bank may reasonably require.
SECURITY
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Security for the Borrowings and all other obligations of the Borrower to the
Bank, shall include:
(a) General security agreement on the Bank's form 924 signed by the Borrower
constituting a first ranking security interest in all personal property of the
Borrower, supported by a certificate of insurance evidencing fire insurance
coverage over the assets of the Borrower, with first loss payable to the Bank
and evidencing business interruption and third party liability insurance;
(b) Guarantee and postponement of claim on the Bank's form 812 in the amount of
$5,500,000 signed by Sentry Technology Corporation, supported by a general
security agreement constituting a first ranking security interest in all
personal property of Sentry Technology Corporation, and further supported by a
certificate of insurance evidencing fire insurance coverage over the assets of
Sentry Technology Corporation, with first loss payable to the Bank and
evidencing business interruption and third party liability insurance;
(c) Guarantee and postponement of claim on the Bank's form 812 in the amount of
$5,500,000 signed by Sentry Technology USA Inc., supported by a general security
agreement constituting a first ranking security interest in all personal
property of Sentry Technology USA Inc. and further supported by a certificate of
insurance evidencing fire insurance coverage over the assets of Sentry
Technology USA Inc., with first loss payable to the Bank and evidencing business
interruption and third party liability insurance;
(d) Guarantee and postponement of claim on the Bank's form 812 in the amount of
$1,000,000 signed by Custom Security Industries Inc. supported by a general
security agreement constituting a first ranking security interest in all
personal property of Custom Security Industries Inc. and further supported by a
certificate of insurance evidencing fire insurance coverage over the assets of
Custom Security Industries Inc., with first loss payable to the Bank and
evidencing business interruption and third party liability insurance; and
(e) Postponement and assignment of claim on the Bank's form 918 signed by
Brascan Technology Fund.
REPRESENTATIONS AND WARRANTIES
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Each of the Borrower and Sentry Technology Corporation represents and warrants
to the Bank that:
(a) it is a corporation duly incorporated, validly existing and duly registered
or qualified to carry on business in the Province of Ontario, in the case of the
Borrower, and in the State of Delaware, in the case of Sentry Technology
Corporation;
(b) the execution, delivery and performance by it of this agreement have been
duly authorized by all necessary actions and do not violate its constating
documents or any Applicable Laws or agreements to which it is subject or by
which it is bound;
(c) the most recent consolidated financial statements provided to the Bank
fairly present its financial position as of the date thereof and its results of
operations and cash flows for the fiscal period covered thereby, and since the
date of such financial statements, there has occurred no material adverse change
in its business or financial condition;
(d) there is no claim, action, prosecution or other proceeding of any kind
pending or threatened against it or any of its assets or properties before any
court or administrative agency which relates to any non-compliance with any
Environmental Law or any Release from its lands of a Contaminant into the
natural environment or which, if adversely determined, might have a material
adverse effect upon its financial condition or operations or its ability to
perform its obligations under this agreement or any of the Bank's security, and
there are no circumstances of which it is aware which might give rise to any
such proceeding which it has not fully disclosed to the Bank;
(e) it has good and marketable title to all of its properties and assets, free
and clear of any encumbrances, other than as may be provided for herein;
(f) it is in compliance in all material respects with all Applicable Laws
including, without limitation, all Environmental Laws;
(g) it possesses all licenses, patents, trade marks, service marks and
copyrights, free from material restrictions, that are necessary for the
ownership, maintenance and operation of its assets and businesses and it is not
in violation of any rights of others with respect to any of the foregoing;
(h) no event has occurred which constitutes, or which, with notice, lapse of
time, or both, would constitute, an Event of Default; and
(i) it has filed all material tax returns which were required to be filed
by it, paid or made provision for payment of all taxes and Potential
Prior-Ranking Claims (including interest and penalties) which are due and
payable, and provided adequate reserves for payment of any tax, the payment of
which is being contested.
REPORTING COVENANTS
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The Borrower covenants and agrees with the Bank, while this agreement is in
effect, to provide the Bank with:
(a) monthly Borrowing Limit Certificate, substantially in the form of Schedule
"C", within 45 days of each month end;
(b) quarterly company prepared financial statements for the Borrower, within 45
days of each fiscal quarter end;
(c) quarterly Compliance Certificate, substantially in the form of Schedule "D",
within 45 days of each fiscal quarter end, certifying compliance with this
agreement; and
(d) annual company prepared financial statements for the Borrower, within 90
days of each fiscal year end. Sentry Technology Corporation covenants and agrees
with the Bank, while this agreement is in effect, to provide the Bank with:
(a) quarterly company prepared consolidated financial statements for
Sentry Technology Corporation, within 45 days of each fiscal quarter end;
(b) quarterly company prepared financial statements for each of Sentry
Technology USA Inc. and Custom Security Industries, within 45 days of each
fiscal quarter end;
(c) quarterly Compliance Certificate, substantially in the form of Schedule "E",
within 45 days of each fiscal quarter end, certifying compliance with this
agreement including the financial covenants set forth below;
(d) annual audited consolidated financial statements for Sentry Technology
Corporation, within 90 days of each fiscal year end;
(e) annual company prepared financial statements for each of Sentry Technology
USA Inc. and Custom Security Industries, within 90 days of each fiscal year end;
(f) annual forecasted balance sheet and income and cash flow statements on a
consolidated basis for Sentry Technology Corporation, supported by full
narrative and details of assumptions, prepared on a monthly basis for the next
following fiscal year, within 45 days of each fiscal year end; and
(g) such other financial and operating statements and reports as and when the
Bank may reasonably require.
GENERAL COVENANTS
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The Borrower covenants and agrees with the Bank, while this agreement is in
effect:
(a) to pay all sums of money when due by it under this agreement;
(b) to provide the Bank with prompt written notice of any event which
constitutes, or which, with notice, lapse of time, or both, would constitute an
Event of Default;
(c) to give the Bank 30 days prior written notice of any intended change in the
ownership of its shares and not to consent to or facilitate a change in the
ownership of its shares without the prior written consent of the Bank;
(d) to keep its assets fully insured against such perils and in such manner as
would be customarily insured by Persons carrying on a similar business or owning
similar assets;
(e) to file all material tax returns which are to be filed by it from time to
time, to pay or make provision for payment of all taxes (including interest and
penalties) and Potential Prior-Ranking Claims when due, and to provide adequate
reserves for the payment of any tax, the payment of which is being contested;
(f) to comply in all material respects with all Applicable Laws including,
without limitation, all Environmental Laws;
(g) not to, without the prior written consent of the Bank, grant, create, assume
or suffer to exist any mortgage, charge, lien, pledge, security interest or
other encumbrance affecting any of its properties, assets or other rights;
(h) not to, without the prior written consent of the Bank, sell, transfer,
convey, lease or otherwise dispose of any of its properties or assets other than
in the ordinary course of business and on commercially reasonable terms;
(i) not to, without the prior written consent of the Bank, guarantee or
otherwise provide for, on a direct, indirect or contingent basis, the payment of
any monies or performance of any obligations by any other Person, except as may
be provided for herein;
(j) not to, without the prior written consent of the Bank, merge,
amalgamate, or otherwise enter into any other form of business combination with
any other Person;
(k) to provide the Bank with prompt written notice of any non-compliance
by the Borrower with any Environmental Laws or any Release from the land of the
Borrower of a Contaminant into the natural environment and to indemnify and save
harmless the Bank from all liability or loss as a result of an Environmental
Activity or any non-compliance with any Environmental Law; and
(1) to permit the Bank or its representatives, from time to time, to visit
and inspect the Borrower's premises, properties and assets and examine and
obtain copies of the Borrower's records or other information and discuss the
Borrower's affairs with the auditors, counsel and other professional advisers of
the Borrower.
Sentry Technology Corporation covenants and agrees with the Bank, while this
agreement is in effect:
(m) not to, and to ensure its subsidiaries do not, without the prior
written consent of the Bank, grant, create, assume or suffer to exist any
mortgage, charge, lien, pledge, security interest or other encumbrance affecting
any of its properties, assets or other rights.
Each of the Borrower, Sentry Technology Corporation and Custom Security
Industries Inc. covenants and agrees with the Bank, while this agreement is in
effect:
(n) that in the event the annual gross revenues of Custom Security Industries
Inc. contribute more than 25% of Sentry Technology Corporation's consolidated
gross revenues, to deliver to the Bank a replacement or an additional guarantee
and postponement of claim on the Bank's form 812 signed by Custom Security
Industries Inc. for an increased amount, as determined by the Bank, acting
reasonably, together with any certificates, authorizations, resolutions and
legal opinions as the Bank may reasonably require.
FINANCIAL COVENANTS
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Sentry Technology Corporation covenants and agrees with the Bank, while any
availability exists or any Borrowings remain outstanding under any Credit
Facility, which is a term facility:
(a) to maintain on a consolidated basis, to be measured as at the end of
each fiscal quarter:
(i) a ratio of Current Assets to Current Liabilities of not less than
1.5:1;
(ii) a ratio of Net Funded Debt to EBITDA, calculated on a rolling 4
quarters basis for the fiscal quarter then ended and the immediately preceding 3
fiscal quarters, of not greater than 2.5:1; and
(iii) a ratio of Total Liabilities to Tangible Net Worth of not greater than
2:1.
EVENTS OF DEFAULT
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Without limiting any other rights of the Bank under this agreement, if any one
or more of the following events (herein an "EVENT OF DEFAULT") has occurred and
is continuing:
(a) the Borrower fails to pay when due any principal, interest, fees or other
amounts due under this agreement;
(b) the Borrower or any Guarantor breaches any provision of this agreement or
any security or other agreement with the Bank or any subsidiary or affiliate of
the Bank;
(c) the Borrower or any Guarantor defaults in the payment of any indebtedness to
any Person other than the Bank, or in the performance or observance of any
agreement in respect of any such indebtedness where, as a result of such
default, the maturity of such indebtedness is or may be accelerated;
(d) any representation or warranty made or deemed to have been made herein or in
any certificate or security provided for herein shall be false or inaccurate in
any materially adverse respect;
(e) there is, in the opinion of the Bank, a material adverse change in the
financial condition, operation or ownership of the Borrower or any Guarantor;
(f) the Borrower or any Guarantor is unable to pay its debts as such debts
become due, or is, or is adjudged or declared to be, or admits to being,
bankrupt or insolvent;
(g) any notice of intention is filed or any voluntary or involuntary case or
proceeding is filed or commenced for (i) the bankruptcy, liquidation,
winding-up, dissolution or suspension of general operations of the Borrower or
any Guarantor, or (ii) the composition, re-scheduling, reorganization,
arrangement or readjustment of, or other relief from, or stay of proceedings to
enforce, some or all of the debts of the Borrower or any Guarantor or (iii) the
appointment of a trustee, receiver, receiver and manager, liquidator,
administrator, custodian or other official for, all or any significant part of
the assets of the Borrower or any Guarantor or (iv) the possession, foreclosure
or retention, or sale or other disposition of, or other proceedings to enforce
security over, all or any significant part of the assets of the Borrower or any
Guarantor;
(h) any secured creditor, encumbrancer or lienor, or any trustee, receiver,
receiver and manager, agent, bailiff or other similar official appointed by or
acting for any secured creditor, encumbrancer or lienor, takes possession of, or
forecloses or retains, or sells or otherwise disposes of, or otherwise proceeds
to enforce security over all or any significant part of the assets of the
Borrower or any Guarantor or gives notice of its intention to do any of the
foregoing, then, in such event, the ability of the Borrower to make further
Borrowings under any Credit Facility which is a term facility under this
agreement shall immediately terminate and the Bank may, by written notice to the
Borrower, declare the Borrowings outstanding under any such Credit Facility to
be immediately due and payable. Upon receipt of such written notice, the
Borrower shall immediately pay to the Bank all Borrowings outstanding under any
Credit Facility which is a term facility under this agreement and all other
obligations of the Borrower to the Bank in connection with any such Credit
Facility under this agreement including, without limitation, an amount equal to
the aggregate of the face amounts of all LCs and LGs which are unmatured or
unexpired, which amount shall be held by the Bank as security for the Borrower's
obligations to the Bank in respect of such instruments or contracts. The Bank
may enforce its rights to realize upon its security and retain an amount
sufficient to secure the Bank for the Borrower's obligations to the Bank in
respect of such contracts or instruments.
SUCCESSORS AND ASSIGNS
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This agreement shall be binding upon and enure to the benefit of the parties and
their respective successors and permitted assigns.
The Bank may assign all or part of its rights and obligations under this
agreement to any Person. The rights and obligations of the Borrower under this
agreement may not be assigned without the prior written consent of the Bank.
The Bank may disclose to potential or actual assignees confidential information
regarding the Borrower (including, any such information provided by the Borrower
to the Bank) and shall not be liable for any such disclosure.
GENERAL
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Expenses
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The Borrower agrees to pay all fees (including legal fees), costs and expenses
incurred by the Bank in connection with the preparation, negotiation and
documentation of this agreement and the security provided for herein and the
operation or enforcement of this agreement and the security provided for herein.
Review
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The Bank may conduct periodic reviews of the affairs of the Borrower, as and
when determined by the Bank, for the purpose of evaluating the financial
condition of the Borrower. The Borrower shall make available to the Bank such
financial statements and other information and documentation as the Bank may
reasonably require and shall do all things reasonably necessary to facilitate
such review by the Bank.
Potential Prior-Ranking Claims
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The Borrower hereby grants its consent (such grant to remain in force as long as
this agreement is in effect or any Borrowings are outstanding) to any Person
having information relating to any Potential Prior-Ranking Claim arising by any
law, statute, regulation or otherwise and including, without limitation, claims
by or on behalf of government to release such information to the Bank at any
time upon its written request for the purpose of assisting the Bank to evaluate
the financial condition of the Borrower.
Set Off
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The Bank is authorized, but not obligated, at any time, to apply any credit
balance, whether or not then due, to which the Borrower is entitled on any
account in any currency at any branch or office of the Bank in or towards
satisfaction of the obligations of the Borrower due to the Bank under this
agreement. The Bank is authorized to use any such credit balance to buy such
other currencies as may be necessary to effect such application.
Non-Merger
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The provisions of this agreement shall not merge with any security provided to
the Bank, but shall continue in full force for the benefit of the parties
hereto.
Amendments and Waivers
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No amendment or waiver of any provision of this agreement will be effective
unless it is in writing signed by the Borrower and the Bank. No failure or
delay, on the part of the Bank, in exercising any right or power hereunder or
under any security document shall operate as a waiver thereof. Each of the
Guarantors agrees that the amendment or waiver of any provision of this
agreement (other than agreements, covenants or representations expressly made by
any Guarantor herein, if any) may be made without and does not require the
consent or agreement of, or notice to, any Guarantor.
Severability
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If any provision of this agreement is or becomes prohibited or unenforceable in
any jurisdiction, such prohibition or unenforceability shall not invalidate or
render unenforceable the provision concerned in any other jurisdiction nor
invalidate, affect or impair any of the remaining provisions of this agreement.
Life Insurance Options
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The Borrower acknowledges that Borrowings are not insured under the Bank's
Business Loan Insurance Plan.
Judgement Currency
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If for the purpose of obtaining judgement in any court in any jurisdiction with
respect to this agreement, it is necessary to convert into the currency of such
jurisdiction (the "Judgement Currency") any amount due hereunder in any currency
other than the Judgement Currency, then conversion shall be made at the rate of
exchange prevailing on the Business Day before the day on which judgement is
given. For this purpose "rate of exchange" means the rate at which the
Bank would, on the relevant date, be prepared to sell a similar amount of such
currency in the Toronto foreign exchange market, against the Judgement Currency,
in accordance with normal banking procedures.
In the event that there is a change in the rate of exchange prevailing between
the Business Day before the day on which judgement is given and the date of
payment of the amount due, the Borrower will, on the date of payment, pay such
additional amounts as may be necessary to ensure that the amount paid on such
date is the amount in the Judgement Currency which, when converted at the rate
of exchange prevailing on the date of payment, is the amount then due under this
agreement in such other currency together with interest at RBP and expenses
(including legal fees on a solicitor and client basis). Any additional amount
due from the Borrower under this section will be due as a separate debt and
shall not be affected by judgement being obtained for any other sums due under
or in respect of this agreement.
Governing Law
- --------------
This agreement shall be construed in accordance with and governed by the laws of
the Province of Ontario and of Canada applicable therein.
Whole Agreement
- ----------------
This agreement, the security and any other written agreement delivered pursuant
to or referred to in this agreement constitute the whole and entire agreement
between the parties in respect of the Credit Facilities. There are no verbal
agreements, undertakings or representations in connection with the Credit
Facilities.
Joint and Several
- -------------------
Where more than one Person is liable as Borrower or Guarantor for any obligation
under this agreement, then the liability of each such Person for such obligation
is joint and several with each other such Person.
Counterpart Execution
- ----------------------
This agreement may be executed in any number of counterparts and by different
parties in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which taken together constitute one and the same
instrument.
Time
- ----
Time shall be of the essence in all provisions of this agreement.
Acceptance
- ----------
This offer is open for acceptance until May 18, 2005, after which date it will
be null and void, unless extended in writing by the Bank.
Please confirm your acceptance of this agreement by signing the attached copy of
this letter in the space provided below and returning it to the undersigned.
Yours truly,
Marc J. Drouin
Senior Account Manager
/spa
We acknowledge and accept the foregoing terms and conditions
as of , 2005.
SENTRY TECHNOLOGY CANADA INC.
By: /s/ Peter L. Murdoch
-----------------------
Name: Peter L. Murdoch
------------------
Title: President
---------
By: __________________________
Name: _______________________
Title: ________________________
I/We have authority to bind the corporation.
We acknowledge and accept the foregoing terms and conditions
as of , 2005.
SENTRY TECHNOLOGY CORPORATION
By: /s/ Peter L. Murdoch
-----------------------
Name: Peter L. Murdoch
------------------
Title: President
----------
By:
Name:
Title: _________________________
I/We have authority to bind the corporation.
We acknowledge and confirm our agreement with
the foregoing terms and conditions, as Guarantor,
as of , 2005.
SENTRY TECHNOLOGY USA INC.
By: /s/ Peter L. Murdoch
-----------------------
Name: Peter L. Murdoch
------------------
Title: President
---------
By:_
Name: Title: "
I/We have authority to bind the corporation
We acknowledge and confirm our agreement with
the foregoing terms and conditions, as Guarantor,
and we acknowledge and accept the terms and conditions
contained in paragraph (n) in the General Covenants section
as of , 2005.
CUSTOM SECURITY INDUSTRIES INC.
By: /s/ Morton Roseman
--------------------
Name: Morton Roseman
----------------
Title: President
---------
By:
Name:
Title: _________________________
I/We have authority to bind the corporation.
SCHEDULE "A" to the agreement dated April 19, 2005, between Sentry Technology
Canada Inc., as Borrower, and Royal Bank of Canada, as the Bank.
Definitions
For the purpose of this agreement, the following terms and phrases shall have
the following meanings:
"ACCEPTABLE COUNTRIES PERSONS" means Persons whose chief operating activities
are located in Australia, Belgium, Germany, Italy, the United Kingdom or the
Hong Kong Special Administrative Region of the People's Republic of China;
"APPLICABLE LAWS" means, with respect to any Person, property, transaction or
event, all present or future Applicable Laws, statutes, regulations, rules,
orders, codes, treaties, conventions, judgments, awards, determinations and
decrees of any governmental, regulatory, fiscal or monetary body or court of
competent jurisdiction in any applicable jurisdiction;
"BRANCH OF ACCOUNT" means the branch of the Bank at which the Borrower's
accounts are maintained. As at the date of this agreement, the "BRANCH OF
ACCOUNT" is the Bank's branch at 260 East Beaver Creek Road, Richmond Hill,
Ontario;
"BUSINESS DAY" means a day, excluding Saturday, Sunday and any other day which
shall be a legal holiday or a day on which banking institutions are closed in
the province of the Branch of Account;
"CONTAMINANT" includes, without limitation, any pollutant, dangerous substance,
liquid waste, industrial waste, hazardous material, hazardous substance or
contaminant including any of the foregoing as defined in any Environmental Law;
"CURRENT ASSETS" means, at any time, those assets ordinarily realizable within
one year from the date of determination or within the normal operating cycle,
where such cycle is longer than a year;
"CURRENT LIABILITIES" means, at any time, amounts payable within one year from
the date of determination or within the normal operating cycle, where such cycle
is longer than a year (the operating cycle must correspond with that used for
current assets);
"DOMESTIC COUNTRIES PERSONS" means Persons whose chief operating activities are
located in the United States of America or Canada;
"EBITDA" means, for any fiscal period, net income from continuing operations
(excluding extraordinary gains or losses) plus, to the extent deducted in
determining net income, Interest Expense and income taxes accrued during, and
depreciation, depletion, amortization and minority interest expenses deducted
for, the period;
"EDC ACCOUNTS RECEIVABLE" means accounts receivable of the Borrower the payment
of which has been insured by the Export Development Canada;
"ENVIRONMENTAL ACTIVITY" means any activity, event or circumstance in respect of
a Contaminant, including, without limitation, its storage, use, holding,
collection, purchase, accumulation, assessment, generation, manufacture,
construction, processing, treatment, stabilization, disposition, handling or
transportation, or its Release into the natural environment, including movement
through or in the air, soil, surface water or groundwater;
"ENVIRONMENTAL LAWS" means all Applicable Laws relating to the environment or
occupational health and safety, or any Environmental Activity;
"EQUITY" means the total of share capital (excluding preferred shares redeemable
within one year), contributed surplus, and retained earnings, and for
calculation purposes, minority interest, as reported on Sentry Technology
Corporation's consolidated financial statements, provided to the Bank in
accordance with the Reporting Covenants section, will be treated as equity;
"EQUIVALENT AMOUNT" means, with respect to an amount of any currency, the amount
of any other currency required to purchase that amount of the first mentioned
currency through the Bank in Toronto, in accordance with normal banking
procedures;
"FUNDED DEBT" means, at any time, all obligations for borrowed money which bears
interest or to which interest is imputed plus, without duplication, all
obligations for the deferred payment of the purchase of property, all capital
lease obligations and all indebtedness secured by purchase money security
interests, plus the amount of any guarantees or other financial assistance
provided in respect of liabilities of a third party, but excluding Postponed
Debt;
"GAAP" means, generally accepted accounting principles in effect from time to
time in Canada applied in a consistent manner from period to period;
"GOOD ACCOUNTS RECEIVABLE" means accounts receivable of Sentry Technology
Corporation on a consolidated basis, excluding (i) EDC Accounts Receivable, (ii)
the entire amount of accounts, any portion of which is outstanding more than 90
days after billing date, provided that the under 90 day portion may be included
where the Bank has designated such portion as nevertheless good, and provided
the under 120 day portion may be included for accounts owing by Lowes Companies
Inc., (iii) all amounts due from any affiliate, (iv) bad or doubtful accounts,
(v) accounts subject to any security interest or other encumbrance ranking or
capable of ranking in priority to the Bank's security, (vi) the amount of all
holdbacks, contra accounts or rights of set-off on the part of any account
debtor, or (vii) any accounts which the Bank has previously advised to be
ineligible;
"GOOD CARREFOUR ACCOUNTS RECEIVABLE" means accounts receivable of Sentry
Technology Corporation on a consolidated basis owing by Carrefour S.A.,
excluding (i) EDC Accounts Receivable, (ii) the entire amount of accounts, any
portion of which is outstanding more than 90 days after billing date, provided
that the under 90 day portion may be included where the Bank has designated such
portion as nevertheless good, (iii) bad or doubtful accounts, (iv) accounts
subject to any security interest or other encumbrance ranking or capable of
ranking in priority to the Bank's security, (v) the amount of all holdbacks,
contra accounts or rights of set-off, or (vi) any accounts which the Bank has
previously advised to be ineligible;
"GOOD DOMESTIC ACCOUNTS RECEIVABLE" means Good Accounts Receivable owing by
Domestic Countries Persons;
"GOOD FOREIGN ACCOUNTS RECEIVABLE" means Good Accounts Receivable owing by
Acceptable Countries Persons;
"GUARANTORS" means Sentry Technology Corporation, a Delaware corporation, Sentry
Technology USA Inc, a Pennsylvania corporation, and Custom Security Industries
Inc., an Ontario corporation and "GUARANTOR" means any one of them;
"LETTER OF CREDIT" or "LC" means a documentary credit issued by the Bank on
behalf of the Borrower for the purpose of paying suppliers of goods;
"LETTER OF GUARANTEE" or "LG" means a documentary credit issued by the Bank on
behalf of the Borrower for the purpose of providing security to a third party
that the Borrower or a person designated by the Borrower will perform a
contractual obligation owed to such third party;
"NET FUNDED DEBT" means Funded Debt less cash or cash equivalents;
"PERSON" includes an individual, a partnership, a joint venture, a trust, an
unincorporated organization, a company, a corporation, an association, a
government or any department or agency thereof, and any other incorporated or
unincorporated entity;
"POSTPONED DEBT" means indebtedness that is fully postponed and subordinated,
both as to principal and interest, on terms satisfactory to the Bank, to the
obligations owing to the Bank hereunder;
"POTENTIAL PRIOR-RANKING CLAIMS" means all amounts owing or required to be paid,
where the failure to pay any such amount could give rise to a claim pursuant to
any law, statute, regulation or otherwise, which ranks or is capable of ranking
in priority to the Bank's security or otherwise in priority to any claim by the
Bank for repayment of any amounts owing under this agreement;
"RBP" and "ROYAL BANK PRIME" each means the annual rate of interest announced by
the Bank from time to time as being a reference rate then in effect for
determining interest rates on commercial loans made in Canadian currency in
Canada;
"RBUSBR" and "ROYAL BANK US BASE RATE" each means the annual rate of interest
announced by the Bank from time to time as a reference rate then in effect for
determining interest rates on commercial loans made in US currency in Canada;
"RELEASE" includes discharge, spray, inject, inoculate, abandon, deposit, spill,
leak, seep, pour, emit, empty, throw, dump, place and exhaust, and when used as
a noun has a similar meaning;
"SENIOR DEBT" means, at any time, the aggregate Borrowings outstanding owing by
the Borrower to the Bank under Facility (1);
"TANGIBLE NET WORTH" means the total of Equity plus Postponed Debt less
intangibles, deferred charges and leasehold improvements. For the purpose
hereof, intangibles are assets lacking physical substance;
"TOTAL LIABILITIES" means all liabilities, exclusive of deferred tax liabilities
and Postponed Debt. For calculation purposes, minority interest, as reported on
Sentry Technology Corporation's consolidated financial statements provided to
the Bank in accordance with the Reporting Covenants section, will be treated as
equity;
"UNENCUMBERED INVENTORY" means finished goods inventory of Sentry Technology
Corporation on a consolidated basis which is not subject to any security
interest or other encumbrance or any other right or claim which ranks or is
capable of ranking in priority to the Bank's security including, without
limitation, rights of unpaid suppliers under the Bankruptcy and Insolvency Act,
Canada, to repossess inventory within 30 days after delivery;
"US" means United States of America.
SCHEDULE "B" to the agreement dated April 19, 2005, between Sentry Technology
Canada Inc., as Borrower, and Royal Bank of Canada, as the Bank.
Borrowing Conditions
Borrowings made otherwise than by way of RBP Loans or RBUSBR Loans will be
subject to the following terms and conditions:
LCSorLGS:
- ---------
(a) each LC and LG shall expire on a Business Day and shall have a term of
not more than 365 days;
(b) at least 2 Business Days prior to the issue of an LC or LG, the Borrower
Shall execute a duly authorized application with respect to such LC or LG and
each LC and LG shall be governed by the terms and conditions of the relevant
application for such contract;
(c) an LC or LG may not be revoked prior to its expiry date unless the
consent of the beneficiary of the LC or LG has been obtained;
(d) any LC or LG issued under a term facility must have an expiry date on or
Before the maturity date of the term facility, unless otherwise agreed to by
the Bank; and
(e) if there is any inconsistency at any time between the terms of this
agreement and the terms of the application for LC or LG, the terms of the
application for LC or LG shall govern.
Schedule "C" to the agreement dated April 19 2005, between Sentry Technology
Canada Inc., as Borrower, and Royal Bank of Canada, as the Bank.
Borrowing Limit Certificate
I, , the of Sentry Technology Canada Inc.
(the "Borrower") hereby certify as of month ending:
1. I am familiar with and have examined the provisions of the letter agreement
(the "Agreement") dated April 19, 2005, between Sentry Technology Canada Inc.,
as Borrower, and Royal Bank of Canada (the "Bank"), as the Bank, and have made
reasonable investigations of corporate records and inquiries of other officers
and senior personnel of the Borrower. Terms defined in the Agreement have the
same meanings where used in this certificate.
2. The Borrowing Limit is $ , calculated as follows:
total accounts receivable owing by Domestic Countries Persons of Sentry $
Technology Corporation on a consolidated basis, excluding EDC Accounts
Receivable Less:
(a) Domestic Countries Persons accounts, any portion of which
($ ) exceeds 90 days
(b) Domestic Countries Persons accounts due from affiliates ($ )
(c) "Under 90 days" Domestic Countries Persons accounts ($ )
where collection is suspect
(d) Domestic Countries Persons accounts subject to prior ($ )
encumbrances
(e) Holdbacks, contra-accounts or rights of set-off ($ )
(f) other ineligible Domestic Countries Persons accounts ($ )
Plus: (s) Under 90 day portion of Domestic Countries Persons $
accounts included in (a) above, which the Bank has designated as nevertheless
good and the under 120 day portion of accounts owing by Lowes Companies Inc.
Good Domestic Accounts Receivable A $
marginable Good Domestic Accounts Receivable at 75% of A B $
total accounts owing by Acceptable Countries Persons of Sentry $_____________
Technology Corporation on a consolidated basis,
excluding EDC Accounts Receivable
Less: (a) Acceptable Countries Persons accounts, any
portion of which ($___________
exceeds 90 days
(b) Acceptable Countries Persons accounts due
from affiliates ($_________)
(c) "Under 90 days" Acceptable Countries Persons
accounts ($_________)
where collection is suspect
(d) Acceptable Countries Persons accounts subject
to prior ($_________)
encumbrances
(e) Holdbacks, contra-accounts or rights of set-off ($_________)
(f) other ineligible Acceptable Countries Persons
accounts ($_________)
Plus: (g) Under 90 day portion of Acceptable
Countries Persons $__________)
accounts included in (a) above, which the Bank has designated
as nevertheless good
Good Foreign Accounts Receivable C $____________
marginable Foreign Accounts Receivable at 75% of C D $____________
total accounts receivable of Sentry Technology Corporation
on a $__________
consolidated basis owing by Carrefour S.A.,
excluding EDC Accounts Receivable
Less:
(a) Carrefour S.A. accounts, any portion of which exceeds
90 days ($ _________)
(b) "Under 90 days" Carrefour S.A. accounts
where collection ($_________)
is suspect
(c) Carrefour S.A. accounts subject to prior
encumbrances ($_________)
(d) Holdbacks, contra-accounts or rights of set-off ($___________)
(e) other ineligible Carrefour S.A. accounts ($___________)
Plus: (f) Under 90 day portion of Carrefour S.A. accounts
included $ _________
in (a) above, which the Bank has designated as
nevertheless good
Good Carrefour S.A. Receivable E $_____________
marginable Carrefour S.A. Receivable at 65% of E F $_____________
total EDC Accounts Receivable G $_____________
marginable EDC Accounts Receivable at 90% of G H $_____________
total filed, cash refundable investment tax credits
of the Borrower I $___________
marginable filed, cash refundable investment tax credits
at 75% of I J $____________
total finished goods inventory of Sentry
Technology Corporation on a $____________
consolidated basis (valued at lesser of cost
or net realizable value)
Less: (a) inventory subject to prior encumbrances ($_____________
(b) inventory subject to 30 day supplier payables ($_____________
(c) other non-qualifying inventory ($_____________
Unencumbered Inventory K $___________
marginable Unencumbered Inventory at 30% of K
(Max. $800,000) L $___________
Less: Potential Prior-Ranking Claims M ($ )
Borrowing Limit (B + D + F + H + J + L-M) $ ___________
Less: Facility (1) Borrowings (including LCs and ($________)
$ LGs)
Margin Surplus (Deficit) $_____________
3. Annexed hereto are the following reports in respect of Sentry Technology
Corporation:
(a) aged list of accounts receivable and accounts payable,
(b) status of inventory,
(c) listing of Potential Prior-Ranking Claims,
(d) listing of supplier payables,
(e) auditors' letter re: filed, cash refundable investment tax credits,
(f) Re EDC - Direction of Proceeds (Form E6) and copy of Schedule B.
4. The reports and information provided herewith are accurate and complete in
all respects and all amounts certified as Potential Prior-Ranking Claims are
current amounts owing and not in arrears.
Dated this day of , 20 .
Per:
Name: Title: "
Schedule "D" to the agreement dated April 19, 2005, between Sentry Technology
Canada Inc., as Borrower, and Royal Bank of Canada, as the Bank.
Compliance Certificate
I, , the of Sentry Technology Canada Inc.
(the "Borrower") hereby certify as of fiscal quarter ending :
1. I am familiar with and have examined the provisions of the letter agreement
(the "Agreement") dated April 19, 2005, between Sentry Technology Canada Inc.,
as Borrower, and Royal Bank of Canada (the "Bank"), as the Bank, and have made
reasonable investigations of corporate records and inquiries of other officers
and senior personnel of the Borrower and Guarantor. Terms defined in the
Agreement have the same meanings when used in this certificate.
2. The representations and warranties contained in the Agreement are true
and correct.
3. No event or circumstance has occurred which constitutes or which, with the
giving of notice, lapse of time, or both, would constitute an Event of Default
under the Agreement and there is no reason to believe that during the next
fiscal quarter of the Borrower, any such event or circumstance will occur.
Dated this day of , 20 .
Per:
Name:
Title:
Schedule "E" to the agreement dated April 19, 2005, between Sentry Technology
Canada Inc., as Borrower, and Royal Bank of Canada, as the Bank.
Compliance Certificate
I, , the of Sentry Technology Corporation
(the "Guarantor") hereby certify as of fiscal quarter ending :
1. I am familiar with and have examined the provisions of the letter agreement
(the "Agreement") dated April 19, 2005, between Sentry Technology Canada Inc.,
as Borrower, and Royal Bank of Canada (the "Bank"), as the Bank, and have made
reasonable investigations of corporate records and inquiries of other officers
and senior personnel of the Borrower and Guarantor. Terms defined in the
Agreement have the same meanings when used in this certificate.
2. The representations and warranties contained in the Agreement are true
and correct.
3. No event or circumstance has occurred which constitutes or which, with the
giving of notice, lapse of time, or both, would constitute an Event of Default
under the Agreement and there is no reason to believe that during the next
fiscal quarter of the Guarantor, any such event or circumstance will occur.
4. The ratio of Current Assets to Current Liabilities is : 1, being not less
than the minimum required ratio of 1.5:1.
5. The ratio of Total Liabilities to Tangible Net Worth is : 1, being not
greater than the maximum ratio of 2:1.
6. The ratio of Net Funded Debt to EBITDA is : 1, being not greater than the
required maximum ratio of 2.5:1.
7. The detailed calculations of the foregoing ratios and covenants is set forth
in the addendum annexed hereto and are true and correct in all respects.
Dated this day of , 20 .
Per:_
Name: Title: "
FEF CONTRACTS SCHEDULE
FEF CONTRACT DEFINITIONS
- --------------------------
"FOREIGN EXCHANGE FORWARD CONTRACT" or "FEF CONTRACT" means a currency exchange
transaction or agreement or any option with respect to any such transaction now
existing or hereafter entered into between the Borrower and the Bank;
CONDITIONS APPLICABLE TO FEF CONTRACTS
- ------------------------------------------
At the Borrower's request, the Bank may agree to enter into FEF Contracts with
the Borrower from time to time. The Borrower acknowledges that the Bank makes no
formal commitment herein to enter into any FEF Contract and the Bank may, at any
time and at all times, in its sole and absolute discretion, accept or reject any
request by the Borrower to enter into a FEF Contract. If the Bank does enter
into a FEF Contract with the Borrower, it will do so subject to the following:
(a) the Borrower shall promptly issue or countersign and return a confirmation
or acknowledgement of the terms of each such FEF Contract as required by
the Bank;
(b) the Borrower shall, if required by the Bank, promptly enter into a Foreign
Exchange and Options Master Agreement or such other agreement in form and
substance satisfactory to the Bank to govern the FEF Contract(s);
(c) in the event of demand for payment under the agreement of which this
schedule forms a part, the Bank may terminate all or any FEF Contracts. If
the agreement governing any FEF Contract does not contain provisions
governing termination, any such termination shall be effected in accordance
with customary market practice. The Bank's determination of amounts owing
under any terminated FEF Contract shall be conclusive in the absence of
manifest error. The Bank shall apply any amount owing by the Bank to the
Borrower on termination of any FEF Contract against the Borrower's
obligations to the Bank under the agreement and any amount owing to the
Bank by the Borrower on such termination shall be added to the Borrower's
obligations to the Bank under the agreement and secured by the Bank's
security;
(d) the Borrower shall pay all required fees in connection with any FEF
Contracts and indemnify and hold the Bank harmless against any loss, cost
or expense incurred by the Bank in relation to any FEF Contract, including
without limitation, the costs of terminating or cancelling any FEF
Contract;
(e) any rights of the Bank herein in respect of any FEF Contract are in
addition to and not in limitation of or substitution for any rights of the
Bank under any agreement governing such FEF Contract. In the event that
there is any inconsistency at any time between the terms hereof and any
agreement governing such FEF Contract, the terms of such agreement shall
prevail; and
(f) in addition to any security which may be held at any time in respect of any
FEF Contract, upon request by the Bank from time to time, the Borrower will
deliver to the Bank such security as is acceptable to the Bank as
continuing collateral security for the Borrower's obligations to the Bank
in respect of FEF Contracts.
EXHIBIT 10.2
MARC DROUIN ROYAL BANK OF CANADA
Senior Account Manager Information Technology - GTA
Tel: (905) 764-4755 260 East Beaver Creek Road, Suite 201
Fax: (905) 764-4361 Richmond Hill, Ontario L4B 3M3
May 12, 2005
PRIVATE AND CONFIDENTIAL
- --------------------------
Sentry Technology Canada Inc.
c/o Sentry Technology Corporation
37 Voyageur Court North
Mississauga, Ontario
M9W 4Y2
ATTENTION: MR. PETER MURDOCH, PRESIDENT & CEO
- ---------------------------------------------------
Dear Sirs:
We refer to the letter agreement dated April 19, 2005 (the "Letter Agreement")
between Sentry Technology Canada Inc. (the "Borrower") and Royal Bank of Canada
(the "Bank").
All capitalized terms not otherwise defined herein shall have the meaning
ascribed thereto in the Letter Agreement.
The Letter Agreement is amended with effect as of the Effective Date (defined
below) as follows:
1. FACILITY (1)
The principal amount of Facility (1) in the Letter Agreement is hereby
permanently reduced from $5,000,000 to $4,500,000, it being understood and
agreed by each of the parties hereto that the maximum available amount of credit
under Facility (1) shall be subject at all times to the availment options,
margin requirements and other applicable terms and conditions set forth in the
Letter Agreement, as amended from time to time.
2. SECURITY
In the Security section of the Letter Agreement, the list of security to be
delivered to the Bank shall be amended as follows:
(i) Paragraph (b) is hereby deleted in its entirety and replaced with the
following:
"(b) Guarantee and postponement of claim signed by Sentry Technology
Corporation in form and substance satisfactory to the Bank in its sole
discretion in the amount of $5,000,000 with interest after demand as set forth
therein, supported by a general security agreement constituting a first ranking
security interest in all personal property of Sentry Technology Corporation and
further supported by a certificate of insurance evidencing fire insurance
coverage over the assets of Sentry Technology Corporation, with first loss
payable to the Bank and evidencing business interruption and third party
liability insurance."
(ii) Paragraph (c) is hereby deleted in its entirety and replaced with the
following:
"(c) Guarantee and postponement of claim signed by Sentry Technology USA
Inc. in form and substance satisfactory to the Bank in its sole discretion in
the amount of $5,000,000 with interest after demand as set forth therein,
supported by a general security agreement constituting a first ranking security
interest in all personal property of Sentry Technology USA Inc. and further
supported by a certificate of insurance evidencing fire insurance coverage over
the assets of Sentry Technology USA Inc., with first loss payable to the Bank
and evidencing business interruption and third party liability insurance".
(iii) Paragraph (d) is hereby deleted in its entirety and replaced with the
following:
"(d) Guarantee and postponement of claim signed by Custom Security
Industries Inc. in form and substance satisfactory to the Bank in its sole
discretion in the amount of $1,000,000 with interest after demand as set forth
therein".
(iv) Paragraph (e) is hereby deleted in its entirety and replaced with the
following:
"(e) Postponement and Subordination Agreement among the Bank, Brascan
Technology Fund, the Borrower and Sentry Technology Corporation in form and
substance satisfactory to the Bank in its sole discretion".
(iv) The following are added as Paragraphs (f) and (g):
"(f) Payout Statement and Undertaking to Release Security from CIT Business
Credit / Group, Inc. ("CIT") in favour of the Bank, regarding any and all
security and insurance interests held by CIT in respect of the Borrower, the
Guarantors and any of their affiliates in form and substance satisfactory to the
Bank in its sole discretion".
"(g) Payout Statement and Undertaking to Release Security from Bank of
Montreal ("BMO") in favour of the Bank, regarding any and all security and
insurance interests held by BMO in respect of the Borrower, the Guarantors and
any of their affiliates in form and substance satisfactory to the Bank in its
sole discretion".
3. REPRESENTATIONS AND WARRANTIES
In the Representations and Warranties section of the Letter Agreement, the
following is added as paragraph (j):
"(j) Custom Security Industries Inc. has not delivered any security to and in
favour of Brascan Technology Fund Inc. or any of its affiliates."
4. GENERAL COVENANTS
In the General Covenants section of the Letter Agreement:
(i) Paragraph (h) is hereby deleted in its entirety and replaced with the
following:
"(h) not to, without the prior written consent of the Bank sell, transfer,
convey, lease or otherwise dispose of any of its properties or assets other than
in the ordinary course of business and on commercially reasonable grounds. For
greater certainty and without limiting the generality of the foregoing, the
Borrower and each of the Guarantors may not sell, transfer, convey, lease or
otherwise dispose of their assets to each other without the prior written
consent of the Bank."
(ii) The following is added as paragraph (o):
"(o) Custom Security Industries Inc. shall not grant any security over any
of its assets to Brascan Technology Fund Inc. or any of its affiliates without
the prior written consent of the Bank".
5. CONDITIONS PRECEDENT
The effectiveness of this amendment agreement is conditional upon receipt by the
Bank of a duly and fully executed copy of this amendment agreement. The date of
receipt by the Bank of a fully executed copy of this amendment agreement shall
be referred to herein as the "Effective Date".
All other terms and conditions outlined in the Letter Agreement remain unchanged
and in full force and effect.
Kindly acknowledge your acceptance of these amendments by signing and returning
the attached copy to the Bank.
This offer is open for acceptance until May 27, 2005, after which date it will
be null and void, unless extended in writing by the Bank.
Yours truly,
/s/ Marc Drouin
- -----------------
Marc Drouin
Senior Account Manager
We acknowledge and accept the foregoing terms and conditions
as of May 2005.
SENTRY TECHNOLOGY CANADA INC.
By: /s/ Peter L. Murdoch
-----------------------
Name: Peter L. Murdoch
------------------
Title: President
---------
By:
Name: _________________________
Title: __________________________
I/We have authority to bind the Corporation.
We acknowledge and confirm our agreement with the foregoing terms and
conditions, in our capacity as a Guarantor, as of May 2005.
SENTRY TECHNOLOGY CORPORATION
By: /s/ Peter L. Murdoch
-------------------------
Name: Peter L. Murdoch
------------------
Title: President
---------
By:
Name: _________________________
Title: __________________________
I/We have authority to bind the Corporation.
We acknowledge and confirm our agreement with the foregoing terms and
conditions, in our capacity as a Guarantor, as of May , 2005.
SENTRY TECHNOLOGY USA INC.
By: /s/ Peter L. Murdoch
--------------------------
Name: Peter L. Murdoch
------------------
Title: President
---------
By:
Name: _________________________
Title: __________________________
I/We have authority to bind the Corporation.
We acknowledge and confirm our agreement with the foregoing terms and
conditions, in our capacity as a Guarantor, as of May , 2005.
CUSTOM SECURITY INDUSTRIES INC.
By: /s/ Morton Roseman
-----------------------
Name: Morton Roseman
------------------
Title: President
------------
By:
Name: _________________________
Title: __________________________
I/We have authority to bind the Corporation.
EXHIBIT 10.3
POSTPONEMENT AND SUBORDINATION AGREEMENT
THIS AGREEMENT made as of the 12th day of May 2005.
AMONG:
BRASCAN TECHNOLOGY FUND,
a limited partnership formed under the
laws of the Province of Ontario
(hereinafter referred to as "BRASCAN")
- and -
ROYAL BANK OF CANADA,
a Canadian chartered bank
(hereinafter referred to as the "LENDER")
- and -
SENTRY TECHNOLOGY CANADA INC.
a corporation incorporated under
the laws of the Province of Ontario
(hereinafter referred to as the "CANADA")
- and -
SENTRY TECHNOLOGY CORPORATION
a corporation incorporated under
the laws of the State of Delaware
(hereinafter referred to as "DELAWARE")
- and -
SENTRY TECHNOLOGY USA INC.
a corporation incorporated under
the laws of the State of Pennsylvania
(hereinafter referred to as "PENNSYLVANIA")
- AND -
CUSTOM SECURITY INDUSTRIES INC.
a corporation incorporated under
the laws of the Province of Ontario
(hereinafter referred to as "CSI")
WHEREAS pursuant to a letter agreement dated on April 19, 2005 (amended by
a letter agreement dated on or about the date hereof) (as same may be
supplemented, amended or restated from time to time, the "LOAN AGREEMENT")
between Canada and the Lender et al., the Lender has established certain credit
facilities and made other credit accommodations available to and in favour of
Canada;
AND WHEREAS Canada has granted security and may hereafter from time to time
grant further security to and in favour of the Lender over all of Canada's
present and after-acquired property, assets and undertaking (all such security
being collectively referred to as the "LENDER CANADA SECURITY") as collateral
security for all indebtedness of Canada arising under or pursuant to the Loan
Agreement together with any other liabilities, obligations or indebtedness now
or hereafter owing by Canada to the Lender from time to time, whether on account
of principal, fees, costs or other amounts (collectively referred to as the
"LENDER CANADA INDEBTEDNESS");
AND WHEREAS Delaware is the parent corporation of Canada and has issued to the
Lender (i) a guarantee (the "LENDER DELAWARE GUARANTEE") of the Lender Canada
Indebtedness and (ii) a general security agreement by Delaware to and in favour
of the Lender charging all of the Delaware's present and after-acquired
property, assets and undertaking (together with any other security which the
Lender may hold from time to time in respect of the Delaware's present and
after-acquired property, assets and undertaking being collectively, the "LENDER
DELAWARE SECURITY".)
AND WHEREAS Pennsylvania is a subsidiary of Delaware and has issued to the
Lender (i) a guarantee (the "LENDER PENNSYLVANIA GUARANTEE") of the Lender
Canada Indebtedness and (ii) a general security agreement by Pennsylvania to and
in favour of the Lender charging all of Pennsylvania's present and
after-acquired property, assets and undertaking (together with any other
security which the Lender may hold from time to time in respect of
Pennsylvania's present and after-acquired property, assets and undertaking being
collectively, the "LENDER PENNSYLVANIA SECURITY".)
AND WHEREAS CSI is a subsidiary of Canada and has issued a guarantee to the
Lender (the "LENDER CSI GUARANTEE") of the Lender Canada Indebtedness;
(The Lender Canada Security, the Lender Delaware Security and the Lender
Pennsylvania Security (including the Lender Delaware Guarantee and the Lender
Pennsylvania Guarantee) and the Lender CSI Guarantee are collectively referred
to as the "LENDER'S SECURITY". All indebtedness of Delaware arising under the
Lender Delaware Guarantee, all indebtedness of Pennsylvania arising under the
Lender Pennsylvania Guarantee and all indebtedness of CSI arising under the
Lender CSI Guarantee, together with any other liabilities, obligations or
indebtedness now or hereafter owing by Delaware, Pennsylvania or CSI to the
Lender from time to time, whether on account of principal, fees, costs or other
amounts are collectively referred to as the "LENDER GUARANTORS INDEBTEDNESS".
The Lender Canada Indebtedness and the Lender Guarantors Indebtedness are
collectively referred to as the "LENDER'S INDEBTEDNESS" of which the amount
thereof excluding any principal amount in excess of $5,350,000 is hereinafter
called the "LENDER'S PRIORITY INDEBTEDNESS".)
AND WHEREAS Delaware is indebted and may hereafter become further indebted to
Brascan pursuant to that certain convertible debenture dated as of April 30,
2004 issued by Delaware to Brascan (as same may be supplemented, amended or
restated from time to time, the "BRASCAN DEBENTURE");
AND WHEREAS Delaware has granted security and may hereafter from time to time
grant further security to and in favour of Brascan over all of Delaware's
present and after-acquired property, assets and undertaking (all such security
being collectively referred to as the "BRASCAN DELAWARE SECURITY") as collateral
security for all indebtedness of Delaware arising under or pursuant to the
Brascan Debenture together with any other liabilities, obligations or
indebtedness now or hereafter owing by Delaware to Brascan from time to time,
whether on account of principal, fees, costs or other amounts (collectively
referred to as the "BRASCAN DELAWARE INDEBTEDNESS");
AND WHEREAS Canada has issued or may hereafter issue to Brascan (i) a guarantee
(the "BRASCAN CANADA GUARANTEE") of the Brascan Delaware Indebtedness and (ii) a
general security agreement by Canada to and in favour of Brascan charging all of
Canada's present and after-acquired property, assets and undertaking (together
with any other security which Brascan may hold from time to time in respect of
Canada's present and after-acquired property, assets and undertaking being
collectively, the "BRASCAN CANADA SECURITY");
AND WHEREAS Pennsylvania has issued to Brascan (i) a guarantee (the "BRASCAN
PENNSYLVANIA GUARANTEE") of the Brascan Delaware Indebtedness and (ii) a general
security agreement by Pennsylvania to and in favour of Brascan charging all of
Pennsylvania's present and after-acquired property, assets and undertaking
(together with any other security which Brascan may hold from time to time in
respect of Pennsylvania's present and after-acquired property, assets and
undertaking being collectively, the "BRASCAN PENNSYLVANIA SECURITY");
AND WHEREAS CSI has not issued, and has not agreed to issue, a guarantee to
Brascan of the Brascan Delaware Indebtedness;
(The Brascan Delaware Security, the Brascan Canada Security and the Brascan
Pennsylvania Security (including the Brascan Canada Guarantee and the Brascan
Pennsylvania Guarantee) are collectively referred to as the "BRASCAN SECURITY".
All indebtedness of Canada arising under the Brascan Canada Guarantee and all
indebtedness of Pennsylvania arising under the Brascan Pennsylvania Guarantee,
together with any other liabilities, obligations or indebtedness now or
hereafter owing by Canada or Pennsylvania to Brascan from time to time, whether
on account of principal, fees, costs or other amounts are collectively referred
to as the "BRASCAN GUARANTORS INDEBTEDNESS". The Brascan Delaware Indebtedness
and the Brascan Guarantors Indebtedness are collectively referred to as the
"BRASCAN INDEBTEDNESS".
The Brascan Security and the Brascan Indebtedness are collectively referred to
as the "BRASCAN OBLIGATIONS". The Lender's Security and the Lender's
Indebtedness are collectively referred to as the "LENDER'S OBLIGATIONS".)
AND WHEREAS Brascan has agreed to postpone the payment and performance of the
obligations of Delaware, Canada and Pennsylvania in respect to the Brascan
Indebtedness to and in favour of the obligations of Delaware, Canada,
Pennsylvania and CSI in respect to the Lender's Priority Indebtedness as
provided herein;
(Delaware, Canada, Pennsylvania and, where applicable, CSI are collectively
referred to as the "OBLIGORS".)
AND WHEREAS Brascan has agreed to subordinate the Brascan Security with respect
to all present and after-acquired assets, property and undertaking of any of the
Obligors, as the case may be, tangible or intangible, real or personal and
wheresoever located (collectively, the "SUBORDINATED ASSETS") to the Lender's
Security;
AND WHEREAS each of Obligors has agreed it will maintain and deal with its
assets solely in accordance with the provisions hereof.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the respective
covenants and agreement of the parties contained herein, the sum of one dollar
paid by each party hereto to each of the other parties hereto and other good and
valuable consideration (the receipt and sufficiency of which is hereby
acknowledged by the parties) it is agreed as follows:
ARTICLE ONE - POSTPONEMENT OF BRASCAN INDEBTEDNESS
1.1 Except as specifically set out in this Agreement, the agreements herein
are not intended to nor will they impair the obligations of any of the Obligors
as applicable, to pay the Lender's Indebtedness or to pay the Brascan
Indebtedness, including the principal thereof and the interest thereon, as and
when the same shall become due and payable in accordance with the terms of the
Lender's Obligations and the Brascan Obligations, as the case may be, nor will
anything in this Agreement prevent the holder of the Lender's Security or the
Brascan Security from exercising all remedies otherwise permitted by applicable
law upon the occurrence of a default under such security.
1.2 Each of the Lender and Brascan hereby agree that if the Lender provides
written notice to Brascan of the Lender issuing a demand pursuant to the
Lender's Obligations (a "DEMAND NOTICE"), Brascan shall cease to receive, and
will postpone receipt of all payments in respect of the Brascan Indebtedness and
shall not be entitled to accelerate the time for payment of any Brascan
Indebtedness, enforce any rights under the Brascan Obligations, petition any of
the Obligors, as the case may be, into bankruptcy (or otherwise participate in
or initiate any similar proceeding under the Companies Creditors Arrangements
Act or similar insolvency legislation) or initiate any proceeding for the
payment of any Brascan Indebtedness until the earliest of the following:
(i) the date which is ninety (90) days following the date on which a Demand
Notice is issued (such period of time being the "POSTPONEMENT PERIOD"); provided
that if Postponement Periods of 120 days or more have already been in effect
during the 365 days preceding the date on which a Demand Notice is issued, then
the period under this clause (i) shall be deemed to be seven (7) days;
(ii) the date on which a Lender-issued Notice of Intention to Enforce
Security pursuant to the Bankruptcy and Insolvency Act (Canada) becomes
effective; and
(iii) the date on which the Lender's Priority Indebtedness is repaid in full
and the Lender has provided written confirmation of same to Brascan (of which
the Lender covenants to provide forthwith upon request).
1.3 If Brascan receives any payment or amount from any of the Obligors or
any third party on account of the Brascan Indebtedness contrary to the
provisions of this Agreement, any such payment or amount shall be held by
Brascan in trust for the Lender and shall be forthwith paid over to the Lender
on account of the Lender's Priority Indebtedness.
ARTICLE TWO - SUBORDINATION OF BRASCAN SECURITY
2.1 SUBORDINATION OF SECURITY. Brascan agrees with the Lender that the
Brascan Security with respect to the Subordinated Assets shall rank subsequent
and be subordinate to the Lender's Security to the extent of all of the Lender's
Priority Indebtedness secured notwithstanding the time or order of registration
or filing of financing statements, the date or dates of any advance or advances
by the Lender and Brascan, the date or dates of any default by any of the
Obligors, as applicable, or the date or dates of taking any enforcement or
realization measures or proceedings; provided that the Lender agrees with
Brascan that, to the extent of any Lender's Indebtedness exceeding the Lender's
Priority Indebtedness, the Lender's Security with respect to the Subordinated
Assets shall rank subsequent and be subordinate to the Brascan Security to the
extent of all of the Brascan Indebtedness.
2.2 EXTENSION OF PRIORITY. The priority to which the Lender and Brascan are
entitled hereunder shall extend to all books, accounts, invoices, letters,
papers, documents and other records in any form relating to the Subordinated
Assets, all contracts, securities, instruments and other rights and benefits in
respect thereof, all substitutions and replacements thereof, and increases,
additions, and accessions thereto, all proceeds therefrom, and any insurance,
indemnity or compensation for loss of or damage to the Subordinated Assets.
2.3 DISTRIBUTION OF PROCEEDS. The proceeds resulting from the enforcements
or realization of any of the mortgages, charges, assignments or other security
interests contained in or constituted by the Brascan Security or Lender's
Security and all other proceeds received by Brascan or the Lender pursuant to
the Brascan Security or the Lender's Security, including without limitations
insurance and expropriation proceeds, will be divided or otherwise dealt with in
such a way as to give effect to the provisions of this agreement and the
priorities created and established hereby.
2.4 Prior to making any demand on any of the Obligors, as the case may be,
for repayment of any funds owed, the Lender or Brascan, as the case may be,
shall provide the other three (3) business days prior notice of such demand,
provided, however, that if the Lender or Brascan, as the case may be, determines
in good faith that any delay in demanding payment would be prejudicial to it,
such notice need only be given at the time that demand for payment is made.
Neither the Lender nor Brascan shall be liable for any accidental omission to
provide notice to the other of them as required pursuant to this section. For
greater certainty and without limiting the generality of the foregoing, any
failure by the Lender to provide notice hereunder shall not impair or restrict
its right as against any of the Obligors, as applicable, to make demand at any
time in its sole discretion.
2.5 The Lender shall have no obligation to Brascan with respect to any
monies in any account of any of the Obligors, as the case may be, maintained at
the Lender, or any monies deposited in or disbursed from any such account,
unless the Lender has received notice from Brascan as provided for in Section
2.4 of this Agreement.
ARTICLE THREE - CONSENT TO LENDER'S SECURITY AND BRASCAN SECURITY
3.1 CONSENT AND INSURANCE. Notwithstanding the terms of any agreement or
instrument establishing or related to the Lender's Security or the Brascan
Security, Brascan hereby consents to the creation and issuance of the Lender's
Security and the Lender hereby consents to the creation and issuance of the
Brascan Security. Brascan and the Lender each consent to the other being named
as a loss payee on any policy of insurance now or hereafter held by any Obligor,
as applicable, in respect of its assets and undertaking, provided that the
proceeds of any such policy shall be payable in accordance with the terms of
this Agreement.
ARTICLE FOUR - CONSENT AND AGREEMENT OF THE OBLIGORS
4.1 OBLIGORS' COVENANT. Each Obligor irrevocably and unconditionally agrees
with the Lender and Brascan that so long as the Lender's Indebtedness and
Brascan Indebtedness are outstanding and are secured by the Lender's Security,
and Brascan Security, it will (i) make all payments in respect to the Lender's
Indebtedness and the Brascan Indebtedness in accordance with the terms of this
Agreement, (ii) consent to any exchange of information in respect to any of the
Obligors, as applicable, by and between Brascan and the Lender, and (iii) stand
possessed of its assets thereby secured and maintain and deal with such assets
in accordance with the priorities herein set out.
4.2 NO CHALLENGE. None of the parties hereto, as the case may be, shall
directly or indirectly take any action or consent to the taking of any action or
otherwise assist any person to challenge the validity, legality, perfection or
priority of the Lender's Security or the Brascan Security, as the case may be.
ARTICLE FIVE - CROSS DEFAULT
5.1 CROSS-DEFAULT. The parties agree that any and all default under the
terms and conditions of the said Brascan Security shall constitute concurrent
default under the Lender's Security and any and all default under the Lender's
Security shall constitute concurrent default under the Brascan Security,
whereupon the unpaid principal amount of the Lender's Indebtedness or the
Brascan Indebtedness together with interest and costs shall, at the option of
and upon demand by the Lender or Brascan, become immediately due and payable.
5.2 LENDER'S RIGHT TO REALIZE. Subject to the provisions of Section 1.2,
upon default by any of the Obligors, as the case may be, under the Brascan
Security or the Lender's Security, as the case may be, the Lender or Brascan
shall have the right to proceed against all, any or any portion of the Lender's
Security or the Brascan Security in such order and in such manner as it shall in
its sole discretion deem fit, without waiving any right which the Lender or
Brascan may have with respect to any and all such securities, and the exercise
of any such powers or remedies from time to time shall in no way affect or
diminish the liability of any of the Obligors, as the case may be, under the
remaining security.
ARTICLE SIX - GENERAL CONTRACT PROVISIONS
6.1 NOTICES. All notices, requests, demands or other communications
(collectively, "NOTICES") by the terms hereof required or permitted to be given
by one party to any other party, or to any other person shall be given in
writing by personal delivery or by registered mail, postage prepaid, or by
facsimile transmission to such other party as follows:
BRASCAN TECHNOLOGY FUND
BCE Place
181 Bay Street, Suite 300, P.O. Box 771
Toronto, ON M5J 2T3
Attention: Mr. Stephen Adams
Fax No.: (416) 446-0050
(a) To Brascan at:
ROYAL BANK OF CANADA
260 East Beaver Creek Rd., S. 201
Richmond Hill, ON L4B 3M3
Attention: Marc Drouin
Fax No.: (905) 764-4361
(b) To the Lender at:
SENTRY TECHNOLOGY CANADA INC.
c/o Sentry Technology Canada Inc.
37 Voyager Court North
Etobicoke, ON M9W 4Y2
(c) To any of the Obligors at: Fax No.: (416) 674-5075
Or at such other address as may be given by such person to the other parties
hereto in writing from time to time.
All such Notices shall be deemed to have been received when delivered or
transmitted, or, if mailed within 48 hours after 12:01 a.m. on the following day
of the mailing thereof. If any Notice shall have been mailed and if regular
mail service shall be interrupted by strikes or other irregularities, such
Notice shall be deemed to have been received 48 hours after 12:01 a.m. on the
day following the resumption of normal mail service, provided that during the
period that regular mail service shall be interrupted all Notices shall be given
by personal delivery, facsimile transmission, or electronic mail.
6.2 ADDITIONAL CONSIDERATIONS. The parties shall sign such further and
other documents, cause such meetings to be held, resolutions passed and by-laws
enacted, exercise their vote and influence, do and perform and cause to be done
and performed such further and other acts and things as may be necessary or
desirable in order to give full effect to this Agreement and every part thereof.
6.3 COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which so executed shall be deemed to be an original and such
counterparts together shall be but one and the same instrument.
6.4 TIME OF THE ESSENCE. Time shall be of the essence of this Agreement and
of every part hereof and no extension or variation of this Agreement shall
operate as a waiver of this provision.
6.5 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to all of the matters herein and its execution
has not been induced by, nor do any of the parties rely upon or regard as
material, any representations or writings whatever not incorporated herein and
made a part hereof and may not be amended or modified in any respect except by
written instrument signed by the parties hereto; provided that no consent of any
of the Obligors shall be necessary for any amendment to the terms hereof by the
Lender and Brascan unless the interests of any of the Obligors are directly and
adversely affected thereby. Any schedules referred to herein are incorporated
herein by reference and form part of the agreement.
6.6 ENUREMENT. This Agreement shall enure to the benefit of and be binding
upon the parties and their respective successors and assigns. Without limiting
the generality of the foregoing, this Agreement shall be binding on all present
and future holders of the Brascan Indebtedness or the Lender's Indebtedness.
Upon any sale, transfer or assignment of the Brascan Indebtedness or the
Lender's Indebtedness, or any part thereof, to any person who is not bound by
this Agreement, the assignee shall agree in writing with the other parties
hereto to be bound by this Agreement.
6.7 CURRENCY. Unless otherwise provided for herein, all monetary amounts
referred to herein shall refer to the lawful money of Canada.
6.8 HEADINGS FOR CONVENIENCE ONLY. The division of this Agreement into
articles and sections is for convenience of reference only and shall not affect
the interpretation or construction of this Agreement.
6.9 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Province of Ontario and the federal laws of
Canada applicable therein and each of the parties hereto agrees irrevocably to
conform to the non-exclusive jurisdiction of the Courts of such Province.
6.10 GENDER. In this Agreement, words importing the singular number shall
include the plural and visa versa, and words importing the use of any gender
shall include the masculine, feminine and neuter genders and the word "person"
shall include an individual, a trust, a partnership, a body corporate, an
association or other incorporated or unincorporated organization or entity.
6.11 CALCULATION OF TIME. When calculating the period of time within which
or following which any act is to be done or step taken pursuant to this
Agreement, the date which is the reference date in calculating such period shall
be excluded. If the last day of such period is not a business day, then the
time period in question shall end on the first business day following such
non-business day.
6.12 LEGISLATION REFERENCES. Any references in this Agreement to any law,
by-law, rule, regulation, order or act of any government, governmental body or
other regulatory body shall be construed as a reference thereto as amended or
re-enacted from time to time or as a reference to any successor thereto.
6.13 SEVERABILITY. If any Article, Section or any portion of any Section of
this Agreement is determined to be unenforceable or invalid for any reason
whatsoever that unenforceability or invalidity shall not affect the
enforceability or validity of the remaining portions of this Agreement and such
unenforceable or invalid Article, Section or portion thereof shall be severed
from the remainder of this Agreement.
6.14 TRANSMISSION BY FACSIMILE. The parties hereto agree that this
Agreement may be transmitted by facsimile or such similar device and that the
reproduction of signatures by facsimile or such similar device will be treated
as binding as if originals and each party hereto undertakes to provide each and
every other party hereto with a copy of the Agreement bearing original
signatures forthwith upon demand.
6.15 EXCHANGE OF INFORMATION. Upon written request of the other, Brascan
and the Lender shall exchange information in respect to the Obligors, including
without limitation, the status of the Brascan Indebtedness and the Lender's
Indebtedness as the case may be.
[THE REST OF THIS PAGE IS INTENTIONALLY BLANK]
IN WITNESS WHEREOF the parties have duly executed this Agreement this 13th day
of May 2005.
BRASCAN TECHNOLOGY FUND,
BY ITS GENERAL PARTNER, BRASCAN TECHNOLOGY FUND
INC.
Per: /s/ L. Quan
-------------
Name: L. Quan
Title: Secretary
Per: /s/B. Robertson
----------------
Name: B. Robertson
Title: President
I/we have authority to bind the Limited Partnership
ROYAL BANK OF CANADA
Per: /s/ Marc J. Drouin
---------------------
Name: Marc J. Drouin
Title: Senior Account Manager
Per: __________________________________
Name:
Title:
I/We have authority to bind the Bank
SENTRY TECHNOLOGY CORPORATION
Per: /s/ Peter L. Murdoch
-----------------------
Name: Peter L. Murdoch
Title: President
Per: c/s
Name:
Title:
I/We have authority to bind the Corporation
SENTRY TECHNOLOGY CANADA INC.
Per: /s/ Peter L. Murdoch
c/s
-----------------------
Name: Peter L. Murdoch
Title: President
Per: __________________________________c/s
Name:
Title:
I/We have authority to bind the Corporation
SENTRY TECHNOLOGY USA INC.
Per: /s/Peter L.Murdoch
c/s
-------------------
Name: Peter L. Murdoch
Title:
Per: __________________________________c/s
Name:
Title:
I/We have authority to bind the Corporation
CUSTOM SECURITY INDUSTRIES INC.
Per: /s/ Morton Roseman_________________c/s
--------------------
Name: Morton Roseman
Title: President
Per: __________________________________c/s
Name:
Title:
I/We have authority to bind the Corporation