RONKONKOMA, N.Y., Feb. 26 /PRNewswire-FirstCall/ -- Sentry Technology
Corporation (OTC Bulletin Board: SKVY) announced today that Sentry has signed
a term sheet to raise $2,000,000 in secured convertible debt with a venture
fund (the VC Fund) managed by a multibillion-dollar North American company.
Key terms of the transaction are as follows:
* Four year term.
* Interest rate of 8%.
* Redeemable at Sentry's option after 18 months.
* Conversion price equal to the market price, at time of conversion, less
a discount of 30% with a maximum conversion price of $0.12 per share.
* Conversion is at the option of the VC Fund when market share price is
equal to or greater than $0.17 per share or with the approval of
Sentry's Board of Directors when the market share price is less than
$0.17 per share.
* Sentry will provide most favored pricing to all VC Fund affiliates and
expects to be a supplier of security and identification products to
the VC Fund.
* The VC Fund will be issued warrants for 5,000,000 shares of Sentry
common stock, priced at $0.15 per share, exercisable anytime within the
next four years.
* The VC Fund will be entitled to one seat on Sentry's Board of
Directors.
* As a condition of the financing, Sentry will be required to acquire ID
Security Systems Canada Inc. ("ID Canada") and ID Systems USA Inc.,
collectively referred to as ID Systems.
Sentry's Board of Directors and shareholders owning a majority of Sentry
common stock have approved the proposed transaction with the VC Fund which is
subject to customary due diligence and expected to close during the next
45 days.
In a related transaction, Dialoc ID Holdings B.V. ("Dialoc") has agreed to
sell 39,066,927 Sentry common shares (representing approximately 46% of the
total issued and outstanding shares of Sentry) and all of the stock of ID
Systems, to Saburah Investments Inc. ("Saburah"). ID Systems is a Toronto
based company engaged in anti-shoplifting technology, security labeling, radio
frequency identification (RFID), access control and library security. Peter
L. Murdoch, President and CEO of Sentry and President of ID Systems, is the
owner of Saburah. The price to be paid to Dialoc by Saburah and Murdoch for
Sentry and ID Systems shares in cash, debt assumption and other consideration
is approximately $3.6 million plus the surrender of Murdoch's 15% interest in
Dialoc. Saburah has also agreed to make a substantial payment to Dialoc in
the future equal to approximately 6% of any payment it receives from
Checkpoint Systems Inc. resulting from litigation brought by ID Canada against
Checkpoint. ID Canada is appealing the reduction of the original jury award
of $79.2 million. The appeal is scheduled to be heard during the last week of
March.
As a condition of the VC Fund financing, Sentry has agreed to purchase ID
Systems from Saburah in exchange for 30,000,000 Sentry common shares. The
price to be paid per Sentry share will be approximately $0.12. An opinion has
been provided to a special committee of Sentry's Board of Directors by
Corporate Valuation Services confirming that both the price paid for the
acquisition of ID Systems and the agreed conversion price of the proposed VC
Fund debt are fair from the point of view of Sentry shareholders. Although
Sentry will not obtain an interest in the Checkpoint Systems litigation,
Saburah and Sentry have agreed that Sentry may require Saburah to purchase
additional Sentry shares equal to approximately 4.5% of any amount received by
Saburah from the Checkpoint litigation, to a maximum of $1,000,000. The price
per share will be determined by market conditions if and when the call is
made. This transaction represents the maximum future benefit that may flow to
Sentry and ID Systems as a result of the Checkpoint lawsuit.
Other benefits flowing to Sentry/ID Systems via the purchase of ID Systems
are as follows:
* ID Systems and Sentry continue as the exclusive distributor in North
and South America for a period of five years for all Dialoc products
including Laserfuse radio frequency security labels and all RFID
products.
* Dialoc becomes the exclusive distributor in Europe and Asia of labels
manufactured by ID Systems' security label manufacturing subsidiary,
Custom Security Industries Inc. ("CSI").
* CSI acquires the right to purchase Laserfuse raw material for
processing into finished security labels in its Toronto plant in order
to reduce the cost of production.
* CSI acquires the option to purchase a non-exclusive license to
manufacture complete Laserfuse security labels for a period of 10 years
subject to the payment of $500,000 and a running royalty of $0.001 per
label.
* Dialoc will continue to be a dealer for Sentry products in Europe and
Asia.
ID Systems' management including Dr. Morton Roseman, President of CSI, and
Peter Murdoch will invest $100,000 each to complete the proposed transaction
between Saburah and Dialoc. Furst Capital Partners LLC and associates will
invest $900,000 of equity in the combined transaction. Mr. Robert Furst is a
long-standing member of Sentry's Board of Directors. On completion of these
transactions and prior to the VC Fund conversion, Peter Murdoch, directly or
indirectly through his ownership of Saburah, will own or control 47.4% of the
outstanding common stock of Sentry.
"We expect this transaction will be very beneficial for Sentry
shareholders," said Peter L. Murdoch, President and CEO of Sentry Technology
Corporation. "Sentry will acquire ID Systems, a profitable business
generating 2003 EBITDA of approximately $700,000; obtain immediate financing
of $2,000,000 from the VC Fund; enjoy future business opportunities through
the VC Fund affiliates; and, receive financing of up to $1,000,000 following
the successful conclusion of ID Canada's litigation against Checkpoint."
Mr. Murdoch also stated, "The separation from Dialoc ID Holdings B.V. will
allow both Dialoc and Sentry/ID Systems to better focus on developing their
respective markets while continuing cooperation between the companies through
on-going mutual distribution agreements. In addition, the investment by the
Company's senior managers and the expected investment by the major venture
fund is a strong vote of confidence in the future of Sentry/ID Systems."
Sentry Technology Corporation designs, manufactures, sells and installs a
complete line of Radio Frequency (RF) and Electro-Magnetic (EM) EAS systems
and Closed Circuit Television (CCTV) solutions. The CCTV product line
features SentryVision(R), SmartTrack, a proprietary, patented traveling
Surveillance System. The Company's products are used by retailers to deter
shoplifting and internal theft and by industrial and institutional customers
to protect assets and people. The Company's partnership with Dialoc ID
Holdings, B.V. expands the Company's product offering to include proximity
Access Control and Radio Frequency Identification (RFID) solutions. For
further information, please visit our Web site at http://www.sentrytechnology.com.
This press release may include information that could constitute forward-
looking statements made pursuant to the safe harbor provision of the Private
Securities Litigation Reform Act of 1995. Any such forward-looking statements
may involve risk and uncertainties that could cause actual results to differ
materially from any future results encompassed within the forward-looking
statements. Factors that could cause or contribute to such differences
include those matters disclosed in the Company's Securities and Exchange
Commission filings.
CONTACT: Peter Murdoch
President & CEO
(416) 674-4788
SOURCE Sentry Technology Corporation
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Related links:
http://www.sentrytechnology.com
Company News On-Call:
http://www.prnewswire.com/comp/494538.html
CONTACT:
Peter Murdoch, President & CEO of Sentry
Technology Corporation, +1-416-674-4788
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