Seventh Amendment To Loan And Security Agreement

EXHIBIT 10(k)


SEVENTH AMENDMENT TO
LOAN AND SECURITY AGREEMENT


This Seventh Amendment to Loan and Security Agreement (this "Amendment"), dated as of October 12, 2000, is entered into by and among AFP IMAGING CORPORATION, a New York corporation, successor by merger to AFP Technologies Corporation, formerly known as Kenro Corporation, a New Jersey corporation ("AFP"), LOGETRONICS CORPORATION, a New York corporation ("LogE"), VISIPLEX INSTRUMENTS CORPORATION, a New York corporation formerly known as Xenon Industries, Inc. ("Visiplex") and REGAM MEDICAL SYSTEMS INTERNATIONAL AB, a Swedish corporation ("Regam"); DENT-X INTERNATIONAL, INC., a New York corporation ("DXI") (AFP, LogE, Visplex, Regam and DXI are hereinafter jointly and severally, referred to as the "Borrower"), and FINOVA CAPITAL CORPORATION, a Delaware corporation ("Lender") formerly known as Greyhound Financial Corporation, successor-by-merger to Greyhound Financial Capital Corporation, an Oregon corporation.


W I T N E S S E T H:


WHEREAS, Borrowers and Lender are parties to that certain Loan and Security Agreement dated as of November 22, 1993, as the same was amended by (i) that certain First Amendment to Loan and Security Agreement dated as of December 7, 1993; (ii) that certain Second Amendment to Loan and Security Agreement dated as of July 14, 1995; (iii) that certain Third Amendment to Loan and Security Agreement dated as of July 14, 1997, (iv) that certain Fourth Amendment to Loan and Security Agreement dated as of August 10, 1999; (v) that certain Fifth Amendment to Loan and Security Agreement dated as of September 14, 1999, and, (vi) that certain Sixth Amendment to Loan and Security Agreement dated as of November 30, 1999 (as so amended, the "Original Loan Agreement") setting forth the terms and conditions under which Lender would make loans and other advances to Borrower; and


WHEREAS, Borrowers have requested that Lender make certain amendments to the Loan Agreement, which Lender is willing to do but only upon the terms and subject to the conditions herein set forth;


NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:


1. Definitions. Unless otherwise defined in this Amendment, all capitalized terms used herein shall have the same meaning as set forth in the Loan Agreement.


2. Amendments. On the Effective Date of this Amendment the Original Loan Agreement is hereby amended as follows:


(a) Paragraph 2(A) of the Loan Agreement is hereby amended and restated in its entirety to read as follows:


(A) Total Facility. Upon the terms and conditions set
forth herein and provided that no Event of Default or event which, with
the giving of notice or the passage of time, or both, would constitute
an Event of Default, shall have occurred and be continuing, Lender
shall, upon Borrower's request, make advances to Borrower from time to
time in an aggregate outstanding principal amount not to exceed Five
Million Four Hundred Thirty Six Thousand Five Hundred Sixty Two and
13/100 Dollars ($5,436,562.13) (the "Total Facility"), subject to
deduction of reserves for accrued interest and such other reserves as
Lender deems proper from time to time, and less amounts Lender may be
obligated to pay in the future on behalf of Borrower.


(b) Paragraph 2(B) of the Loan Agreement is hereby amended and restated in its entirety to read as follows:


(B) Loans. Advances under the Total Facility shall be
comprised of the following:


(i) Receivable Loans: a revolving line of credit in an aggregate
outstanding principal amount not to exceed Four Million Five Hundred
Thousand and no/100 Dollars ($4,500,000.00) (the "Revolving Line of
Credit Facility" or the "Revolving Credit Limit") consisting of loans
against Borrower's Eligible Receivables ("Receivable Loans") in an
aggregate outstanding principal amount not to exceed the lesser of:


(a) an amount equal to (I) Four Million Five Hundred
Thousand and no/100 Dollars ($4,500,000.00), less (II) the aggregate
outstanding principal amount of all Inventory Loans (as defined below),
less (III) the aggregate undrawn face outstanding amount of all Letters
of Credit issued under paragraph 2(D) of this Agreement, or


(b) an amount equal to (1) eighty percent (80%) of the net
amount of Eligible Receivables other than Eligible Named Foreign
Receivables or Eligible Foreign Receivables, plus (2) the lesser or
(A) eighty percent (80%) of the net amount of Eligible Named Foreign
Receivables or (B) $500,000, plus (3) the lesser of (A) fifty percent
(50%) of the net amount of Eligible Foreign Receivables or
(B) $500,000;


(ii) Inventory Loans: As a sub-line of the Receivable Loans, a
revolving line of credit consisting of loans against Borrower's
Eligible Inventory (Inventory Loans") in an aggregate outstanding
principal amount not to exceed the lesser of


2


(a) fifty percent (50%) of the value of Borrower's Eligible
Inventory, calculated at the lower of cost or market value and
determined on a first in, first out basis, or


(b) Two Million Five Hundred Thousand and no/100 Dollars
($2,500,000.00); and


(iii) Fixed Asset Loan: a term loan ("Fixed Asset Loan") in
an aggregate outstanding principal amount not to exceed Nine Hundred
Thirty Six Thousand Five Hundred Sixty Two and 13/100 Dollars
($936,562.13) provided, that the Fixed Asset Loan, if any, shall be in
such amounts and on such terms as are set forth on separate promissory
notes of Borrower from time to time, each in form and substance
satisfactory to Lender in its sole discretion.


(c) Paragraph 2(D)(i) of the Loan Agreement is hereby amended and restated in its entirety to read as follows:


(D) Letters of Credit.
-----------------


(i) At the request of Borrower, Lender may, in its sole
discretion, arrange for the issuance of letters of credit for the
account of Borrower and guarantees of payment of such letters of
credit, in each case in form and substance satisfactory to Lender in
its sole discretion (collectively, "Letters of Credit"). The aggregate
face amount of all outstanding Letters of Credit from time to time
shall not exceed Four Hundred Thousand and No/100 Dollars
($400,000.00), and shall be reserved against the availability of
Receivable Loans pursuant to Paragraph 2(B) hereof. Borrower shall pay
all bank charges for the issuance of Letters of Credit, together with
an additional fee to Lender equal to two percent (2%) per annum of the
aggregate face amount of each Letter of Credit outstanding from time to
time during the term of this Agreement (the "L/C Fee"). The L/C Fee
shall be deemed to be fully earned upon the issuance of each Letter of
Credit and shall be due and payable on the first Business Day of each
month following a month during which any Letter of Credit is
outstanding. Any advance by Lender under or in connection with a Letter
of Credit shall constitute an Obligation hereunder and an advance of
the Receivables Loans.


(d) Paragraph 3(A) of the Loan Agreement is amended and restated in its entirety to read as follows:


(A) Interest. Borrower shall pay Lender interest on the daily
outstanding balance of Borrower's loan account at a per annum rate of
one and one-half percent (1.5%) in excess of the rate of interest
announced publicly by Citibank, N.A., from time to time as its "base
rate" (or any successor thereto), which may not be such institution's
lowest rate (the "Base Rate"). The interest rate chargeable hereunder
shall be increased or decreased, as the case may be, without notice or
demand of any kind, upon the announcement of any change in the Base
Rate. Each change in the Base Rate shall be effective hereunder on the
first day following the announcement of such change. Interest charges
and all other fees and charges herein shall be computed on the basis of
a year of 360 days and actual days elapsed and will be payable to
Lender in arrears on the first day of each month hereafter at its
address set forth in Exhibit B hereto.


3


(e) Paragraph 3 of the Loan Agreement is amended and restated with the addition of the following language in its entirety to read as follows:


Unused Line Fee. With respect to each calendar month, or
portion thereof during the term of this Agreement, commencing with the
month of October, 2000, Borrower shall unconditionally pay to Lender a
fee equal to one-fourth of one percent (.25%) per annum of the
difference between the Revolving Credit Limit and the average daily
outstanding balance of the Receivables Loans during such month, or
portion thereof ("Unused Line Fee"), which fee shall be calculated and
payable monthly, in arrears, and shall be due and payable commencing on
November 1, 2000, and continuing on the first Business Day of each
calendar month thereafter.


(f) Paragraph 14(J) of the Loan Agreement is hereby amended and restated in its entirety to read as follows:


"Capital Expenditures" Promptly notify Lender in writing of the
making of the making of any single Capital Expenditure which exceed
$50,000 or any group of Capital Expenditures expended in connection
with the purchase of a particular asset which cumulatively exceeds
$450,000 per fiscal year, however, for the 2001 fiscal year only, the
cumulative cap shall be $550,000.


(g) Paragraph 14 (O) of the Loan Agreement is hereby amended and restated in its entirety to read as follows:


"Net Worth" Maintain, on a consolidated basis, Net Worth of not
less than Four Million and No/100 Dollars ($4,000,000.00)


(h) Paragraph 14 (Q) of the Loan Agreement, as amended by the Sixth Amendment to Loan and Security Agreement, is hereby further amended to add the following at the end of the subparagraph:


Notwithstanding the foregoing, the parties agrees that (1) for
only the testing periods ending on September 30, 2000 and December 31,
2000, the Borrower will be required to maintain, on a consolidated
basis, a ratio of Operating Cash Flow to (i) Senior Contractual Debt
Service of no less than .30 to 1.0, and (ii) Total Contractual Debt
Service of no less than .25 to 1.0; (for all testing period thereafter,
the ratios will be as set forth above); and (2) the covenants set forth
in this Paragraph 14(Q) shall be tested commencing on a rolling
quarterly basis from July 1, 2000 through the testing period ending
March 31, 2001 and, thereafter, on a rolling four quarter basis."


4


(i) Paragraph 17 (A) of the Loan Agreement is amended and
restated in its entirety to read as follows:


"Term" Notwithstanding the provisions of that certain Side
Letter between Borrower and Lender dated August 21, 2000, the initial
term of this Agreement shall expire on November 17, 2000 (the "Initial
Term") and shall be automatically extended for an additional term (the
"Renewal Term") which shall expire on October 31, 2001, unless sooner
terminated as provided herein. All loans and all credit facilities
shall be coterminous.


3. Waiver.
------


(a) Based on the financial statements the Borrower has supplied
for the calendar quarters ending March 31, 2000 and June 30, 2000, the
Borrower is in default of the covenants of Borrower contained in
Section 14(Q) of the Original Loan Agreement. For so long as there is
no other Event of Default by Borrower, the Lender agrees that the
failure of the Borrower to conform, for the calendar quarters ending
March 31, 2000 and June 30, 2000, with the covenants contained in
Section 14(Q) of the Loan Agreement shall not constitute an Event of
Default.


(b) The Lender has become aware of the fact that the Borrower
has entered into a security agreement with Den-a-lez, Inc. related to
contract SP0200-00-D-8501 (the "Contract"). In connection with the
Contract, the Borrower granted to Den-a-lez a security interest in
inventory described in the Contract. The foregoing security has
subsequently been terminated and released on record. Relying on the
foregoing releases, the Lender agrees that the foregoing shall not
constitute an Event of Default.


(c) The Borrower acknowledges that the foregoing waivers by
Lender are limited to the specific periods, matters, and circumstances
set forth in this Section. Nothing in this Section should be construed
as a waiver by Lender of the Borrower's compliance with all other
provisions of the Original Loan Agreement (as amended hereby) nor as a
waiver of the requirement that the Borrower observe all other financial
covenants contained in the Original Loan Agreement and to conform with
Section 14(Q) of the Original Loan Agreement for all other periods
other than those specifically set forth in this Section.


4. Sale of LogE. The Lender will consent to the sale by the
Bor ...