EXHIBIT 10.7

               THIRD AMENDMENT TO THE LOAN AND SECURITY AGREEMENT


     Third Amendment dated as of December 29, 1999 (this "Amendment") to the
Loan and Security Agreement, dated as of December 31, 1997 (as amended,
restated, supplemented and modified, the "LOAN AGREEMENT"), among GENERAL
ELECTRIC CAPITAL CORPORATION, a New York corporation ("LENDER") and KNOGO NORTH
AMERICA INC., a Delaware corporation ("BORROWER"), and the other Credit Parties
executing this Amendment.

                                  WITNESSETH :

     WHEREAS, Borrower and Lender are parties to the Loan Agreement pursuant to
which Lender provides Borrower with certain financial accommodations;

     WHEREAS, Borrower has requested that Lender amend certain provisions of the
Loan Agreement and Lender is willing to do so on the terms and conditions set
forth herein;

     NOW, THEREFORE, in consideration of the premises, the covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties do hereby
agree that all capitalized terms used herein shall have the meanings ascribed
thereto in the Loan Agreement and do hereby further agree as follows:

                               STATEMENT OF TERMS

     1. AMENDMENT TO LOAN AGREEMENT. Subject to the Satisfaction of the
conditions precedent set forth in Section 3 below, the Loan Agreement is hereby
amended as follows:

          (a) Section 1.5(a) is amended in its entirety to provide as follows:

               "(a) Borrower shall pay interest to Lender on the aggregate
outstanding Revolving Credit Advances at a floating rate equal to the Index Rate
plus four and one-half percent (4.50%) per annum (the "Revolving Credit Rate");
PROVIDED, HOWEVER, if no Default shall have occurred and be continuing,
effective on the first calendar month that occurs more than five (5) Business
Days after delivery of the audited Financial Statements for the Fiscal Year
ending December 31, 2000 and a compliance certificate signed by the Chief
Financial Borrower which indicates that Sentry and its Subsidiaries on a
consolidated basis have a Fixed Charge Coverage for such Fiscal Year equal to or
greater than 1.0 to 1.0, the Revolving Credit Rate shall be reduced to the sum
of the Index Rate plus (a) four percent (4.00%) if such Fixed Charged Coverage
is 1.2 to 1.0 or greater or (b) four and one-quarter percent (4.25%) if such
Fixed Charge Coverage is equal to or greater than 1.0 to 1.0 but less than 1.2
to 1.0."

          (b) Schedule A to the Loan Agreement is amended as follows:

               (i) The following defined terms are amended in their entirety to
               provide as follows:

               "Borrowing Base" shall mean at any time an amount equal to the
               sum at such time of:

               A) the sum of (A) 80% (or such lesser percentage as may be
          specified by Lender from time to time by written notice to Borrower)
          of the value (as determined by Lender) of the Eligible Accounts (other
          than Eligible Deferred Accounts) of Borrower and Video PLUS (B) the
          lesser of (i) $1,000,000 or (ii) 70% (or such lesser percentage as may
          be specified by Lender from time to time by written notice to
          Borrower) of the value (as determined by Lender) of the Eligible
          Deferred Accounts of Borrower; provided that Lender (without limiting
          its rights to otherwise reduce the foregoing percentage) shall reduce
          the foregoing percentages (the "Accounts Advance Rates") by one
          percentage point for each percentage point that the dilution of the
          Accounts of Borrower (calculated as the average dilution from the
          Accounts Receivable Roll Forward Analysis (Exhibit E) over the most
          recent three months) exceeds ten percent (10%); provided, that in the
          event the Accounts Advance Rates are so reduced and dilution of the
          Accounts of Borrower (calculated as the average dilution from the
          Accounts Receivable Roll Forward Analysis (Exhibit E) over the most
          recent three months) decreases to ten percent (10%) or less then
          Lender shall increase the Accounts Advance Rates by one percentage
          point for each percentage point of such decrease except that in no
          event shall the Accounts Advance Rates exceed the percentages set
          forth above; PLUS

               B) the lesser of (i) the Inventory Maximum Amount or (ii) the sum
          of 25% (or such lesser percentage as may be specified by Lender from
          time to time by written notice to Borrower) of the value of the
          Eligible Inventory of Borrower and Video consisting of raw material,
          finished goods and work-in-process consisting of component parts that
          could be sold as finished goods, in each case as determined by Lender,
          valued on a first-in, first-out basis (at the lower of cost or
          market); PLUS

               C) the Special Advance Amount.

          "Stated Expiry Date" shall mean December 31, 2001.

               (ii) The following defined terms are inserted in the appropriate
               alphabetical order:

               "Inventory Appraisal" shall mean an appraisal of the Inventory of
               Borrower and Video prepared by an appraiser satisfactory to
               Lender which is satisfactory in all respects to Lender.

               "Inventory Maximum Amount" shall mean (a) upon receipt by Lender
               of the Inventory Appraisal, $1,500,000 and (b) at all other
               times, $500,000.

               "Special Advance Amount" shall mean (a) for the period commencing
               on the Third Amendment Effective Date and ending on the earlier
               of (i) January 31, 2000 or (ii) receipt by Lender of the
               Inventory Appraisal, $250,000 and (b) at all other times, $0.

               "Third Amendment" shall mean the Third Amendment to Loan and
               Security Agreement dated as of December 29, 1999 among Lender and
               Credit Parties.

               "Third Amendment Effective Date" shall have the meaning given to
               the term "Effective Date" in the Third Amendment.

               (iii) The defined term "Eligible Inventory" is amended by
               amending clause (i) in its entirety to provide as follows:

                    "(i) does not consist of raw materials, finished goods or
               work-in-process consisting of component parts that could be sold
               as finished goods."

          (c)  Schedule E is amended as follows:

               (i) The second sentence of Paragraph 1 is amended by replacing
               the percentage ".25%" with the percentage ".375%".

               (ii) The first sentence of paragraph 5 is amended in its entirety
               to provide as follows:

               "PREPAYMENT FEE:
               For the Revolving Credit Loan, an amount equal to the Maximum
          Amount multiplied by:

               2% if Lender's obligation to make further Revolving Credit
          Advances or incur additional Letter of Credit Obligations is
          terminated (voluntarily by Borrower, upon Default or otherwise) on or
          after the first anniversary of the Closing Date and on or before the
          third anniversary of the Closing Date, payable on the Commitment
          Termination Date; or

               1% if Lender's obligation to make further Revolving Credit
          Advances or incur additional Letter of Credit Obligations is
          terminated (voluntarily by Borrower, upon Default or otherwise) after
          the third anniversary of the Closing Date payable on the Commitment
          Termination Date."

               (iii) Paragraph 6 is amended in its entirety to provide as
               follows:

                    "Audit Fees: Borrower will reimburse Lender at Lender's then
                    applicable rate per person per day (not to exceed $750 per
                    person per day) plus out-of-pocket expenses for the audit
                    reviews, field examinations and collateral examinations."

          (d)       Schedule G is amended as follows:

                    (i) Paragraph 2 is amended in its entirety to provide as
                    follows:

                    "MINIMUM NET WORTH. Sentry and its Subsidiaries on a
                    consolidated basis shall at the end of each Fiscal Month
                    have a Net Worth of not less than an amount equal to (x) the
                    amount of the Net Worth of Sentry and its Subsidiaries on a
                    consolidated basis for the Fiscal Year ending December 31,
                    1999 minus (y) $3,000,000.

                    (ii) Paragraph 3 entitled "Fixed Charge Coverage Ratio" is
                    amended in its entirety to provide as follows:

                         "3. Intentionally Omitted"

                    (iii) Paragraph 4 is amended in its entirety to provide as
                    follows:

                    "4. CAPITAL EXPENDITURES. Sentry and its Subsidiaries on a
                    consolidated basis shall not make aggregate Capital
                    Expenditures in any Fiscal Year in excess of $250,000."

                    (iv) Paragraph 5 entitled "Working Capital Ratio" is amended
                    in its entirety to provide as follows:

                         "5. Intentionally Omitted"

          (e)       Exhibit B to the Loan Agreement is replaced with Exhibit B
                    to this Amendment.

          (f)       The Transaction Summary is amended to reflect the terms set
                    forth in this Amendment.

     2. REPRESENTATIONS AND WARRANTIES. To induce Lender to enter into this
Amendment, each Credit Party hereto hereby warrants, represents and covenants to
Lender that except as they relate to paragraphs 3 and 4 of Exhibit E to that
certain Sale and Leaseback Agreement dated as of December 24, 1996 between NOG
(NY) QRS 12-23, Inc. ("NOG") and Borrower (the "Lease"): (a) each representation
and warranty of the Credit Parties set forth in the Loan Agreement is hereby
restated and reaffirmed as true and correct on and as of the date hereof after
giving affect to this Amendment as if such representation or warranty were made
on and as of the date hereof (except to the extent that any such representation
or warranty expressly relates to a prior specific date or period in which case
it is true and correct as of such prior date or period), and no Default or Event
of Default has occurred and is continuing as of this date under the Loan
Agreement after giving effect to this Amendment; and (b) each Credit Party
hereto has the power and is duly authorized to enter into, deliver and perform
this Amendment, and this Amendment is the legal, valid and binding obligation of
such Credit Party enforceable against it in accordance with its terms. Borrower
agrees to provide Lender with copies of all communications between Borrower and
NOG relating to the Lease. Borrower agrees to provide an updated Disclosure
Schedule (3.14) Intellectual Property on or before January 15, 2000.

     3. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AMENDMENT. The
effectiveness (the "Effective Date") of this Amendment is subject to the
fulfillment of the following conditions precedent:

          (a)  Lender shall have received one or more counterparts of this
               Amendment duly executed and delivered by the Credit Parties
               hereto;

          (b)  Any and all guarantors of the Obligations shall have consented to
               the execution, delivery and performance of this Amendment and all
               of the transactions contemplated hereby by signing one or more
               counterparts of this Amendment in the appropriate space indicated
               below and returning same to Lender; and

          (c)  Borrower shall have paid to Lender an Amendment Fee in the amount
               of $25,000.

     4. CONTINUING EFFECT OF LOAN AGREEMENT. Except as expressly amended and
modified hereby, the provisions of the Loan Agreement, and the Liens granted
thereunder, are and shall remain in full force and effect and the waiver set
forth herein shall be limited precisely as drafted and shall not constitute a
waiver of any other provisions of the Loan Agreement.

     5. COUNTERPARTS. This Amendment may be executed in multiple counterparts
each of which shall be deemed to be an original and all of which when taken
together shall constitute one and the same instrument.

     6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND PERFORMED IN SUCH STATE WITHOUT REGARD TO THE PRINCIPLES
THEREOF REGARDING CONFLICTS OF LAWS.


<PAGE>


     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered as of the day and year specified at the beginning
hereof.

                                 KNOGO NORTH AMERICA INC.,
                                 AS BORROWER

                                 By: /s/ Peter J. Mundy
                                     --------------------------
                                     Name:  Peter J. Mundy
                                     Title: V.P. - CFO

                                 SENTRY TECHNOLOGY CORPORATION,
                                 AS CREDIT PARTY

                                 By: /s/ Peter J. Mundy
                                    -----------------------------
                                    Name:  Peter J. Mundy
                                    Title: V.P. - CFO

                                 VIDEO SENTRY CORPORATION,
                                 AS CREDIT PARTY

                                 By: /s/ Peter J. Mundy
                                    ------------------------------
                                    Name:  Peter J. Mundy
                                    Title: V.P. - CFO

                                 KNOGO CARIBE, INC.,
                                 AS CREDIT PARTY

                                 By: /s/ Peter J. Mundy
                                    --------------------------------
                                    Name:  Peter J. Mundy
                                    Title: V.P. - CFO

                                 GENERAL ELECTRIC CAPITAL CORPORATION,
                                 AS LENDER

                                 By: /s/ Philip Carfora
                                    --------------------------------
                                    Name:  Philip Carfora
                                    Title: Duly Authorized Signatory

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                              CONSENT OF GUARANTORS

     Each of the undersigned guarantors does hereby consent to the execution,
delivery and performance of the within and foregoing Amendment and confirms the
continuing effect of such guarantor's guarantee of the Obligations after giving
effect to the foregoing Amendment.

     IN WITNESS WHEREOF, each of the undersigned guarantors has executed this
Consent to Guarantors as of the day and year first above set forth.

                                            GUARANTORS:

                                            SENTRY TECHNOLOGY CORPORATION

                                            By: /s/ Peter J. Mundy
                                               --------------------------------
                                               Name: Peter J. Mundy
                                               Title: V.P. CFO

                                            VIDEO SENTRY CORPORATION

                                            By: /s/ Peter J. Mundy
                                               --------------------------------
                                               Name: Peter J. Mundy
                                               Title: V.P. CFO

                                            KNOGO CARIBE, INC.

                                            By: /s/ Peter J. Mundy
                                                --------------------------------
                                               Name: Peter J. Mundy
                                               Title: Treasurer