FOURTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT
EXHIBIT 10.21
FOURTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT
This Fourth Amendment, dated as of May 1, 2006, is made by and among ZAREBA SYSTEMS, INC.,
f/k/a/ Waters Instruments, Inc., a Minnesota corporation (“Zareba Systems”), WATERS MEDICAL
SYSTEMS, INC., a Minnesota corporation (“Waters Medical Systems”), ZAREBA SECURITY, INC., a
Minnesota corporation (“Zareba Security”), and XXXXX FARGO BANK, NATIONAL ASSOCIATION,
acting through its XXXXX FARGO BUSINESS CREDIT operating division (the “Lender”).
Recitals
Zareba Systems and the Lender are parties to a Credit and Security Agreement dated as of
September 7, 2004, as amended by a First Amendment to Credit and Security Agreement, dated as of
April 29, 2005, by the Second Amendment to Credit and Security Agreement dated as of December 23,
2005 (pursuant to which Waters Medical Systems was made part of the Borrower), and by the Third
Amendment to Credit and Security Agreement dated as of February 22, 2006 (which, as the same is
amended hereby, shall be the “Credit Agreement”). Capitalized terms used in these recitals
have the meanings given to them in the Credit Agreement unless otherwise specified.
Zareba Systems has requested the Lender to consent to the organization of Zareba Security as a
new wholly owned subsidiary of Zareba Systems, and to the transfer to Zareba Security all of Zareba
Systems’ right, title and interest in and to the assets, subject to all of the liabilities,
comprising Zareba Systems’ security business.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements
herein contained, it is agreed as follows:
1. Defined Terms. Capitalized terms used in this Fourth Amendment that are defined in
the Credit Agreement shall have the same meanings as defined there, unless otherwise defined
herein.
2. “Borrower” Definition; Security Interest; Borrowing Base. The term
“Borrower” shall for all purposes as used herein and in the Credit Agreement and in any
other Loan Document, refer to Zareba Systems, Waters Medical Systems and Zareba Security. From and
after the date of this Fourth Amendment (a) Zareba Systems, Waters Medical Systems and Zareba
Security will be jointly and severally liable for all Obligations, whether now existing or
hereafter created or incurred, and whether originally owed to a different party to the Credit
Agreement or to the Lender in a different capacity, and (b) Zareba Security will have granted to
the Lender a security interest in and to all the Collateral owned by it as security for the payment
and performance of all Obligations in accordance with Article III of the Credit Agreement.
Collateral owned by Zareba Security will be included in the Borrowing Base to the extent it
otherwise satisfies the requirements therefor.
3. No Other Changes. Except as explicitly amended by this Amendment, all of the terms
and conditions of the Credit Agreement shall remain in full force and effect and shall apply to any
advance or letter of credit thereunder.
4. Amendment to Exhibit D. Exhibit D to the Credit Agreement is hereby amended by
adding Zareba Security as a signatory thereto.
5. Consent to Formation of Zareba Security; New Schedule 5.5. The Lender consents to
the Borrower’s formation of Zareba Security as a wholly-owned subsidiary of Zareba Systems and to
the transfer of certain assets by Zareba Systems to Zareba Security, subject to such transactions
conforming to the following requirements, and only upon the satisfaction of conditions set forth
below:
A. Zareba Security’s business operations shall be limited to conducting the same
activities that the security division of Zareba Systems previously conducted;
B. The only assets that have been transferred from Zareba Systems to Zareba Security
shall be Accounts resulting from sales by the security division of Zareba Systems, and
Inventory, Equipment and any specified intellectual property used exclusively in connection
with business activities formerly performed by the security division of Zareba Systems
(“Transfer Assets”); and
C. The Transfer Assets will be transferred effective May 1, 2006 pursuant to documents
in the form of Exhibit A hereto, and no other assets of Zareba have been or will be
transferred by Zareba Systems to Zareba Security.
D. The revenue of the security division of Zareba Systems for the period from January
1, 2005 to April 30, 2006 was not greater than $500,000.00 and the book value of the
Transfer Assets as of April 30, 2006, was not greater than $250,000.00.
Upon the effectiveness of this consent, Schedule 5.5 of the Credit Agreement is hereby amended in
its entirety to conform to the form attached hereto as Schedule 5.5. The Lender’s consent under
this Section 5 is conditioned upon and will be effective only after Lender has received all of the
instruments and documents required to be delivered by each of Zareba Systems, Waters Medical
Systems and Zareba Security under Section 7 hereof.
6. Effectiveness; Post-Execution Covenants. This Fourth Amendment shall be effective
as of May 1, 2006 upon execution hereof by Zareba Systems, Waters Medical Systems and Zareba
Security, and delivery hereof to the Lender. Not later than May 31, 2006, Borrower shall deliver
to the Lender each of the following, each in substance and form acceptable to the Lender in its
sole discretion:
A. A Certificate of the Secretary or Assistant Secretary of Zareba Systems certifying
(i) as to the resolutions of the Board of Directors of Zareba Systems approving the
execution and delivery of this Fourth Amendment, (ii) to the fact that the articles of
incorporation and bylaws of Zareba Systems, which were certified and delivered to the Lender
pursuant to the Certificate of Authority of Zareba Systems’ secretary or assistant secretary
dated as of February 22, 2006 continue in full force and effect
and have not been amended or otherwise modified), and
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(iii) that the Officers and agents of Zareba
Systems who have been certified to the Lender, pursuant to the Certificate of Authority of
Zareba Systems’ secretary or assistant secretary dated as of February 22, 2006 as being
authorized to sign and to act on behalf of Zareba Systems continue to be so authorized or
setting forth the sample signatures of each of the Officers and agents of Zareba Systems
authorized to execute and deliver this Fourth Amendment and all other documents, agreements
and certificates on behalf of Zareba Systems.
B. A Certificate of the Secretary or Assistant Secretary of Waters Medical Systems
certifying (i) as to the resolutions of the Board of Directors of Waters Medical Systems
approving the execution and delivery of this Fourth Amendment, (ii) to the fact that the
articles of incorporation and bylaws of Waters Medical Systems, which were certified and
delivered to the Lender pursuant to the Certificate of Authority of the Borrower’s secretary
or assistant secretary dated as of February 22, 2006 continue in full force and effect and
have not been amended or otherwise modified except as set forth in the Certificate to be
delivered, and (iii) that the Officers and agents of Waters Medical Systems who have been
certified to the Lender, pursuant to the Certificate of Authority of Waters Medical Systems’
secretary or assistant secretary dated as of February 22, 2006 as being authorized to sign
and to act on behalf of Waters Medical Systems continue to be so authorized or setting forth
the sample signatures of each of the Officers and agents of Waters Medical Systems
authorized to execute and deliver this Fourth Amendment and all other documents, agreements
and certificates on behalf of Waters Medical Systems.
C. A certificate of Zareba Security’s Secretary or Assistant Secretary certifying that
attached to or set forth in such certificate are (i) the resolutions of Zareba Security’s
Directors and, if required, Owners, authorizing the execution, delivery and performance of
this Fourth Amendment and the documents required herein, (ii) true, correct and complete
copies of Zareba Security’s Constituent Documents, and (iii) the names and positions of the
Officers and Directors of Zareba Security authorized to execute and deliver this Fourth
Amendment and the other documents required herein and examples of their signatures.
D. An amended and restated Revolving Note (or other satisfactory joinder of Zareba
Security as an obligor thereunder) executed by Zareba Systems, Waters Medical Systems and
Zareba Security.
E. An amended and restated Real Estate Term Note (or other satisfactory joinder of
Zareba Security as an obligor thereunder) executed by Zareba Systems, Waters Medical Systems
and Zareba Security.
F. An amended and restated Equipment Term Note (or other satisfactory joinder of Zareba
Security as an obligor thereunder) executed by Zareba Systems, Waters Medical Systems and
Zareba Security.
G. An amended and restated Capex Term Note (or other satisfactory joinder of Zareba
Security as an obligor thereunder) executed by Zareba Systems, Waters Medical Systems and
Zareba Security.
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H. A pledge agreement in form satisfactory to the Lender made by Zareba Systems
pursuant to which all of the issued and outstanding capital stock of Waters Medical Systems
and Zareba Security are pledged to the Lender as security for the Obligation.
I. Any item described in Section 4.1(d)-(i) of the Credit Agreement, to the extent
applicable to Zareba Security, or a certificate executed thereby stating such provisions are
not applicable.
J. A UCC Financing Statement filed with the Secretary of State for the State of
Minnesota perfecting the Lender’s interest in all assets of Zareba Security.
K. A UCC financing search showing that Lender holds a first priority perfected security
interest in all assets of Zareba Security.
L. Execution and delivery by Zareba Security of agreements substantially similar to, or
joinders to, the agreements referenced in Section 4.1(k)-(m) of the Credit Agreement, in
either case as required by and satisfactory to the Lender.
M. A current certificate issued by the Secretary of State of Minnesota, certifying that
Zareba Security is in compliance with all applicable organizational requirements of the
State of Minnesota.
N. Evidence that Zareba Security is duly licensed or qualified to transact business in
all jurisdictions where the character of the property owned or leased or the nature of the
business transacted by it makes such licensing or qualification necessary.
O. A Customer Identification Information form and such other forms and verification as
Lender may need from Zareba Security to comply with the U.S.A. Patriot Act.
P. Certificates of the insurance for Zareba Security as required under the Credit
Agreement, with all hazard insurance containing a lender’s loss payable endorsement in the
Lender’s favor and with all liability insurance naming the Lender as an additional insured.
Q. Payment of the costs and expenses described in Section 12.
R. Such other matters as the Lender may require.
Failure by the Borrower to deliver any of the foregoing when required or perform any other
obligation hereunder as required hereby will constitute an Event of Default under the Credit
Agreement.
7. Representations and Warranties. The Borrower hereby represents and warrants to the
Lender as follows:
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A. The Borrower has all requisite power and authority to execute this Amendment and to
perform all of its obligations hereunder, and this Fourth Amendment has been duly executed
and delivered by the Borrower and constitutes the legal, valid and binding obligation of the
Borrower, enforceable in accordance with its terms.
B. The execution, delivery and performance by the Borrower of this Fourth Amendment
have been duly authorized by all necessary corporate action and do not (i) require any
authorization, consent or approval by any governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, (ii) violate any provision of any
law, rule or regulation or of any order, writ, injunction or decree presently in effect,
having applicability to the Borrower, or the articles of incorporation or by-laws of the
Borrower, or (iii) result in a breach of or constitute a default under any indenture or loan
or credit agreement or any other agreement, lease or instrument to which the Borrower is a
party or by which it or its properties may be bound or affected.
C. The statements set forth in Section 5.A.-D. are true and correct as of May 1, 2006.
D. All of the representations and warranties contained in Article V of the Credit
Agreement are correct on and as of the date hereof as though made on and as of such date,
except to the extent that such representations and warranties relate solely to an earlier
date.
8. References. All references in the Credit Agreement to “this Agreement” shall be
deemed to refer to the Credit Agreement as amended hereby; and any and all references in the
Security Documents to the Credit Agreement shall be deemed to refer to the Credit Agreement as
amended hereby.
9. No Waiver. The execution of this Fourth Amendment and acceptance of any documents
related hereto shall not be deemed to be a waiver of any Default or Event of Default under the
Credit Agreement or breach, default or event of default under any Security Document or other
document held by the Lender, whether or not known to the Lender and whether or not existing on the
date of this Fourth Amendment.
10. Release. The Borrower hereby absolutely and unconditionally releases and forever
discharges the Lender, and any and all participants, parent corporations, subsidiary corporations,
affiliated corporations, insurers, indemnitors, successors and assigns thereof, together with all
of the present and former directors, officers, agents and employees of any of the foregoing, from
any and all claims, demands or causes of action of any kind, nature or description, whether arising
in law or equity or upon contract or tort or under any state or federal law or otherwise, that the
Borrower has had, now has or has made claim to have against any such person for or by reason of any
act, omission, matter, cause or thing whatsoever arising from the beginning of time to and
including the date of this Fourth Amendment, whether such claims, demands and causes of action are
matured or unmatured or known or unknown.
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11. Costs and Expenses. The Borrower hereby reaffirms its agreement under the Credit
Agreement to pay or reimburse the Lender on demand for all costs and
expenses incurred by the Lender in connection with the Loan Documents, including without limitation all
reasonable fees and disbursements of legal counsel. Without limiting the generality of the
foregoing, the Borrower specifically agrees to pay all fees and disbursements of counsel to the
Lender for the services performed by such counsel in connection with the preparation of this Fourth
Amendment and the documents and instruments incidental hereto. The Borrower hereby agrees that the
Lender may, at any time or from time to time in its sole discretion and without further
authorization by the Borrower, make a loan to the Borrower under the Credit Agreement, or apply the
proceeds of any loan, for the purpose of paying any such fees, disbursements, costs and expenses.
12. Miscellaneous. This Fourth Amendment may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an original and all of
which counterparts, taken together, shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Fourth Amendment to be duly executed
as of the date first written above.
| ZAREBA SYSTEMS, INC., a Minnesota | WATERS MEDICAL SYSTEMS, INC., a | |||||||||
| corporation | Minnesota corporation | |||||||||
By:
|
/s/Xxxxx Xxxxxxxxx
|
By: | /s/Xxxxx Xxxxxxxxx
|
|||||||
| Its: President & CEO | Its: President | |||||||||
| ZAREBA SECURITY, INC., a Minnesota corporation | XXXXX FARGO BANK, NATIONAL ASSOCIATION | |||||||||
By:
|
/s/Xxxxx Xxxxxxxxx
|
By: | /s/ Xxxxx X. Xxxxxxxxx
|
|||||||
| Its: President | Its Vice President | |||||||||
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EXHIBIT A
TRANSFER DOCUMENTS
Schedule 5.5 to Credit and Security Agreement
SUBSIDIARIES
| • | Zareba Systems of Canada, Ltd., a corporation formed under the laws of the Province of Ontario, Canada | |
| • | Zareba Systems Europe Limited, a private company limited by shares incorporated in the United Kingdom | |
| • | No. 549 Leicester Limited, a private company limited by shares incorporated in the United Kingdom | |
| • | Rutland Electric Fencing Co. Limited, a private company limited by shares incorporated in the United Kingdom | |
| • | Rutland Electric Fencing Co. (Scotland) Limited, a private company limited by shares incorporated in Scotland | |
| • | Electric Shepherd Products Limited, a private company limited by shares incorporated in the United Kingdom | |
| • | Waters Medical Systems, Inc., a corporation formed under the laws of the State of Minnesota | |
| • | Zareba Security, Inc., a corporation formed under the laws of the State of Minnesota |
