SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT
Exhibit 10.1
SECOND AMENDMENT TO REVOLVING CREDIT AGREEMENT
This Amendment, dated effective as of October 22, 2008, is made by and between Zareba Systems,
Inc., a Minnesota corporation (“Systems”) and Zareba Security, Inc., a Minnesota corporation
(“Security”) (Systems and Security are individually and collectively referred to herein as the
“Borrower”), and JPMorgan Chase Bank, N.A., a national banking association (the “Lender”).
RECITALS
The Borrower and the Lender have entered into a Credit and Security Agreement dated as of
August 29, 2007, as amended by that certain First Amendment to Revolving Credit Agreement dated
September 30, 2008 (as so amended, the “Credit Agreement”). Capitalized terms used in these
recitals have the meanings given to them in the Credit Agreement unless otherwise specified.
The Borrower has requested that certain amendments be made to the Credit Agreement, which the
Lender is willing to make pursuant to the terms and conditions set forth herein.
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 Amendment which are defined in the
Credit Agreement shall have the same meanings as defined therein, unless otherwise defined
herein. In addition, Section 1.1 of the Credit Agreement is amended by adding or amending,
as the case may be, the following definitions:
“Banking Day” means any day that is not a Saturday, Sunday or other day on which commercial
banks in New York City are authorized or required by law to remain closed; provided that,
when used in connection with a LIBOR Advance, the term “Banking Day” shall also exclude any
day on which banks are not open for dealings in dollar deposits in the London interbank
market.
“Change in Law” means (a) the adoption of any law, rule or regulation after the date of this
Agreement, (b) any change in any law, rule or regulation or in the interpretation or
application thereof by any Governmental Authority after the date of this Agreement or (c)
compliance by the Lender (or by any applicable lending office of such Lender) with any
request, guideline or directive (whether or not having the force of law) of any Governmental
Authority made or issued after the date of this Agreement
“Governmental Authority” means the government of the United States of America, any other
nation or any political subdivision thereof, whether state or local, and any agency,
authority, instrumentality, regulatory body, court, central bank or other entity exercising
executive, legislative, judicial, taxing, regulatory or administrative powers or functions
of or pertaining to government.
“LIBOR” means, with respect to any LIBOR Advance for any Interest Period, an interest rate
per annum (rounded upward, if necessary, to the next 1/16th of 1%) equal to (a) the rate
appearing on Reuters Screen LIBOR 01 (or on any successor or substitute page of such
Service, or any successor to or substitute for such Service, providing rate quotations
comparable to those currently provided on such page of such Service, as determined by the
Lender from time to time for purposes of providing quotations of interest rates applicable
to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time,
two Banking Days prior to the commencement of such Interest Period, as the rate for dollar
deposits with a maturity comparable to such Interest Period multiplied by (b) a fraction
(expressed as a decimal), the numerator of which is the number one and the denominator of
which is the number one minus the aggregate of the maximum reserve percentages (including
any marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board of Governors of the Federal Reserve System to which the Lender is
subject eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in
Regulation D of the Board). Such reserve percentages shall include those imposed pursuant
to such Regulation D. LIBOR Advances shall be deemed to constitute eurocurrency funding and
to be subject to such reserve requirements without benefit of or credit for proration,
exemptions or offsets that may be available from time to time under such Regulation D or any
comparable regulation. The statutory reserve rate described in this clause (b) shall be
adjusted automatically on and as of the effective date of any change in any reserve
percentage. In the event that such rate is not available at such time for any reason, then
the “LIBOR” with respect to such LIBOR Advance for such Interest Period shall be the rate at
which dollar deposits in the approximate amount of principal outstanding on such date and
for a maturity comparable to such Interest Period are offered by the principal London office
of the Lender in immediately available funds in the London interbank market at approximately
11:00 a.m., London time, two Banking Days prior to the commencement of such Interest Period.
“Prime Rate” means the rate of interest per annum announced from time to time by the Lender
as its prime rate. The Prime Rate is a variable rate and each change in the Prime Rate is
effective from and including the date the change is announced as being effective. THE PRIME
RATE IS A REFERENCE RATE AND MAY NOT BE THE LENDER’S LOWEST RATE.
2. Section 2.1 of the Credit Agreement is hereby amended by adding clause (d) thereto which
shall read as follows:
(d) Alternate Rate of Interest. If prior to the commencement of any
Interest Period for a LIBOR Advance :
(i) the Lender determines (which determination shall be conclusive absent
manifest error) that adequate and reasonable means do not exist for ascertaining
LIBOR for such Interest Period; or
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(ii) LIBOR for such Interest Period will not adequately and fairly reflect the
cost to the Lender of making or maintaining the LIBOR Advance for such Interest
Period;
then the Lender shall give notice thereof to the Borrower by telephone or telecopy
as promptly as practicable thereafter and, until the Lender notifies the Borrower
that the circumstances giving rise to such notice no longer exist, (i) any interest
election request that requests the conversion of any Advance to, or continuation of
any Advance as, a LIBOR Advance shall be ineffective, and (ii) any request for a new
LIBOR Advance shall be made as a Base Rate Advance.
3. Section 2.8 of the Credit Agreement is hereby amended in its entirety to read as follows:
Section 2.8 Computation and Payment of Interest and Fees. Interest shall be
payable on Base Rate Advances in arrears on the first day of each calendar month and
on the Termination Date. Interest shall be payable on LIBOR Advances on the last
day of the Interest Period applicable to such Advance and on the Termination Date.
Interest accruing on the outstanding principal balance of the Note and fees
hereunder outstanding from time to time shall be computed on the basis of actual
number of days elapsed in a year of three hundred and sixty (360) days.
4. Section 2.18 of the Credit Agreement is hereby amended in its entirety to read as
follows:
Section 2.18 Increased Costs.
(a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for the account of, or credit
extended by, the Bank (except any such reserve requirement reflected in LIBOR); or
(ii) impose on the Lender or the London interbank market any other condition
affecting this Agreement or LIBOR Advance made by the Lender;
and the result of any of the foregoing shall be to increase the cost to the Lender
of making or maintaining any LIBOR Advance (or of maintaining its obligation to make
any such LIBOR Advance) or to increase the cost or to reduce the amount of any sum
received or receivable by the Lender (whether of principal, interest or otherwise),
then the Borrower will pay to the Lender such additional amount or amounts as will
compensate the Lender for such additional costs incurred or reduction suffered.
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(b) If the Lender determines that any Change in Law regarding capital requirements
has or would have the effect of reducing the rate of return on the Lender’s capital
or on the capital of the Lender’s holding company, if any, as a consequence of this
Agreement or the Loans made by the Lender to a level below that which the Lender or
the Lender’s holding company could have achieved but for such Change in Law (taking
into consideration the Lender’s policies with respect to capital adequacy), then
from time to time the Borrower will pay to the Lender, such additional amount or
amounts as will compensate the Lender or the Lender’s holding company for any such
reduction suffered.
(c) A certificate of the Lender setting forth the amount or amounts necessary to
compensate the Lender or its holding company, as the case may be, as specified in
paragraph (a) or (b) of this Section shall be delivered to the Borrower and shall be
conclusive absent manifest error. The Borrower shall pay the Lender, the amount
shown as due on any such certificate within 10 days after receipt thereof.
(d) Failure or delay on the part of the Lender to demand compensation pursuant to
this Section shall not constitute a waiver of the Lender’s right to demand such
compensation; provided that the Borrower shall not be required to compensate the
Lender pursuant to this Section for any increased costs or reductions incurred more
than 270 days prior to the date that the Lender notifies the Borrower of the Change
in Law giving rise to such increased costs or reductions and of the Lender’s
intention to claim compensation therefor; provided further that, if the Change in
Law giving rise to such increased costs or reductions is retroactive, then the
270-day period referred to above shall be extended to include the period of
retroactive effect thereof.
5. A new Section 2.19 is hereby added to the Credit Agreement which shall read as follows:
Section 2.19 Break Funding Payments. In the event of (a) the payment of any
principal of any LIBOR Advance other than on the last day of an Interest Period
applicable thereto (including as a result of an Event of Default), (b) the
conversion of any LIBOR Advance other than on the last day of the Interest Period
applicable thereto, or (c) the failure to borrow, convert, continue or prepay any
LIBOR Advance on the date specified in any notice delivered pursuant hereto, then,
in any such event, the Borrower shall compensate the Lender for the loss, cost and
expense attributable to such event. In the case of a LIBOR Advance, such loss, cost
or expense to the Lender shall be deemed to include an amount determined by the
Lender to be the excess, if any, of (i) the amount of interest which would have
accrued on the principal amount of such Advance had such event not occurred, at
LIBOR that would have been applicable to such Advance, for the period from the date
of such event to the last day of the then current Interest Period therefor (or, in
the case of a failure to borrow, convert or continue, for the period that would have
been the Interest Period for such Advance), over (ii) the amount of interest which
would accrue on such principal
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amount for such period at the interest rate which the Lender would bid were it to
bid, at the commencement of such period, for dollar deposits of a comparable amount
and period from other banks in the eurodollar market. A certificate of the Lender
setting forth any amount or amounts that the Lender is entitled to receive pursuant
to this Section shall be delivered to the Borrower and shall be conclusive absent
manifest error. The Borrower shall pay the Lender the amount shown as due on any
such certificate within 10 days after receipt thereof.
6. A new Section 2.20 is hereby added to the Credit Agreement which shall read as follows:
Section 2.20 Authorization for Direct Payments (ACH Debits). To effectuate
any payment due under any of the Obligations, the Borrower hereby authorizes the
Lender to initiate debit entries to any deposit account of the Borrower maintained
with the Lender and to debit the same to such account. This authorization to
initiate debit entries shall remain in full force and effect until the Lender has
received written notification of its termination in such time and in such manner as
to afford the Lender a reasonable opportunity to act on it. The Borrower
acknowledges (1) that such debit entries may cause an overdraft of any such account
which may result in the Lender’s refusal to honor items drawn on any such account
until adequate deposits are made to any such account; (2) that the Lender is under
no duty or obligation to initiate any debit entry for any purpose; and (3) that if a
debit is not made because any such account does not have a sufficient available
balance, or otherwise, the payment may be late or past due.
7. A new Section 6.16 is hereby added to the Credit Agreement which shall read as follows:
Section 6.16 Government Regulation. Borrower shall not (1) be or become
subject at any time to any law, regulation, or list of any government agency
(including, without limitation, the U.S. Office of Foreign Asset Control list) that
prohibits or limits Lender from making any advance or extension of credit to
Borrower or from otherwise conducting business with Borrower, or (2) fail to provide
documentary and other evidence of Borrower’s identity as may be requested by Lender
at any time to enable Lender to verify Borrower’s identity or to comply with any
applicable law or regulation, including, without limitation, Section 326 of the USA
Patriot Act of 2001, 31 U.S.C. Section 5318.
8. A new Section 8.16 is hereby added to the Credit Agreement which shall read as follows:
Section 8.16 Information Sharing. The Borrower agrees that the Lender may
provide any information or knowledge the Lender may have about the Borrower or about
any matter relating to this Agreement or the Loan Documents to JPMorgan Chase & Co.,
or any of its subsidiaries or affiliates or their successors, or to any one or more
purchasers or potential purchasers of this Agreement or the
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Loan Documents. The Borrower agrees that the Lender may at any time sell, assign or
transfer one or more interests or participations in all or any part of its rights
and obligations as set forth in this Agreement and in the Loan Documents to one or
more purchasers whether or not related to the Lender.
9. A new Section 8.17 is hereby added to the Credit Agreement which shall read as follows:
Section 8.17 WAIVER OF SPECIAL DAMAGES. THE BORROWER WAIVES, TO THE MAXIMUM
EXTENT NOT PROHIBITED BY LAW, ANY RIGHT THE UNDERSIGNED MAY HAVE TO CLAIM OR RECOVER
FROM THE LENDER IN ANY LEGAL ACTION OR PROCEEDING ANY SPECIAL, EXEMPLARY, PUNITIVE
OR CONSEQUENTIAL DAMAGES.
10. 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.
11. Conditions Precedent. This Amendment shall be effective when the Lender shall
have received an executed original hereof, together with each of the following, each in
substance and form acceptable to the Lender in its sole discretion:
(a) A Certificate of the Secretary of the Borrower certifying as to (i) the
resolutions of the board of directors of the Borrower approving the execution and
delivery of this Amendment, (ii) the fact that the articles of incorporation and
bylaws of the Borrower, 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 August 29, 2007 in connection with the execution and delivery of the
Credit Agreement 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) certifying that the officers and agents of the Borrower who have been
certified to the Lender, pursuant to the Certificate of Authority of the Borrower’s
secretary or assistant secretary dated as of August 29, 2007, as being authorized to
sign and to act on behalf of the Borrower continue to be so authorized or setting
forth the sample signatures of each of the officers and agents of the Borrower
authorized to execute and deliver this Amendment and all other documents, agreements
and certificates on behalf of the Borrower.
(b) Such other matters as the Lender may require.
12. Representations and Warranties. The Borrower hereby represents and warrants to
the Lender as follows:
(a) The Borrower has all requisite power and authority to execute this Amendment and
to perform all of its obligations hereunder, and this Amendment has been duly
executed and delivered by the Borrower and constitutes the legal,
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valid and binding obligation of the Borrower, enforceable in accordance with its
terms.
(b) The execution, delivery and performance by the Borrower of this 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) All of the representations and warranties contained in Article IV 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.
13. 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
Loan Documents to the Credit Agreement shall be deemed to refer to the Credit Agreement as
amended hereby.
14. No Waiver. The execution of this 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 Amendment.
15. 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, which 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 Amendment, whether such claims, demands and causes of action are matured or unmatured
or known or unknown.
16. 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 Credit Agreement, the Loan Documents and all other
documents contemplated thereby, including without limitation all reasonable fees and
disbursements of legal counsel. Without limiting the generality of the
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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 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.
17. Miscellaneous. This 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.
18. Consent. Borrower has advised the Lender that Systems intends to enter into an
agreement for purchase and sale of RPP assets (the “RPP Agreement”) with Amazing Gates of
America, LLC (“Amazing Gates”) in substantially the form of Exhibit A attached
hereto, pursuant to which Systems will sell certain assets (consisting of inventory,
tangible assets and certain intellectual property rights) to Amazing Gates. Such sale
requires the Lender’s consent pursuant to Section 6.6 of the Credit Agreement. The Lender
hereby consents to the sale contemplated by the RPP Agreement so long as (i) all cash paid
to Systems at closing is paid to the Lender to be applied to the Advances, (ii) all payments
received by Systems under the “RPP Inventory Note” and “RPP Drawings Note” are paid to the
Lender to be applied to the Advances as and when received by Systems, and no Default Period
exists at the time of the closing of such sale.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of
the date first written above.
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| ZAREBA SYSTEMS, INC. |
||||
| By: | /s/ Xxxxxxx Xxxxxxxxx | |||
| Xxxxxxx Xxxxxxxxx | ||||
| Its: Chief Financial Officer | ||||
| ZAREBA SECURITY, INC. |
||||
| By: | /s/ Xxxxxxx Xxxxxxxxx | |||
| Xxxxxxx Xxxxxxxxx | ||||
| Its: Chief Financial Officer | ||||
| JPMORGAN CHASE BANK, N.A. |
||||
| By: | /s/ Xxxxxx X. Xxxxx | |||
| Xxxxxx X. Xxxxx | ||||
| Its: Vice President | ||||
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EXHIBIT A
(RPP Agreement)
