Document:

exv10w4

 

Exhibit 10.4

REVOLVING NOTE

			
	 	 	 
	$6,000,000.00
	 	Minneapolis, Minnesota
	 
	 	August 29, 2007
	 	 	 

     For value received, the undersigned, Zareba Systems, Inc., a Minnesota corporation (“Systems”)
and Zareba Security, Inc., a Minnesota corporation (“Security”) (Systems and Security are
hereinafter individually and collectively referred to as the “Borrower”), hereby jointly and
severally promise to pay on the Termination Date under the Credit Agreement (defined below), to the
order of JPMorgan Chase Bank, N.A., a national banking association, its successors and assigns (the
“Lender”), at its office in Minneapolis, Minnesota, or at any other place designated at any time by
the holder hereof, in lawful money of the United States of America and in immediately available
funds, the principal sum of Six Million and 00/100 Dollars ($6,000,000.00) or, if less, the
aggregate unpaid principal amount of all Advances made by the Lender to the Borrower under the
Credit Agreement (as defined below) together with interest on the principal amount hereunder
remaining unpaid from time to time, computed on the basis of the actual number of days elapsed and
a 360-day year, from the date hereof until this Note is fully paid at the rate from time to time in
effect under the Revolving Credit Agreement of even date herewith (as the same may hereafter be
amended, supplemented or restated from time to time, the “Credit Agreement”) by and between the
Lender and the Borrower. The principal hereof and interest accruing hereon shall be due and
payable as provided in the Credit Agreement. This Note may be prepaid only in accordance with the
Credit Agreement.

     This Note is issued pursuant, and is subject, to the Credit Agreement, which provides, among
other things, for acceleration hereof. This Note is the Revolving Note referred to in the Credit
Agreement. This Note is secured, among other things, pursuant to the Credit Agreement and the Loan
Documents as therein defined, and may now or hereafter be secured by one or more other security
agreements, mortgages, deeds of trust, assignments or other instruments or agreements.

     The Borrower hereby agrees to pay all costs of collection, including reasonable attorneys’
fees and legal expenses, in the event this Note is not paid when due, whether or not legal
proceedings are commenced.

     Presentment or other demand for payment, notice of dishonor and protest are expressly waived.

 

 

	 	 	 	 	 
	 	ZAREBA SYSTEMS, INC.

 	 
	 	By:  	/s/ Jeffrey Mathiesen
 	 
	 	 	Jeffrey Mathiesen 	 
	 	 	Its:  Chief Financial Officer 	 
	 
	 	ZAREBA SECURITY, INC.

 	 
	 	By:  	/s/ Jeffrey Mathiesen
 	 
	 	 	Jeffrey Mathiesen 	 
	 	 	Its:  Chief Financial Officerexv10w5

 

Exhibit 10.5

STOCK PLEDGE AGREEMENT

THIS STOCK PLEDGE AGREEMENT, is made effective as of the 29th day of August, 2007, by and between
Zareba Systems, Inc., a Minnesota corporation (“Debtor”), and JPMorgan Chase Bank, N.A., a national
banking association (“Secured Party”).

In order to secure the payment of the obligations of the Debtor and Zareba Security, Inc., a
Minnesota corporation (“Security”) to the Secured Party pursuant to that certain Revolving Credit
Agreement of even date herewith (as the same may hereafter be amended, supplemented or restated
from time to time, the “Credit Agreement”), by and between the Debtor, Security and the Secured
Party and as evidenced by the Note (as defined in the Credit Agreement), and each and every other
debt, liability and obligation of every type and description which the Debtor or Security may now
or at any time hereafter owe to Secured Party (whether such debt, liability or obligation now
exists or is hereafter created or incurred, whether it arises under or is evidenced by this
Agreement, the Credit Agreement, the Note or any other present or future instrument or agreement or
by operation of law, and whether it is or may be direct or indirect, due or to become due, absolute
or contingent, primary or secondary, liquidated or unliquidated, or sole, joint, several or joint
and several) (all such debts, liabilities and obligations of the Debtor and Security to Secured
Party herein collectively referred to as the “Obligations”), Debtor and Security hereby agree as
follows:

     1. Pledge. To secure repayment of the Obligations, Debtor hereby grants to Secured
Party a security interest in and to the following (all of which shall constitute the “Pledged
Property”):

     (a) All of the shares of stock and other securities described on Exhibit A (the
“Pledged Shares”), all of the certificates and instruments representing the Pledged Shares,
all cash, securities, rights and other property at any time and from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all of the
Pledged Shares;

     (b) All cash dividends and cash distributions with respect to any Pledged Property
(“Dividends”);

     (c) All additional shares of stock or securities of the corporation issuing the Pledged
Shares at any time or from time to time acquired by Debtor in any manner and all of the
certificates representing such additional shares or securities;

     (d) All other property hereafter delivered to Debtor in substitution for any of the
foregoing, all certificates and instruments representing or evidencing such property, and
all cash, securities, interest, Dividends, rights and other property at any time and from
time to time received or receivable or otherwise distributed in respect of or in exchange
for any or all thereof;

 

 

     (e) All stock dividends, liquidating dividends, shares of stock resulting from (or in
connection with the exercise of) stock splits, reclassifications, warrants, options,
non-cash dividends, mergers, consolidations and all other distributions on or with respect
to the Pledged Shares or the Pledged Property; and

     (f) All products and proceeds of any and all of the foregoing.

The stock certificates representing the Pledged Shares are herewith delivered to Secured Party
contemporaneously with the execution of this Agreement. Debtor shall execute and deliver to
Secured Party any and all other documents and instruments as Secured Party may determine to be
necessary in order to perfect and maintain the security interest granted under this Agreement.

     2. Possession. Secured Party acknowledges receipt of the stock certificates
representing the Pledged Shares, together with a stock power endorsed in blank to hold under
payment in full of the Obligations. Upon satisfaction in full of the Obligations, the Secured
Party shall deliver the certificates and the stock powers to the Debtor.

     3. Representations. Debtor warrants and represents that (i) there are no restrictions
upon the transfer or pledge of any of the Pledged Shares, (ii) that Debtor has the right to
transfer and pledge the Pledged Shares free and clear of any pledge, lien, charge, security
interest or other encumbrance and without obtaining the consent of any third party, (iii) Debtor is
the legal and beneficial owner of all of the Pledged Shares and, upon delivery of the Pledged
Shares (and the certificates representing such Pledged Shares) to Secured Party and the recording
of a financing statement with the Minnesota Secretary of State covering the Pledged Shares, this
Agreement shall create a valid first lien upon and a perfected security interest in the Pledged
Shares and the proceeds thereof, (iv) the Pledged Shares constitute 100% of the issued and
outstanding shares of stock of Zareba Systems of Canada, Ltd., (v) there are no other classes or
series of stock of the Borrower which are authorized or outstanding, and (vi) there are no options,
warrants or other rights outstanding to acquire any stock of the Borrower.

     4. Covenants. For as long as this Agreement is in force and the Secured Party is in
possession of the Pledged Shares, the Debtor agrees that (i) Debtor will not grant any other lien
or security interest with respect to the Pledged Shares, (ii) Debtor will not sell, transfer or
sign the Pledged Shares or any interest, financial rights or title to the Pledged Shares, and (iii)
upon the Secured Party’s reasonable request, the Debtor will take all action and will execute all
documents and instruments necessary or desirable to consummate and give effect to this Agreement.

     5. Adjustments. If, during the term of this pledge, any share dividend,
reclassification, readjustment, or other change is declared or made in the capital structure of the
Borrower pertaining directly to all or any portion of the Pledged Shares, all new, substituted and
additional shares or other securities issued by reason of any such change shall be immediately
assigned to Secured Party to be held by Secured Party under the terms of this Agreement in the same
manner as the shares originally pledged hereunder.

     6. Release of Pledged Shares. Upon the complete performance of the Obligations,
Secured Party shall release all of its rights in and to the Pledged Shares hereunder.

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     7. Authorized Actions; Proxy. The Debtor irrevocably appoints the Secured Party as
the Debtor’s attorney-in-fact and grants the Secured Party a proxy to do (but the Secured Party
shall not be obligated and shall incur no liability to the Debtor or any third party for failure to
do so), after and during the continuance of an Event of Default (as defined in the Note), any act
that the Debtor is obligated by this Agreement to do and to exercise such rights and powers as the
Debtor might exercise with respect to the Pledged Shares. With respect to voting the Pledged
Shares, this Section constitutes an irrevocable appointment of a proxy, coupled with an interest,
which shall continue until the Asset Purchase Agreement and Note are paid in full.

     8. Default. Upon the occurrence of an Event of Default (as defined in the Note), the
Secured Party may require all Dividends of any sort with respect to the Pledged Shares to be
delivered to the Secured Party as additional security hereunder or applied toward the satisfaction
of the Obligations. Upon the occurrence of an Event of Default, the Secured Party also shall have
the right to exercise all voting rights as to all Pledged Shares. Further, upon the occurrence of
an Event of Default, the Secured Party may exercise the Secured Party’s proxy rights with respect
to all or any portion of the Pledged Shares. In such event, the Debtor agrees to promptly deliver
to the Secured Party further evidence of the grant of such proxy in any form requested by the
Secured Party. Furthermore, upon the occurrence of an Event of Default, and at any time
thereafter, Secured Party shall have the rights and remedies provided in the Uniform Commercial
Code in force in the State of Minnesota and, in this connection, Secured Party may, upon ten (10)
days written notice to Debtor, and without liability for any diminution in price which may have
occurred, sell the Pledged Shares in the manner described herein. Secured Party shall be free to
purchase all or any part of the Pledged Shares at any such sale. Out of the proceeds of any sale,
Secured Party may retain an amount equal to the principal and accrued interest then due on the
Obligations, plus the amount of the expenses of sale and costs of collection incurred by Secured
Party with respect to the Obligations, and shall pay any remaining balance of such proceeds to
Debtor.

     9. Sale Upon Default. The Debtor and the Secured Party acknowledge and agree that the
Pledged Shares are restricted, unregistered stock and that it is difficult to value such Pledged
Shares and that no public market exists for such Pledged Shares. The parties further agree that
the Pledged Shares are not subject to sale in a “recognized market: as that term is described in
Article 9, Section 504 of the Uniform Commercial Code. The Debtor and the Secured Party wish to
agree to reasonable standards for conducting a commercially reasonable sale of the Shares. Without
limiting rights and remedies otherwise available to the Secured Party, the parties agree that
compliance with the following steps shall satisfy requirements of a commercially reasonable sale:

     (a) Public or Private Sale Permitted. The sale may be either a public or a
private sale, at the Secured Party’s discretion, and it may be for all or any portion of the
Pledged Shares.

     (b) Timing of Sale. The Secured Party shall set a date for public sale of the
Pledged Shares, or a date after which a private sale may occur, which date shall be not less
than thirty (30) days after the date notice of the sale is delivered to the Debtor. Such
notice of sale shall include the date and the time of the public sale, or the date after
which a private sale may occur.

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     (c) Place of Sale. The Secured Party may select any reasonable place in this
state to conduct such sale.

     (d) Securities Law Compliance. Immediately upon request, the Debtor shall
provide the Secured Party with any and all information requested by the Secured Party in
order for such sale to comply with applicable state or federal securities laws.

     (e) Prospective Purchasers Restricted. At any sale of any of the Pledged
Shares, the Secured Party may restrict the prospective bidders or purchasers to persons or
entities who, by certain representations made by them, would render registration of the sale
under state or federal securities laws unnecessary.

     10. Notices. All notices and other communications required or permitted to be given
under and pursuant to this Agreement shall be deemed to have been given and received for all
purposes forty-eight (48) hours after mailing at any general or branch United States Post Office if
sent by registered or certified mail, postage prepaid, addressed to the addressee at his address
last furnished to the sender in writing by the addressee for the purpose of receiving notices under
and pursuant to this Agreement, or, unless and until such an address shall have been so furnished,
addressed to the addressee as follows:

	 	 	 	 	 
	 

	 	If to Secured Party:
	 	JPMorgan Chase Bank, N.A.
	 

	 	 	 	225 South Sixth Street
	 

	 	 	 	Suite 2500
	 

	 	 	 	Minneapolis, MN 55402
	 
	 	 	 	 
	 

	 	If to Debtor:
	 	Zareba Systems, Inc.
	 

	 	 	 	13705 26th Avenue North
	 

	 	 	 	Suite 102
	 

	 	 	 	Plymouth, MN 55441

     11. Entire Agreement. This Agreement sets forth the entire understanding of the
parties to this Agreement relating to the subject matter hereof and supersedes all prior agreements
and understandings, whether oral or written.

     12. Amendments and Captions. This Agreement shall not be modified, amended or
terminated (except as provided herein) other than by the written agreement of Debtor and Secured
Party. Captions appearing in this Agreement are for convenience only and shall not be deemed to
explain, limit or amplify the provisions of this Agreement.

     13. Continuance of Agreement. This Agreement shall be binding upon the parties hereto
and their respective heirs, legal representatives, successors and assigns.

     14. Waiver. No delay or failure by Secured Party in the exercise of any right or
remedy shall constitute a waiver thereof, and no single or partial exercise by Secured Party of any
right or remedy shall preclude other or further exercise thereof or the exercise of any other right
or remedy.

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     15. Governing Law. This Agreement shall be governed by and construed in accordance
with the internal laws of the State of Minnesota without consideration to Minnesota choice of law
rules which might otherwise require that the laws of another state be applied.

     16. Assigns. The Debtor’s rights under this Agreement shall not be assigned unless
agreed in writing between the parties, such consent not to be unreasonably withheld. The rights
and privileges of the Secured Party hereunder shall inure to the benefit of its successors, heirs
and assigns, and all the obligations of the Debtor shall bind Debtor’s successors, heirs and
assigns.

     IN WITNESS WHEREOF, the parties hereto have executed and delivered this Stock Pledge Agreement
as of the date and year first above written.

	 	 	 	 	 
	 	DEBTOR:

ZAREBA SYSTEMS, INC.

 	 
	 	By:  	/s/ Jeffrey Mathiesen
 	 
	 	 	Jeffrey Mathiesen 	 
	 	 	Its:  Chief Financial Officer 	 
	 
	 	SECURED PARTY:

JPMORGAN CHASE BANK, N.A.

 	 
	 	By:  	/s/ Jay A. Isaman
 	 
	 	 	Jay A. Isaman 	 
	 	 	Its:  Vice President 	 
	 

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EXHIBIT A

(Description of Pledged Shares)

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Certificate	 	 	Number of	 
	Stock Issued By	 	Class	 	 	Number(s)	 	 	Shares	 
	Zareba Systems of Canada, Ltd.

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