CREDIT AGREEMENT
This CREDIT AGREEMENT (this "Agreement") is made as of January 21,
1997, by and between Shepherd Surveillance Solutions, Inc. (the "Borrower"), a
Nevada corporation, and Trilon Dominion Partners, L.L.C. (the "Lender"), a
Delaware limited liability company.
WHEREAS, the Lender loaned to the Borrower the aggregate amount of
$1,000,000 on November 1, 1995 (the "Loan"), in connection with a restructuring
of the operations of the Borrower; and
WHEREAS, the Lender and the Borrower desire to enter into a Credit
Agreement to which sets forth the terms and conditions of the Loan and pursuant
to which (i) the Borrower will issue to the Lender a Convertible Promissory Note
in the principal amount of $1,000,000 plus an additional amount of $141,229.50
representing interest accrued from November 1, 1995 to the date hereof, and (ii)
the Borrower will agree to certain restrictions and covenants until all amounts
due under the Convertible Promissory Note are repaid or such Convertible Note is
converted into shares of the Borrower's Common Stock, $.001 par value per share;
and
WHEREAS, the Lender and the Borrower desire to extinguish all other
obligations of the Borrower with respect to the Loan.
NOW, THEREFORE, the Lender and the Borrower hereby agree as follows:
1. DEFINITIONS:
Certain capitalized terms are defined below:
Business Day: Any day on which the stock markets in New York are open
for business generally.
Charter Documents: In respect of any entity, the certificate or
articles of incorporation or organization and the by-laws of such entity, or
other constitutive documents of such entity.
Commission: The Securities and Exchange Commission.
Common Stock: The common stock, $.001 par value, of the Borrower.
Consent: In respect of any person or entity, any permit, license or
exemption from, approval, consent of, registration or filing with any local,
state or federal governmental or regulatory agency or authority, required under
applicable law.
Current Assets: All assets of the Borrower that in accordance with GAAP
are properly classified as current assets, excluding bad debts and inventory not
yet salable.
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Current Liabilities: All liabilities of the Borrower payable on demand
or maturing within one (1) year from the date as of which current liabilities
are to be determined, and such other liabilities that in accordance with GAAP
are properly classified as current liabilities.
Default: An event or act which with the giving of notice and/or the
lapse of time, would become an Event of Default.
Environmental Laws: All laws pertaining to environmental matters,
including without limitation, the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response Compensation and Liability Act of 1980, the
Superfund Amendments and Reauthorization Act of 1986, the Federal Clean Water
Act, the Federal Clean Air Act, the Toxic Substances Control Act, in each case
as amended, and all rules, regulations, judgments, decrees, orders and licenses
arising under all such laws.
ERISA: The Employee Retirement Income Security Act of 1974, as amended,
and all rules, regulations, judgments, decrees, and orders arising thereunder.
Event of Default: Any of the events listed in Section 5 hereof.
Fair Market Value: The value of Common Stock as determined in good
faith by the Board Directors of the Company, provided that a majority of the
independent directors of the Board shall have concurred. In the event of the
failure of such Board of Directors to act in good faith with respect thereto,
the fair market value shall be determined by a single qualified appraiser (which
shall be either a national accounting firm or a national or regional major
investment bank) selected by mutual agreement between the Company and the Lender
of the portion of the assets or indebtedness so to be distributed to one share
of Common Stock.
GAAP: Generally accepted accounting principles consistent with those
adopted by the Financial Accounting Standards Board and its predecessor, (i)
generally, as in effect from time to time, and (ii) for purposes of determining
compliance by the Borrower with its financial covenants set forth herein, as in
effect for the fiscal year therein reported in certain financial information
submitted to the Lender prior to execution of this Agreement.
Indebtedness: In respect of any entity, all obligations, contingent and
otherwise, that in accordance with GAAP should be classified as liabilities,
including without limitation (i) all debt obligations, (ii) all liabilities
secured by Liens, (iii) all guarantees and (iv) all liabilities in respect of
bankers' acceptances or letters of credit.
Inventory: All goods, merchandise and other personal property, now
owned or hereafter acquired by the Borrower, which are held for sale or leased,
or furnished under a contract for service, or are raw materials, work in
process, or materials used in the Borrower's business.
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Loan Documents: This Agreement, the Convertible Note, and the Security
Agreement and any and all other agreements and documents evidencing, securing or
pertaining to the Loan made hereby, in each case as from time to time amended or
supplemented.
Materially Adverse Effect: Any materially adverse effect on the
financial condition or business operations of the Borrower or material
impairment of the ability of the Borrower to perform its obligations hereunder
or under any of the other Loan Documents.
Maturity Date: August 8, 2000 or such earlier date on which all Loans
may become due and payable pursuant to the terms hereof.
Obligations: All indebtedness, obligations and liabilities of the
Borrower to the Lender of every kind and nature existing on the date of this
Agreement or arising thereafter, direct or indirect, joint or several, absolute
or contingent, matured or unmatured, liquidated or unliquidated, secured or
unsecured, arising by contract, operation of law or otherwise arising or
incurred under this Agreement or any other Loan Document or in respect of any of
the Loans or the Convertible Note or other instruments at any time evidencing
any thereof.
Plan of Record: The operating plan for the Company for the fiscal year
agreed to by the Board of Directors, from which reporting periods are measured
and to which adjustments are made with respect to performance on an ongoing
basis.
Qualified Private Placement: An offering and sale for cash of shares of
Common Stock pursuant to an exemption from registration under the Securities Act
where the gross proceeds to the Company or its Stockholders exceed $7,500,000.
Qualified Public Offering: A firm commitment underwritten public
offering of shares of Common Stock pursuant to an effective registration
statement under the Securities Act where the gross proceeds to the Company or
its Stockholders exceed $7,500,000.
Requirement of Law: In respect of any person or entity, any law,
treaty, rule, regulation or determination of an arbitrator, court, or other
governmental authority, in each case applicable to or binding upon such person
or entity or affecting any of its property.
Securities Act: The Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Securities and
Exchange Commission thereunder, all as the same are in effect at the relevant
time of reference.
Security Agreement: The Amended and Restated Security Agreement, dated
as of August 8, 1994, between the Borrower and the Lender.
2. THE NOTE.
2.1. Issuance of Convertible Note. The obligation of the Borrower to
repay to the Lender the principal of the Loan and interest accrued thereon shall
be evidenced by a Convertible Promissory Note (the "Convertible Note") in the
principal amount of $_______ executed and delivered by the Borrower and payable
to the order of the Lender, in the form attached hereto as Exhibit A.
2.2. Repayment of Loan. The Borrower shall pay to the Lender the
principal of the Loan and interest accrued thereon on the Maturity Date and as
set forth in the Convertible Note.
2.3. Prepayments.
(a) The Borrower may elect to prepay the outstanding principal of all
or any part of the Loan, without premium or penalty, in a minimum amount of
$50,000, upon written notice to the Lender given by 10:00 a.m. New York time on
the date of such prepayment, of the amount to be prepaid. Each repayment or
prepayment of principal of the Loan shall be accompanied by payment of the
unpaid interest accrued to such date on the principal being repaid or prepaid.
(b) In the event of a Qualified Public Offering or a Qualified Private
Placement by the Borrower, and subject to any prepayment rights pursuant to the
Credit Agreement, dated as of June 28, 1996 ( the "June 1996 Agreement "),
between the Borrower and the Lender, and the Credit Agreement, dated as of
January 17, 1997, between the Borrower and the Lender (referred to hereinafter
together with the June 1996 Agreement as the "Prior Agreements"), the entire
unpaid principal of and interest on the Loan shall be prepaid upon the closing
of such offering or placement in an amount equal to the lessor of: (i) the net
proceeds received by the Borrower (after compliance with the provisions of the
Prior Agreements); or (ii) the entire unpaid principal of and interest on the
Loan.
REPRESENTATIONS AND WARRANTIES OF BORROWER.
The Borrower represents and warrants to the Lender that:
(a) except as disclosed on Schedule 3(a), the Borrower is duly
organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation and is duly qualified and in good
standing in every other jurisdiction where it is doing business, and
the execution, delivery and performance by the Borrower of the Loan
Documents (i) are within its corporate authority, (ii) have been duly
authorized, (iii) do not conflict with or contravene its Charter
Documents;
(b) upon execution and delivery thereof, each Loan Document
shall constitute the legal, valid and binding obligation of the
Borrower, enforceable in accordance with its terms;
(c) the Borrower maintains the insurance described on Schedule
3(c) hereto, which insurance the Borrower believes covers such risks
and is in such amounts and
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with such deductibles as is reasonably appropriate for the Borrower's
business as it is currently being conducted;
(d) except as disclosed on Schedule 3(d) attached hereto, the
Borrower has made all filings on a timely basis that it has been
required to make under the Securities Act and the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). The Borrower has provided
to the Lender true and accurate copies of all filings that have been
made with the Commission since June 28, 1996. All of such filings
(including all exhibits and schedules thereto and documents
incorporated by reference therein) complied in all material respects
with all applicable requirements of the Securities Act and the Exchange
Act and the rules and regulations promulgated thereunder. None of such
filings, including without limitation, any financial statements or
schedules therein, at the time filed, contained any untrue statements
of a material fact or omitted to state a material fact required therein
to be stated or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
The financial statements included in the Borrower's SEC filings fairly
present the position of the Borrower as at such date and for such
period in accordance with GAAP consistently applied;
(e) except as described on Schedule 3(e), since January 1,
1996, there has been no materially adverse change of any kind in the
Borrower which is likely to have a Materially Adverse Effect;
(f) there are no legal or other proceedings or investigations
pending or threatened against the Borrower before any court, tribunal
or regulatory authority which would, if adversely determined, alone or
together, be likely to have a Materially Adverse Effect;
(g) the execution, delivery, performance of its obligations,
and exercise of its rights under the Loan Documents by the Borrower,
including borrowing under this Agreement, the use of the proceeds by
the Borrower and the issuance of the Closing Warrant to the Lender (i)
do not require any Consents; and (ii) are not and will not be in
conflict with, constitute a violation or breach of or be prohibited or
prevented by (A) any Requirement of Law, or (B) any Charter Document,
corporate minute or resolution, instrument, agreement or provision
thereof, in each case binding on it or affecting its property;
(h) no representation or warranty herein contains or will
contain any untrue statement of fact, or omits or will omit to state
facts required or necessary to make the statements contained herein not
false or misleading;
(i) except as described on Schedule 3(i) hereto, the Borrower
has no Subsidiaries and is not a party to any partnership or joint
venture;
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(j) except as described on Schedule 3(j) hereto, Borrower has
no material liabilities or obligations of any nature, whether absolute
or contingent, accrued or otherwise, which are not shown or provided
for on the audited balance sheet of Borrower as of September 30, 1996,
except for those incurred in the ordinary course of business since such
date;
(k) Borrower has good and marketable title to all of its
material, real, personal and mixed properties (the "Assets") free and
clear of all mortgages, liens, pledges, charges, claims, leases,
restrictions or encumbrances of any nature whatsoever (other than those
granted to Lender), and subject to no restrictions with respect to
transferability. All of the Assets are in the Borrower's possession and
control. All inventory of the Borrower is of a quality and quantity
usable and saleable in the ordinary course of business of Borrower and
the values at which such inventories are carried on the books and
records of Seller reflect accurately the normal inventory valuation
policy of Borrower of inventory at the lower of cost or market on a
LIFO basis.
The accounts receivable of Borrower as shown on its books and
records have arisen in the ordinary course of business, represent valid
obligations owed to Borrower and are recorded as accounts receivable on
the books of Borrower in accordance with GAAP consistently applied, and
Borrower has no reason to believe that said accounts receivable (billed
and unbilled) will not be fully paid in the ordinary course of business
except to the extent of any bad debts reserved against on the books and
records of the Borrower.
(l) Borrower has no existing employment contracts with
directors, officers, employees or shareholders that have not been
reviewed and approved by the Compensation Committee of the Board of
Directors.
(m) to the best of Borrower's knowledge, Borrower has not
violated and is not currently in violation of or breach of, any zoning
or building laws, statutes, ordinances or regulations or any health,
safety or environmental laws, statutes, ordinances or regulations or
any other laws, statutes, ordinances or regulations relating to
Borrower or their use which violation or breach would have a Material
Adverse Effect. All material licenses, permits, franchise and other
governmental or quasi-governmental authorizations and approvals
required or necessary for Borrower to carry on its business have been
obtained and are in full force and effect;
(n) except as disclosed on Schedule 3(n), Borrower has filed
with the appropriate government agencies all tax or information returns
and tax reports required to be filed on or before the date hereof.
Except as disclosed on Schedule 3(n), all federal, state, local,
foreign, dominion and provincial income, profits, franchise, sales,
use, occupation, property, excise or other taxes whether or not yet due
have been fully paid or adequately provided for on the financial
statements of Borrower;
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(o) the books and records of accounts of Borrower (i) have
been maintained in accordance with good business practices on a basis
consistent with prior years, (ii) state in reasonable detail and
accurately reflect the transactions and dispositions of the assets of
Borrower, and (iii) accurately and fairly reflect the basis for the
financial statements referred to in (d) above;
(p) Borrower has complied in all material respects with all
applicable laws, rules and regulations relating to the employment of
labor, including those relating to wages, hours, collective bargaining
and the payment and withholding of taxes, and Borrower has withheld all
amounts required by law or agreement to be withheld from the wages or
salaries of its employees and Borrower is not liable for any arrears of
wages or other taxes or penalties for failure to comply with any of the
foregoing. There are no material controversies pending or, to the
Borrower's knowledge, threatened between Borrower and any of its
employees or former employees. No union or other collective bargaining
unit has been certified or recognized by Borrower as representing any
of its respective employees;
(q) no representation or warranty of Borrower in this
Agreement or the exhibits hereto or any certificate or other document
referenced herein and furnished to the Lender by the Borrower contains
or will contain any untrue statement of a material fact or omits or
will omit a material fact necessary to make the statements contained
therein not misleading. To the knowledge of Borrower, there is no fact
which Borrower has not disclosed to Lender which materially adversely
affects, or may materially adversely affect, Borrower, its business or
operations;
(r) neither Borrower, any ERISA Affiliate (as defined in
ERISA) of the Borrower, nor any benefit plan of the Borrower ("Benefit
Plan") is in violation in any material respect of any of the provisions
of ERISA or any of the qualification requirements of Section 401(a) of
the Internal Revenue Code of 1986, as amended; and
(s) the authorized capital stock of the Borrower as of the
date hereof consists of 50,000,000 shares of Common Stock, of which
4,293,822 are validly issued and outstanding, fully paid and non
assessable.
4. COVENANTS.
4.1 AFFIRMATIVE COVENANTS. The Borrower agrees that so long as the
Convertible Note is outstanding, the Borrower will:
(a) maintain a system of accounting in accordance with GAAP,
maintain its current fiscal year, and permit the Lender or its
designated representatives to inspect the Borrower's premises during
normal business hours, to examine and be advised as to such other books
of account upon the request of the Lender, and to discuss the
Borrower's finances and accounts with its officers, all at such
reasonable times and as
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often as may be reasonably requested; provided, that unless an Event of
Default has occurred and is continuing, the Lender shall provide at
least two (2) Business Days notice of such visit. The rights contained
herein shall be exercised solely in furtherance of the proper interests
of the Lender as an investor in the Borrower, and the Lender and its
agents and representatives shall maintain the confidentiality of all
financial and other confidential information of the Borrower acquired
by the exercise of such rights except in connection with pursuing any
rights and remedies of Lender hereunder;
(b) deliver to the Lender, as soon as available and in any
event within 90 days after the close of each fiscal year, a balance
sheet and statements of income, retained earnings, cash flows, and
comparisons to prior year earlier results, audited by an independent
accounting firm selected by the Borrower, fairly reflecting the
financial condition of the Company as of the close of such fiscal year
and the results of its operations during such fiscal year;
(c) deliver to the Lender, as soon as available and in any
event within 45 days after the end of each fiscal quarter a
consolidated unaudited balance sheet dated as of the end of such
quarter and consolidated unaudited statements of income and cash flow
for the period ending each quarter, prepared in accordance with GAAP
and certified by the chief financial officer of the Borrower as
presenting fairly the financial condition of the Borrower, and periodic
reporting against budget as approved in the Plan of Record;
(d) (i) maintain its corporate existence, business and assets,
(ii) keep its business and assets adequately insured, (iii) maintain
its chief executive office in the United States, (iv) continue to
engage in the same lines of business, (v) comply with all Requirements
of Law, including ERISA, Environmental Laws and the Securities Act, and
(vi) maintain insurance with financially responsible insurers, covering
such risks and in such amounts and with such deductibles as are
customary in the Borrower's business and are adequate;
(e) notify the Lender promptly in writing of the occurrence of
any Event of Default;
(f) use the proceeds of the Loans solely for working capital
purposes, and not for the carrying of "margin security" or "margin
stock" within the meaning of Regulations U and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224;
(g) cooperate with the Lender, take such action, execute such
documents, and provide such information as the Lender may from time to
time request in order further to effect the transactions contemplated
by and the purposes of the Loan Documents;
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(h) deliver to the Lender as soon as practicable upon the
filing thereof, all material filings, reports and statements, if any,
filed by the Borrower with the Commission or any other regulatory
authority;
(i) pay and discharge all taxes, assessments and government
charges incurred by, assessed against or imposed upon the Borrower
that, if unpaid, might by law become a lien or charge against its
property; provided, that the Borrower need not pay or discharge such
tax, assessment or government charges if they shall be or are being
contested in good faith and if it shall have set aside on its books
reserves deemed by its independent public accountant to be adequate
with respect thereto;
(j) Borrower will make all filings required pursuant to the
Securities Act or the Exchange Act on a timely basis;
(k) Borrower will provide Lender within ninety (90) days after
the end of Borrower's fiscal year a certificate of an officer of
Borrower certifying that during the past fiscal year no Event of
Default has occurred or if an Event of Default has occurred, detailing
the current status of such Event of Default;
(l) Borrower will comply with each and every agreement and
covenant in each of the Loan Documents; and
(m) Borrower will reserve for issuance a sufficient number of
shares of Common Stock to permit the conversion of the Convertible
Note.
4.2 NEGATIVE COVENANTS. The Borrower agrees that so long as the
Convertible Note is outstanding the Borrower will not, without the Lender's
consent:
(a) mortgage, pledge, or create or permit to exist any
security interest in, or lien on, any shares of Common Stock;
(b) merge or consolidate with any other corporation or entity,
or sell, lease, transfer, distribute or otherwise dispose of all or any
substantial part of its properties or assets, in an aggregate amount in
excess of $200,000 (in any single transaction or series of related
transactions), or any intellectual property material to its operations
or business prospects in one or a series of related transactions to a
Subsidiary or any other person (including capital stock of its
Subsidiaries);
(c) transfer or permit any Subsidiary to transfer any of its
properties or assets (other than equipment) for the purpose of
subjecting the same to the payment of obligations in priority to
payment of general creditors;
(d) make any loan or advance to, or assume, guarantee or
become liable (contingently or otherwise) for any indebtedness, and
will not permit any of its
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Subsidiaries to do the same, except accounts payable and employee
travel advances incurred in the ordinary course of business;
(e) enter into or be a party to, or amend, modify, supplement
or waive any provisions of any contracts involving payments from the
Borrower in an amount in excess of $200,000 other than those approved
in the Plan of Record;
(f) permit any of its Subsidiaries to create, incur, assume or
suffer to exist any lien upon any of its property, assets or revenues,
whether now owned or hereafter acquired, except (i) mechanics' liens,
(ii) liens for taxes not yet due or (iii) other statutory liens arising
in the ordinary course of the Borrower's business;
(g) sell, issue or otherwise dispose of, or part with control
of, any shares of capital stock of the Borrower or any of its
Subsidiaries, except pursuant to the exercise of any options or
warrants outstanding as of the date hereof and as set forth on Schedule
4.2(g) attached hereto;
(h) acquire any assets of any kind or nature over $200,000
other than those in the ordinary course of business or approved in the
Plan of Record; and
(i) make any capital expenditures not approved in the Plan of
Record in excess of $200,000.
4.3 FEES AND EXPENSES OF COUNSEL. Borrower will reimburse Lender for
all costs and expenses including, without limitation, reasonable legal expenses
and attorneys' fees, incurred by Lender in connection with the documentation and
consummation of this transaction and any amendments or modifications of this
Agreement or other transactions between Borrower and Lender, in each case up to
a maximum of $10,000, including without limitation, Uniform Commercial Code and
other public record searches, lien filings, Federal Express or similar express
or messenger delivery, appraisal costs, surveys, title insurance and
environmental audit or review costs. All such costs, expenses and charges will
constitute Loans hereunder and may be advanced or paid by Lender from Loan
proceeds.
EVENTS OF DEFAULT; ACCELERATION.
If any of the following events ("Events of Default") shall occur:
(a) the Borrower fails to pay the principal, interest or both
under the terms of the Note, whether at maturity or by acceleration,
within five (5) days after the Lender has given written notice of such
failure to the Borrower;
(b) any representation or warranty of the Borrower in the Loan
Documents or in any certificate or notice given in connection therewith
shall have been false or misleading in any material respect at the time
made or deemed to have been made;
(c) any of the Loan Documents shall cease to be in full force
and effect;
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(d) the Borrower shall materially breach the agreements
specified in Section 4.1(e) or (f) hereof;
(e) the Borrower shall materially breach any of the agreements
specified in Section 4.2 hereof which breach is not cured within ten
(10) days after the Lender has given written notice of such breach to
the Borrower;
(f) the Borrower shall fail to perform any other term,
covenant or agreement contained in the Loan Documents within thirty
(30) days after the Lender has given written notice of such failure to
the Borrower;
(g) the Borrower (i) shall make an assignment for the benefit
of creditors, (ii) shall be adjudicated bankrupt or insolvent, (iii)
shall seek the appointment of, or be the subject of an order
appointing, a trustee, liquidator or receiver as to all or part of its
assets, (iv) shall commence, approve or consent to, any case or
proceeding under any bankruptcy, reorganization or similar law and, in
the case of an involuntary case or proceeding, such case or proceeding
is not dismissed within forty-five (45) days following the commencement
thereof, or (v) shall be the subject of an order for relief in an
involuntary case under federal bankruptcy law;
(h) upon the effective date of a sale of all or substantially
all of the assets of the Borrower;
(i) the entry of any final judgment or order in excess of
$250,000 against Borrower which is uninsured and remains unsatisfied or
undischarged and in effect for thirty (30) days after such entry
without a stay of enforcement or execution;
(j) the occurrence of an event of default under any other
agreement or instrument evidencing indebtedness for borrowed money in
excess of $500,000 executed or delivered by Borrower or pursuant to
which agreement or instrument Borrower or its properties is or may be
bound; or
(k) the occurrence of any event or condition which has had a
Material Adverse Effect.
THEN, or at any time thereafter:
(1) In the case of any Event of Default under clause (g), the
Commitment shall automatically terminate, and the entire unpaid
principal amount of the Loan, all interest accrued and unpaid thereon,
and all other amounts payable thereunder and under the Convertible Note
shall automatically become forthwith due and payable in accordance with
the terms of the Note;
(2) In the case of any Event of Default other than (g), the
Lender may, by written notice to the Borrower, terminate the
Committment and upon any Event of
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Default, the Lender may, without further notice, declare the unpaid
principal amount of the Loan, all interest accrued and unpaid thereon,
and all other amounts payable hereunder and under the Convertible Note
to be forthwith due and payable in accordance with the terms of the
Convertible Note, and may exercise any and all remedies available at
law, in equity and under any of the Loan Documents.
No remedy herein conferred upon the Lender is intended to be exclusive of any
other remedy and each and every remedy shall be cumulative and in addition to
every other remedy hereunder, now or hereafter existing at law or in equity or
otherwise. No course of dealing between the Borrower and the Lender or any
failure or delay on the Lender's part in exercising any rights or remedies
hereunder shall operate as a waiver of any rights or remedies.
6. REPRESENTATIONS AND WARRANTIES OF LENDER.
(a) The Lender has adequate means of providing for its current
financial needs and possible contingencies, and has no present need, and
anticipates no need in the foreseeable future, to sell the Convertible Note. The
Lender is able to bear the economic risk of this investment and, consequently,
the Lender is able to hold any of the securities it may acquire for an
indefinite period of time, and has a sufficient net worth to sustain a loss of
its entire investment in such securities.
(b) The Lender is an "accredited investor" within the meaning of
Regulation D of the Securities Act and is acquiring the securities for its own
account, for investment purposes only, and not with a view to the distribution
of all or any part thereof. The Lender will not distribute or transfer any of
the securities in the United States except in compliance with all applicable
federal securities laws.
(c) The Lender acknowledges that it has been advised that any
securities which may be issued upon the conversion of the Convertible Note (a)
will not be registered under the Securities Act or any state securities or blue
sky laws (the "Blue Sky Laws"), (b) will be "restricted securities" as defined
in paragraph (a) (3) of Rule 144 under the Securities Act ("Rule 144"), (c) have
been issued in reliance on the statutory exemptions contained in the Securities
Act, (d) have been issued in reliance on the statutory exemptions contemplated
in the Blue Sky Laws and that the Borrower relied on the representations of the
Lender set forth herein in granting certain warrants to the Lender, (e) will not
be transferable without registration under the Securities Act and applicable
Blue Sky Laws, unless an exemption from the registration requirement thereof is
available and an opinion of counsel to that effect satisfactory to the Borrower
is delivered to the Borrower, and (f) will bear the following form of
restrictive legend evidencing such restrictions:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
PURPOSES AND MAY NOT BE SOLD OR TRANSFERRED UNLESS THE SAME ARE REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE BORROWER RECEIVES AN
OPINION FROM
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COUNSEL TO THE HOLDER THAT AN EXEMPTION FROM THE ACT IS AVAILABLE.
Moreover, the Lender has been advised that Rule 144 may not be available for
resales nor may all of the registration rights contained in any warrant issued
or to be issued pursuant to this Agreement be available unless the Borrower
remains a reporting company subject to and is in compliance with the
requirements of the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder.
(d) The Lender is a limited liability company duly organized, validly
existing, and in good standing under the laws of Delaware. The Lender has all
requisite power and full legal right to execute and deliver this Agreement, and
to perform all of its respective obligations hereunder in accordance with all
terms. This Agreement and the transactions contemplated hereby have been duly
approved and authorized by all requisite corporate action, and constitutes when
executed and delivered a legal, valid and binding obligation of the Lender,
enforceable against it and in accordance with all terms.
7. ACKNOWLEDGMENT
Each of the Borrower and the Lender acknowledge and agree that all of
the Lender's outstanding rights with respect to the Loan are embodied in the
Loan Documents. The Lender hereby represents to the Borrower that, except for
the Convertible Note, there are no promissory notes or other instruments
outstanding which represent or evidence any obligations of the Borrower with
respect to the Loan.
8. MISCELLANEOUS.
(a) Any notice to be made hereunder shall (i) be made in writing, but
unless otherwise stated, may be made by telex, facsimile transmission or letter,
and (ii) be made or delivered to the address of the party receiving notice which
is identified with its signature below (unless such party has by three (3) days
written notice specified another address), and shall be deemed made or
delivered, when dispatched, left at that address, or three (3) days after being
mailed, postage prepaid, to such address.
(b) This Agreement shall be binding upon and inure to the benefit of
each party hereto and its successors and assigns.
(c) This Agreement may not be amended or waived except by a written
instrument signed by the Borrower and the Lender, and any such amendment or
waiver shall be effective only for the specific purpose given.
(d) No failure or delay by the Lender to exercise any right hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or privilege preclude any other right, power or privilege.
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(e) The provisions of this Agreement are severable and if any one
provision hereof shall be held invalid or unenforceable in whole or in part in
any jurisdiction, such invalidity or unenforceability shall affect only such
provision in such jurisdiction.
(f) This Agreement, together with all Schedules hereto, expresses the
entire understanding of the parties with respect to the transactions
contemplated hereby.
(g) This Agreement and any amendment hereby may be executed in several
counterparts, each of which shall be an original, and all of which shall
constitute one agreement. In proving this Agreement, it shall not be necessary
to produce more than one such counterpart executed by the party to be charged.
(h) THIS AGREEMENT AND THE NOTE ARE CONTRACTS UNDER THE LAWS OF THE
STATE OF NEW YORK AND SHALL BE CONSTRUED IN ACCORDANCE THEREWITH AND GOVERNED
THEREBY. THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF ANY OF THE
LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR ANY
FEDERAL COURT SITTING THEREIN. THE BORROWER, AS AN INDUCEMENT TO THE LENDER TO
ENTER INTO THIS AGREEMENT, HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT
TO ANY ACTION ARISING IN CONNECTION WITH ANY LOAN DOCUMENTS.
(i) The Borrower shall pay on demand all costs, including court costs
and reasonable attorney's fees and expenses, paid or incurred by the Lender in
enforcing this Agreement and the Loan Documents. Lender may make a Loan for
these expenses and pay said fees and expenses to the appropriate party.
(j) The headings in this Agreement are for convenience of reference
only, and shall not limit or otherwise affect the meaning hereof.
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IN WITNESS WHEREOF, the undersigned have duly executed this Agreement
as a sealed instrument as of the date first above written.
BORROWER: SHEPHERD SURVEILLANCE
SOLUTIONS, INC.
/s/ M. Xxxxxx Xxxxxxx
By: _______________________________________
Name: M. Xxxxxx Xxxxxxx
Title: President and CEO
Address:
0 Xxxxxxxxx Xxxx, Xxxxx 0
Xxxxxxxxxx, Xxx Xxxxxxxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
LENDER: TRILON DOMINION PARTNERS, LLC
By: VC Holdings, Inc., its Managing Member
/s/ Xxxx X. Xxxxx
By: _______________________________________
Name: Xxxx X. Xxxxx
Title: Vice President
Address:
000 Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
