EXHIBIT 10.1
SHEPHERD SURVEILLANCE SOLUTIONS, INC.
CREDIT AGREEMENT
June 28, 1996
TABLE OF CONTENTS
Page
1. Credit Facility
1.1. Credit Facility
1.2 Borrowings
1.3 Changes of Credit Facility
1.4. Warrant
1.5 Note
1.6 Optional Prepayment of Credit Facility
1.7 Maturity
2. Payments of Principal and Interest
2.1. Repayment of Credit Facility
2.2. Mandatory Prepayment
2.3 Interest
2.4. Minimum Amounts
2.5 Certain Notices
3 . Closing
3.1 Closing Date
3.2 Transactions at Closing
4. Representations and Warranties of the Borrower
4.1. Organization, Standing, Qualification, Capitalization, etc
4.2. Authority: No Defaults and No Material Adverse Effect
4.3. Financial Statements
4.4. The Offering
4.5. Litigation, etc.
4.6. Compliance with other Instruments, Law, etc.
4.7. Approvals
4.8. Tax Returns and Payments
4.9. Disclosure
4.10. Insurance
5. Conditions of Lender's Obligations
5.1. Representations and Warranties Correct
5.2. Performance
5.3. Proceedings and Documents
5.4. Security Agreement
5.5. Compliance Certificate
6. Accounting, Financial Statements and other Information.
6.1. Accounting
6.2. Financial Statements
7. Other Covenants
8. Events of Default; Remedies
9. Representations and Warranties by the Lender: Purchase for Investment,
Transfers, Legends on Certificates
9.1. Representations and Warranties by the Lender
9.2. Purchase for Investment
9.3. Transfers; Legends on Certificates
9.4. Removal of Legends and Transfer Restrictions
10. Successors and Assignees
11. Expenses
12. Survival of Representations and Warranties, etc.
13. Notices
14. Amendments and Waivers
15. Miscellaneous
15.1. Governing Law
15.2. Consent to Jurisdiction
15.3. Entire Agreement
15.4. Headings of the Agreement
15.5. Counterparts of the Agreement
15.6. Severability of the Agreement
CREDIT AGREEMENT
This Credit Agreement (the "Agreement") is entered into this 28th day of
June, 1996 by and between Shepherd Surveillance Solutions, Inc., a Nevada
corporation (the "Borrower"), and Trilon Dominion Partners, L.L.C., a Delaware
limited liability company (the "Lender"), and the parties hereto agree to the
following:
1. Credit Facilitv.
1.1. Credit Facility. The Lender agrees, subject to the terms of this
Agreement, to extend credit to the Borrower from and including the date hereof
to but not including the Maturity Date, as hereinafter defined, in the aggregate
principal amount at any one time outstanding not exceeding $1,611,000 (the
"Credit Facility"). The Lender has previously issued certain demand notes (the
"Demand Notes") to the Borrower between November 1, 1995 and the date hereof, in
the aggregate amount of $1,298,500. Such Demand Notes are hereby merged into
this Agreement and the provisions of this Agreement shall supersede the
provisions of such Demand Notes. The Lender shall provide such extensions of
credit by making one or more advances (a "Borrowing") to the Borrower. Subject
to the terms of this Agreement, prior to the Maturity Date, the Borrower may
borrow, pay and reborrow up to the amount of the Credit Facility.
1.2. Borrowings. The Borrower shall give the Lender notice of each
Borrowing requested hereunder by delivering to the Lender a request
substantially in the form of Exhibit A attached hereto, completed to the
satisfaction of the Lender and delivered as provided in Section 2.4 hereof. The
Lender shall make the amount of any new Borrowing available to the Borrower by
remitting the same, in immediately available funds, to such account as the
Borrower may specify to the Lender in writing from time to time.
1.3 Chances of Credit Facility. The Borrower shall have the right to
terminate or reduce the unused amount of the Credit Facility at any time or from
time to time, provided that: (i) the Borrower shall give notice of each such
termination or reduction as provided in Section 2.4 hereof; and (ii) each
partial reduction shall be in an amount at least equal to $50,000.00. The Credit
Facility once terminated or reduced may not be reinstated.
1.4. Warrant. In consideration of the Lender's providing the Credit
Facility, the Borrower hereby agrees to issue to the Lender i) a warrant in the
form of Exhibit B attached hereto (the "Warrant") to purchase 14,226,578 shares
of common stock of the Borrower, $.001 par value per share (the "Common Stock"),
at an exercise price per share equal to $0.01, exerciseable from the date hereof
through June 28, 2001.
1.5. Note. Borrowings under the Credit Facility shall be evidenced by a
promissory note (the "Note") of the Borrower in substantially the form of
Exhibit C attached hereto.
1.6. Optional Prepayment of Credit Facility. Subject to Section 2.3
hereof, the Borrower shall have the right to prepay, without penalty, the Credit
Facility, together with any accrued and unpaid interest on the Credit Facility,
at any time or from time to time, provided that the Borrower shall give the
Lender notice of each such repayment, as provided in Section 2.4 hereof.
1.7. Maturity. The Credit Facility shall mature on June 28, 1999 (the
"Maturity Date").
2. Payments of Principal and Interest.
2.1. Repayment of Credit Facilitv. The Borrower will pay to the Lender
the principal amount of the Credit Facility, together with any accrued and
unpaid interest, on the Maturity Date.
2.2. Mandatory Prepayment. (a) Upon the occurrence of a Primary Public
Offering or Primary Private offering (as such terms are defined below) by the
Borrower, the principal amount then outstanding under this Credit Agreement,
together with all accrued and unpaid interest thereon, shall be immediately
prepaid in an amount equal to the lesser of (i) the net proceeds received by the
Borrower from such offering or (ii) all of the principal amount outstanding
under the Note, together with all accrued and unpaid interest thereon. For
purposes hereof, the term "Primary Public Offering" shall mean an underwritten
public offering and sale for cash by the Borrower of capital stock of the
Borrower to an underwriter or underwriters pursuant to a binding "firm
commitment" underwriting agreement with a bona fide investment bank pursuant to
a registration statement declared effective by the Securities and Exchange
Commission (or any governmental authority succeeding to any of its functions)
(the "Commission") under the Securities Act of 1933, as amended (the "1933
Act"). For purposes hereof, the term "Primary Private Placement" shall mean an
offering and sale for cash by the Borrower of capital stock of the Borrower
pursuant to an exemption from registration under the rules and regulations
promulgated under the 1933 Act.
(b) Upon the occurrence of a sale of all or substantially
all of the assets of the Borrower, all of the principal amount then outstanding
under the Note shall be immediately prepaid in full, together with all accrued
and unpaid interest thereon and any other amounts owing in connection therewith.
2.3. Interest. Interest on the Credit Facility shall be paid by the
Borrower to the Lender in accordance with the provisions of the Note.
2.4. Minimum Amounts. Each Borrowing and prepayment of principal of a
Borrowing shall be in an amount at least equal to $50,000.
2.5. Certain Notices. Notices by the Borrower to the Lender of any
terminations or reductions of the Credit Facility, of Borrowings and of
prepayments shall be irrevocable and shall be effective only if received by the
Lender in writing not
later than 10:00 a.m. New York time at least two business days prior to the date
of the relevant termination, reduction, Borrowing or prepayment. Each such
notice of Borrowing, prepayment, termination or reduction shall so specify the
amount of the Commitment to be borrowed, prepaid, terminated or reduced.
3. Closing.
3.1. Closing Date. The Lender shall. make the Credit Facility available
on the date hereof or such later date as the parties shall mutually agree upon
(the "Closing Date").
3.2. Transactions at Closing. On the Closing Date, Borrower will
deliver to the Lender: i) the Note, (ii) Warrant, and (iii) the Amended Security
Agreement (as hereinafter defined) (clauses (i) through (iii) being collectively
referred to as, the "Other Transaction Documents").
4. Representations and Warranties of the Borrower. The Borrower represents
and warrants that:
4.1. Organization, Standing, Qualification Capitalization, etc. The
Borrower is a corporation duly organized, validly existing and in good standing
under the laws of the State of Nevada and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on the business
as it is now being conducted. The Borrower is licensed and qualified to do
business as a foreign corporation in each jurisdiction in which the character of
the Borrower's properties, owned or leased, or the nature of its activities
makes such qualification or licensing necessary, unless the failure to be so
licensed or qualified does not have a material adverse effect on the business,
condition (financial or otherwise), assets, properties, results of operations or
prospects of the Borrower, and any of its Subsidiaries, taken as a whole (a
"Material Adverse Effect"). The Borrower has previously supplied to the Lender a
complete and correct copy of the Articles of Incorporation of the Borrower, and
all amendments thereto, substantially as the Articles of Incorporation, as
amended, will be in effect at the Closing Date, and a complete and correct copy
of the Bylaws of the Borrower as they will be in effect at the Closing Date. The
Borrower has authorized capital stock as set forth on Schedule 4.1A attached
hereto. All of the outstanding shares of capital stock of the Borrower (as
listed on Schedule 4.1A attached hereto) have been duly authorized and validly
issued and are fully paid and nonassessable. There are no preemptive rights or
similar rights on the part of the holders of shares of the Borrower's capital
stock in connection with the sale of the Warrant or the shares of Common Stock
issuable upon exercise of the Warrant. The Borrower has no Subsidiary (defined
as any corporation or other business entity, a majority of the voting stock (or
other beneficial interests) of which, entitled to vote for the election of
directors, is at any time owned by the Borrower or one or more Subsidiaries).
4.2. Authority: No Defaults and No Material Adverse Effect. The
Borrower has all requisite corporate power and authority to enter into this
Agreement, the Note and the Warrant and to consummate the transactions
contemplated hereby and
thereby. The execution and delivery of this Agreement, the Note and the Warrant
and the consummation of the transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate action on the part of the
Borrower. No further approval or authorization of the Board of Directors or the
shareholders of the Borrower will be required for the issuance and sale of the
Note, the Warrant or the Common Stock to be issued upon exercise of the Warrant
as contemplated herein. The Common Stock to be issued upon exercise of the
Warrant will be, at the time of issuance in accordance with the terms of the
Warrant, validly issued and outstanding, and fully paid and non-assessable. The
shares of Common Stock issuable upon exercise of the Warrant have been reserved
for issuance by all necessary corporate action on behalf of the Borrower. To the
best of Borrower's knowledge, all of the shares of Common Stock that have been
offered, issued and sold by the Borrower have been so offered, issued and sold
in compliance with the 1933 Act, and state securities laws. This Agreement, the
Note and the Warrant have been executed and delivered by the Borrower and
constitute the valid and binding obligations of the Borrower, enforceable in
accordance with their terms, subject to bankruptcy, insolvency, moratorium and
other similar laws affecting creditors' rights generally and general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law). The execution and delivery of this Agreement,
the Note and the Warrant do not, and the consummation of the transactions
contemplated hereby and thereby will not, conflict with or result in a breach of
or the acceleration of any material obligation under, or constitute a default or
event of default (or event which, with notice or lapse of time or both, would
constitute a default) under, any provision of any charter, bylaw, indenture,
mortgage, lien lease, agreement, contract, instrument, order, judgment, decree,
ordinance or regulation, or any restriction to which any property of the
Borrower is subject or by which the Borrower is bound, the effect of which would
be Material Adverse Effect.
4.3. Financial Statements. Except as disclosed by the Borrower to the
Lender in written form or set forth on Schedule 4.3 attached hereto, the
Borrower has made all filings with the Commission that it has been required to
make under the 1933 Act and the Securities Exchange Act of 1934, as amended (the
"1934 Act"). The Borrower has provided to the Lender a true, complete and
correct copy of all filings with the Commission made by the Borrower (including
all exhibits to such filings) since January 1, 1996 (herein referred to as the
"Borrower SEC Documents"). As of their respective dates, and except as amended,
the Borrower SEC Documents complied in all material respects with the
requirements of the 1933 Act or the 1934 Act, as the case may be, and none of
the Borrower SEC Documents contained any untrue statements of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Borrower included in the
Borrower SEC Documents comply as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the Commission with respect thereto, have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except as may be indicated in the notes thereto or, in the
case of the unaudited statements, as permitted by Form 10-QSB) and fairly
present (subject, in
the case of the unaudited statements, to normal recurring audit adjustments) the
consolidated financial position of the Borrower as of the dates thereof and the
consolidated results of its operations and cash flows for the periods then
ended.
4.4. The Offering. Neither the Borrower nor anyone acting on its behalf
has directly or indirectly offered the Note or the Warrant to be issued to the
Lender, any part thereof, or any similar security of the Borrower, for sale to,
or solicited any offer to buy the same from, anyone other than the Lender and
other investors to whom such offers can be made without requiring the
registration of the Note or the Warrant under the 1933 Act or any state
securities laws.
4.5. Litigation, etc. Except as described in the Borrower SEC Documents
or as set forth on Schedule 4.5 hereto, there is no action, proceeding or
investigation pending or threatened (or any basis therefor known to the
Borrower) that questions the validity of this Agreement, the Note, the Warrant,
or the Common Stock to be issued upon exercise of the Warrant or any action
taken or to be taken pursuant hereto or contemplated hereby, or that might
result, either in any case or in the aggregate, in a Material Adverse Effect.
4.6. Compliance with other Instruments, Law, etc. The Borrower is not
in violation of any provision of its Articles of Incorporation or Bylaws, or of
any loan agreement or other agreement to which it is a party, other than
violations which singly or in the aggregate will not have a Material Adverse
Effect. The Borrower is not, nor is it alleged to be, in violation or default of
any applicable law, statute, order, rule or regulation promulgated, including,
without limitation, federal or state securities laws, zoning laws and
ordinances, federal labor laws and regulations, the federal Occupational Safety
and Health Act and regulations thereunder, the federal Employees Retirement
Income Security Act, and federal, state and local environmental protection laws
and regulations, or judgment entered by any court, administrative agency or
commission or other governmental agency or instrumentality, domestic or foreign
(a "Governmental Entity"), relating to or affecting the operation, conduct or
ownership of the property or business of the Borrower, which violation or
default or alleged violation or default would have a Material Adverse Effect.
4.7. Approvals. There is no legal impediment to the execution and
delivery of this Agreement or any of the other Transaction Documents by the
Borrower or to the consummation of the transactions contemplated hereby or
thereby, and no filing or registration with, or authorization, consent or
approval of, a Governmental Entity, shareholders or any other third party is
necessary for the consummation by the Borrower of the transactions contemplated
hereby or thereby, other than such which, if not made or obtained, would not, in
the aggregate, have a Material Adverse Effect on the transactions contemplated
hereby.
4.8. Tax Returns and Payments. All of the tax returns and reports of
the Borrower required by law to be filed have been accurately prepared and
timely filed and all taxes shown as due thereon have been paid or adequately
reserved on the Borrower's books and reflected on the Borrower SEC Documents.
The federal income
tax returns of the Borrower have never been audited by the Internal Revenue
Service and there are in effect no waivers by the Borrower (or on behalf of any
consolidated group that includes the Borrower) of the applicable statutes of
limitations for federal taxes for any period. No deficiency assessment or
proposed adjustment of the Borrower's federal, state or municipal income taxes
is pending, and the Borrower has no knowledge of any proposed liability for any
tax to be imposed upon its properties or assets for which there is not an
adequate reserve reflected on the Borrower SEC Documents.
4.9. Disclosure. Neither this Agreement nor any Schedule hereto nor any
certificate or other document referenced herein or therein and furnished to the
Lender by the Borrower contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements contained
therein or herein, in light of the circumstances under which they were made, not
misleading.
4.10. Insurance. The Borrower has commercial general liability
insurance, products liability insurance and workers, compensation insurance in
such amounts as are commercially reasonable for businesses of a similar type and
size as the Borrower. The Borrower has fire and casualty insurance policies with
extended coverage sufficient in amount (subject to reasonable deductibles) to
allow it to replace any of its properties that might be damaged or destroyed.
5. Conditions of Lender's obligations. The Lender's obligation to
purchase and pay for the Note and the Warrant to be delivered to the Lender at
Closing is subject to the fulfillment to the Lender's reasonable satisfaction,
before or at the Closing, of all of the following conditions:
5.1. Representations and Warranties Correct. The representations and
warranties of the Borrower made or contained herein or otherwise made in writing
by or on behalf of the Borrower in connection with the transactions contemplated
hereby shall be true and correct in all respects at and as of the Closing Date
as if made on and as of the Closing Date, except as affected by the transactions
contemplated hereby.
5.2. Performance. The Borrower shall have performed and complied with
all agreements and conditions contained herein required to be performed or
complied with by it before or at the Closing.
5.3. Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be satisfactory in
substance and form to the Lender and the Lender's counsel, and the Lender or the
Lender's counsel shall have received all such counterpart originals or certified
or other copies of such documents as the Lender or they may reasonably request.
5.4. Security Agreement. The Amended and Restated Security Agreement,
dated as of August 8, 1994, between the Lender and the Borrower shall continue
to be in full force and effect, and shall have been amended to provide that the
collateral
pledged thereunder covers the Credit Facility provided under this Agreement (the
"Amended Security Agreement").
5.5. Compliance Certificate. The Lender shall have received an
Officer's Certificate, dated as of the Closing Date, certifying that the
conditions specified in Sections 5.1 and 5.2 have been fulfilled.
6. Accounting; Financial Statements and Other Information.
6.1. Accounting. The Borrower will maintain and cause each of its
Subsidiaries to maintain a system of accounting established and administered in
accordance with generally accepted accounting principles ("GAAP") consistently
followed, and will set aside on its books and cause each of its Subsidiaries to
set aside on its books all such proper reserves as shall be required by GAAP.
6.2. Financial Statements. The Borrower will deliver to each holder of
the Note, the Warrant or a share of Common Stock issued upon exercise of the
Warrant the following financial statements, which shall be prepared in
accordance with GAAP:
(a) as soon as practicable and in any event within 45 days after the
end of each fiscal quarter of the Borrower, consolidated statements of income
and cash flow of the Borrower and its Subsidiaries for such quarter and for the
period from the current fiscal year to the end of such quarter and consolidated
and consolidating balance sheets of the Borrower and its Subsidiaries as at the
end of such quarter, and setting forth, in comparative form, figures for the
corresponding quarter in the approved annual budget, all in reasonable detail
and certified by the chief financial officer of the Borrower as being a true and
correct reflection in all material respects of the financial condition and
results of operation of the Borrower and its Subsidiaries on a consolidated and
consolidating basis, subject to changes resulting from year-end adjustments and
except as otherwise noted therein;
(b) as soon as practicable and in any event within 90 days after the
end of each fiscal year, audited consolidated and consolidating statements of
income and cash flow of the Borrower and its Subsidiaries for such year, and
audited consolidated and consolidating balance sheets of the Borrower and its
Subsidiaries as at the end of such year, and setting forth, in each case, in
comparative form, corresponding figures from the preceding fiscal year, and
corresponding figures for such year from the approved annual budget, all in
reasonable detail, and, as to the consolidated statements, reported upon by an
independent accounting firm of nationally recognized standing whose
certification shall be without qualification as to the scope of the audit or as
to GAAP, and, as to the consolidating statements, certified by the chief
financial officer of the Borrower;
(c) promptly upon receipt thereof, a copy of each other report
(including, without limitation, each management and/or controller letter)
submitted to the Borrower or any of its Subsidiaries by independent accountants
in connection with any
annual, interim, or special audit of the books of the Borrower or any of its
Subsidiaries made by such accountants;
(d) immediately upon any material revision to any of the financial
statements referred to in paragraphs (a), (b), or (c) above, such financial
statements, as revised;
(e) within five (5) business days after the end of each month, a copy
of a schedule containing the monthly use of cash by the Borrower, prepared with
reasonable detail;
(f) promptly upon the filing thereof, all Forms 10-KSB and Forms 10-QSB
and all other reports and statements, if any, filed by the Borrower or any of
its Subsidiaries with the Commission or with any securities exchange; and
(g) with reasonable promptness, such other information and data with
respect to the Borrower or any of its Subsidiaries as from time to time may be
reasonably requested by the Lender.
7. Other Covenants. The Borrower further covenants and agrees that, so
long as the Note and/or Warrant is outstanding:
(a) The Borrower shall:
(1) promptly make all payments on accruals of principal and
interest (subject to a five (5) day grace period) on the Note when due, and
comply with the other provisions hereof and the provisions of the Note and the
Warrant;
(2) comply, and cause each of its Subsidiaries to comply, in
all material respects, with all applicable federal, state and local laws,
ordinances and regulations;
(3) conduct, and cause each of its Subsidiaries to conduct,
its business in the usual and ordinary course;
(4) maintain, and cause each of its Subsidiaries to maintain,
its corporate existence and right to carry on its business and duly procure all
necessary renewals and extensions thereof and use, and cause each of its
Subsidiaries to use, its best efforts to maintain, preserve and renew all such
rights, powers, privileges and franchises;
(5) keep and maintain, and cause each of its Subsidiaries to
keep and maintain, all buildings, plants and other property in such good
condition, repair and working order and supplied with all such necessary
equipment as in the judgment of its Board of Directors may be necessary, so that
the business carried on in connection therewith may be properly and
advantageously conducted at all times;
(6) pay and discharge, and cause each of its Subsidiaries to
pay and discharge, promptly, or cause to be paid and discharged promptly, all
taxes, assessments and governmental charges or levies imposed upon it or upon
its income or upon any part thereof, as well as all claims of any kind
(including claims for labor, materials and supplies) that, if unsaid, might by
law become a lien or charge upon its property; provided, however, that neither
the Borrower nor any Subsidiary shall be required to pay any such tax,
assessment, charge, levy or claim if the amount, applicability or validity
thereof shall be diligently contested in good faith by appropriate proceedings
and if it shall have set aside on its books reserves (segregated to the extent
required by sound accounting practice) deemed by its independent public
accountant to be adequate with respect thereto;
(7) pay, or cause to be said, the principal of and interest on
all indebtedness for borrowed monies heretofore or hereafter incurred or assumed
by the Borrower or any Subsidiary when and as the same shall become due and
payable unless such indebtedness be renewed or extended on terms no less
favorable than the original terms thereof;
(8) faithfully observe, perform and discharge, and cause each
of its Subsidiaries to faithfully observe, perform and discharge, all covenants,
conditions and obligations that are imposed on it by any and all indentures and
other agreements securing or evidencing such indebtedness or pursuant to which
such indebtedness was incurred, and not permit the occurrence of any act or
omission that is or may be declared to be a default thereunder; provided,
however, that neither the Borrower nor any Subsidiary shall be required to make
any payment or to take any other action by reason of the provisions of this
paragraph (8) if it is diligently contesting in good faith its obligation to
make such payment or to take such action and shall have set aside on its books
adequate reserves (to the extent, and segregated if and to the extent required,
in the opinion of its independent accountants, by sound accounting practice)
with respect thereto;
(9) provide or cause to be provided for itself and each
Subsidiary commercial general liability insurance, products liability insurance
and workers' compensation insurance in such amounts as are commercially
reasonable for business of similar type and size as the Borrower and fire and
casualty insurance policies with extended coverage sufficient in amount (subject
to reasonable deductibles) to allow it to replace any of its properties that
might be damaged or destroyed;
(10) notify the Lender in writing, promptly upon the
occurrence of any Event of Default (as such term is hereinafter defined)
hereunder or any event that would become an Event of Default upon notice or the
lapse of time, or both; and
(11) permit the Lender or any authorized representatives of
the Lender to visit and inspect any of the properties of the Borrower or any of
its Subsidiaries including its and their books of account (and to make copies
thereof and to take extracts therefrom) and to discuss its and their affairs,
finances and accounts with its and their officers, all at such reasonable times
and as often as may be reasonably
requested; provided, however, that Lender shall provide Borrower with at least
two (2) days notice of such visit. The rights set forth herein shall be
exercised solely in furtherance of the proper interests of the Lender as an
investor in the Borrower, and such Lender exercising its rights of inspection,
hereunder, and its agents and representatives, shall maintain the
confidentiality of all financial and other confidential information of the
Borrower acquired by them in exercising such rights.
(b) The Borrower shall not, without the Lender's prior written consent:
(1) 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);
(2) 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;
(3) 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 Subsidiaries to incur any indebtedness, except accounts
payable and employee travel advances incurred in the ordinary course of
business;
(4) 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 $100,000;
(5) 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;
(6) create any new Subsidiaries, convert any Subsidiaries from
inactive to active or enter into any joint ventures or partnerships, permit any
amendment of, or modification or supplement to, its or any of its Subsidiaries'
certificates of incorporation or by-laws or iii) permit any amendment of, or
modification or supplement to this Agreement, the Note or the Warrant;
(7) mortgage, pledge, hypothecate or create or permit to exist
any security interest in, or lien on, any shares of the capital stock of its
Subsidiaries; or
(8) sell, issue or otherwise dispose of, or part with control
of, any shares of capital stock of the Borrower or any of its Subsidiaries, or
permit any of its Subsidiaries to do the same, except pursuant to the exercise
of any options or warrants outstanding as of the date hereof and as set forth on
Schedule 7(b)
For purposes of this section 7(b), "Affiliate" shall mean, with respect
to any Person, any other Person directly or indirectly controlling, controlled
by, or under direct or indirect common control with, such Person. A Person shall
be deemed to control another Person if such Person possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such other Person, whether through the ownership of voting
securities, by contract or otherwise.
8. Events of Default; Remedies.
(a) If any one or more of the following events shall occur for any
reason whatsoever (whether such occurrence shall be voluntary or involuntary or
be effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or other
governmental body), it shall be deemed an Event of Default hereunder:
(1) default by the Borrower in the due and punctual payment of
the principal, interest or both on the Note when and as the same or each such
obligation shall become due and payable, whether at maturity or all a date fixed
for prepayment or by acceleration or otherwise;
(2) default by the Borrower in the performance or observance
of any covenant, agreement or other provision of this Agreement or of any
instrument or document delivered to the Lender in connection with or pursuant to
this Agreement that is not cured within a period of 30 days after written notice
of such default is given to the Borrower, or if any such instruments or document
shall terminate or become void or unenforceable other than (i) in accordance
with its terms or (ii) with the Lender's prior written consent;
(3) default by the Borrower in the due and punctual payment of
the Principal, interest or both on any financial obligation, when and as the
same of each such obligation shall become due and payable, and the passage of
any applicable cure period;
(4) if any representation or warranty, or any other statement
of fact herein or in any writing, certificate, report or statement (including,
financial statement) at any time furnished to the Lender pursuant to or in
connection with this Agreement, or otherwise, shall be false or misleading in
any material respect when made;
(5) the Borrower's becoming insolvent or unable to meet its
obligations as they mature, making a general assignment for the benefit of
creditors, or consenting to the appointment of a trustee or a receiver, or
admitting in writing its inability to pay its debts as they mature;
(6) the appointment of a trustee or receiver for the Borrower
or for a substantial part of the properties of the Borrower without the consent
of the Borrower and such trustee or receiver not being discharged within 30
days;
(7) the institution of bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings by or against the Borrower
and, instituted against it, the same being, consented to by the Borrower or
remaining undismissed for a period of 30 days;
(8) the rendering of any final judgment against the Borrower
for the payment of money which judgment is uninsured and in an amount in excess
of $250,000;
(9) any substantial part of the property of the Borrower being
sequestered or attached and not being returned to the possession of the Borrower
or release from such attachment within 30 days; and
(10) upon the effective date of a merger, reorganization or
sale of all or substantially all of the consolidated assets of the Borrower and
its Subsidiaries, if any.
If any such Event of Default or any other default under any
other agreement or instrument executed in connection herewith shall occur and be
continuing, the Lender may, at the Lender's option, declare the entire unpaid
balance of principal and accrued and unpaid interest on the Note to be
immediately due and payable, whereupon the maturity of the then unpaid balance
on the Note shall be accelerated, and the principal and all interest accrued
thereon shall forthwith become due and payable without presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived,
anything contained herein or in the Note to the contrary notwithstanding, and
the Lender may exercise and shall have any and all remedies accorded the Lender
by law; provided, however, that with respect to any Event of Default set forth
in Section 8 (a) (5) (6) , (7) or (8) , such Event of Default will automatically
cause the principal and accrued interest to become immediately due and payable.
(b) In case any one or more Events of Default shall occur and be
continuing, the Lender or the holder of the Note may proceed to protect and
enforce their respective rights or remedies either by suit in equity or by
action at law, or both, whether for the specific performance of any covenant,
agreement or other provisions contained herein, in the Note or in any document
or instrument delivered pursuant to this Agreement, including but not limited to
the Borrower's Articles of Incorporation, or proceed to enforce the payment of
the Note or any other legal, equitable or statutory right or remedy.
(c) No right or remedy herein conferred upon the Lender or the holder
of the Note is intended to be exclusive of any other right or remedy contained
herein, therein or in any instrument or document delivered in connection with or
pursuant to this Agreement, and every such right or remedy contained herein and
therein or now or
hereafter existing at law or in equity or by statute or otherwise may be
exercised separately or in any combination.
(d) 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 of the Lender's rights or remedies
and no single or partial exercise of any rights or remedies hereunder shall
operate as a waiver or preclude the exercise of any other rights or remedies
hereunder.
9. Representations and Warranties by the Lender: Purchase for Investment,
Transfers, Legends on Certificates.
9.1. Representations and Warranties by the Lender. 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 Note, the Warrant or the Common Stock issuable
upon exercise of the Warrant (collectively, the "Securities") that it may
acquire. The Lender is able to bear the economic risk of this investment and,
consequently, without limiting the generality of the foregoing, the Lender (a)
is able to hold any of the Securities it may acquire for an indefinite period of
time and (b) have a sufficient net worth to sustain a loss of its entire
investment in the Securities.
9.2. Purchase for Investment. The Lender represents that it is an
"accredited investor" within the meaning of Regulation D under the 1933 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.
9.3 Transfers; Legends on Certificates. The Lender acknowledges that it
has been advised that the Securities and/or the certificate(s) representing the
Securities (a) will not be registered under the 1933 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 1933 Act ("Rule 144"), (c)
have been issued in reliance on the statutory exemptions contained in the 1933
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 consummating the issuance of the Securities, (e) will
not be transferable without registration under the 1933 Act and/or applicable
Blue Sky Laws, unless an exemption from the registration requirement thereof is
available and an opinion of counsel to that effect is delivered to the Borrower,
and (f) will bear the following restrictive legends evidencing such
restrictions:
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
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 unless the Borrower remains a reporting company subject to the
requirements of the 1934 Act, and the Borrower files all required information
with the Commission.
9.4. Removal of Legends and Transfer Restrictions. The legend relating
to the 1933 Act endorsed on a stock certificate or other instrument pursuant to
Section 9.3 and the stock transfer instructions with respect to the Securities
represented by such certificate or instrument shall be removed and the Borrower
shall issue a certificate or instrument without such legend to the holder of
such Securities if such Securities are registered under the 1933 Act and a
prospectus meeting the requirements of Section 10 of the 1933 Act is available
or if such holder provides to the Borrower an opinion of counsel for such holder
of the Securities reasonably satisfactory to the Borrower to the effect that a
public sale, transfer or assignment of such Securities may be made without
registration under the 1933 Act.
10. Successors and Assignees.
(a) All of the terms of this Agreement shall be binding upon and INURE
to the benefit of and be enforceable by the respective successors and assignees
of the parties hereto, whether so expressed or not, and, in particular, shall
inure to the benefit of and be enforceable by any holder or holders at the time
of the Note, the Warrant or of any portions thereof.
(b) The Lender may at any time assign to one or more individuals or
entities (each an "Assignee") all or a proportionate part of this Agreement, the
Note and/or the Warrant and such Assignee shall become the holder of all or a
proportionate part of this Agreement, the Note and/or the Warrant pursuant to an
Assignment Agreement: executed by such Assignee and the Lender. Upon execution
and delivery of such Assignment Agreement and payment by such Assignee to the
Lender of an amount equal to the purchase price agreed to between the Lender and
such Assignee, the Assignee shall have full authority to act in place of the
Lender with respect to all rights and obligations under this Agreement, and the
Lender shall be released from its obligations hereunder. Upon the consummation
of any assignment pursuant to this subsection (b), the Lender and the Borrower
shall make appropriate arrangements so that, if required, a new Note and/or
Warrant is issued to the Assignee. If the Assignee is not incorporated under
laws of the United States of America or a state thereof, it shall, prior to the
first date on which interest or fees are payable hereunder for its account,
deliver to the Lender certification as to exemption from deduction or
withholding of any United States federal income taxes.
11. Expenses. Subject to the proviso at the end of this Section 11, the Borrower
will pay: (a) all the costs and expenses of the reproduction of this Agreement
and of all agreements referenced herein; (b) all original issue taxes and other
taxes (including any interest and penalties in respect thereof) payable with
respect to this Agreement
and the issuance of the Note and the Warrant (the Borrower agreeing to indemnify
the Lender in respect thereof); (c) all costs and expenses of furnishing all
opinions by counsel referenced herein and all certificates on behalf of the
Borrower and of the Borrower's performance of and compliance with all agreements
and conditions contained herein on its part to be performed or complied with;
(d) the cost of complying with the securities or Blue Sky laws of any
jurisdiction with respect to the offering or issuance of the Note and the
Warrant; (e) the cost of delivering to such address as the Lender specifies the
certificates for the Note and the Warrant purchased by the Lender; and (f) the
miscellaneous expenses of the Lender and the fees, expenses and disbursements of
the Lender's special counsel, Pryor, Cashman, Xxxxxxx & Xxxxx, in connection
with the subject matter of this Agreement and the transactions contemplated
hereby provided, however, that in no event shall the borrower be required to pay
any amounts under clause (f) above in excess of an aggregate of $25,000.
12. Survival of Representations and Warranties, etc. All agreements,
representations and warranties contained herein or made in writing by the Lender
and/or the Borrower in connection with the transactions contemplated hereby
shall survive the execution and delivery of this Agreement, any investigation at
any time made by the Lender or on the Lender's behalf, the sale and purchase of
the Note and the Warrant and payment therefor. All statements contained in any
certificate or other instrument executed and delivered by the Borrower or its
duly authorized officers pursuant hereto in connection with the transactions
contemplated hereby shall be deemed representations by the Borrower hereunder.
13. Notices. All notices, requests, consents and other communications hereunder
(except as stated in the last sentence of this Section 14) shall be in writing
and shall be delivered by facsimile, reliable courier or first-class registered
or certified mail, postage prepaid, (a) if to the Lender, at the Lender's
address as set forth below, marked for attention as there indicated, or at such
other address as may have been furnished to the Borrower by the Lender in
writing, or (b) if to any other holder of the Note, Warrant or Common Stock, at
such address as may have been furnished to the Borrower in writing by such
holder, or, until any such other holder furnishes to the Borrower an address,
then to, and at the address of, the last holder of the Note, Warrant or Common
Stock who has so furnished an address to the Borrower or (c) if to the Borrower,
at the address set forth below, or at such other address as may have been
furnished to the Lender in writing by the Borrower:
To the Borrower:
Shepherd Surveillance Solutions, Inc.
00 Xxxxxxx Xxx
Xxxxxx, Xxxxxxx 00000
Attn: Xxxxxx Xxxxxxx
Telephone No.: (000) 000-0000
Telecopy No.:
To the Lender:
Trilon Dominion Partners, L.L.C.
000 Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxxx
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
Copy to:
Pryor, Cashman, Xxxxxxx & Xxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxx, Esq.
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
14. Amendments and Waivers. Except as otherwise provided herein, neither this
Agreement nor any term hereof may be changed, waived, discharged or terminated
orally or in writing, except that any term of this Agreement may be amended and
the observance of any such term may be waived (either generally or in a
particular instance and either retroactively or prospectively) with (but only
with) the written consent of the Borrower and the holders of at least 51% of the
outstanding principal amount of the Note. No waiver of any of the provisions of
this Agreement or of any breach hereunder shall be deemed or shall constitute a
waiver of any other provisions nor shall such waiver constitute a continuing
waiver unless otherwise expressly provided.
15. Miscellaneous.
15.1 Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of New York without regard to its conflict
of laws principles or rules.
15.2. Consent to Jurisdiction. Any legal action, suit or proceeding
arising out of or relating to this Agreement or the consummation of the
transactions contemplated hereby may only be instituted in any federal court of
the Southern District of New York or any state court located in New York County,
State of New York, and each party agrees not to assert, by way of motion, as a
defense or otherwise, in any action, suit or proceeding, any claim that it is
not subject personally to the jurisdiction of such courts, that the action, suit
or proceeding if brought in such courts, would be an inconvenient forum, that
the venue of the action, suit or proceeding, if brought in any of such courts,
is improper or that this Agreement or the subject matter may not be enforced in
or by such courts on jurisdictional grounds.
15.3. Entire Agreement. This Agreement (with the Exhibits and Schedules
annexed hereto) embodies the entire agreement and understanding between the
Lender and the Borrower and supersedes all prior agreements and understandings
relating to the subject matter hereof.
15.4. Headings of the Agreement. The headings in this Agreement are for
convenience of reference only, and shall not limit or otherwise affect the
meaning hereof.
15.5. Counterparts of the Agreement. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
15.6. Severability of the Agreement. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first written above.
THE BORROWER: SHEPHERD SURVEILLANCE SOLUTIONS, INC.
By: /s/ M. Xxxxxx Xxxxxxx
--------------------------------
Name: M. Xxxxxx Xxxxxxx
Title: President and CEO
THE LENDER: TRILON DOMINION PARTNERS, L.L.C.
By: VC Holdings, Inc., its Managing Member
By: /s/ Xxxx Xxxxx
--------------------------------
Name: Xxxx Xxxxx
Title: Vice President
Schedule 4.1A - Capitalization
------------------------------
Authorized Capital:
-------------------
50,000,000 shares at $.001 par value per share.
Outstanding Capital:
--------------------
4,293,877 shares at $.001 par value per share.
Schedule 4.3 - Delinquent Filings
---------------------------------
The Company has not filed an Annual Report on Form 10-K for its 1995
fiscal year and did not file definitive proxy materials for a 1996 Annual
Meeting of Shareholders.
The Company has not filed Quarterly Reports on Form 10-Q for its fiscal
quarters ended March 31, 1996 and June 30, 1996.
The Company has not filed Current Reports on Form 8-K with respect to
(i) the changes of its name from "IMProCom, Inc." to "InVision Technology,
Inc.," and from "InVision Technology, Inc." to "Shepherd Surveillance Solutions,
Inc.," and (ii) the change in the Company's Certifying Accountants.
Schedule 4.5 - Litigation
-------------------------
None.
Schedule 7(b) - Existing Stock Options
--------------------------------------
The Company has issued or reserved for issuance the following options
to purchase its common stock, $.001 par value per share:
Optionee: Number of Shares:
--------- -----------------
M. Xxxxxx Xxxxxxx 1,685,636
Xxxx Xxxxx 602,013
Xxxxx XxXxxxx 602,013
Xxxxx Xxxxxxxx 602,013
Xxxx Able 180,603
Xxxx Xxxx 180,603
Anti Xxxxxxx 180,603
Ly Xxxx 84,282
Xxxxxxx Xxxxxxx 60,201
Xxxx Xxxx 60,201
Others in the Aggregate 60,201
Unallocated 925,349
EXHIBIT A
FORM OF NOTICE OF BORROWING
Date:_____________________
Trilon Dominion Partners, L.L.C.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxxx X. Xxxxxxxx
Re: Shepherd Surveillance Solutions, Inc.
-------------------------------------
Gentlemen:
Reference is made to the Credit Agreement dated as of June 28, 1996 between
Shepherd Surveillance Solutions, Inc. (the "Borrower") and Trilon Dominion
Partners, L.L.C. (the "Lender")(as it may be amended, modified, supplemental or
restated from time to time, the "Credit Agreement"; and capitalized terms used
herein but not otherwise defined herein being defined therein). The undersigned
Borrower, hereby gives you irrevocable notice pursuant to Section 1.2 of the
Credit Agreement that the Borrower hereby requests a Borrowing under the Credit
Agreement, and in that connection set forth below the information relating to
such Borrowing (the "Proposed Loan") as required by Section 1.2 of the Credit
Agreement.
(i) The requested Borrowing date of the Proposed Loan is _______,
__________, __________.
(ii) The aggregate amount of the Proposed Loan is $ ______________.
(iii) As of the date hereof, the unused amount of the Credit
Facility is $ _____________.
The Borrower hereby certifies that the following statements are true on the
date hereof, and will be true on the date of the Proposed Loan, before and after
giving effect thereto and to the application of the proceeds therefrom:
(A) all of the representations and warranties contained in
Article 4 of the Credit Agreement and the information set forth in the
Schedules related thereto are true and correct as of the date hereof
Trilon Dominion Partners, L.L.C.
Page 2
(except (i) to the extent that such representations and warranties
relate to an earlier date, or (ii) as are affected by transactions
specifically contemplated by the Credit Agreement), with the same
effect as though such representations and warranties had been made on
and as of such date;
(B) no Default or Event of Default exists as of the date
hereof or will result from the Proposed Loan; and
(C) the Borrower is in compliance with all of the terms and
conditions of the Credit Agreement, the Notes, the Warrant and each of
the other related documents that it has entered into with the Lender.
Very truly yours,
SHEPHERD SURVEILLANCE SOLUTIONS, INC.
By:__________________________________
Name:
Title:
