UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark one)
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended ______________March 31,1996______________________
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________ to ____________
Commission File Number: 33-9868-A
Shepherd Surveillance Solutions, Inc.(formerly Invision Technology, Inc.)
-------------------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 88-0212471
------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7 Perimeter Road, Suite 4, Manchester, NH 03103
-----------------------------------------------
(Address of principal executive offices) (Zip Code)
(603) 622-8668
--------------
(Registrant's telephone number, including area code)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes [ ] No [x]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Check whether the registrant filed all documents and reports required to be
filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
At October 31, 1996, 4,293,822 shares of common stock,
$.001 par value per share, were outstanding.
Transitional Small Business Disclosure Format (check one);
Yes [ ] No [x]
Part I. Financial Information
- ------- ---------------------
Item 1. Financial Statements
- ------- --------------------
<TABLE>
<CAPTION>
Shepherd Surveillance Solutions, Inc.
Balance Sheet
March 31, 1996 September 30, 1995
-------------- ------------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 77,470 $ 18,215
Accounts receivable 42,290 126,934
Inventories, net 318,202 255,348
Prepaid expenses 7,415 12,849
---------- ---------
Total current assets 445,377 413,346
---------- ----------
Property and equipment:
Furniture and equipment 43,915 47,619
Software and hardware 70,296 70,296
Leasehold improvements -0- 35,000
---------- ----------
114,211 152,915
Accumulated depreciation and amortization 68,014 64,565
---------- ----------
46,197 88,350
Other assets 5,498 1,689
---------- ----------
Total assets $ 497,072 $ 503,385
========== ==========
See accompanying notes.
</TABLE>
2
<TABLE>
<CAPTION>
Shepherd Surveillance Solutions, Inc.
Balance Sheet (Continued)
March 31, 1996 September 30, 1995
-------------- ------------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 23,436 $ 136,443
Accrued loss on open contracts 48,257 48,257
Deferred revenue 265,993 265,993
Deferred revenue on shipments to distributor 125,420 125,420
Accrued officers' salaries -0- 456,384
Loan from shareholder 1,548,500 925,000
Due to officer -0- 110,577
Due to shareholder 80,562 19,036
------------ ------------
Total current liabilities 2,092,168 2,087,110
------------ ------------
Commitments
Shareholders' deficit
Common Stock - $.001 par value
50,000,000 shares authorized;
Issued and outstanding shares
4,293,822 at March 31, 1996 4,294 5,753
Additional paid-in capital 6,226,715 5,768,871
Accumulated deficit (7,826,105) (7,358,349)
------------ ------------
Total shareholders' deficit (1,595,096) (1,583,725)
------------ ------------
Total liabilities and shareholders' deficit $ 497,072 $ 503,385
============ ===========
See accompanying notes.
</TABLE>
3
<TABLE>
<CAPTION>
Shepherd Surveillance Solutions, Inc.
Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
March 31, 1996 March 31, 1995 March 31, 1996 March 31, 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues $ 101,818 $ 109,525 $ 121,922 $ 117,984
--------- --------- --------- ---------
Cost of revenues earned 34,358 63,237 37,594 70,337
--------- --------- --------- ---------
67,460 46,288 84,328 47,647
--------- --------- --------- ---------
Costs and other operating expenses:
Selling and promotion 115,963 144,369 214,482 300,894
General and administrative 164,049 146,324 251,352 279,279
Research and development 5,374 25,429 17,450 49,209
Depreciation and amortization 3,373 15,874 6,820 40,266
--------- --------- --------- ---------
Total costs and operating
expenses 288,759 331,996 490,104 669,648
--------- --------- --------- ---------
Loss from operations (221,299) (285,708) (405,776) (622,001)
Other income (expenses):
Other income -0- 2,000 -0- 5,000
Interest income -0- 391 2 809
Loss on sale of asset -0- (993) -0- (993)
Loss on abandonment of asset (457) -0- (457) -0-
Interest expense (35,338) (8,833) (61,525) (63,326)
--------- --------- --------- ---------
(35,795) (7,375) (61,980) (58,450)
--------- --------- --------- ---------
Net loss $(257,094) $(293,083) $(467,756) $(680,451)
========= ========= ========= =========
Loss per share $ (.06) $ (.05) $ (.11) $ (.12)
========= ========= ========= =========
See accompanying notes.
</TABLE>
4
<TABLE>
<CAPTION>
Shepherd Surveillance Solutions, Inc.
Statement of Shareholder's Deficit
For the Six Months Ended March 31, 1996
(Unaudited)
Additional
Common Paid-In Accumulated
Stock Capital Deficit Total
----- ------- ------- -----
<S> <C> <C> <C> <C>
Balance at September 30, 1995 $ 5,753 $ 5,768,871 $ (7,358,349) $(1,583,725)
Stock retired (1,459) 1,459 - -
Contributed capital - 456,385 - 456,385
Net loss - - (467,756) (467,756)
----------- ------------ ------------- -------------
Balance at March 31,1996 $ 4,294 $ 6,226,715 $ (7,826,105) $ (1,595,096)
=========== ============ ============= =============
See accompanying notes.
</TABLE>
5
<TABLE>
<CAPTION>
Shepherd Surveillance Solutions, Inc.
Condensed Statements of Cash Flows
(Unaudited)
Six Months Ended March 31,
1996 1995
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net cash used by operating activities $(599,578) $(697,221)
--------- ---------
INVESTING ACTIVITIES
Capital expenditures (net) 35,333 (29,091)
Net cash provided by (used in) investing activities 35,333 (29,091)
--------- ---------
FINANCING ACTIVITIES
Loan from shareholder 623,500 700,000
Issuance of common stock -0- 107
Net cash provided by financing activities 623,500 700,107
--------- ---------
Net increase (decrease) in cash and cash equivalents 59,255 (26,205)
Cash and cash equivalents at beginning of period 18,215 44,316
--------- ---------
Cash and cash equivalents at end of period $ 77,470 $ 18,111
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest $ -0- $ -0-
========== ==========
Retirement of debt with exercise of warrants
for common stock $ -0- $2,650,000
========== ==========
Issuance of common stock in lieu of cash payment
for interest $ -0- $ 54,493
========== ==========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Release of liability for accrued officers' salaries $ 456,385 $ -0-
========== ==========
Retirement of 1,459,190 shares of common stock
conveyed to the Company $ 1,459 $ -0-
========== ==========
See accompanying notes.
</TABLE>
6
Shepherd Surveillance Solutions, Inc.
Notes to Financial Statements
March 31, 1996 and September 30, 1995
1. Basis of Presentation
The accompanying condensed quarterly financial statements have been prepared in
accordance with Item 310(b) of Regulation S-B and do not include all of the
information and footnotes required for complete financial statements. These
quarterly financial statements should be read in conjunction with the Company's
audited financial statements for the fiscal year ended September 30, 1995. In
the opinion of management, these financial statements include all adjustments
necessary for a fair presentation of the results of the reported interim
periods. All such adjustments are of a normal recurring nature.
The results of operations for the interim periods shown are not necessarily
indicative of results for any future interim periods or for the entire fiscal
year.
2. Inventory
Inventory consists of the following:
March 31, 1996 September 30, 1995
-------------- ------------------
Components $ 7,966 $ 7,966
Work in progress 310,236 247,382
---------- ----------
$ 318,202 $ 255,348
========== ==========
3. Stock Options
Stock options activity follows:
Outstanding September 30, 1995 1,264,893
Options conveyed to the Company during the First Quarter (1,264,893)
Outstanding March 31, 1996 -
=========
4. Related Party Transactions
Loan from shareholder
- ---------------------
During the six months ended March 31, 1996, the Company borrowed $75,000 from
Dominion Capital, Inc. ("Dominion") and $548,500 from Trilon Dominion Partners,
LLC ("Trilon"). Of the latter amount, $270,000 was received during the three
months ended March 31, 1996 (the "Second Quarter").
7
During the First Quarter of 1996, Dominion conveyed to Trilon promissory notes,
issued by the Company and payable to Dominion, in the total amount of
$1,000,000.
Advances from Trilon during the Second Quarter were made pursuant to an informal
funding agreement, which was intended to enable the Company to continue its
development of technology. The informal funding agreement was replaced by a
Credit Agreement dated as of June 28, 1996, between the Company and Trilon,
which is discussed further in Item 5 of Part II below.
Due to shareholder
- ------------------
The March 31, 1996 balance represents interest due on notes payable to and
advances from Trilon. No interest has been paid and the increase in accrued
interest corresponds to the additional borrowings from Trilon during the First
and Second Quarters of the Company's 1996 fiscal year.
5. Per Share Amounts
Per share amounts for the three month and six month periods ended March 31, 1996
were determined by dividing the net loss for each period by 4,293,822, the
number of shares of Common Stock outstanding during the periods.
Part I. Financial Information
- ------------------------------
Item 2.
- -------
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
Results of operations
- ---------------------
The Company has, for the past several years, experienced substantial operating
losses, and its sales do not currently generate working capital sufficient to
meet future projected operating expenses.
Contract revenues increased by approximately $3,000 during the six months ended
March 31, 1996 over the comparable period in 1995, as a result of the timing of
completion of jobs. Operating expenses decreased by approximately $180,000 due
to administrative infrastructure changes and a decrease in staffing. Accounts
receivable decreased as a result of the completion of certain jobs and billing
for those jobs, and the receipt of payments. Inventories increased due to work
in progress. Interest expense increased as a result of accrued interest due on
the outstanding borrowings from Trilon. Accrued Officers' Salaries decreased as
a result of a settlement agreement and was recognized as contributed capital in
the First Quarter. The amount Due To Officer decreased as a result of payment in
the First Quarter.
Liquidity and capital resources
- -------------------------------
Management believes that the ratio of current assets to current liabilities in
the financial statements for the period ended March 31, 1996, as well as the
Shareholders' deficit, reflects the Company's current lack of liquidity.
Trilon, the owner of 78% of the Company's outstanding common stock, advanced
$548,500 to the Company during the six months ended March 31, 1996, of which
$270,000 was in the second quarter. This was the principal source of the
Company's working capital. Such advances were made pursuant to an informal
agreement between Trilon and the Company. The informal funding agreement was
replaced by a June 28, 1996 Credit Agreement, which is discussed further in Item
5 of Part II below.
The Company had cash and cash equivalents of approximately $77,000 at March 31,
1996 and $750,000 was available at that time for further borrowings under the
Credit Agreement dated as of June 28, 1996, which the Company subsequently
borrowed. The Company is required to repay the total of $1,298,500 borrowed
under this Credit Agreement on or before June 28, 1999, and will also be
required to repay to Trilon the $1,000,000 previously borrowed (See Note 4 to
financial statements for further detail). During the next two fiscal quarters,
the Company intends to apply any capital recieved (from Trilon or otherwise) to
the continued development of its technology, to the positioning of its products
in the market, and to repaying obligations under credit agreements and other
financing arrangements. Such costs will be for engineering, promotion, marketing
and production materials.
The Company's primary capital resources are proprietary software and specialized
hardware. As a result of its ongoing research and development efforts, enhanced
by recent working capital infusions, the Company anticipates no material change
to such resources. The Company intends to use those resources and any additional
capital raised or
8
borrowed to continue its research and development efforts to produce a line of
new products which it will try to produce at reasonable costs.
The Company will need and hopes to continue to obtain additional capital or
financing for working capital purposes.
Risk Factors and Cautionary Statements
- --------------------------------------
When used in this Form 10-QSB and in other filings by the Company with the
Securities and Exchange Commission, in the Company's press releases and in oral
statements made with the approval of an authorized executive officer, the words
or phrases "will likely result", "are expected to", "will continue", "is
anticipated", "estimate", "project", "hope to" or similar expressions are
intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements are subject to
certain risks and uncertainties, including but not limited to those discussed in
the notes to the financial statements and under this caption "Risk Factors and
Cautionary Statements", that could cause actual results to differ materially
from historical earnings and those presently anticipated or projected. The
Company wishes to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made, and wishes to
advise readers that the factors listed below could cause the Company's actual
results for future periods to differ materially from any opinions or statements
expressed with respect to future periods in any current statements.
The Company will NOT undertake and specifically declines any obligation to
publicly release the result of any revisions which may be made to any
forward-looking statements to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or unanticipated
events.
o The Company's future operating results are dependent on its ability to
develop, produce and market new and innovative products and technologies,
and eventually to enter into favorable licensing and distribution
relationships. There are numerous risks inherent in this complex process,
including the risk that rapid technological change could render the
Company's products obsolete, the risk that the Company will not be able to
timely develop new products at a reasonable cost that find acceptance in
the marketplace, and the risk that the Company will not be able to develop
procedures to bring to these products to the market in a timely fashion.
o The Company's continued working capital and cash resources are dependent on
its ability to obtain additional financing in the future, as the Company's
operations currently generate minimal revenues or income.
o The Company is highly leveraged, having borrowed over $2,700,000 during
fiscal 1996 from one of its shareholders without repaying any amounts of
principal or interest due on these loans. There can be no assurance that
the Company will be able to pay principal or interest due on any of these
loans from time to time. Any failure to pay interest or principal due on
these loans would have a material adverse effect on the Company.
o A single shareholder, Trilon Dominion Partners, L.L.C., which has been the
Company's principal lender, currently holds 3,367,802 shares of Common
Stock (78% of the outstanding Common Stock) and holds a warrant to purchase
14,226,578 additional shares of the Company's Common Stock. Accordingly,
such stockholder will be able to elect all of the Company's directors and,
generally, to direct the affairs of the Company. This stockholder could
effectively block any majority corporate transactions, such as a merger or
sale of all of the Company's assets, which, under Nevada law, requires the
affirmative vote of holders of a majority of the outstanding Common Stock
of the Company.
Furthermore, the Company's operating results have varied from fiscal period to
fiscal period; accordingly, the Company's financial results in any particular
fiscal period are not necessarily indicative of results for future periods.
Part II. Other Information
- ---------------------------
Item 1. Legal proceedings N/A
- --------------------------
Item 2. Changes in Securities N/A
- ------------------------------
Item 3. Defaults Upon Senior Securities N/A
- ----------------------------------------
9
Item 4. Submission of Matters to a Vote of Security Holders N/A
- ------------------------------------------------------------
Item 5. Other Information
- --------------------------
June 1996 Credit Agreement
- --------------------------
Pursuant to a Credit Agreement, dated as of June 28, 1996 (the "Agreement"),
between the Company and Trilon Dominion Partners, LLC, a Delaware limited
liability company ("Trilon"), among other things, Trilon agreed to extend credit
to the Company until June 27, 1999, in the aggregate principal amount not to
exceed $2,909,500 (including an aggregate amount of $1,298,500 lent by Trilon to
the Company prior to June 28, 1996). As of October 1, 1996, Trilon owned
3,367,802 of the 4,293,822 outstanding shares of the Common Stock, $.001 par
value (the "Common Stock").
In connection with the Agreement, the Company executed and delivered to Trilon a
promissory note in the amount of $1,298,500 (the "Note"), and issued to Trilon a
warrant to purchase an additional 14,226,578 shares (before any adjustments) of
the Common Stock at an exercise price of $.01 per share, exercisable during the
period from June 28, 1996 until June 28, 2001 (the "Warrant").
As of October 1, 1996, the Company has borrowed an aggregate amount of
$3,659,000 from Trilon and Trilon had not exercised the Warrant. The Note
requires the Company either to make quarterly interest payments in cash during
the first year, calculated on the basis of a 360 day year at an annual rate
equal to the prime rate of the Chase Manhattan Bank, N.A., as announced from
time to time, plus four percent (4%) or of capitalizing the amount of such
interest due by adding such amount to the then outstanding principal amount of
the Note, with interest continuing to accrue on such aggregate principal amount.
The Note matures on June 28, 1999. The obligations of the Company under the Note
are secured by a lien on all of the Company's assets pursuant to an Amended and
Restated Security Agreement, dated as of August 8, 1994, between the Company and
Trilon.
Change in Certifying Accountant
- -------------------------------
By action of written consent, the Board of Directors of the Company approved the
engagement of Ernst & Young LLP, as its independent auditors for the fiscal year
ending September 30, 1996, to replace the firm of James Moore & Co., P.L., who
were dismissed as auditors of the Company effective as of November 25, 1996.
The reports of James Moore & Co., P.L. on the registrant's financial statements
for the past two fiscal years did not contain an adverse opinion or a disclaimer
of opinion. The reports of James Moore & Co., P.L. on the registrant's financial
statements as of September 30, 1995 and 1994 were modified as to an uncertainty
over whether the registrant had the ability to continue as a going concern.
In connection with the audits of the Company's financial statements for each of
the two fiscal years ended September 30, 1994 and September 30, 1995, and in the
subsequent interim periods, there were no disagreements with James Moore & Co.,
P.L. on any matters of accounting principles or practices, financial statement
disclosure, or auditing scope and procedures which, if not resolved to the
satisfaction of James Moore & Co., P.L., would have caused James Moore & Co.,
P.L. to make reference to the matters in their report.
The Company has requested James Moore & Co., P.L. to furnish a letter addressed
to the Commission stating whether it agrees with the above statements. A copy of
the letter, dated November 26, 1996, is filed as Exhibit 16 to this Form 10-QSB.
Change in Company's Name
- ------------------------
On March 11, 1996, the Company changed its name from IMProCOM, Inc. to InVision
Technology, Inc. On May 14, 1996, the Company changed its name from InVision
Technology, Inc. to Shepherd Surveillance Solutions, Inc.
10
The Company filed amendments to its Articles of Incorporation in connection with
said name changes with the Secretary of State for the State of Nevada on March
14, 1996 and May 22, 1996, respectively.
Item 6. Exhibits and reports on Form 8-K
- -----------------------------------------
Exhibits
- --------
3.1 Articles of Incorporation, as amended
3.2 By-Laws
10.1 Credit Agreement, dated as of June 28, 1996, by and between the Company
and Trilon Dominion Partners, L.L.C., a Delaware limited liability
company
10.2 Promissory Note, dated as of June 28, 1996, by the Company in favor of
Trilon Dominion Partners, L.L.C., a Delaware limited liability company
10.3 Warrant to Purchase 14,226,578 shares of Common Stock of the company,
dated June 28, 1996
16 Letter, dated November 26, 1996, from James Moore & Co., P.L., the
Company's former certifying accountant, to the Securities and Exchange
Commission regarding the change in the Company's certifying accountant
27 Financial Data Schedule
No reports on Form 8-K have been filed during the quarter for which this report
is filed.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Shepherd Surveillance Solutions, Inc.
(Registrant)
Date: November 26, 1996 /s/ M. Thomas Makmann
- ------------------------ -----------------------------
M. Thomas Makmann
President and Principal Financial Officer
11
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
IMProCOM, INC.
The undersigned proposes to form a corporation under the laws of the State of
Nevada, relating to private corporations, and to that end hereby adopts articles
of incorporation as follows:
ARTICLE ONE
NAME
The name of the corporation is IMProCOM, Inc..
ARTICLE TWO
LOCATION
The principal office of this corporation is to be at 150 Lake Glen Drive, City
of Carson City, State of Nevada. The Mailing address is Post Office Box 2152,
Carson City, Nevada 89702.
ARTICLE THREE
PURPOSES
The Corporation is authorized to carry on any lawful business or enterprise,
including but not exclusive to:
(a) Purchasing and selling all types of aircraft and related
accessories,
(b) purchasing and selling all types and kinds of computers,
imaging technologies, laser technologies, including hardware
products and software packages,
(c) Purchasing and selling all types and kinds of marine equipment
and related accessories,
(d) Offering advertising services in connection with the sale of
airplanes, computers, boats, ships, and any and all other
products,
(e) Constructing, manufacturing, raising or otherwise producing,
and repairing, servicing, storing or otherwise caring for any
type of structure, commodity or livestock whatsoever,
processing, selling, brokering, factoring or distributing any
type of property whether real or personal; extracting and
processing natural resources, transporting freight or
passengers by land, sea or air; collecting and disseminating
information or advertisement through any medium whatsoever;
performing personal services of any nature;
-2-
and entering into or serving in any type of management,
investigative, advisory, promotional, protective, insurance,
guarantyship, suretyship, fiduciary or representative capacity
or relationship for any persons or corporations whatsoever,
(f) Engaging in sales, appraisal, management and promotion of
musical and literary properties and activities including but
not limited to publishing, booking talent, making commercials,
and instruction,
(g) Purchasing, distributing, engineering, selling, designing
systems, leasing and franchising all types of
telecommunication-computer products, including but not limited
to satellite-communication devices.
ARTICLE FOUR
CAPITAL STOCK
The amount of the total authorized capital stock of this corporation is
50,000,000 at $.001.
ARTICLE FIVE
DIRECTORS
The members of the governing board of this corporation shall be styled directors
and their number shall be three.
The name and address of each member of the first board of directors is:
Frederick M. Jenner, P.O. Box 10038, Charlotte, NC 28212
Zalkind Hurwitz, 610 Mt. Vernon Avenue, Charlotte, NC 28203
Annette H. Greene, 6810 Old Post Road, Charlotte, NC 28212
ARTICLE SIX
INCORPORATORS
The name and address of the incorporator is: Elizabeth R. Block, 150 Lake Glen
Drive, Carson City, Nevada 89701.
ARTICLE SEVEN
PERIOD OF EXISTENCE
The period of existence of this corporation shall be perpetual.
ARTICLE EIGHT
AMENDMENT OF ARTICLES OF INCORPORATION
The articles of incorporation of the corporation may be amended from time to
time by a majority vote of all shareholders voting by written ballot in person
or
-3-
by proxy held at any general or special meeting of shareholders upon lawful
notice.
ARTICLE NINE
STATUTORY RESIDENT AGENT
The corporation does hereby name, constitute and appoint as its statutory
resident agent within the State of Nevada for receipt of process or any other
lawful purpose STATE AGENT AND TRANSFER SYNDICATE, INCORPORATED, 150 Lake Glen
Drive, Carson City, Nevada with a mailing address of Post Office Box 2152,
Carson City, Nevada 89702, telephone number is (702) 882-1013. This appointment
of resident agent shall be continuous unless otherwise changed by the Board of
Directors of the corporation acting pursuant to the laws of the State of Nevada.
ARTICLE TEN
VOTING OF SHARES
In any election participated in by the shareholders, each shareholder shall have
one vote for each share of stock he owns, either in person or by proxy as
provided by law. Cumulative voting shall not prevail in any election by the
shareholders of this corporation.
IN WITNESS WHEREOF the undersigned, Elizabeth R. Block, for the purpose
of forming a corporation under the laws of the State of Nevada, does make, file
and record these articles, and certifies that the facts herein stated are true;
and I have accordingly hereunto set my hand this 3rd day of October 1985.
INCORPORATOR:
/s/ Elizabeth R. Block
-----------------------
Elizabeth R. Block
STATE OF NEVADA
COUNTY OF CARSON CITY
On October 3, 1985, Elizabeth R. Block personally appeared before me, a notary
public, and executed the above instrument.
/s/ Nancy Graham
-----------------------
SIGNATURE OF NOTARY
Notary Stamp or seal
EXHIBIT 3.1 (con't)
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
IMProCOM, INC.
IMProCOM, INC., a corporation organized under the laws of the State of
Nevada, by its president and assistant secretary, does hereby certify:
1. That the board of directors of said corporation passed a resolution
by unanimous written consent dated March 12, 1996, authorizing the following
change and amendment in the articles of incorporation:
RESOLVED that Article One of said articles of incorporation be amended
to read as follows: "The name of the corporation is InVision Technology, Inc."
2. That the number of shares of the corporation outstanding and
entitled to vote on an amendment to the articles of incorporation is 4,293,930;
that the said change and amendment has been consented to and authorized by the
written consent of stockholders holding at least a majority of each class of
stock outstanding and entitled to vote thereon.
IN WITNESS WHEREOF, the said corporation has caused this certificate to
be signed by its president and assistant secretary and its corporate seal to be
hereto affixed this 12th day of March, 1996.
-2-
IMProCOM, INC.
By:/s/ Jack R. Sauer
--------------------
Jack R. Sauer
President
By:/s/ Ronald W. Cantwell
--------------------
Ronald W. Cantwell
Assistant Secretary
(SEAL)
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On March 12th, 1996, personally appeared before me, a Notary Public,
Jack R. Sauer and Ronald W. Cantwell, who acknowledged that they executed the
above instrument.
/s/ Patricia M. Rudloff
------------------------
Notary Public
(SEAL)
EXHIBIT 3.1 (con't)
--------------------------
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
INVISION TECHNOLOGY, INC.
--------------------------
InVision Technology, Inc., a corporation organized under the laws of
the States of Nevada, by its President and Assistant Secretary, does hereby
certify:
1. That the board of directors of said corporation passed a resolution
by unanimous written consent dated May 14, 1996, authorizing the following
change and amendment in the Articles of Incorporation:
RESOLVED that Article One of said Articles of Incorporation be amended
to read as follows: "The name of the corporation is Shepherd Surveillance
Solutions, Inc."
2. That the number of shares of the corporation outstanding and
entitled to vote on an amendment to the articles of incorporation is 4,293,822;
that the said change and amendment has been consented to and authorized by the
written consent of stockholders holding at least a majority of each class of
stock outstanding and entitled to vote thereon.
IN WITNESS WHEREOF, the said corporation has caused this certificate to
be signed by its President and Assistant Secretary and its corporate seal to be
hereto affixed this 15th day of May, 1996.
-2-
InVision Technology, Inc.
By:/s/ Jack R. Sauer
----------------------
Jack R. Sauer
President
By:/s/ Ronald W. Cantwell
----------------------
Ronald W. Cantwell
Assistant Secretary
(SEAL)
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On May 15th, 1996, personally appeared before me, a Notary Public, Jack
R. Sauer and Ronald W. Cantwell, who acknowledged that they executed the above
instrument.
/s/ Patricia M. Rudloff
--------------------
Notary Public
(SEAL)
EXHIBIT 3.2
BY-LAWS OF IMProCOM, INC.
ARTICLES 1 - OFFICES
OFFICES.
1. The principal office of the Corporation in the State of Nevada shall be
located in the City of CARSON CITY, County of Carson City. The Corporation may
have other such offices, either within or without the State of Incorporation, as
the Board of Directors may designated, or as the business of the Corporation
may, from time to time, require.
2. As expressly required by Nevada Domestic and Foreign Corporation Laws
(78.105), copies of articles, by laws and duplicate stock ledgers or statements
are kept at the Corporation's principal offices.
3. The right to inspect the stock ledger by authorized stockholders of record,
or other persons, may be denied to such stockholder or other person upon his
refusal to furnish to the corporation an affidavit that such inspection is not
desired for a purpose which is in the interest of a business or object other
than the business of the Corporation, and that he has not, at any time, sold, or
offered for sale, any list of stockholders of any domestic or foreign
corporation, or aided or abetted any person in procuring any such record of
stockholders for any such purpose.
ARTICLE II - STOCKHOLDERS
1. ANNUAL MEETING (As amended at BOD Meeting 12 04 89).
The annual meeting of the stockholders shall be held on the first
Wednesday in February next following the end of the fiscal year in each year,
beginning with the fiscal year ending on September 30, 1989, at the hour of 9:00
o'clock A.M., for the purpose of electing directors and for the transaction of
such other business as may come before the meeting. If the day fixed for the
annual meeting shall be a legal holiday, such meeting shall be held on the next
succeeding business day.
2. PLACE OF MEETINGS.
All meetings of the shareholders shall be held at the principal offices
of the corporation, or at such other place, either within or without the State
of Nevada, as shall be designated in the notice of the meeting or agreed upon by
a majority of the shareholders entitled to vote thereat.
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3. SUBSTITUTE ANNUAL MEETING.
If the annual meeting shall not be held on the day designated by these
By-Laws, a substitute meeting may be called in accordance with the provisions of
Sec. 4 of this Article. A meeting so called shall be designated and treated, for
all purposes, as the annual meeting.
4. SPECIAL MEETINGS.
Special Meetings of the shareholders may be called at any time by the
President, Secretary, or by any two members of the Board of Directors of the
Corporation, or by any shareholder, pursuant to the written request of the
holders of not less than ten per cent (10%) of all the shares entitled to vote
at the meeting.
5. NOTICE OF MEETING (As amended at BOD M'tng, 12 22 87).
Written or printed notice stating the place, day and hour of the
meeting, and, in case of a special meeting, the purpose or purposes for which
the meeting is called, as expressly required by the provisions of the Nevada
Domestic and Foreign Corporation Laws, shall be delivered not less than ten (10)
nor more than sixty (60) days before the date of the meeting, either personally
or by mail, by or at the direction of the president, or the secretary, or the
officer or persons calling the meeting, to each stockholder of record entitled
to vote at such meeting. If mailed, such notice shall be deemed to be delivered
when deposited in the United States Mail, addressed to the stockholder at his
address as it appears on the stock transfer books of the Corporation, with
postage thereon prepaid.
When a meeting is adjourned for thirty (30) days or more, notice of the
adjourned meeting shall be given as in the case of an original meeting. When a
meeting is adjourned for less than thirty (30) days, in any one adjournment, it
is not necessary to give any announcement at the meeting at which the
adjournment is taken.
6. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE.
For the purposes of determining stockholders entitled to notice of, or
to vote at, any meeting of stockholders or any adjournment thereof, or
stockholders entitled to receive payment of any dividend or in order to make a
determination of stockholders for any other proper purpose, the directors of the
corporation may provide that the stock transfer books shall be closed for a
stated period but not to exceed, in any case, sixty (60) days.
If the stock transfer books shall be closed for the purpose of
determining stockholders entitled to notice of or to vote at a meeting of
stockholders, such books shall be closed for at least 10 days immediately
preceding such meeting.
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In lieu of closing the stock transfer books, the directors may fix in advance, a
date as the record date for any such determination of stockholders, such date,
in any case, to be not more than sixty (60) days and, in case of a meetings of
stockholders, not less than thirty (30) days prior to the date on which the
particular action requiring such determination of stockholders is to be taken.
If the stock transfer books are not closed and no record date if fixed for the
determination of stockholders entitled to notice of or to vote at a meeting of
stockholders, or stockholders entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed, or the date on which the
resolution of the directors declaring such dividend is adopted, as the case may
be, shall be the record date for such determination of stockholders. When a
determination of stockholders entitled to vote at any meeting of stockholders
has been made, as provided in this section, such determination shall apply to
any adjournment thereof.
7. VOTING LISTS.
The officer or agent having charge of the stock transfer books for
shares of the corporation shall make, at least ten (10) days before each meeting
of stockholders, a complete list of the stockholders entitled to vote at such
meeting, or any adjournment thereof, arranged in alphabetical order, with the
address of and the number of shares held by each, which list, for a period of
ten (10) days prior to such meeting, shall be kept on file at the principal
office of the corporation, and shall be subject to inspection by any stockholder
at any time during usual business hours. Such list shall also be produced and
kept open at the time and place of the meeting and shall be subject to the
inspection of any stockholder during the whole time of the meeting. The original
stock transfer book shall be prima facie evidence as to who are the stockholders
entitled to examine such list or transfer books or to vote at the meeting of
stockholders.
8. QUORUM.
A majority of the outstanding shares of the Corporation entitled to
vote, represented in person or by proxy, shall constitute a quorum at a meeting
of shareholders. If less than a majority of the outstanding shares are
represented at a meeting, a majority of the shares so represented may adjourn
the meeting from time to time without further notice. At such adjourned meeting
at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. The shareholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
9. PROXIES.
1. At all meetings of stockholders, a stockholder may vote by proxy
executed in writing by the stockholder or by his duly authorized attorney in
fact.
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Such proxy shall be filed with the secretary of the corporation before or at the
time of the meeting.
2. In the event that any such instrument in writing shall designate;
two or more persons to act as proxies; a majority of such persons present at the
meeting; or, if only one shall be present, then that one shall have and may
exercise all of the powers conferred upon all of the persons so designated,
unless the instrument shall otherwise provide.
3. No such proxy shall be valid after expiration of six (6) months from
date of its execution, unless coupled with an interest, or unless the person
executing it specifies therein the length of time for which it is to continue in
force, which, in no case, shall exceed seven (7) years from the date of its
execution. Subject to the above, any proxy duly executed is not revoked and
continues in full force and effect until an instrument revoking it, or a duly
executed proxy bearing a later date is filed with the secretary of the
corporation.
10. VOTING OF SHARES.
1. Each stockholder entitled to vote in accordance with the terms and
provisions of the Certificate of Incorporation and these by-laws shall be
entitled to one vote, in person or by proxy, for each share of stock entitled to
vote held by such stockholders.
2. Upon the demand of thirty percent (30%) of the stockholders at the
meeting, the vote for directors and upon any question before the meeting shall
be by ballot. All elections for directors shall be decided by plurality vote;
all other questions shall be decided by majority vote except as otherwise
provided by the Certificate of Incorporation, or by the laws of the State of
Nevada.
11. ORDER OF BUSINESS.
The order of business at all meetings of the stockholders shall be as
follows:
1. Roll Call.
2. Proof of notice of meeting or waiver of notice.
3. Reading of minutes or preceding meeting.
4. Reports of Officers.
5. Reports of Committees.
6. Election of Directors.
7. Unfinished Business.
8. New Business.
12. INFORMAL ACTION BY STOCKHOLDERS. (As amended BOD M'tng 11 30 89)
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Unless otherwise provided by law, any action required to be taken at a
meeting of the shareholders, or any other action which may be taken at a meeting
of the shareholders, may be taken without a meeting if authorized by the written
consent of stockholders holding at least a majority of the voting powers,
provided;
That if any greater proportion of voting power is required for such
action at a meeting, then such greater proportion of written consents shall be
required. Such consents shall be in writing, setting forth the actions so taken,
and shall be filed with the Secretary of the Corporation to be kept in the
corporate minute book.
13. RIGHTS OF STOCKHOLDERS TO INSPECT AND AUDIT FINANCIAL RECORDS.
Any stockholder of record who owns not less than fifteen percent (15%)
of all of the issued and outstanding shares of the stock of the corporation,
upon at least five days written demand, is entitled to inspect the books of
accounts and all financial records of the corporation during normal business
hours, subject to the State of Nevada Domestic and Foreign Corporation Laws
described in NRS 78.257, et al.
ARTICLE III - BOARD OF DIRECTORS
1. NUMBER, TENURE AND QUALIFICATIONS.
Amended at Shareholder's Annual Meeting 02/20/91.
There shall be five (5) members on the Board of Directors of the
Corporation. Directors need not be residents of the State of Nevada or
shareholders of the Corporation. In the event that less than this number are
named as the initial members of the Board of Directors, the initial members of
the Board of Directors shall have the authority and power to elect additional
members of the Board of Directors not to exceed the above number. The initial
members of the Board of Directors and the additional members elected by them
shall have the same power and authority to act as though elected by the
Shareholders of the Corporation, and shall serve until the first annual meeting
of the shareholders or until their successors are elected and are qualified.
Each Director shall hold office until his death, resignation,
retirement, removal, disqualification, or his successor is elected and
qualified.
2. GENERAL POWERS.
The business and affairs of the corporation shall be managed by the
Board of Directors or by such Executive Committees as the Board of Directors
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may establish pursuant to these By-Laws. The Directors shall, in all cases, act
as a board, and they may adopt such rules and regulations for the conduct of
their meetings and the management of the corporation, as they may deem proper,
not inconsistent with these By-Laws, and the laws of the State of Nevada.
3. REGULAR MEETINGS.
A regular meeting of the directors shall be held, without other notice
than this by-law, immediately after, and at the same place as, the annual
meeting of stockholders. The directors may provide, by resolution, the time and
place for the holding of additional regular meetings without other notice than
such resolution.
4. SPECIAL MEETINGS.
Special meetings of the directors may be called by or at the request of
the president or any two directors. The person or persons authorized to call
special meetings of the directors may fix the place and/or method for holding
any special meeting of the directors, including available telecommunications
devices. Such meetings may be held within or without of the State of Nevada.
5. NOTICE OF MEETINGS.
No notice of regular meetings of the Board of Directors on the date
fixed for the annual regular meeting of the Shareholders shall be necessary.
The person or persons calling a special meeting of the Board of
Directors shall, at least two days before the meeting, give notice thereof by
the usual means of communication. Such notice need not specify the purpose for
which the meeting is called. If notice has not being given otherwise, all notice
requirements shall be deemed fully met if mailed to the last address appearing
upon the records of the Secretary.
Attendance by a Director at a meeting shall constitute a waiver of
notice of such meeting, except where a Director attends a meeting for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called.
6. QUORUM.
At any meeting of the Directors, not less than two (2) shall constitute
a quorum for the transaction of business.
The act of the majority of the directors present at a meeting at which
a quorum is present shall be the act of the directors.
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7. ELECTION OF DIRECTORS.
Except as provided in Section 1 of this Article, the Directors shall be
elected at the annual meeting of the Shareholders; and those persons who receive
the highest number of votes shall be deemed to have been elected.
If thirty (30) percent of the shareholders entitled to vote so demands,
election of Directors shall be by ballot.
Every shareholder entitled to vote at an election of Directors shall
have the right to vote the number of shares standing of record in his name for
as many persons as there are Directors to be elected, and for whose election he
has a right to vote. No shareholder or proxy holder may vote cumulatively.
8. CHAIRMAN.
There may be Chairman of the said Board of Directors elected by the
Directors from their number at any meeting of the Board. The Chairman shall
preside at all meetings of the Board of Directors and perform such other duties
as may be directed by the Board.
9. EXECUTIVE AND OTHER COMMITTEES.
The Board of Directors, by resolution, may designate from among its
members an Executive Committee, and other committees, each consisting of one or
more directors. Each such committee shall serve at the pleasure of the Board.
The designation of such committee and the delegation thereto of authority shall
not operate to relieve the Board of Directors, or any member thereof, of any
responsibility imposed by law.
10. NEWLY CREATED DIRECTORSHIPS AND VACANCIES.
Newly created directorships resulting from an increase in the number of
directors and vacancies occurring in the Board for any reason, except the
removal of Directors without cause, may be filled by a vote of a majority of the
Directors then in office, although less than a quorum exists. Vacancies
occurring by reason of the removal of the Directors without cause shall be
filled by vote of the stockholders. A Director elected to fill a vacancy caused
by resignation, death or removal shall be elected to hold office for the
unexpired term of his predecessor.
11. REMOVAL OF DIRECTORS.
Any or all of the Directors may be removed for cause by vote of the
stockholders or by action of the Board. Directors may be removed without cause
only by vote of the stockholders.
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12. RESIGNATION.
A Director may resign at any time by giving written notice to the
Board, the President or the Secretary of the Corporation. Unless otherwise
specified in the notice, the resignation shall take effect upon receipt thereof
by the Board or such officer, and the acceptance of the resignation shall not be
necessary to make it effective.
13. COMPENSATION.
No compensation shall be paid to Directors, as such, for their
services, but by resolution of the Board, a fixed sum and expenses for actual
attendance at each regular or special meeting of the Board may be authorized.
Nothing herein contained shall be construed to preclude any Director from
serving the Corporation in any other capacity and receiving compensation
therefor.
14. PRESUMPTION OF ASSENT.
A Director of the Corporation who is present at a meeting of the
Directors at which action on any corporate mater is taken, shall be presumed to
have assented to the action taken unless his dissent shall be entered in the
minutes of the meeting or unless he shall file his written dissent to such
action with the person acting as the Secretary of the meeting before the
adjournment thereof or shall forward such dissent by registered mail to the
Secretary of the Corporation immediately after the adjournment of the meeting.
Such right to dissent shall not apply to a Director who voted in favor of such
actions.
15. INFORMAL ACTION BY DIRECTORS.
Action taken by a majority of the Directors of Executive Committee
without a meeting is, nevertheless, Board or Committee action if written consent
to the action in question is signed by all the Directors or members of the
Executive Committee and filed with the minutes of the proceedings of the Board
or Committee whether done before or after the action so taken.
ARTICLE IV - OFFICERS
1. NUMBER.
The Officers of the Corporations shall be a President, a
Vice-President, a Secretary and a Treasurer, each of whom shall be elected by
the Directors. Such other Officers and Assistant Officers, as may be deemed
necessary, may be elected or appointment by the Directors. Any person may hold
two or more offices.
2. ELECTION AND TERM OFFICE.
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The Officers of the Corporation to be elected by the Directors shall be
elected annually at the first meeting of the Directors held after such meeting
of the stockholders. Each Officer shall hold office until his successor shall
have been duly elected and shall have qualified, or until his death, or until he
shall resign or shall have been removed in the manner hereinafter provided.
3. REMOVAL.
Any Officer, or Agent elected or appointed by the Directors may be
removed by the Directors whenever, in their judgment, the best interests of the
Corporation would be served thereby, but such removal shall be without prejudice
to the contract rights, if any, of the person so removed.
4. VACANCIES.
A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, may be filled by the Directors for the unexpired
portion of the term.
5. PRESIDENT.
The President shall be the principal executive officer of the
Corporation and, subject to the control of the Directors shall, in general,
supervise and control all of the business and affairs of the Corporation. The
President shall, when resent, preside at all meetings of the stockholders and of
the Directors. He may sign, with the Secretary or any other proper Officer of
the Corporation thereunto authorized by the Directors, certificates for shares
of the corporation, any deeds, mortgages, bonds, contracts, or other instruments
which the directors have authorized to be executed, except in cases where the
signing and execution thereof shall be expressly delegated by the Directors or
by these by-laws to some other office or agent of the Corporation, or shall be
required by law to be otherwise signed or executed; and, in general, shall
perform all the duties incident to the office of president and such other duties
as may be prescribed by the Directors, from time to time.
6. VICE-PRESIDENT.
In the absence of the President or in event of his death, inability or
refusal to act, the Vice-President shall perform the duties of the President
and, when so acting, shall have all the powers of, and be subject to, all the
restrictions upon the President. The Vice-President shall perform such other
duties as, from time to time, may be assigned to him by the President, or by the
Directors.
7. SECRETARY.
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The Secretary shall: keep the minutes of the Stockholders' and the
Directors' meetings in one or more books provided for that purpose; see that all
notices are duly given in accordance with the provisions of these by-laws; or,
as required, be custodian of the Corporate records and of the Seal of the
Corporation and keep a register of the post office address of each stockholder
which shall be furnished to the Secretary by such stockholder; have general
charge of the stock transfer books of the Corporation and, in general perform
all duties incident to the Office of Secretary and such other duties as, from
time to time, may be assigned to him by the President, or by the Directors.
8. TREASURER.
The Treasurer shall have charge and custody of, and be responsible for,
all funds and securities of the Corporation; receive and give receipts for
moneys due and payable to the Corporation from any source whatsoever, and
deposit all such moneys in the name of the Corporation in such banks, trust
companies or other depositories as shall be selected in accordance with these
by-laws and, in general, perform all of the duties incident to the Office of
Treasurer and such other duties as, from time to time, may be assigned to him by
the President or by the Directors. If required by the Directors, the Treasurer
shall give a bond for the faithful discharge of his duties in such sum and with
such surety or sureties as the Directors shall determine.
9. ASSISTANT SECRETARIES AND TREASURERS.
The Assistant Secretaries and Treasurers, when authorized by the Board
of Directors, shall, in the absence or disability of the Secretary or the
Treasurer, respectively perform the duties and exercise the powers of those
offices, and they shall, in general, perform such duties as shall be assigned
them by the Secretary or the Treasurer, respectively, or by the President or the
Board of Directors or the Executive Committee.
10. SALARIES.
The salaries of the Officers shall be fixed, from time to time, by the
Directors, and no Officer shall be prevented from receiving such salary by
reason of the fact that he is also a Director of the Corporation.
ARTICLE V - AUTHORIZATION FOR
EXECUTING CONTRACTS AND OTHER WRITTEN MATTERS
1. CONTRACTS.
The Board of Directors may authorize any Officer or Officers, Agent or
Agents, to enter into any contract or execute and deliver any instrument in the
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name of and on behalf of the Corporation, and such authority may be general or
confined to specific instances.
2. LOANS.
No loans shall be contracted on behalf of the Corporation and no
evidences of indebtedness shall be issued in its name unless authorized by a
resolution of the Directors. Such authority may be general or confined to
specific instances.
3. CHECKS, DRAFTS, ETC.
All checks, drafts or other offers for the payment of money, notes or
such evidences of indebtedness issued in the name of the Corporation, shall be
signed by such officer or officers, agent or agents of the Corporation and in
such manner as shall, from time to time, be determined by resolution of the
Directors.
4. DEPOSITS.
All funds of the Corporation, not otherwise employed, shall be
deposited, from time to time, to the credit of the Corporation in such banks,
trust companies or other depositories as the Directors may select.
ARTICLE VI - CERTIFICATES FOR SHARES AND THEIR TRANSFER
1. Certificates representing shares of the Corporation shall be in such form as
shall be determined by the Directors. Such certificates shall be signed by the
president and by the secretary or by such other officers authorized by law and
by the Directors.
2. All certificates for shares shall be consecutively numbered or otherwise
identified. The name and address of the stockholders, the number of shares and
date of issue shall be entered on the stock transfer book of the Corporation.
All certificates surrendered to the Corporation for transfer shall be cancelled
and no new certificate shall be issued until the former certificate for a like
number of shares shall have been surrendered and cancelled, except that in the
case of a lost, destroyed or mutilated certificate, a new one may be issued
therefor upon such a terms and indemnity to the Corporation as the Directors may
prescribe.
3. LOST CERTIFICATES. The Board of Directors or Executive Committee may
authorize the issuance of a new share certificate in place of a certificate
claimed to have been lost or destroyed, upon receipt of an affidavit of such
fact form the person claiming the loss or destruction. When authorizing such
issuance of a new certificate, the Board of Directors or Executive Committee may
require the claimant to give the Corporation a bond in such sum as it may
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direct to indemnify the corporation against loss from any claim with respect to
the certificate claimed to have been lost or destroyed; or the board of
Directors or Executive Committee may, by resolution reciting that the
circumstances justify such action, authorize the issuance of the new certificate
without requiring such a bond.
ARTICLE VII - FISCAL YEAR
The fiscal year of the Corporation shall begin on the first day of
October in each year.
ARTICLE VIII - DIVIDENDS
The Directors may, from time to time, declare, and the Corporation may
pay, dividends on its outstanding shares in the manner and upon the terms and
condition provided by law.
ARTICLE IX - SEAL
The Directors shall provide a Corporation Seal which shall be circular
in form and shall have inscribed thereon the name of the Corporation, the State
of Incorporation, and the words, "Corporate Seal".
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ARTICLE X - INDEMNIFICATION
The Corporation shall indemnify any Director, Officer, or employee, or
former Director, Officer, or employee of the Corporation, or any person who may
have served, at its request, as a Director, Officer, or employee of another
Corporation in which it owns shares of capital stock, or of which it is a
creditor, against expenses actually and necessarily incurred by him in
connection with the defense of any action, suit or proceeding in which he is
made a party by reason of being or having been such Director, Officer, or
employee, if he acted in good faith and in a manner which he reasonably believed
to be in, or not opposed to, the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in, or not opposed to,
the best interests of the Corporation, and that, with respect to any criminal
action or proceeding, he had no reasonable cause to believe that his conduct was
unlawful except in relation to matters as to which he shall be adjudged in such
action, suit, or proceeding to be liable for negligence or misconduct in the
performance of his duty to the Corporation unless and only to the extent that
the court, in which such action or suit was brought, determines upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses as the court deems proper, including: attorneys fees actually and
reasonably incurred by him in such defense, judgments, fines and amounts paid in
settlement, actually and reasonably incurred by him.
Such rights of indemnification and reimbursement shall not be deemed
exclusive of any other right to which such Director, Officer, or employee may be
entitled under any by-laws, agreement, vote of shareholders, or otherwise.
The Corporation may purchase and maintain insurance on behalf of any
person who is, or was, Director, officer, employee or agent of the Corporation
or who is, or was, serving at the request of the Corporation as a Director,
Officer, employee, or agent of another corporation, partnership, joint venture,
trust, or other enterprise against any liability asserted against him and
incurred by him in such capacity or arising out of his status as such, whether
or not the Corporation would have the power to indemnify him against such
liability under provisions of this Article.
ARTICLE XI - WAIVER OF NOTICE
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Unless otherwise provided by law, whenever any notice is required to be
given to any stockholder or Director of the Corporation under the provisions of
these by-laws or under the provisions of the Articles of Incorporation, a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
ARTICLE XII - AMENDMENTS
Except as otherwise provided herein, these by-laws may be altered,
amended or repealed and new by-laws may be adopted by the affirmative vote of
the majority of the Directors then holding office at any regular or special
meeting of the Board of Directors.
The Board of Directors shall have no power to adopt a bylaw (1)
requiring more than a majority of the voting shares for a quorum at a meeting of
shareholders, or more than a majority of the votes cast, except where higher
percentages are required by law; (2) providing for the management of the
corporation otherwise than by the Board of Directors or its Executive Committee;
(3) increasing or decreasing the number of Directors except as herein provided;
(4) classifying and staggering the election of the Directors.
EXHIBIT 10.1
SHEPHERD SURVEILLANCE SOLUTIONS, INC.
CREDIT AGREEMENT
June 28, 1996
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C> <C>
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
</TABLE>
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, Sherman & Flynn, 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.
10 Aviator Way
Ormond, Florida 32174
Attn: Thomas Makmann
Telephone No.: (904) 676-7081
Telecopy No.:
To the Lender:
Trilon Dominion Partners, L.L.C.
250 Park Avenue, Suite 2020
New York, New York 10017
Attn: Ronald W. Cantwell
Telephone No.: (212) 867-3800
Telecopy No.: (212) 867-2955
Copy to:
Pryor, Cashman, Sherman & Flynn
410 Park Avenue
New York, New York 10022
Attn: Selig D. Sacks, Esq.
Telephone No.: (212) 421-4100
Telecopy No.: (212) 326-0806
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. Thomas Makmann
--------------------------------
Name: M. Thomas Makmann
Title: President and CEO
THE LENDER: TRILON DOMINION PARTNERS, L.L.C.
By: VC Holdings, Inc., its Managing Member
By: /s/ Jack Sauer
--------------------------------
Name: Jack Sauer
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. Thomas Makmann 1,685,636
John Leone 602,013
Barry McGriff 602,013
Roger Kirkland 602,013
Dori Able 180,603
Beth Hays 180,603
Anti Oliveri 180,603
Ly Dang 84,282
Brendan Collins 60,201
John Ross 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.
250 Park Avenue
New York, New York 10017
Attention: Mr. Ronald W. Cantwell
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:
EXHIBIT 10.2
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS. UNLESS THEY ARE SOLD PURSUANT
TO RULE 144 PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION UNDER SAID
ACT, THEY MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION AND QUALIFICATION WITHOUT AN OPINION OF COUNSEL FOR THE HOLDER,
REASONABLY SATISFACTORY TO COUNSEL FOR THE COMPANY, THAT SUCH REGISTRATION AND
QUALIFICATION ARE NOT REQUIRED.
PROMISSORY NOTE
$1,298,500 June 28, 1996
FOR VALUED RECEIVED, the undersigned, SHEPHERD SURVEILLANCE SOLUTIONS,
INC., a Nevada corporation (the "Company"), hereby promises to pay to the order
of TRILON DOMINION PARTNERS, L.L.C., a Delaware limited liability company (the
"Lender"), the principal sum of ONE MILLION TWO HUNDRED NINETY EIGHT THOUSAND
FIVE HUNDRED DOLLARS ($1,298,500), in lawful money of the United States of
America, together with interest on the unpaid principal balance from day-to-day
remaining computed from the last Interest Payment Date (as such term is
hereinafter defined) until the maturity of this Note on June 28, 1999 (the
"Maturity Date") at an annual rate equal to the prime rate of Chase Manhattan
Bank, N.A., as announced from time to time (the "Prime Rate"), plus 4% (the
"Interest Rate"), at the Lender's principal place of business located at 250
Park Avenue, New York, New York 10017, or such other address as the Lender shall
notify the Company in writing.
1. For purposes of calculating interest accrued hereon at the Interest
Rate, interest on this Promissory Note (the "Note") shall be calculated on the
basis of a 360 day year.
2. Interest shall be payable quarterly in arrears on the first day of
the first month of each calendar quarter ("Interest Payment Date") for the
immediately preceding quarter commencing July 1, 1996. All outstanding principal
and all accrued and unpaid interest on this Note shall be due and payable on the
Maturity Date.
From the date hereof until the first anniversary of such date, interest
shall, at the option of the Borrower, be payable either (i) in cash, or (ii) by
capitalizing the amount of such interest and adding such amount to the then
-2-
outstanding principal amount of the Note as of such Interest Payment Date, and
interest shall continue to accrue on such additional principal amount.
3. Should the principal of, or any installment of the principal or
interest on, this Note become due and payable on any day other than a business
day, the Maturity Date thereof shall be extended to the next succeeding business
day and interest shall be payable with respect to such extension.
4. Except as herein provided, the Company waives demand for payment,
presentment, protest, notice of protest and non-payment or other notice of
default, notice of acceleration and intention to accelerate, and agrees that its
liability under this Note shall not be affected by any renewal or extension in
the time of payment hereof, or by any indulgences, or by any release or change
in any security for the payment of this Note.
5. No waiver by the Lender of any of its rights or remedies hereunder
or under any other document evidencing or securing this Note or otherwise shall
be considered a waiver of any other subsequent right or remedy of the Lender; no
delay or omission in the exercise or enforcement by the Lender of any rights or
remedies shall ever be construed as a waiver of any right or remedy of the
Lender; and no exercise or enforcement of any such rights or remedies shall ever
be held to exhaust any right or remedy of the Lender.
6. This Note is being issued pursuant to that certain Credit Agreement
dated as of the date hereof between the Company and the Lender (the "Credit
Agreement"). The terms of this Note include those stated in the Credit
Agreement, including, without limitation, the provisions in the Credit Agreement
relating to Events of Default (as such term is defined in the Credit Agreement)
and remedies. This Note is subject to all such terms, and holders of this Note
are referred to the Credit for a statement of such terms.
7. Upon the occurrence of an Event of Default, the interest rate on the
unpaid principal balance outstanding under this Note shall be equal to the
lesser of (i) the Prime Rate plus 8%, or (ii) the maximum interest rate then
permitted by law.
8. This Note is being executed and delivered, and is intended to be
performed in the State of New York. Except to the extent that the laws of the
United States may apply to the terms hereof, the substantive laws of the State
of New York shall govern the validity, construction, enforcement and
interpretation of this Note.
9. If this Note is placed in the hands of an attorney for collection,
and if it is collected through any legal proceedings at law or in equity or in
bankruptcy, receivership or other court proceedings, the Company promises to pay
all costs and expenses of collection, including, but not limited to, court cots
and the reasonable attorneys' fees of the holder hereof.
-3-
10. Whenever this Note requires or permits any consent, approval,
notice, request, or demand from one party to another, the consent, approval,
notice, request, or demand must be in writing to be effective and shall be
deemed to have been given when delivered by facsimile (with confirmed receipt)
or reliable courier or five (5) days after being deposited in the United States
mail registered or certified, return receipt requested, addressed to the party
to be notified at the address set forth below (or at such other address as may
have been designated by written notice).
11. The Company, for itself, its successors and assigns, covenants and
agrees that it will not incur any secured indebtedness or indebtedness that is
senior or pari passu to the indebtedness of the Company under this Note without
first obtaining the written consent of the holder of this Note.
The address for the Company for all purposes contained in this Note and
for the notices hereunder shall be: 10 Aviator Way, Ormond, Florida 32174,
Attention: Mr. Thomas Makmann.
The address of the Lender for all purposes contained in this Note and
for all notices hereunder shall be: 250 Park Avenue, New York, New York 10017,
Attention: Mr. Ronald W. Cantwell.
Executed as of the day and year first above written.
SHEPHERD SURVEILLANCE
SOLUTIONS, INC.
By: /s/ M. Thomas Makmann
-----------------------------
Name: M. Thomas Makmann
Title: President and CEO
EXHIBIT 10.3
NEITHER THIS WARRANT NOR THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT
HAS BEEN REGISTERED UNDER THE 1933 ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
LAWS AND NEITHER THIS WARRANT NOR THE COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT MAY BE TRANSFERRED EXCEPT AS PROVIDED IN SECTION 4 OF THIS WARRANT.
WARRANT
to Purchase Common Stock of
Shepherd Surveillance Solutions, Inc.
Expiring June 28, 2001
This Warrant certifies that Trilon Dominion Partners, L.L.C., a
Delaware limited liability company, or registered assigns (the "Holder"), is
entitled to, subject to the terms set forth below, subscribe for and purchase
from Shepherd Surveillance Solutions, Inc., a Nevada corporation (the
"Company"), 14,226,578 duly authorized, validly issued, fully paid and
nonassessable shares of the Company's common stock, $.001 par value per share
(the common stock, including any stock into which it may be changed,
reclassified, or converted, and as it may be adjusted pursuant to Section 10
below, is herein referred to as the "Common Stock"), at a purchase price per
share equal to $0.01 (the "Exercise Price"). The Warrant may be exercised at any
time, and from time to time, during the period (the "Exercise Period") from the
date hereof and ending on June 28, 2001.
This Warrant is subject to the following provisions, terms and
conditions:
Section 1. Exercise of Warrant.
To exercise this Warrant in whole or in part (but for not less than 100
shares at a time, or such lesser number of shares which may constitute the
maximum number purchasable; such number being subject to adjustment as provided
in Section 10 below), the Holder shall deliver to the Company at its principal
office in Ormond Beach, Florida, (a) a written notice, in substantially the form
of the Subscription Notice appearing at the end of this Warrant, which notice
shall specify the number of shares of Common Stock to be purchased, (b) cash or
a certified check payable
-2-
to the Company, or by cancellation of indebtedness of the Company to the Holder
hereof, if any, at the time of exercise, including any portion of the promissory
note, dated as of the date hereof, bearing interest at the rate of 12.25% per
annum, in a principal amount of $1,298,500, made by the Company in favor of the
Holder, in an amount equal to the aggregate purchase price of the number of
shares of Common Stock being purchased, and (c) this Warrant. The Company shall
as promptly as practicable, and in any event within 15 days thereafter, execute
and deliver or cause to be executed and delivered, in accordance with such
notice, a stock certificate or certificates representing the aggregate number of
shares of Common Stock specified in such notice. The stock certificate or
certificates so delivered shall be in the denomination of 100 shares each or
such lesser or greater denomination as may be specified in such notice and shall
be issued in the name of the Holder or, provided that the Holder complies with
Section 4 hereof applicable to the transfer of this Warrant or Common Stock
purchasable pursuant hereto, such other name as shall be designated in such
notice. Such stock certificate or certificates shall be deemed to have been
issued and the Holder or any other person so designated to be named therein
shall be deemed for all purposes to have become a holder of record of such
shares immediately prior to the close of business on the date such notice is
received by the Company as aforesaid. If this Warrant shall have been exercised
only in part, the Company shall, at the time of delivery of said stock
certificate or certificates, deliver to the Holder a new Warrant evidencing the
rights of the Holder to purchase the remaining shares of Common Stock called for
by this Warrant, which new warrant shall in all other respects be identical to
this Warrant, or, at the request of the Holder, appropriate notation may be made
on this Warrant and the same returned to the Holder. The Company shall pay all
expenses, taxes and other charges payable in connection with the preparation,
issue and delivery of such stock certificates and new warrants, except that, in
case such stock certificates or new Warrants shall be registered in a name or
names other than the name of the Holder, funds sufficient to pay all stock
transfer taxes that are payable upon the issuance of such stock certificates or
new Warrants shall be paid by the Holder at the time of delivering the notice of
exercise mentioned above.
All shares of Common Stock issued upon the exercise of this Warrant
shall be validly issued, fully paid and nonassessable and, if the Common Stock
is then listed on a national securities exchange or quoted on an automated
quotation system, shall be duly listed or quoted thereon.
The Company shall not be required upon any exercise of this Warrant to
issue a certificate representing any fraction of a share of Common Stock, but,
in lieu thereof, shall pay to the Holder cash in an amount equal to a
corresponding fraction (calculated to the nearest 1/100 of a share) of the
purchase price of one share of Common Stock as of the date of receipt by the
Company of notice of exercise of this Warrant.
Section 1A. Right to Convert Warrant.
The Holder shall have the right to convert this Warrant (the
"Conversion Right") at any time prior to the expiration of the Exercise Period,
into shares of Common Stock in accordance with this Section 2. Upon exercise of
the Conversion Right, the Company shall deliver to the Holder (without payment
by the Holder of the Exercise Price) that number of shares of Common Stock equal
to the quotient obtained by dividing (x) the value of this Warrant at the time
the Conversion Right is exercised (determined by subtracting the aggregate
Exercise Price for this Warrant (in effect immediately prior to the exercise of
the Conversion Right) from the amount obtained by multiplying the number of
shares of Common Stock issuable upon the exercise of this Warrant by the Closing
Price (as defined below) immediately prior to the exercise of the Conversion
Right) by (y) the Closing Price of one share of Common Stock immediately prior
to the exercise of the Conversion Right.
For purposes hereof, the "Closing Price" shall mean the closing sale
price (or the average of the closing bid and ask prices if there is no closing
sale price reported) of the Common Stock on the date specified on the principal
national securities exchange on which the Common Stock is listed or admitted to
trading, or, if the Common Stock is not listed or admitted to trading on any
national securities exchange on such date, the average of the highest reported
bid and lowest reported asked prices as furnished by the National Association of
Securities Dealers, Inc. through NASDAQ or a similar organization if NASDAQ is
no longer reporting such information. If there is no reported bid and asked
price for the Common Stock, the "Closing Price" shall be the fair market value
of the Common Stock on the date specified, as determined in good faith by the
Company and the Holder, or, if the Company and the Holder cannot agree, by an
independent appraiser mutually selected by the Company and the holder.
The Conversion Right may be exercised by the Holder, at any time or
from time to time, prior to its expiration, on any business day by delivering a
written notice (the "Conversion Notice") to the Company at the offices of the
Company, exercising the Conversion Right and specifying (i) the total number of
shares of Common Stock the Holder will purchase pursuant to the conversion and
(ii) a place and date not less than two nor more than 20 business days from the
date of the Conversion Notice for the closing of such purchase.
At any closing under this Section 2, (i) the Holder will surrender this
Warrant and (ii) the Company will deliver to the Holder a certificate or
certificates for the number of shares of Common Stock issuable upon such
conversion.
Section 2. Right to Convert Warrant.
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The Holder shall have the right to convert this Warrant (the
"Conversion Right") at any time prior to the expiration of the Exercise Period,
into shares of Common Stock in accordance with this Section 2. Upon exercise of
the Conversion Right, the Company shall deliver to the Holder (without payment
by the Holder of the Exercise Price) that number of shares of Common Stock equal
to the quotient obtained by dividing (x) the value of this Warrant at the time
the Conversion Right is exercised (determined by subtracting the aggregate
Exercise Price for this Warrant (in effect immediately prior to the exercise of
the Conversion Right) from the amount obtained by multiplying the number of
shares of Common Stock issuable upon the exercise of this Warrant by the Closing
Price (as defined below) immediately prior to the exercise of the Conversion
Right) by (y) the Closing Price of one share of Common Stock immediately prior
to the exercise of the Conversion Right.
For purposes hereof, the "Closing Price" shall mean the closing sale
price (or the average of the closing bid and ask prices if there is no closing
sale price reported) of the Common Stock on the date specified on the principal
national securities exchange on which the Common Stock is listed or admitted to
trading, or, if the Common Stock is not listed or admitted to trading on any
national securities exchange on such date, the average of the highest reported
bid and lowest reported asked prices as furnished by the National Association of
Securities Dealers, Inc. through NASDAQ or a similar organization if NASDAQ is
no longer reporting such information. If there is no reported bid and asked
price for the Common Stock, the "Closing Price" shall be the fair market value
of the Common Stock on the date specified, as determined in good faith by the
Company's Board of Directors.
The Conversion Right may be exercised by the Holder, at any time or
from time to time, prior to its expiration, on any business day by delivering a
written notice (the "Conversion Notice") to the Company at the offices of the
Company, exercising the Conversion Right and specifying (i) the total number of
shares of Common Stock the Holder will purchase pursuant to the conversion and
(ii) a place and date not less than two nor more than 20 business days from the
date of the Conversion Notice for the closing of such purchase.
At any closing under this Section 2, (i) the Holder will surrender this
Warrant and (ii) the Company will deliver to the Holder a certificate or
certificates for the number of shares of Common Stock issuable upon such
conversion.
Section 3. Transfer, Division and Combination.
The Company agrees to maintain at its principal office in Ormond Beach,
Florida, books for the registration and transfer of this Warrant, and, subject
to the provisions of Section 4 hereof, this Warrant and all rights hereunder are
transferable, in whole or in part, on such books at such office, upon surrender
of this Warrant at such office, together with a written assignment of this
Warrant duly executed by the Holder or his agent or attorney and funds
sufficient to pay
-4-
any stock transfer taxes payable upon the making of such transfer. Upon such
surrender and payment, the Company shall execute and deliver a new Warrant or
Warrants in the name of the assignee or assignees and in the denominations
specified in such instrument of assignment, and this Warrant shall promptly be
canceled. A Warrant may be exercised by a new holder for the purchase of shares
of Common Stock without having a new Warrant issued.
This Warrant may be divided or combined with other Warrants upon
presentation hereof at such principal office in Ormond Beach, Florida, together
with a written notice specifying the names and denominations in which new
Warrants are to be issued, signed by the Holder or his agent or attorney.
Subject to compliance with the preceding paragraph as to any transfer that may
be involved in such division or combination, the Company shall execute and
deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be
divided or combined in accordance with such notice.
Section 4. Restrictions on Exercise and Transfer of Warrants
and Common Stock
The Holder, by acceptance hereof, acknowledges that this Warrant and,
to the extent not registered under the 1933 Act of Securities, as amended (the
"1933 Act"), any Common Stock purchased or acquired pursuant hereto is being or
will be acquired solely for the Holder's own account and not as a nominee for
any other party, and with a current investment intent and not with a view to
distribution thereof.
This Warrant shall be exercisable or convertible (a) only under
circumstances such that the issue of Common Stock issuable upon such exercise or
conversion is exempt from the requirements of registration under the 1933 Act
and any applicable state securities law or (b) upon registration of such Common
Stock in compliance therewith. This Warrant shall be transferable only under
circumstances such that the transfer is exempt from the requirements of
registration under the 1933 Act and any applicable state securities law. By
acceptance hereof, the Holder agrees to comply with such laws.
Before any transfer or attempted transfer of all or any part of this
Warrant or such Common Stock, the Holder shall deliver to the Company written
notice of its intention so to do briefly describing the manner of any such
proposed transfer. Promptly after receiving such written notice, the Company
shall present copies thereof to Company counsel and, if the Company requests the
Holder to designate special counsel therefor, to any special counsel designated
by the Holder that is knowledgeable as to securities matters and reasonably
satisfactory to the Company. If, in the opinion of counsel for the Company and
counsel, if any, for the Holder, the proposed transfer may be effected without
registration under the 1933 Act and any applicable state securities law of any
such securities, the Company, as promptly as practicable, shall notify the
Holder of such opinion, whereupon the securities proposed to be transferred may
be transferred in accordance with the terms of such notice. The
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Company shall not be required to effect any such transfer before the receipt of
such favorable opinion or opinions of the effectiveness of registration.
Section 5. Covenant to Reserve Shares of Common Stock.
The Company covenants and agrees that it will at all times reserve and
set apart and have, free from preemptive rights, a number of shares of
authorized but unissued Common Stock, or other stock or securities deliverable
pursuant to this Warrant, sufficient to enable it at any time to fulfill all its
obligations hereunder.
Section 6. Notices.
In the event that:
(a) the Company proposes to pay any dividend payable in stock
(of any class or classes) or in Convertible Securities, as defined
below, upon its Common Stock or make any distribution (other than
ordinary cash dividends) to the holders of its Common Stock,
(b) the Company proposes to grant to the holders of its Common
Stock generally any rights or options (excluding any options granted to
any employee, director, officer, contractor or consultant of the
Company pursuant to any plan approved by the Board of Directors of the
Company),
(c) the Company proposes to effect any capital reorganization
or reclassification of capital stock of the Company,
(d) the Company proposes to consolidate with, or merge into,
any other corporation or to transfer its property as an entirety or
substantially as an entirety, or
(e) the Company proposes to effect the liquidation,
dissolution or winding up of the Company,
then the Company shall cause notice of any such intended action to be given to
the holder of this Warrant not less than 30 days before date on which the
transfer books of the Company shall close or a record shall be taken for such
stock dividend, distribution or granting of rights or options, or the date when
such capital reorganization, reclassification, consolidation, merger, transfer,
liquidation, dissolution or winding up shall be effective, as the case may be.
Any notice or other document required or permitted to be given or
delivered to the holder of this Warrant shall be delivered by facsimile
transmission, reliable courier or first-class mail postage prepaid to the Holder
at the last address shown on the books of the Company maintained for the
registry and transfer of this Warrant. Any notice or other document required or
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permitted to be given or delivered to holders of record of Common Stock issued
pursuant to this Warrant shall be delivered by facsimile, reliable courier or
first-class mail postage prepaid to Holder at Holder's address as the same
appears on the stock records of the Company. Any notice or other document
required or permitted to be given or delivered to the Company shall be delivered
by facsimile transmission, reliable courier or first-class mail postage prepaid,
to the principal office of the Company in Ormond Beach, Florida or delivered to
the office of one of the Company's executive officers at such address, or such
other address as shall have been furnished by the Company to the holders of
record of such Warrants and the holders of record of such Common Stock.
Section 7. Limitation of Liability; Not Shareholders.
No Provision of this Warrant shall be construed as conferring upon the
Holder the right to vote or to consent or to receive dividends or to receive
notice as a shareholder in respect of meetings of shareholders for the election
of directors of the Company or any other matter whatsoever as shareholders of
the Company. No provision hereof, in the absence of affirmative action by the
Holder to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the Holder, shall give rise to any liability of Holder
for the purchase price or as a shareholder of the Company, whether such
liability is asserted by the Company, creditors of the Company or others.
Section 8. Loss, Destruction, etc., of Warrant.
Upon receipt of evidence satisfactory to the Company of the loss,
theft, mutilation or destruction of any Warrant, and in the case of any such
loss, theft or destruction upon delivery of a bond of indemnity in such form and
amount as shall be reasonably satisfactory to the Company, or in the event of
such mutilation upon surrender and cancellation of such Warrant, the Company
will make and deliver a new warrant, of like tenor, in lieu of such lost,
stolen, destroyed or mutilated Warrant. Any Warrant issued under the provisions
of this Section 8 in lieu of any Warrant alleged to be lost, destroyed or
stolen, or of any mutilated Warrant, shall constitute an original contractual
obligation on the part of the Company.
Section 9. Exercise and Expiration of Warrant.
This Warrant shall become exercisable immediately upon its issuance to
the initial Holder. The expiration time and date of the Warrant shall be 5:00
p.m. New York, New York time, June . 2001.
Section 10. Adjustment of Number of Shares Issuable Pursuant to
this Warrant.
The number of shares of Common Stock that may be subscribed for and
purchased hereunder shall be subject to adjustment from time to time as follows:
-7-
(a) Effect of "Split-ups" and "Split-downs"; Stock Dividends. If at any
time or from time to time the Company shall subdivide as a whole, by
reclassification, by the issuance of a stock dividend on the Common Stock
payable in Common Stock, or otherwise, the number of shares of Common Stock,
with or without par value, that may be purchased hereunder shall be increased
proportionately as of the effective or record date of such action. The issuance
of such a stock dividend shall be treated as a subdivision of the whole number
of shares of Common Stock outstanding immediately before the record date for
such dividend into a number of shares equal to such whole number of shares so
outstanding plus the number of shares issued as a stock dividend. In case at any
time or from time to time the Company shall combine as a whole, by
reclassification or otherwise, the number of shares of Common Stock then
outstanding into a lesser number of shares of Common Stock, with or without par
value, the number of shares of Common Stock that may be purchased hereunder
shall be reduced proportionately as of the effective date of such action.
(b) Effect of Certain Dividends. If on any date the Company makes a
distribution to holders of its Common Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of its indebtedness or assets, the number
of shares of Common Stock purchasable hereunder shall be adjusted as at the
close of business on said date to a number determined by multiplying the number
of shares purchasable hereunder by a fraction, the numerator of which shall be
the Current Price (as defined herein) immediately prior to such distribution,
and the denominator of which shall be such Current Price minus the fair market
value (as determined in good faith by the Board of Directors of the Company,
provided that a majority of the independent directors of the Board shall have
concurred, or upon the failure of such Board of Directors to act in good faith
with respect thereto, 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 Holder) of the portion
of the assets or evidences of indebtedness so to be distributed to one share of
Common Stock.
(c) Effect of Merger or Consolidation. If the Company shall, while this
Warrant remains outstanding, enter into any consolidation with or merge into any
other corporation wherein the Company is not the continuing corporation, or
wherein cash or securities of a corporation other than the Company are
distributable to holders of Common Stock of the Company, or sell or convey its
property as an entirety or substantially as an entirety, and in connection with
such consolidation, merger, sale or conveyance, shares of stock or cash or other
securities shall be issuable or deliverable in exchange for the Common Stock of
the Company, the Holder shall thereafter be entitled to purchase pursuant to
this Warrant (in lieu of the number of shares of Common Stock that the Holder
would have been entitled to purchase or acquire immediately before the effective
date of such consolidation, merger, sale or conveyance) the shares of stock or
cash or other securities to which such number of shares of Common Stock would
-8-
have been entitled at the time of such consolidation, merger, sale or
conveyance, at an aggregate purchase price equal to that which would have been
payable if such number of shares of Common Stock had been purchased upon
exercise of this Warrant immediately prior thereto. In case of any such
consolidation, merger, sale or conveyance, appropriate provision (as determined
by a resolution of the Board of Directors of the Company) shall be made with
respect to the rights and interests thereafter of the Holder, to the end that
all the provisions of this Warrant (including adjustment provisions) shall
thereafter be applicable as nearly as reasonably practicable, in relation to
such stock or other securities.
(d) Reorganization and Reclassification. In case of any capital
reorganization or any reclassification of the capital stock of the Company
(except as provided in Sections 10(a) and (c) hereof) while this Warrant remains
outstanding, the Holder shall thereafter be entitled to purchase pursuant to
this Warrant (in lieu of the number of shares of Common Stock that the Holder
would have been entitled to purchase immediately before such reorganization or
reclassification) the shares of stock of any class or classes or other
securities or cash or property to which such number of shares of Common Stock
would have been entitled if such shares of Common Stock had been purchased
immediately before such reorganization or reclassification. In case of any such
reorganization or reclassification, appropriate provision (as determined by
resolution of the Board of Directors of the Company) shall be made with respect
to the rights and interests thereafter of the Holder, to the end that all the
provisions of this Warrant (including adjustment provisions) shall thereafter be
applicable, as nearly as reasonably practicable, in relation to such stock or
other securities or property.
(e) Adjustment of Number of Shares after a "Diluting Issue". If on any
date on or after the date of this Warrant any additional shares of Common Stock
(other than shares of Excluded Stock) (hereinafter, "Equity Stock") shall be
issued for a consideration per share (or, in the case of any transactions
contemplated in paragraphs (2) or (3) of this Section 10(e), shall be deemed to
be issued for a Presumed Consideration per share) less than the Current Price on
the date such Common Stock was issued or deemed to have been issued, the number
of shares of Common Stock purchasable hereunder shall be adjusted as at the
close of business on such date to a number equal to the product (computed to the
nearest ten thousandth of a share) resulting from the multiplication of (i) the
total number of shares of Common Stock purchasable hereunder immediately before
such adjustment by (ii) a fraction determined as follows (and in such event, the
number of shares of Common Stock reserved for issuance upon conversion shall be
appropriately and concurrently increased):
(x) the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issuance, plus the
number of shares of Common Stock issued or issuable in connection with
such Equity Stock offering, and
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(y) the denominator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issuance, plus the
number of shares of Common Stock which the aggregate consideration
received by the Company for such Equity Stock so offered would purchase
at the then Current Price.
For the purpose of this Section 10(e), the following provisions shall
be applicable with respect to the issuance of additional shares of Common Stock
and the computation set forth in the immediately preceding paragraph:
(1) Stock Dividends, etc. In case any additional shares of
Common Stock shall be issued as a dividend on Common Stock, the number
of shares of Common Stock purchasable hereunder shall be adjusted as
provided in Section 10(a) hereof.
In case any additional shares of Common Stock shall be issued
as a dividend on any class of stock of the Company other than Common
Stock, or in case any obligations or stock convertible into or
exchangeable for shares of Common Stock (such convertible or
exchangeable obligations or stock being hereinafter called "Convertible
Securities") shall be issued as a dividend on any class of stock of the
Company, such shares of Common Stock or Convertible Securities shall be
deemed to have been issued without consideration on the day next
succeeding the date for the determination of stockholders entitled to
such dividend.
(2) Rights or Options below Current Price. In case the Company
shall on or after the date of this Warrant grant any rights or options
(other than those exercisable for Excluded Stock) to subscribe for or
to purchase additional shares of Common Stock or Convertible
Securities, and the Presumed Consideration per share received and
receivable by the Company for such additional shares under such rights
or options or pursuant to the terms of such Convertible Securities
shall be less than the Current Price in effect immediately prior to the
time of the granting of such rights or options, the maximum number of
additional shares of Common Stock issuable pursuant to such rights or
options or necessary to effect the conversion or exchange of all such
Convertible Securities shall be deemed to have been issued as of the
date of the granting of such rights or options, and the Company shall
be deemed to have received the Presumed Consideration therefor. No
adjustment (except as provided in paragraph (4) of this Section 10(e))
shall be made upon the actual issuance of Common Stock upon the
exercise of rights or options referenced in this paragraph (2) or the
conversion of Convertible Securities referenced in this paragraph (2).
(3) Securities Convertible below Current Price. In case:
(i) the Company shall issue any Convertible
Securities (other than those convertible into Excluded Stock
or
-10-
pursuant to the exercise of rights or options therefor in
respect of which an adjustment shall have theretofore been
made under the foregoing paragraph (2)), and
(ii) the Presumed Consideration per share for
additional shares of Common Stock issuable pursuant to the
terms of such Convertible Securities shall be less than the
Current Price in effect immediately prior to the time of the
issuance of such Convertible Securities,
then the issuance of such Convertible Securities shall be deemed to be
an issuance (as of the date of issuance of such Convertible Securities)
of the maximum number of additional shares of Common Stock necessary to
effect the conversion or exchange of all such Convertible Securities,
and the Company shall be deemed to have received the Presumed
Consideration therefor as of the date of issuance of such Convertible
Securities. No further adjustment, except as provided in paragraph (4)
of this Section 10(e), shall be made upon the actual issuance of Common
Stock upon the conversion of Convertible Securities.
(4) Superseding Adjustment of Number of Shares of Common Stock
Purchasable Hereunder. If, at any time and from time to time after any
adjustment of the shares of Common Stock purchasable hereunder shall
have been made on the basis of shares of Common Stock deemed to be
issued by reason of the provisions of the foregoing paragraphs (2) or
(3) of this Section 10(e) on the basis of the granting of certain
rights or options or the issuance of certain Convertible Securities, or
after any new adjustments of the number of shares of Common Stock
purchasable hereunder shall have been made on the basis of shares of
Common Stock deemed to be issued by reason of the provisions of this
paragraph (4), such rights or options or the right of conversion or
exchange in any such Convertible Securities (for which, or purchased
pursuant to any rights or options for which, such an adjustment shall
previously have been made) shall expire, and a portion of such rights
or options, or the right of conversion or exchange in respect of a
portion of such Convertible Securities, as the case may be, shall not
have been exercised, then such previous adjustment shall be rescinded
and annulled and the shares of Common Stock that were deemed to have
been issued by virtue of the computation made in connection with the
adjustment so rescinded and annulled, shall no longer be deemed to have
been issued by virtue of such computation. Thereupon, a recomputation
shall be made of the effect of such rights or options or such
Convertible Securities on the basis of:
(i) treating the number of additional shares of
Common Stock, if any, theretofore actually issued pursuant to
the exercise of such expired rights or options or such expired
right of conversion or exchange, as having been issued on the
date or dates
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of such exercise for the consideration actually received
therefor (computed as provided in paragraph (6) of this
Section 10(e)); and
(ii) treating the maximum number of additional shares
of Common Stock, if any, thereafter issuable pursuant to the
conversion or exchange of any Convertible Securities actually
issued or issuable pursuant to the previous exercise of such
rights or options as having been issued as of the date of the
granting of such rights or options and treating the Presumed
Consideration therefor as received as of such date;
and, on such basis, such new adjustment, if any, of the number of
shares of Common Stock purchasable hereunder shall be made as may be
required by the first paragraph of this Section 10(e), which new
adjustment shall supersede the previous adjustment so rescinded and
annulled for the Warrant exercised after such new adjustment.
(5) Effect of "Split-up" or "Split-down" on "Deemed Issued"
Shares. Upon the effective or record date for any subdivision or
combination of the Common Stock of the character described in Section
10(a) hereof, including the issuance of a stock dividend which is
treated as such a subdivision under paragraph (1) of this Section
10(e), the number of the shares of Common Stock which are at the time
deemed to have been issued by virtue of paragraphs (2), (3) or (4) of
this Section 10(e), but have not actually been issued, shall be deemed
to be increased or decreased proportionately.
(6) Computation of Consideration and Presumed Consideration.
For the purposes of this Section 10:
(i) The consideration received by the Company upon
the actual issuance of additional shares of Common Stock shall
be deemed to be the sum of the amount of cash and the fair
value of property (as determined in good faith by the Board of
Directors of the Company, provided that a majority of the
independent directors of the Board shall have concurred, or
upon the failure of such Board of Directors to act in good
faith with respect thereto, 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 Holder as at the time of
issue or "deemed issue" in the case of the following paragraph
(ii)) received or receivable by the Company as the
consideration or part of the consideration (v) at the time of
issuance of the Common Stock, (w) for the issuance of any
rights or options upon the exercise or conversion of which
such Common Stock was issued, (x) for the issuance of any
rights or options to purchase Convertible Securities upon the
conversion of which such Common Stock was issued, (y) for the
issuance of the Convertible
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Securities upon conversion of which such Common Stock was
issued and (z) at the time of the actual exercise of such
rights, options or conversion privileges upon the exercise or
conversion of which such Common Stock was issued, in each case
without deduction for commissions and expenses incurred by the
Company for any underwriting or, or otherwise in connection
with the issue or sale of, such rights, options, Convertible
Securities or Common Stock, but after deduction of any sums
paid by the Company in cash upon the exercise of, and pursuant
to, such rights, options or conversion privileges in respect
of fractional shares of Common Stock; and
(ii) The consideration deemed to have been received
by the Company for additional shares of Common Stock deemed to
be issued pursuant to rights, options and conversion
privileges by reason of transactions or the character
described in paragraphs (2), (3) and (4)(ii) of this Section
10(e) (herein called the "Presumed Consideration" therefor)
shall be the consideration (determined as provided in the
foregoing paragraph (i)) that would be received or receivable
by the Company at or before the actual issue of such shares of
Common Stock so deemed to be issued, if all rights, options
and conversion privileges necessary to effect the actual issue
of the number of shares deemed to have been issued had been
exercised (successively exercised in the case of rights or
options to purchase Convertible Securities), and the minimum
consideration received or receivable by the Company upon such
exercise had been received; all computed without regard to the
possible future effect of anti-dilution provisions on such
rights, options and/or conversion privileges.
(f) Statement of Adjustment of Number of Shares Purchasable Hereunder
and Current Price. Whenever the number of shares of Common Stock purchasable
hereunder is adjusted pursuant to any of the foregoing provisions of this
Section 10, the Company shall promptly prepare a written statement signed by the
chief executive officer of the Company, setting forth the adjustment in the
number of shares purchasable hereunder, determined as provided in this Section,
and the amount of the then effective Current Price, and in reasonable detail the
facts requiring such adjustment and the calculation thereof. Such statement
shall be filed among the permanent records of the Company and a copy thereof
shall be furnished to the Holder without request and shall at all reasonable
times during business hours be open to inspection by the Holder. The Company
shall also promptly cause a notice, stating that such an adjustment has been
effected and setting forth the increased or decreased number of shares
purchasable and the amount of the then effective Current Price, to be delivered
by facsimile, reliable courier or first-class mail postage prepaid to the
Holder.
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(g) Determination by the Board of Directors. All determinations by the
Board of Directors of the Company under the provisions of this Section 10 shall
be made in good faith with due regard to the interests of the Holder and the
other holders of securities of the Company and in accordance with good financial
practice, and all valuations made by the Board of Directors of the Company under
the terms of this Section 10 must be made with due regard to any market
quotations of securities involved in, or related to, the subject of such
valuation.
(h) Definitions. For all purposes of this Section 10 and this Warrant,
unless the context otherwise requires, the following terms have the following
respective meanings:
"Common Stock": (i) the Company's presently authorized Common
Stock as such class exists on the date of this Warrant; and (ii) stock
of the Company of any class thereafter authorized that ranks, or is
entitled to a participation, as to assets or dividends, substantially
on a parity with Common Stock.
"Company": Shepherd Surveillance Solutions, Inc., a Nevada
corporation, and any other corporation assuming the Company's
obligations with respect to this Warrant pursuant to this Section 10.
"Convertible Securities": the meaning specified in Section
10(e)(1).
"Current Price": per share of Common Stock, the amount equal
to the quotient resulting from dividing (i) the aggregate Exercise
Price herein provided by (ii) the number of shares (including any
fractional share) of Common Stock purchasable hereunder on such date.
The Current Price on the date of the issuance of this Warrant is $0.01
per share of Common Stock.
"Excluded Stock": shares of Common Stock issued (i) upon
exercise of this Warrant, (ii) in respect of which an adjustment is
required to be made pursuant to Section 10(a), (b), (c) or (d) hereof,
(iii) pursuant to the exercise or conversion of any options, warrants,
convertible securities or other securities issued and outstanding on
the date hereof, (iv) to any employee, director, officer, contractor or
consultant of the Company pursuant to an approval of the Board of
Directors of the Company or pursuant to any plan approved by the Board
of Directors of the Company, (v) in connection with an acquisition of a
business by the Company as a result of which the Company owns in excess
of 50% of the voting power with respect to such business or (vi) upon
the closing of an underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933 (or any
successor statute) covering the offer and sale of Common Stock (or of
any equity security that is part of a unit that includes Common Stock)
for the account of the Company.
-14-
"Presumed Consideration": the meaning specified in Section
10(e)(6)(ii).
Section 11. Registration Rights.
(a) Registrable Stock. As used in this Section 11, the term
"Registrable Stock" shall mean (i) all shares of Common Stock that may be issued
upon exercise of this Warrant (and all shares of Common Stock that may
thereafter be issued in respect of such Warrant) that is from time to time
outstanding.
References in this Warrant to rules, regulations and forms promulgated
by the Securities and Exchange Commission shall include rules, regulations and
forms succeeding to the functions thereof, whether or not bearing the same
designation.
The rights and obligations of the Company and the Holder with respect
to the Registrable Stock set forth in this Section 11 shall supersede any
registration rights and obligations of the Company and the Holder existing prior
to the date hereof with respect to the Registrable Stock.
(b) Request for Registration. If the Company shall receive a written
request (specifying that it is being made pursuant to this Section 11(b)), at
any time from the holders of more than 50% of the Registrable Stock that the
Company file a registration statement under the 1933 Act, or a similar document
pursuant to any other statute then in effect corresponding to the 1933 Act
covering the registration of at least 20% of the Registrable Stock, then the
Company shall promptly notify all other holders of Registrable Stock of such
request and shall use its reasonable best efforts to cause all Registrable Stock
(and any other securities of the Company that such holders may own) that holders
have requested be registered to be registered under the 1933 Act.
Notwithstanding the foregoing, (i) the Company shall not be obligated
to effect a registration pursuant to this Section 11(b) during the period
starting with the date 60 days prior to the Company's estimated date of filing
of, and ending on a date 180 days following the effective date of a registration
statement pertaining to an underwritten public offering or securities for the
account of the Company, provided that no other selling stockholder has the right
to exercise demand registration rights during such time period and the Company
is actively employing in good faith all reasonable efforts to cause such
registration statement to become effective and that the Company's estimate of
the date of filing such registration statement is made in good faith; (ii) if
the Company shall furnish to such holders a certificate signed by the chief
executive officer of the Company stating that in the good faith judgment of the
Board of Directors it would be seriously detrimental to the Company or its
shareholders for a registration statement to be filed in the near future, then
the Company's obligation to use its best efforts to file a registration
statement shall be deferred for a period not to exceed six months, (iii) the
Company shall not be obligated to
-15-
effect a registration pursuant to this Section 11(b) relating to a delayed or
continuous offering under Rule 415 of the 1933 Act (or any successor rule
thereunder); provided, however, that a registration on Form S-3 may be effected
at such time if requested by such holders and if the Company is entitled to use
Form S-3 to register such shares.
The Company shall not be obligated to effect more than three
registrations pursuant to this Section 11(b). The registration statement filed
pursuant to this Section 11(b) may, subject to the provisions hereof, include
other securities of the Company with respect to which registration rights have
been granted, and may include securities of the Company being sold for the
account of the Company.
(c) Company Registration. Subject to Section 11(g), if at any time the
Company proposes to register any of its Common Stock under the 1933 Act in
connection with the public offering of such securities solely for cash on a form
that would also permit the registration of the Registrable Stock, the Company
shall, each such time and without limitation as to the number of times, promptly
give each holder of Registrable Stock written notice of such determination. Upon
the written request of any holder, given within 20 days after mailing of any
such notice by the Company, the Company shall use its reasonable best efforts to
cause to be registered under the 1933 Act all of the Registrable Stock (and any
other securities of the Company that such holders may own) that each such holder
has requested be registered.
(d) Obligations of the Company. Whenever required under Sections 11(b),
11(c) or 11(j) to use its reasonable best efforts to effect the registration of
any Registrable Stock, the Company shall, as expeditiously as reasonably
possible:
(1) prepare and file with the Securities and Exchange
Commission a registration statement with respect to such Registrable
Stock and use its reasonable best efforts to cause such registration
statement to become and remain effective for no more than 180 days at
the Company's expense, provided, however, that the holders of
Registrable Securities may extend the effectiveness of any such
registration statement at their own cost and expense;
(2) prepare and file with the Securities and Exchange
Commission such amendments and supplements to such registration
statement and the prospectus used in connection with such registration
statement as may be necessary to comply with the provisions of the 1933
Act with respect to the disposition of all securities covered by such
registration statement;
(3) furnish to the holders of Registrable Stock such numbers
of copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the 1933 Act, and such other
documents as they
-16-
may reasonably request in order to facilitate the disposition of
Registrable Stock owned by them; and
(4) use its reasonable best efforts to register and qualify
the securities covered by such registration statement under such other
securities or Blue Sky Laws of such jurisdictions as shall be
reasonably appropriate for the distribution of the securities covered
by the registration statement; provided, that the Company shall not be
required in connection therewith or as a condition thereto to qualify
to do business or to file a general consent to service of process in
any such states or jurisdictions; and further, provided, that if any
jurisdiction in which the securities shall be qualified shall require
that expenses incurred in connection with the qualification of the
securities in that jurisdiction be borne by selling shareholders, then
such expenses shall be payable by selling shareholders pro rata, to the
extent required by such jurisdiction.
(e) Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 11 that
the holders of Registrable Stock shall furnish to the Company such information
regarding them, the Registrable Stock held by them and the intended method of
disposition of such securities as the Company shall reasonably request and as
shall be required in connection with the action to be taken by the Company.
(f) Expenses of Registration. All expenses incurred in connection with
a registration pursuant to Sections 11(b) or 11(c) (excluding underwriters'
discounts and commissions), including, without limitation, all registration and
qualification fees, printers, and accounting fees, fees and disbursements of
counsel for the Company and the reasonable fees and disbursements of one counsel
for the selling holders, shall be borne by the Company; provided, however, that
the Company shall not be required to pay for any expenses of any registration
proceeding begun pursuant to Section 11(b) if the registration request is
subsequently withdrawn, unless the holders agree to forfeit their right to
demand registration pursuant to Section 11(b).
(g) Underwriting Requirements. (i) In connection with any offering
initiated by the Company involving an underwriting of shares being issued by the
Company, the Company shall not be required under Section 11(c) to include any of
the holders' Registrable Stock in such underwriting unless they accept the terms
of the underwriting as agreed upon between the Company and the underwriters
selected by it, and then only in such quantity as will not, in the written
opinion of the underwriters, jeopardize the success of the offering by the
Company. If the total amount of securities that all holders request to be
included in such offering exceeds the amount of securities that the underwriters
reasonably believe compatible with the success of the offering, the Company
shall only be required to include in the offering so many of the securities of
the selling holders as the underwriters believe will not jeopardize the success
of the offering, shall so advise all selling holders of Registrable Stock and
the number of shares of securities that are entitled to be included in the
offering
-17-
and underwriting shall be allocated first, to the Company for securities being
sold for its own account, second, among all selling holders of Registrable Stock
and other securities of the Company held by such holders and, third, among all
other selling stockholders, in each case in proportion, as nearly as
practicable, to the respective total amounts of securities owned by said selling
holders of Registrable Stock and other selling stockholders. If any selling
holder of Registrable Stock or any other selling stockholder disapproves of the
terms of any such underwriting, he, she or it may elect to withdraw therefrom by
written notice to the Company and the underwriter.
(ii) In connection with any offering initiated by any holders of
Registrable Stock involving an underwriting of shares being sold by such holders
of Registrable Stock, such holders shall not be required under Section 11(b) to
include any shares being issued by the Company or sold by any other selling
stockholders in such underwriting unless the Company and such other selling
stockholders accept the terms of the underwriting as agreed upon between such
holders of Registrable Stock and the underwriters selected by it and reasonably
acceptable to the Company, and then only in such quantity as will not, in the
written opinion of the underwriters, jeopardize the success of the offering by
such holders. If the total amount of securities that all holders request to be
included in such offering exceeds the amount of securities that the underwriters
reasonably believe compatible with the success of the offering, the holders of
Registrable Stock shall only be required to include in the offering so many of
the securities of the Company as the underwriters believe will not jeopardize
the success of the offering, shall so advise the Company and such other selling
stockholders, and the number of shares of securities that are entitled to be
included in the offering and underwriting shall be allocated first, among all
such selling holders of Registrable Stock and other securities of the Company
held by such holders, second, to the Company for securities being sold for its
own account and, third, among all other selling stockholders, in each case in
proportion, as nearly as practicable, to the respective total amounts of
securities owned by such other selling stockholders. If the Company or any other
selling stockholder disapproves of the terms of any such underwriting, he, she
or it may elect to withdraw therefrom by written notice to the holders of
Registrable Stock and the underwriter.
(h) Delay of Registration. No holders of Registrable Stock shall have
any right to take any action to restrain, enjoin or otherwise delay any
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 11.
(i) Indemnification. In the event any shares of Registrable Stock are
included in a registration statement under this Section 11:
(1) to the extent permitted by law, the Company will indemnify
and hold harmless each holder of Registrable Stock requesting or
joining in a registration, any underwriter (as defined in the 1933 Act)
for it and
-18-
each person, if any, who controls such holder or underwriter within the
meaning of the 1933 Act, against any losses, claims, damages or
liabilities, joint or several, to which they may become subject under
the 1933 Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
on any untrue or alleged untrue statement of any material fact
contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein, or necessary to make the statements therein not misleading or
arise out of any violation by the Company of any rule or regulation
promulgated under the 1933 Act applicable to the Company and relating
to action or inaction required of the Company in connection with any
such registration; and will reimburse each such holder, such
underwriter or controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that the indemnity agreement contained in this Section
11(i)(1) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected
without the consent of the Company (which consent shall not be
unreasonably withheld) nor shall the Company be liable in any such case
for any such loss, claim, damage, liability or action to the extent
that it arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in connection
with such registration statement, preliminary prospectus, final
prospectus, or amendments or supplements thereto, in reliance upon and
in conformity with written information furnished expressly for use in
connection with such registration by any such holder, underwriter or
controlling person;
(2) to the extent permitted by law, each holder requesting or
joining in a registration will indemnify and hold harmless the Company,
each of its directors, each of its officers who have signed the
registration statement, each person, if any, who controls the Company
within the meaning of the 1933 Act and each agent and any underwriter
for the Company (within the meaning of the 1933 Act) against any
losses, claims, damages or liabilities to which the Company or any such
director, officer, controlling person, agent or underwriter may become
subject, under the 1933 Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereto) arise
out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in such registration
statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, or arise
out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to the extent,
but only to the extent, that such untrue
-19-
statement or alleged untrue statement or omission or alleged omission
was made in such registration statement, preliminary or final
prospectus, or amendments or supplements thereto, in reliance upon and
in conformity with written information furnished by such holder
expressly for use in connection with such registration; and each such
holder will reimburse any legal or other expenses reasonably incurred
by the Company or any such director, officer, controlling person, agent
or underwriter in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this Section 11(i)(2) shall not apply
to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent
of such holder (which consent shall not be unreasonably withheld); and
(3) promptly after receipt by an indemnified party under this
paragraph of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against any
indemnifying party under this paragraph, notify the indemnifying party
in writing of the commencement thereof and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly
noticed, to assume the defense thereof with counsel mutually and
reasonably satisfactory to the parties. The failure to notify an
indemnifying party promptly of the commencement of any such action, if
prejudicial to his ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this
paragraph, but the omission so to notify the indemnifying party will
not relieve him of any liability that he may have to any indemnified
party otherwise than under this paragraph. No indemnifying party, in
the defense of any such claim or litigation, shall, except with the
consent of each indemnified party, consent to entry of any judgment or
enter into any settlement that does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such
claim or litigation. Each indemnified party shall furnish such
information regarding itself or the claim in question as an
indemnifying party may reasonably request in writing and as shall be
reasonably required in connection with defense of such claim and
litigation resulting therefrom.
(4) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in any
underwriting agreement entered into connection with the underwritten
public offering are in conflict with the foregoing provisions, the
provisions in the underwriting agreement shall control.
(j) Registrations on Form S-3.
-20-
(1) If (i) holders of at least 25% of the Registrable Stock
request in writing (specifying that the request is being made pursuant
to this Section 11(j)) that the Company file a registration statement
on Form S-3 under the 1933 Act ("Form S-3") (or any successor form to
Form S-3 regardless of its designation) for a public offering of shares
of the Registrable Stock, the reasonably anticipated aggregate price to
the public of which would exceed $250,000, and (ii) the Company is a
registrant entitled to use Form S-3 to register such shares, then the
Company shall use its reasonable best efforts to cause such shares to
be registered on Form S-3 (or any successor form to Form S-3).
(2) All expenses incurred in connection with a registration
requested pursuant, to Section 11(j)(1) (excluding underwriters'
discounts and commissions), including, without limitation, all
registration, qualification, printing and accounting fees, and
reasonable fees and disbursements of one counsel for the selling holder
or holders and counsel for the Company, shall be borne by the Company.
(3) Holders, rights to registration under this Section 11(j)
shall be unlimited as to number of times exercised, are in addition to,
and not in lieu of, their rights to registration under sections 11(b)
and 11(c) and shall be subject to the provisions of Sections 11(d)
through 11(i).
(k) Reports Under Securities Exchange Act of 1934. With a view to
making available to the holders of Registrable Stock the benefits of Rule 144
promulgated under the 1933 Act and any other rule or regulation of the
Securities and Exchange Commission that may at any time permit a holder to sell
securities of the Company to the public without registration, the Company agrees
to use its reasonable best efforts to:
(1) file with the Securities and Exchange Commission in a
timely manner all reports and other documents required of the Company
under the 1933 Act and the Securities Exchange Act of 1934 ( the "1934
Act"); and
(2) furnish to any holder so long as such holder owns at least
5% of the Registrable Stock forthwith upon request a written statement
by the Company that it has complied with the reporting requirements of
Rule 144, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed by the Company
as may be reasonably requested in availing any holder of any rule or
regulation of the Securities and Exchange Commission permitting the
selling of any such securities without registration.
(l) Lockup Agreement. In consideration for the Company's agreeing to
its obligations under this Section 11, the holder of Registrable Stock agrees in
connection with any registration of the Company's securities that, upon the
request of the Company or the underwriters managing any underwritten
-21-
offering of the Company's securities, not to, sell, make any short sale of,
loan, grant any option for the purchase of or otherwise dispose of any
Registrable Stock (other than those included in the registration) or other
capital stock in the Company, in transactions taking place during the lockup
period set forth below whereby securities of the Company may come to rest in the
public market, without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed 180
days) from the effective date of such registration as the Company or the
underwriters may specify; provided, however, that all holders of 5% or more of
the Company's securities and all directors and officers shall be subject to the
restrictions set forth in this Section 11(l).
(m) Certain Limitations in Connection with Future Grants of
Registration Rights. From and after the date hereof, the Company shall not enter
into any agreement with any holder or prospective holder of any securities of
the Company providing for the granting to such holder of registration rights
unless such agreement:
(1) includes the equivalent of Section 11(l) as a term;
(2) includes a provision that, in the case of a public
offering involving an underwritten registered offering under Section
11(c), protects the holders of Registrable Stock if marketing factors
require a limitation on the number of securities to be included in the
underwriting in the manner in which the Company is protected under
Section 11(g); and
(3) does not grant to such holder or prospective holder
registration rights more favorable than those granted to the holders of
Registrable Stock under this Section 11.
(n) Transfer of Registration Rights. The registration rights of the
Holder of the Warrant under this Section 11 may be transferred to any transferee
who acquires at least 10% of the Registrable Stock, or the Warrant; provided,
however, that the Company is given written notice by the Holder at the time of
such transfer stating the name and address of the transferee and identifying the
securities with respect to which the rights under this Section 11 are being
assigned.
Section 12. Amendments.
Neither this Warrant nor any term hereof may be changed, waived,
discharged or terminated orally or in writing, provided that any term of this
warrant may be amended or the observance of 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 Company and the holders of
Warrants that are exercisable for a number of shares of Common Stock that
represent in the aggregate at least a majority of the total number of shares of
-22-
Common Stock for which all Warrants are then exercisable (whether or not the
holder of this warrant consents).
Section 13. Governing Law and Consent to Jurisdiction.
This Warrant shall be governed by the laws of the State of New York
without regard to its conflict of laws principles or rules. This Warrant shall
be deemed to have been executed and delivered at and shall be deemed to have
been made in New York, New York.
Any legal action, suit or proceeding arising out of or relating to this
Warrant 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
the Company 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.
-23-
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in
its name by its duly authorized officer.
Dated: June 28, 1996
SHEPHERD SURVEILLANCE SOLUTIONS, INC.
By: /s/ M. Thomas Makmann
---------------------------------
Name: M. Thomas Makmann
Title: President and CEO
-24-
SUBSCRIPTION NOTICE
The undersigned, the Holder, hereby elects to exercise purchase rights
represented by such Warrant for, and to purchase thereunder, ________________
shares of the Common Stock covered by such Warrant and herewith makes payment in
full therefor of $__________ cash and/or cancellation of $__________ of
indebtedness of the Company to the Holder hereof and requests that certificates
for such shares (and any securities or property deliverable upon such exercise)
be issued in the name of and delivered to________________________________ whose
address is _____________________________________________________ and whose
social security or employer identification number is __________________________.
The undersigned agrees that, in the absence of an effective
registration statement with respect to Common Stock issued upon this exercise,
the undersigned is acquiring such Common Stock for the Holder's own account and
not as a nominee for any other party, for investment and not with a view to
distribution thereof and that the certificate or certificates representing such
Common Stock may bear a legend substantially as follows:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS. UNLESS THEY
ARE SOLD PURSUANT To RULE 144 PROMULGATED BY THE SECURITIES AND
EXCHANGE COMMISSION UNDER SAID ACT, THEY MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION AND QUALIFICATION
WITHOUT AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY
TO COUNSEL FOR THE COMPANY, THAT SUCH REGISTRATION AND QUALIFICATION
ARE NOT REQUIRED.
In addition, the undersigned agrees that stop transfer instructions
will be entered on the Company's stock transfer records with respect to Common
Stock issued upon this exercise.
Dated:
------------------------------
Signature guaranteed:
-25-
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _________________________________________ the rights represented by the
foregoing Warrant of _______________ and appoints ______________ attorney to
transfer said rights on the books of said corporation, with full power of
substitution in the premises.
Dated:
------------------------------
Signature guaranteed:
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
J A M E S
M O O R E
& C O.
CERTIFIED PUBLIC ACCOUNTANTS
November 26, 1996
Securities and Exchange Commission
450 5th Street N.W.
Washington, DC 20549
Gentlemen:
We have reviewed the statements (copy attached) made by Shepherd
Surveillance Solutions, Inc., (Commission File Number 33-9868-A), formerly known
as InVision Technology, Inc. and IMProCOM, Inc., which we understand will be
filed with the Commission pursuant to Item 4 of Form 8-K, and included as part
of the Company's Form 10-QSB for the quarterly period ended March 31, 1996. We
agree with the statements concerning our Firm in said Form 10-QSB.
Very truly yours,
JAMES MOORE & CO., P.L.
By: ____________________
Lisa C. Park
LCP/lktc
Enclosure
233 Oakridge Street o Holly Hill, Florida 32117-5092 o (904) 257-4100
J A M E S
M O O R E
& C O.
CERTIFIED PUBLIC ACCOUNTANTS
November 26, 1996
Office of the Chief Accountant
SECPS Letter File
Securities and Exchange Commission
Mail Stop 9-5
450 Fifth Street, N.W.
Washington, DC 20549
This is to confirm that the client-auditor relationship between Shepherd
Surveillance Solutions, Inc., formerly known as InVision Technology, Inc. and
IMProCOM, Inc., (Commission File Number 33-9868-A) and James Moore & Co., P.L.
has ceased.
Very truly yours,
JAMES MOORE & CO., P.L.
By: ____________________
Lisa C. Park
LCP/lktc
233 Oakridge Street o Holly Hill, Florida 32117-5092 o (904) 257-4100
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's financial statements for the period ended March 31, 1996, included
with Form 10Q-SB, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 77,470
<SECURITIES> 0
<RECEIVABLES> 42,290
<ALLOWANCES> 0
<INVENTORY> 318,202
<CURRENT-ASSETS> 445,377
<PP&E> 114,211
<DEPRECIATION> (68,014)
<TOTAL-ASSETS> 497,072
<CURRENT-LIABILITIES> 2,092,168
<BONDS> 0
0
0
<COMMON> 4,294
<OTHER-SE> (1,599,390)
<TOTAL-LIABILITY-AND-EQUITY> 497,072
<SALES> 121,922
<TOTAL-REVENUES> 121,922
<CGS> 37,594
<TOTAL-COSTS> 37,594
<OTHER-EXPENSES> 490,559
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 61,525
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (467,756)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (467,756)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> 0
</TABLE>
